RNS Number:7796O
World Travel Holdings PLC
18 August 2003
World Travel Holdings plc
Preliminary Results for the year ended 31 December 2002
World Travel Holdings plc, the AIM quoted travel service distribution business
today announces its trading results for the year to 31 December 2002 and the
posting of its annual accounts to shareholders.
Highlights
* Loss before and after tax reduced to #1.36m from #12.62m
* Profit of #350,000 before goodwill impairment (#1.71m) , compared with
a loss of #8.1 million (goodwill impairment #4.4m)
* After a good first half in 2002, US market deteriorated and other
markets depressed following the war in Iraq and SARS
* Proposed equity funding to support new management team in the travel
business has failed
* Group has ceased all travel operations
* Terms agreed with creditors which will require further fund-raising by
31 October 2003 or the Group will fail
* Terms agreed for conversion of loan stock to equity
* Proposed share consolidation and capital reduction
* Move into new markets with acquisition of Wanbase, an Enhanced Virtual
Network Operator
* Proposed change of name to Advanced Virtual Networks plc.
CHAIRMAN'S STATEMENT
RESULTS
It is disappointing to have to report a further, albeit substantially reduced,
loss of #1.36 million before and after taxation (2001 - #12.62 million) on
turnover of #1.97 million (2001 - #2.10 million). Gross sales were slightly down
at #21.6 million (2001 - #23.7 million) reflecting the poor performance in and
subsequent withdrawal from the US market.
The loss per share for the period was 2.08p (2001: 19.21p). The Directors are
not declaring a dividend.
The operating loss before goodwill impairment was reduced to #1.56 million from
#7.80 million and after taking into account profits and losses on the disposal
of fixed assets and discontinued operations there was a surplus before goodwill
impairment of #350,000 (2001 - #8.1 million loss).
As you may recall, the first six months of 2002 were very encouraging for the
Group and led the Directors to believe that the Group was well on the way to
sustainable profitability. Unfortunately, soon after that, sales in the US
started to deteriorate and the Group's US subsidiary, Travac USA Inc, became
unprofitable. By December, with the war in Iraq looming, it was decided that
there was no realistic chance of that business being restored to profitability
in the short term and it was decided to withdraw from the US market.
The remaining market in which the Group operated has also been depressed in the
current year. In particular, the substantial seasonal upturn which usually
occurs in January did not materialise with its usual significance.
Since then, the effects of the war in Iraq and the SARS epidemic produced a
climate within which the Group traded at levels significantly below
expectations. This lead to constraints on the Group's cash resources, which in
turn caused the termination of relationships with a number of the Group's
distribution channels.
As a result, the Directors concluded that it would not be possible for the Group
to be profitable, as previously anticipated, in the current year and they
decided in January, that in the absence of a further fund-raising, the Group
would have had to cease trading.
Since then a new management team has been attempting to raise new equity finance
to support a new strategy for the Group in the travel industry. Regrettably this
has not succeeded. We have now been faced with the choice of allowing the
Company to fail or to change direction and try to rebuild the Company in markets
with a greater margin and, in our view, more potential. Accordingly, Tony Prior
resigned from the Board on 31 July 2003 and we have taken the steps detailed
below to come to terms with the Company's creditors, commence the reorganisation
of the capital structure and acquire a very small and loss making technology
company from Culver Holdings plc ("Culver"), our former parent, of which Bruce
Fireman and I are also directors. Your board hopes that these steps will enable
the Company to build a successful business in the voice and data communications
business.
It will, however, be necessary to raise further capital to fund the commuted
claims of creditors and provide working capital for the future. This must be
completed by 31 October or the Company will fail.
CORPORATE ACTIVITY
As announced on 9 January 2003, the business of Travac USA Inc was discontinued
at the end of 2002 after the Board had concluded that the potential for future
profitability in the current political and economic climate in the United States
did not warrant further investment. Following the closure of Travac USA Inc, and
in order to secure the business of flights.com in the US market, the Company
also disposed at the end of 2002 of a 50 per cent interest in the URL
www.flights.com and granted sole US distribution rights for that brand to a
joint venture company, TISS.com, Inc. in which the Group had a 49 per cent
shareholding.
On 17 April 2003, the Company sold its interest in Netfaresonline.com Inc
("NFO") to Logiciels OpenFares Inc., a Canadian software development company,
for a cash consideration of CND$450,000. Of this amount, CND$112,500 was paid to
the chairman of NFO, as previously agreed, in exchange for his waiving any
salary entitlement, leaving proceeds of CND$337,500, of which CND$23,500 may be
due to Softvoyage Inc. by virtue of its preferred shareholder status in 3053787
Nova Scotia Limited.
Following the Company's decision to reduce its dependence on airline ticketing,
it made two acquisitions in October and November 2002. The first was
LeisureHunt.com Limited ("LeisureHunt"), which was acquired for a consideration
satisfied by the issue of 70 million Ordinary Shares. Shortly after the
acquisition of LeisureHunt, the Company acquired Select Line Holidays Limited
and Select Travel International Limited (together "Select Line") for a
consideration satisfied by the issue of 80 million Ordinary Shares. Select Line
was a promoter of travel offers through national and regional newspapers in
Britain, providing breaks, flight and accommodation offers. At the time of the
acquisitions, the intention was to integrate these businesses with those of the
Group to provide it with additional cross-selling opportunities.
For a short time following completion, LeisureHunt performed to the Board's
expectations but unfortunately, this did not happen with Select Line. Given the
poor financial state of Select Line revealed following completion, the Board
decided not to integrate its operations with the Group's existing businesses and
both the Select Line companies have been put into liquidation.
As announced on 16 June 2003, Deckchair.com and LeisureHunt.com, together with
their associated trade marks and customer databases, have been sold by the
Group's affiliate International Travel Agents Link Limited and the funds
received used for that company's working capital.
The Group sold its remaining interest in the URL www.flights.com and its
minority interest in TISS.com, Inc for #125,000 on 23 June 2003 which was used
to reduce the secured loan due to Culver.
As a base for the future development of the Company agreement has been reached
with Culver for the acquisition, conditional on shareholders' approval of the
reorganisation of the capital structure of the Company, of the entire share
capital of its wholly owned subsidiary, Wanbase Limited for a cash consideration
of #1,000.
If shareholders do not approve the reconstruction then this purchase will not be
completed, and the Company will not be able to satisfy the agreements with
creditors referred to below and will be liquidated.
Agreements with creditors
As at 31 December 2002, the Group had a number of long outstanding creditor
balances, principally with firms providing professional advice and services,
totalling #858,405. The Company has successfully negotiated a reduced cash
settlement in respect of these balances with these creditors, conditional on
payment by 31 October 2003, of 10p per #1 previously outstanding. The overall
effect of these agreements, if implemented at 31 December 2002, would have been
to reduce these creditor balances by #772,564.
Between June and August 2003 the Company agreed with trade creditors totalling
#327,369, a settlement of 20p in per #1 previously outstanding, conditional on
payment being made by 31 October 2003.
As at 31 December 2002, the Company was indebted to its loan stock holders in
the sum of #787,378 (#487,378 of which was due to Culver) and separately to
Culver in the sum of approximately #300,000. This amount of #300,000 was the
subject of a conditional agreement entered into between the Company and Culver
on 16 April 2002 whereby Culver undertook to grant a secured loan to World
Travel to provide the Group with sufficient working capital following the
lengthened credit card clearance periods imposed on the Group after the events
of 11 September 2001. This secured loan carries an interest rate of two per
cent. over base rate subject to a minimum of six per cent. and is repayable in
four equal payments during 2004 and, together with all other amounts due to
Culver, is secured by way of fixed and floating charges over the Group. The
making of this loan was conditional upon the sale by Culver to investors of not
less than 16 million Ordinary Shares in World Travel and #300,000 nominal of
loan stock in Aerotech Europe Limited, a subsidiary of World Travel. This
#300,000 of loan stock, sold to investors, was subsequently substituted by loan
stock of the Company, rather than a subsidiary, and is guaranteed as to both
interest and principal by Culver.
As a result of using the proceeds of disposals made by the Company to reduce the
loan outstanding, the balance due to Culver at 11 August 2003 was #192,570.
Culver has agreed, conditional on the passing of the various resolutions to be
proposed at the AGM, to dispose of its interest in the loan stock.
In settlement of the loan stock the holders have agreed to accept Shares with an
aggregate value of #787,378 at the Issue Price. Culver has granted the
respective holders of the #300,000 of loan stock guaranteed by them an option to
put the shares issued on Culver on terms corresponding to the terms of the
guarantee.
Litigation settlement
The Company is involved in litigation with Sabre UK Marketing Limited ("Sabre").
In August 2002, Sabre issued proceedings against the Company for, inter alia,
sums to which it claimed entitlement under a master services agreement ("MSA")
and damages which in total, it was claimed, amounted to approximately #964,440.
The Company issued a defence and made a counterclaim in respect of Sabre's
repudiation of the MSA and pre-contractual misrepresentation, for a sum
exceeding #500,000. The matter was listed for hearing at the High Court in July
2003. On 5 July 2003, the Company agreed a settlement with Sabre, in full and
final settlement of all claims, and, subject to payment being made by 31 October
2003, of #192,888 (inclusive of all costs).
Share Consolidation
At present, the nominal value of the ordinary shares ("Existing Ordinary
Shares") is 1p each, compared to the mid-market price of 0.3p of an Existing
Ordinary Share at the time the shares were suspended on 1 July 2003, being the
latest practicable dealing date prior to the posting of this document. Since the
Companies Act 1985 does not permit a company to issue shares at a price less
than their nominal value and as the board believes that it will be necessary to
issue more shares to complete the recapitalisation of the Company, it is
intended to effect a share consolidation ("Share Consolidation"). The Share
Consolidation will change the nominal value of an Ordinary Share and will reduce
the number of shares that will otherwise be in issue by a factor of 20. The
Directors believe that the Share Consolidation will make the number of shares in
issue more manageable. The proposed Share Consolidation will require Shareholder
approval at the Annual General Meeting, which is being held on 17 September
2003. At present, the authorised share capital of the Company is #4,600,000,
divided into 460,000,000 existing ordinary shares of 1p each ("Existing Ordinary
Shares") of which 327,085,428 Existing Ordinary Shares are currently issued and
fully paid. The Share Consolidation will result in the authorised share capital
being divided into approximately (depending upon fractions) 1,345 million new
ordinary shares of 0.1p each ("New Ordinary Shares") and approximately 16
million Deferred Shares of 19.9p each. It is proposed that the Share
Consolidation will consist of the following steps:
(i) every 20 existing ordinary shares of 1p each ("Existing
Ordinary Shares") in issue held by each member, the balance held by each member
being dealt with as provided in sub-paragraphs (ii) and (v) below, be
consolidated into one ordinary share of 20p ("Consolidated Share");
(ii) all of the Existing Ordinary Shares in issue not
consolidated under sub-paragraph (i) above be aggregated and every 20 of them be
consolidated into one Consolidated Share of 20p and each of the remaining
Existing Ordinary Shares not so consolidated be subdivided into 10 New Ordinary
Shares of 0.1p each;
(iii) each Consolidated Share arising by reason of (i) and (ii)
above be subdivided into one New Ordinary Share of 0.1p and one Deferred Share
of 19.9p.
(iv) every unissued Existing Ordinary Share of 1p each be
subdivided into 10 New Ordinary Shares of 0.1p each; and
(v) the Directors are authorised to arrange, if practicable,
for the New Ordinary Shares arising by virtue of sub paragraph (ii) above to be
sold by Credit Lyonnais Securities and the net proceeds of the sale thereof to
be received by the Company for its own benefit, and for the Deferred Shares
arising by virtue of sub-paragraph (iii) above to be transferred to any person
and any Director of the Company is hereby authorised to execute a transfer of
any such shares.
The New Ordinary Shares will replace the Existing Ordinary Shares under the
Company's new articles of association proposed to be amended pursuant to
Resolution 6 at the AGM. It is expected that the New Ordinary Shares will be
admitted to trading on 18 September 2003. The Deferred Shares will carry no
rights to vote or to participate in dividends, will carry only limited rights on
a return of capital (whether on liquidation or otherwise) and will not be
admitted to trading on AIM. No share certificates will be issued for the
Deferred Shares. It is intended that the Deferred Shares arising under the Share
Consolidation will, in due course, be cancelled by the Company pursuant to the
proposed Capital Reduction referred to below. Share certificates in respect of
New Ordinary Shares to be held in certificated form are expected to be
despatched by no later than 24 September 2003. All existing certificates should
be destroyed on receipt of the certificate for the New Ordinary Shares. New
Ordinary Shares in uncertificated form are expected to be delivered in CREST on
18 September 2003.
Capital Reduction
The Company's audited balance sheet as at 31 December 2002, showed an
accumulated deficit of #16.99 million on its profit and loss account. Under its
present capital structure the Company will be unable, under the Act, to pay
dividends or make any other distributions until this deficit is eliminated. In
view of the size of the deficit, the Board believes that it is unlikely that the
deficit will be eliminated by the generation of earnings for some years. The
Board therefore considers it appropriate (subject to, and conditional upon,
Shareholders' approval and the ruling of the High Court) to eliminate the amount
standing to the credit of its share premium account, being the sum of #10.14
million. The elimination of the Company's share premium account will assist in
diminishing the deficit on its profit and loss account. In addition, the Company
proposes (subject to, and conditional upon, confirmation by Shareholders'
approval and the High Court) to cancel the Deferred Shares amounting to a
nominal value of #3,254,500 which, as mentioned above, will have minimal rights
attaching to them. The cancellation of the Deferred Shares will create a reserve
account against which the deficit on the profit and loss account will also be
reduced. It should be noted that, given its size, the proposed Capital Reduction
will only partially reduce, and not eliminate, the accumulated deficit and
accordingly, it is likely that it will still be a considerable time before the
deficit is fully eliminated from the profit and loss account and a surplus
accumulated to enable the payment of dividends. The Capital Reduction will
become effective on the date on which the order of the High Court confirming the
Capital Reduction is registered with the Registrar of Companies.
It will be necessary to raise additional capital to satisfy the Company's
obligations to creditors by 31 October, it is therefore not anticipated that
application to the Court will be made for the time being until those creditors
have been paid.
Amendment of Articles
In order to enable the Share Consolidation to proceed it will be necessary to
amend the Articles. Subject to approval of the Share Consolidation by
Shareholders at the AGM, the Consolidated Shares will replace the Existing
Ordinary Shares and the Deferred Shares will carry no right to vote or to
participate in dividends, will carry only limited rights on a return of capital
(whether on a liquidation or otherwise) and will not be admitted to trading on
AIM. It is intended that the Deferred Shares arising under the Share
Consolidation will be cancelled pursuant to the Capital Reduction referred to
above.
Extraordinary general meeting
As the net assets of the Company have now fallen to below fifty per cent of the
called up share capital, the Directors are required by the provisions of the
Companies Acts 1985 to convene an Extraordinary General Meeting. This will be
held immediately following the Annual General Meeting.
Wanbase Limited
As stated earlier, agreement has been reached with Culver for the acquisition,
conditional on the passing of the various resolutions to be proposed at the AGM,
of the entire share capital of its wholly owned subsidiary, Wanbase Limited as a
base for the future development of the Company.
Whilst Culver has, since 1999, invested over #700,000 in the business now
operated by Wanbase which has five employees, revenue generative trading did not
start until early 2003 and the company is still loss making. The first accounts
of Wanbase will be prepared to 31 December 2003. Culver has agreed to make
sufficient working capital available to Wanbase for it to continue to trade
until 31 October 2003.
Wanbase is a Global Enhanced Virtual Network Operator. Enhanced Virtual Networks
are voice-enabled with an ability to carry voice traffic together with the data
traffic carried by conventional Virtual Networks Operators. It specialises in
the design and implementation of voice and data networks using virtual private
networks ("VPNs"), which eliminate the need for dedicated leased lines.
Voice traffic carried over the world public switched telephone network ("PSTN")
is migrating from circuit switching to packet switching over internet protocol
("IP"). Virtually all data traffic is presently using IP and the carriage of
voice over an IP network is known as voice over internet protocol ("VoIP").
Wanbase is a solutions provider in this evolving shift of communications on
separate voice and data networks to convergence of voice and data transmitted
over the same network.
PROSPECTS
The year to date has been traumatic for the Company but your board believes that
there are very significant opportunities to make profits in the new technology
areas in which Wanbase operates and the Group will now concentrate. Clearly
additional capital will have to be raised to finance the development of the
business and the payment of the commuted creditor liabilities. The Group is
actively examining a number of acquisition opportunities to enable more rapid
growth than can be achieved organically and it is envisaged that additional
equity capital will be raised at the time of such an acquisition.
If additional finance is not found by 31 October 2003, which is by no means
certain, then the Group will fail.
In order to demonstrate the significant change in its activities, it is proposed
to change the name of the Company to Advanced Virtual Networks plc.
My colleagues and I believe that as the attempts that the proposed new
management team have made to raise new equity finance have been unsuccessful,
the steps we are now proposing offer the best opportunity to develop a
profitable future for the Company and to return value to Shareholders.
J C M Biles
Chairman
WORLD TRAVEL HOLDINGS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
Note #'000 #'000
---------------------- ------ --------- ---------
Gross Travel Sales 1 (h), 2
Existing operations 8,355 9,263
Acquisitions 240 -
---------------------- ------ --------- ---------
Continuing operations 8,595 9,263
Discontinued operations 13,020 14,409
---------------------- ------ --------- ---------
21,615 23,672
---------------------- ------ --------- ---------
Turnover 1 (i), 2
Existing operations 915 884
Acquisitions 28 -
---------------------- ------ --------- ---------
Continuing operations 943 884
Discontinued operations 1,027 1,213
---------------------- ------ --------- ---------
1,970 2,097
---------------------- ------ --------- ---------
Administrative expenses:
Goodwill amortisation - (1,359)
Exceptional items
- Impairment of fixed assets - (100)
- Impairment of goodwill 3 (1,712) (4,446)
Other administrative expenses (3,189) (7,090)
---------------------- ------ --------- ---------
Total administrative expenses 3 (4,901) (12,995)
Distribution costs 3 (343) (1,352)
---------------------- ------ --------- ---------
(5,244) (14,347)
---------------------- ------ --------- ---------
Operating loss
Existing (1,357) (12,072)
Acquisitions* (1,837) -
---------------------- ------ --------- ---------
Continuing (3,194) (12,072)
Discontinued (80) (178)
---------------------- ------ --------- ---------
(3,274) (12,250)
Loss on disposal of fixed assets (122) (296)
Profit on disposal of discontinued 14 2,030 -
operations ------ --------- ---------
----------------------
Loss on ordinary activities before interest (1,366) (12,546)
and taxation
Finance charges (net) 3 (70)
---------------------- ------ --------- ---------
Loss on ordinary activities before taxation 4 (1,363) (12,616)
Taxation 5 - -
---------------------- ------ --------- ---------
Retained loss (1,363) (12,616)
---------------------- ------ --------- ---------
Basic and diluted loss per share 7 (2.08)p (19.21)p
Adjusted basic and diluted loss per share 7 (2.56)p (10.37)p
The accompanying notes are an integral part of this consolidated profit and loss
account.
* Includes goodwill impairment of #(1.7)m
WORLD TRAVEL HOLDINGS PLC
CONSOLIDATED STATEMENT OF TOTALRECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
#'000 #'000
Loss for the financial year (1,363) (12,616)
Loss on foreign currency translation (39) (40)
--------------------- --------- ---------
Total gains and losses recognised during the year (1,402) (12,656)
--------------------- --------- ---------
The accompanying notes are an integral part of this consolidated statement of
total recognised gains and losses.
WORLD TRAVEL HOLDINGS PLC
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2002
2002 2001
#000 #000
Fixed assets
Intangible assets 200 -
Tangible assets 69 509
--------------------- -------- --------- ---------
269 509
--------------------- -------- --------- ---------
Current assets
Debtors 332 2,243
Cash at bank and in hand 80 280
--------------------- -------- --------- ---------
412 2,523
Creditors: amounts falling due within one year (2,641) (3,754)
--------------------- -------- --------- ---------
Net current liabilities (2,229) (1,231)
--------------------- -------- --------- ---------
Total assets less current liabilities (1,960) (722)
Creditors: amounts falling due after more than
one year
(787) (1,525)
Provisions for liabilities and charges 8 (231) (1,204)
--------------------- -------- --------- ---------
Net liabilities (2,978) (3,451)
--------------------- -------- --------- ---------
Capital and reserves
Called-up share capital 9 1,771 1,771
Share premium account 10,139 10,139
Shares to be issued 2,556 681
Capital reserve 4,763 4,763
Profit and loss account (22,267) (20,865)
--------------------- -------- --------- ---------
Equity shareholders' deficit (3,038) (3,511)
Minority interests (Equity) 60 60
--------------------- -------- --------- ---------
(2,978) (3,451)
--------------------- -------- --------- ---------
WORLD TRAVEL HOLDINGS PLC
COMPANY BALANCE SHEET
AT 31 DECEMBER 2002
Note 2002 2001
#'000 #'000
Fixed assets
Investments 146 3,000
--------------------- -------- --------- ---------
146 3,000
--------------------- -------- --------- ---------
Current assets
Debtors 49 215
Cash at bank and in hand 1 -
--------------------- -------- --------- ---------
50 215
Creditors: amounts falling due within one year (1,816) (868)
--------------------- -------- --------- ---------
Net current liabilities (1,766) (653)
--------------------- -------- --------- ---------
Total assets less current liabilities (1,620) 2,347
Creditors: amounts falling due after more than
one year
(787) (703)
Provisions for liabilities and charges (116) (477)
--------------------- -------- --------- ---------
Net (liabilities)/assets (2,523) 1,167
--------------------- -------- --------- ---------
Capital and reserves
Called-up share capital 1,771 1,771
Share premium account 10,139 10,139
Shares to be issued 2,556 681
Profit and loss account (16,989) (11,424)
--------------------- -------- --------- ---------
Equity shareholders' (deficit)/funds (2,523) 1,167
--------------------- -------- --------- ---------
WORLD TRAVEL HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
Note #'000 #'000
Net cash outflow from operating activities 12 (433) (3,494)
--------------------- ------- --------- ---------
Returns on investments and servicing of finance
Interest received 3 7
Interest paid - (77)
--------------------- ------- --------- ---------
3 (70)
--------------------- ------- --------- ---------
Taxation - -
--------------------- ------- --------- ---------
Capital expenditure and financial investment
Purchase of tangible fixed assets (12) (247)
Sale of tangible fixed assets - 1,400
--------------------- ------- --------- ---------
(12) 1,153
--------------------- ------- --------- ---------
Acquisitions and disposals
Purchase of subsidiary undertakings - (1,665)
Disposal of subsidiary undertakings 133
--------------------- ------- --------- ---------
Net cash balances acquired with subsidiary
undertakings
167 726
--------------------- ------- --------- ---------
300 (939)
--------------------- ------- --------- ---------
Net cash outflow before financing (142) (3,350)
--------------------- ------- --------- ---------
Financing
Issue of shares (net of costs) - 1,755
Repayment of long term loan - (897)
Receipt of short term loan 300 -
Capital element of finance lease rental (9) (3)
payments ------- --------- ---------
---------------------
Net cash inflow from financing 291 855
--------------------- ------- --------- ---------
Increase/(Decrease) in cash in period 13 149 (2,495)
--------------------- ------- --------- ---------
The accompanying notes are an integral part of this consolidated cash flow
statement
WORLD TRAVEL HOLDINGS PLC
NOTES
The attached notes form part of these financial statements.
Basis of Preparation and Auditors Report
The preliminary results have been extracted from the statutory accounts for the
year ended 31 December 2002. The auditors have qualified their opinion arising
from limitations in scope regarding any adjustment that might have arisen had
they been able to obtain sufficient evidence in the form of suitable accounting
records and explanations as necessary on Travac USA and Flights.com Limited.
They also reported that in respect alone of the limitations on their work
relating to the 31 December 2001 balance sheet of Travac USA and the 2002 gain
on disposal and transactions of Travac USA and Flights.com Limited, together
included as discontinued operations, they had not obtained all the information
and explanations that they considered necessary for the purposes of their audit
(Section 237 (3) Companies Act 1985. No statement was made under Section 237 (2)
Companies Act 1985).
Going Concern Uncertainty
As at 31 December 2002, the Group had net current liabilities of #2.2m (2001:
#1.2m) and net liabilities of #3.0m (2001: #3.5m). Without a combination of
shareholder approval for the reorganisation of the capital structure of the
Company, further equity funding and settlement arrangements with outstanding
creditors, the Group will not be able to meet its current or long-term
liabilities and will be required to go into liquidation. For the Group to
continue it will need to exit its current operations which are in the travel
sector, and acquire businesses in the telecommunications sector. The Group's
current operations will, therefore, need to be sold or cease operations and
undergo formal insolvency proceedings, new funding will need to be raised, and
new businesses will need to be acquired by the Group. To that end the Directors
have initiated a process for the purchase of at least one telecommunications
business in the short term. The Directors are confident of being able to acquire
suitable businesses, successfully raise sufficient further equity funding and
reach settlements with the outstanding creditors who have claims on World Travel
Holdings plc. On this basis the Directors consider it appropriate to prepare the
financial statements on a going concern basis, and therefore no adjustments that
might have otherwise been required have been made.
Statutory Accounts
The financial information contained in this statement does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
financial statements for 2002 are being posted to shareholders on 18 August
2003. Copies can be obtained from the Compay Secretary at the Company's
Registered Office, 53, The London Fruit & Wool Exchange London E1 6EX.
1. Accounting policies
The following accounting policies have been applied consistently throughout the
current and preceding year in dealing with items which are considered material
in relation to the financial statements.
a) Basis of accounting
The financial statements have been prepared in accordance with applicable United
Kingdom accounting standards and under the historical cost convention.
b) Basis of consolidation
World Travel Holdings plc was incorporated on 10 May 2000. Following a Group
re-organisation on 20 September 2000, World Travel Holdings plc acquired the
whole of the issued share capital of worldtraveldirect.com plc from Culver
Holdings plc by way of a share-for-share exchange.
Although not a subsidiary of World Travel Holdings plc throughout 2000,
worldtraveldirect.com plc was a wholly owned subsidiary of Culver Holdings plc
and was acquired by way of a share-for-share exchange in a re-organisation that
qualifies as a group reconstruction under Financial Reporting Standard 6 ('FRS
6') 'Acquisitions and Mergers'. Accordingly, the principles of merger accounting
have been applied.
Acquisitions are treated as acquired by this combined entity and are
consolidated using the acquisition method of accounting in accordance with FRS
6. The results of subsidiaries acquired or sold are consolidated for the periods
from or to the date on which control passed.
During the prior year, the Group acquired Netfaresonline.com, Inc. As part of
the consideration the Group issued 3053787 Nova Scotia Limited exchangeable
shares. Under the shareholders' agreement the exchangeable shares rank equally
with the World Travel Holdings ordinary 1 pence shares, with the same voting
rights and dividends. Therefore the consolidated financial statements, to
present a true and fair view, differ from the presentation requirements of the
Companies Act by including the exchangeable shares in the capital and reserves
section of the balance sheet as shares to be issued. The Companies Act 1985
would require the presentation of such shares as a minority interest within
shareholders' funds.
c) Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost net of depreciation and any provision
for impairment. Depreciation is provided at rates calculated to write off the
cost less estimated residual value of tangible fixed assets by equal instalments
over their estimated useful economic lives as follows:
Freehold buildings - 5 per cent per annum (20 years)
Computer equipment - 33 per cent per annum (3 years)
Fixtures and fittings - 33 per cent per annum (3 years)
Motor vehicles - 25 per cent per annum (4 years)
Leasehold improvements - lease term
d) Investments
Except as stated below, fixed asset investments are shown at cost less provision
for impairment.
In the company balance sheet, for investments in subsidiaries acquired for
consideration including the issue of shares qualifying for merger relief, cost
is measured by reference to the nominal value only of the shares issued. Any
premium is ignored.
e) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings representing any
excess of the fair value of the consideration paid over the fair value of the
identifiable assets and liabilities acquired is capitalised and written off on a
straight-line basis over its estimated useful economic life, which is 5 years.
Provision is made for any impairment.
f) Taxation
Current tax, including UK corporation tax and foreign tax, is provided at
amounts expected to be paid (or recovered) using the tax rates and laws that
have been enacted or substantially enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the group's taxable profits and its results
as stated in the financial statements that arise from the inclusion of gains and
losses in tax assessments in periods different from those in which they are
recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised
only when, on the basis of all available evidence, it can be regarded as more
likely than not that there will be suitable taxable profits from which the
future reversal of the underlying timing differences can be deducted.
Deferred tax is not recognised when fixed assets are sold and it is more likely
than not that the taxable gain will be rolled over, being charged to tax only if
and when the replacement assets are sold.
Deferred tax is recognised in respect of the retained earnings of overseas
subsidiaries and associates only to the extent that, at the balance sheet date,
dividends have been accrued as receivable or a binding agreement to distribute
past earnings in future has been entered into by the subsidiary or associate.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which the timing differences are expected to reverse, based on
tax rates and laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax is measured on a non-discounted basis.
g) Web and product development expenditure
Except for the purchase of domain names, expenditure on web and product
development is charged to the profit and loss account in the year in which it is
incurred. The costs relating to the purchase of domain names are capitalised and
amortised over their useful economic life, which is estimated to be 5 years.
h) Gross travel sales
Gross travel sales represent the customer sales value of travel products
distributed during the period, net of discounts, VAT and other sales taxes. The
gross travel sales value is recognised at the date of travel booking, net of
provision for cancellations.
i) Turnover
Turnover (being statutory turnover) represents the commission income earned by
the Group in the normal course of business, excluding value added tax and net of
any rebates and discounts. Turnover is recognised as the date of travel booking,
net of provision for cancellations.
j) Pensions
The amount charged to the profit and loss account in respect of pension costs is
the contributions payable in the year. Differences between contributions payable
in the year and contributions actually paid are shown as either accruals or
prepayments.
k) Foreign currency
Transactions in foreign currency are recorded at the rate of exchange at the
date of the transaction or, if hedged, the forward contract rate. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet
date are reported at the rates of exchange prevailing at that date or, if
appropriate, at the forward contract rate.
The results of overseas operations are translated at the closing rates of
exchange during the period and their balance sheets at the rates ruling at the
balance sheet date. Exchange differences arising on translation of the opening
net assets and on foreign currency borrowings, to the extent that they hedge the
Group's investment in such operations, are dealt with through reserves. All
other exchange differences are included in the profit and loss account.
l) Leasing
Leases, which entail the Group obtaining all, or substantially all the risks and
rewards of ownership, are classified as finance leases. Finance leases are
significant items of plant, machinery and vehicles which have been capitalised
in accordance with Statement of Standard Accounting Practice 21, ("SSAP 21").
All other leases are classified as operating leases and rentals payable are
charged to the profit and loss account on a straight-line basis over the lease
term.
2. Segment information
The Group's turnover for the current year was primarily generated in the United
Kingdom and the United States and in the opinion of the Directors arose from one
class of business.
United Kingdom United States Other Group
2002 2001 2002 2001 2002 2001 2002 2001
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Gross travel
sales 8,367 9,135 13,009 14,361 239 176 21,615 23,672
------------ ------ ------ ----- ------ ----- ----- ------ ------
Turnover 714 756 1,017 1,165 239 176 1,970 2,097
Operating
costs (4,022) (12,309) (959) (1,664) (263) (374) (5,244) (14,347)
------------ ------ ------ ----- ------ ----- ----- ------ ------
Operating
(loss)
profit (3,308) (11,553) 58 (499) (24) (198) (3,274) (12,250)
------------ ------ ------ ----- ------ ----- ----- ------ ------
Loss on
disposal of
fixed
assets (122) (296)
Profit on
sale of
discontinued
operations 2,030 -
Finance
charges (net) 3 (70)
------------ ------ ------ ----- ------ ----- ----- ------ ------
Loss on
ordinary
activities
before
taxation (1,363) (12,616)
------------ ------ ------ ----- ------ ----- ----- ------ ------
Net
liabilities (2,813) (2,513) - (794) (165) (144) (2,978) (3,451)
------------ ------ ------ ----- ------ ----- ----- ------ ------
Acquisitions
All acquisitions made in the year conducted their activities in the United
Kingdom.
3. Acquired, continuing and discontinued operations
2002 2001
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 943 1,027 1,970 884 1,213 2,097
Distribution (324) (19) (343) (1,271) (81) (1,352)
costs
Administrative (3,813) (1,088) (4,901) (11,685) (1,310) (12,995)
expenses
Net (2,978) - (2,978) (3,712) 261 (3,451)
liabilities
In relation to the acquisition of LeisureHunt.com Limited continuing operations
in 2002 include #28,000 turnover and #829,000 in administrative expenses
(including #712,000 of exceptional goodwill impairment).
In relation to the acquisitions of Select Line Holidays Limited and Select
Travel International Limited (together "Select Line"), continuing operations in
2002 include #nil turnover and #1,036,000 in administrative expenses (including
#1,000,000 of exceptional goodwill impairment).
In relation to the above acquisitions in aggregate, continuing operations in
2002 include #28,000 turnover and #1,865,000 administrative expenses (including
#1,712,000 of exceptional goodwill impairment).
On 30 November 2002, the operations of Travac USA (comprising Travac USA Inc.
and World Travel Holdings Inc) were discontinued. In December 2002, the company
appointed a third party with full authority to commence the liquidation of
Travac USA and control is deemed as having passed on that date. On 6 February
2003, Travac USA was put into liquidation under the laws of the USA.
On 31 December 2002 the operations of Flights.com, which provided internet
services for the delivery of airline tickets advertised through the Flights.com
website to US customers, were discontinued.
There have been no guarantees or financial commitments made by the Group to
either Travac USA or Flights.com Limited.
4. Loss on ordinary activities before taxation
Loss on ordinary activities before taxation is stated after charging:
2002 2001
#'000 #'000
Depreciation of tangible fixed assets
- owned 24 693
- hire purchase 2 39
Amortisation of goodwill - 1,359
Impairment of goodwill 1,712 4,446
Impairment of tangible fixed assets - 100
Rentals payable under operating leases
- hire of plant and machinery 37 2
- other 28 140
Remuneration of auditors
- audit 62 95
Amounts payable to the auditors for other services relating to the year were
#20,000 (2001: #80,000). In 2001, these amounts relate primarily to their role
as reporting accountants in connection with the placing and open offer in
December 2001. In 2002 these amounts relate solely to the provision of taxation
services. Of the Group audit fee of #62,000, #10,000 (2001: #10,000) relates to
the audit of the company.
5. Taxation
The Group did not incur a profit chargeable to UK corporation tax in the year
(2001: #nil). No deferred tax or credit arose in the year (2001: nil) as there
were no recognised deferred tax assets or liabilities at either year-end.
There is a potential deferred tax asset as at 31 December 2002 of #1,205,000
(2001:#3,960,000). This has not been recognised due to the uncertainty over the
generation of future taxable profits against which to set this asset.
The difference between the total current tax charge and the amount calculated by
applying the standard rate of UK corporation tax to the loss on ordinary
activities before tax is as follows:
2002 2001
#'000 #'000
Group loss on ordinary activities before taxation (1,363) (12,616)
Tax on Group loss on ordinary activities before taxation at
standard
UK Corporation tax rate of 30% (2001 - 30%). (409) (3,785)
Effects of:
- Expenses not deductible for tax purposes 574 1,802
- Capital allowances in excess of depreciation 8 293
- Losses not available to be carried forward 93 -
- Losses carried forward 307 1,570
- Capital gain realised on sale of property - 120
- Profit on disposal of discontinued operations (609) -
- Loss on disposal of fixed assets 36 -
---------------------------- -------- ---------
Group current tax charge for period - -
---------------------------- -------- ---------
The tax charge in future periods will be affected by the use of tax losses
carried forward that have not been provided for through deferred tax. The
Group's losses arise primarily in the United Kingdom and therefore the tax rate
used for tax on loss on ordinary activities is the standard rate for United
Kingdom corporation tax, currently 30%.
6. Loss attributable to World Travel Holdings plc
The loss for the financial period dealt within the financial statements of the
parent company was #5.6m (2001: #12.1m). As permitted by section 230 of the
Companies Act 1985, no separate profit and loss account is presented in respect
of the parent company.
7. Loss per share
The calculation of loss per share is based on the loss on ordinary activities
after taxation in the financial year and the weighted average number of ordinary
shares of World Travel Holdings plc in issue as adjusted for the capital
re-organisation described in the accounting policies in Note 1 and changes in
World Travel Holdings plc's issued share capital throughout the period since
incorporation.
2002 2001
#'000 #'000
Loss on ordinary activities after taxation (1,363) (12,616)
Goodwill amortisation and impairment 1,712 5,805
Profit on disposal of discontinued operations (2,030) -
---------------------------- -------- --------
Adjusted loss on ordinary activities after taxation (1,681) (6,811)
---------------------------- -------- --------
Weighted average number of shares (000's) 65,658 65,658
---------------------------- -------- --------
2002 2001
Basic and diluted loss per share (2,08)p (19.21)p
Goodwill amortisation and impairment 2.61p 8.84p
Profit on disposal of discontinued operations (3.09)p -
---------------------------- -------- --------
Adjusted basic and diluted loss per share (2.56)p (10.37)p
---------------------------- -------- --------
Any potential ordinary shares to be issued as a result of the 4,510,056 (2001 -
16,225,760) share options outstanding were excluded from the calculation of
diluted loss per share because their inclusion would have been anti-dilutive.
Adjusted loss per share has been calculated to show the impact of impairment of
goodwill and profit on disposal of discontinued operations as these can have a
distorting effect on losses and therefore warrant separate consideration.
8. Provision for liabilities and charges
#'000
Group
At 1 January 2002 1,204
Transfer from creditors 62
Charged to the profit and loss account 63
Utilised in year (1,098)
-------------------- ------------
At 31 December 2002 231
-------------------- ------------
#'000
Company
At 1 January 2002 477
Transfer from creditors 62
Utilised in year (423)
-------------------- ------------
At 31 December 2002 116
-------------------- ------------
Provisions principally comprise a provision for potential payments to be made by
the Group to Sabre UK Marketing Limited ("Sabre") as a result of litigation
initiated by Sabre, together with associated legal costs. As described above,
the litigation was settled with Sabre through an agreement to pay #192,888 in
full and final settlement. Of the consolidated provision of #231,000, #116,000
is maintained in the balance sheet of the company.
9. Called-up share capital
2002 2001
#'000 #'000
Authorised
460 million (2001: 300 million) ordinary shares of 1 pence 4,600 3,000
each
Allotted, called-up and fully paid
177,085,428 (2001: 177,085,428) ordinary shares of 1 pence 1,771 1,771
each
On 26 July 2002 the authorised share capital of the Company was increased from
#3,000,000 to #4,600,000 by the creation of an additional 160,000,000 shares of
1 pence each.
Share options
No share options, including Directors' share options, were exercised in the year
ended 31 December 2002.
10. Reserves
Group
Share
premium Shares to Capital Profit &
account be issued reserve loss
#'000 #'000 #'000 #'000
At 1 January 2002 10,139 681 4,763 (20,865)
Shares to be issued - - 1,875 - -
acquisitions
Retained loss for the year - - - (1,363)
Loss on foreign currency - - - (39)
translation ------- ------- ------- --------
----------------
At 31 December 2002 10,139 2,556 4,763 (22,267)
---------------- ------- ------- ------- --------
As part consideration for the acquisition of Netfaresonline.com Inc in 2001, the
Group issued 3053787 Nova Scotia Limited Exchangeable Shares, which have been
included as World Travel Holdings plc shares to be issued. At 31 December 2002,
1,362,707 Exchangeable Shares had been exchanged (2001: 1,362,707) and there
remained a balance of #681,000 (2001: #681,000) within shares to be issued.
In consideration for the purchase of LeisureHunt.com Limited and Select Line,
the Group is to issue shares as follows:
(i) 70,000,000 shares in relation to the acquisition of LeisureHunt.com Limited.
(ii) 80,000,000 shares in relation to the acquisition of Select Line.
These shares were issued on 30 June 2003. The value of these shares has
therefore been included within shares to be issued above as the acquisition has
completed and the consideration was paid after the balance sheet date.
The capital reserve arises after applying the principles of merger accounting in
accordance with the basis of preparation (note 1b).
Company
Share
Premium Shares to Profit &
Account be issued loss
#'000 #'000 #'000
At 1 January 2002 10,139 681 (11,424)
Share issue - acquisitions - 1,875 -
Retained loss for the year - - (5,565)
---------------- ------- ------- -------
At 31 December 2002 10,139 2,556 (16,989)
---------------- ------- ------- -------
11. Reconciliation of movement in Group equity shareholders' deficit
2002 2001
#'000 #'000
Loss for the financial year (1,363) (12,616)
Other recognised losses relating to the year (net) (39) (40)
Conversion of shares to be issued - 647
Shares to be issued 1,875 3,781
Exchangeable shares to be issued - 681
Reversal of contingent consideration - (1,987)
-------------------- ------- -------
Net change in equity shareholders' deficit 473 (9,534)
Equity shareholders' deficit at 1 January 2002 (3,511) 6,023
-------------------- ------- -------
Equity shareholders' deficit at 31 December 2002 (3,038) (3,511)
-------------------- ------- -------
12. Reconciliation of operating loss to net cash flow from operating
activities
2002 2001
#'000 #'000
Operating loss (3,274) (12,250)
Depreciation charge 26 732
Goodwill impairment and amortisation 1,712 5,805
Impairment on fixed assets - 100
Decrease in debtors 1,403 841
Increase in creditors 501 74
(Decrease)/increase in provisions (801) 1,204
----------------- -------------------- --------
Net cash outflow from operating activities (433) (3,494)
----------------- -------------------- --------
13. Analysis and reconciliation of net debt
Disposals
At beginning excluding cash At end
of year Cash flow and overdrafts of year
#'000 #'000 #'000 #'000
Cash in hand, at bank 280 (200) - 80
Overdrafts (349) 349 - -
-----------
149
Finance leases (184) 9 175 -
Loan due in less than - (300) - (300)
one year
Loan stock due in more (787) - - (787)
than one year
------------- ------- ------- ------- --------
Total (1,040) (142) 175 (1,007)
------------- ------- ------- ------- --------
2002 2001
#'000 #'000
Increase/(decrease) in cash in the year 149 (2,495)
Cash outflow from decrease in lease financing 9 3
Cash (inflow) outflow from (increase) decrease in debt (300) 874
financing --------- --------
----------------------------
Change in net (debt)/funds resulting from cash flows (142) (1,618)
Loan stock acquired with subsidiary - (787)
Finance leases acquired with subsidiary - (140)
Finance leases disposed of with subsidiaries 175 -
New finance leases - (42)
---------------------------- --------- --------
Movement in net (debt)/funds in the year 33 (2,587)
Net (debt)/funds at 1 January (1,040) 1,547
---------------------------- --------- --------
Net debt at 31 December (1,007) (1,040)
---------------------------- --------- --------
Companies acquired in the year contributed #123,000 to the Group's operating
cash outflows, received #nil in respect of net returns on investment and
servicing of finance, paid #nil in respect of finance leases and utilised #nil
for capital expenditure.
14. Profit on disposal of discontinued operations
During the year and subsequent to year-end a number of entities within the World
Travel Group were liquidated. A gain of #2,030,000 was realised as the entities
disposed of had overall net third party liabilities of #2,030,000. This process
caused various movements in balance sheet accounts with no cash flow impact.
These are summarised as follows:
#'000
Tangible fixed assets 352
Debtors 607
Cash (net of overdrafts) (133)
Creditors (2,509)
Finance lease liabilities (175)
Provisions (172)
------------------------------- --------
Net liabilities, being gain realised on disposal of liquidated (2,030)
entities --------
-------------------------------
15. Post balance sheet events
On 6 February 2003, Travac USA, comprising Travac USA Inc and World Travel
Holdings Inc was placed into liquidation under the laws of the USA (see note 3).
During April 2003, certain creditors of the Group agreed to accept part payment
of amounts due to them in full settlement of amounts outstanding. It was agreed
that of a total balance of #858,000 payable by the Group as at 31 December 2002,
payment of #86,000 would be accepted as full and final settlement of this
amount.
On 16 April 2003, the Group disposed of Netfaresonline.com Inc. 100% of the
ordinary issued share capital of Netfaresonline.com Inc was sold for a total
consideration of #195,000, of which the Group realised #146,000 paid in cash.
On 5 July 2003, the Group reached a settlement with Sabre UK Marketing Limited.
This has resulted in the Group agreeing to pay #192,888 to Sabre UK Marketing
Limited in cash by 31 October 2003 in full and final settlement of the
outstanding dispute.
On 13 June 2003, the board resolved to place all remaining subsidiaries of the
Group into liquidation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UWUOROURWAAR