investor day caythorpe park 28 th september 2007 l.
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Investor Day Caythorpe Park 28 th September 2007

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  1. Investor Day Caythorpe Park 28th September 2007

  2. INVESTOR DAY PRESENTATION • Corporate Overview – Carl Michel • Education (PGL) – Martin Davies • Q&A • Hotel Breaks – Nick Cust / Mark Wray • Q&A • Adventure – Simon Tobin • Q&A • Camping – Steve Whitfield • Q&A

  3. Corporate Overview

  4. STRATEGIC GOALS • Build on core competences: leverage synergies • Develop a multi-path approach • Pursue sustainable faster growth • Secure strong positions in higher margin businesses • Diversify sales mix

  5. PRO FORMA DIVISIONAL SPLIT* Turnover (£m) Operating profit before exceptional items (£m) Before After * Based on: Holidaybreak FY results to 30 September 2006; PGL 12 months to 22 February 2007.

  6. MARKET TRENDS • Consolidation amongst major tour operators • Thomas Cook and TUI Travel now listed on FTSE • Will lead to only modest pruning of retail estates • Ability to control margins still to be tested • Online growth slowing down • Consumers more ‘savvy’; prefer building trust-based relationships • Affiliates being squeezed • HMG really pushing the Outdoor Learning agenda • Fragmentation of tastes throws up new niche opportunities • Green lobby and political responses will become much more prevalent for wider tourism market

  7. Education (PGL)

  8. OVERVIEW • PGL operates in three areas • Outdoor education and adventure for schools • School Tours • School Ski Trips • Market • High Margins • A market-leading position • Very high barriers to entry • Strong demand conditions • Under supply • Visible income

  9. OUR MARKETS Outdoor Education and Adventure • PGL is the clear market leader in this sector • PGL operates predominantly at the Key Stage Two level for 8 – 12 year olds • Estimated market growth of c. 7% over from 2005 - 2010 • In excess of 800 registered operators in the outdoor sector. Over 60% are not for profit (i.e. LEAs) Competition Size Drivers • Market historically dominated by LEAs • Funding pressure and teacher expectations means LEA provision is decreasing • Administration and fear of litigation means teachers are less willing to organise • Experienced commercial providers sought • Brand recognition and values important • Demand at peak outstrips supply • Government support for outdoor learning • Other operators: - Acorn - Travelclass - Kingswood - NST - Manor Adv. • The market is also served by 99 LEA centres • In addition there are a further 50 registered centres usually run and managed by the owner

  10. OUR MARKETS School Tours • Market trend of more foreign travel • Core age range – 11 – 16 years • Majority of operators in this sector are growing at c. 3% per annum • Static real growth Competition Size Drivers • Risk management and government approval issues impacting the outdoor education market also apply • Admin / risk management costs will drive business towards the larger, more professional operators • Brand awareness and trust is key • Barriers to entry will become even higher • PGL sees an opportunity to professionalise the market, taking share from smaller operators and DIY • Other operators include NST and STS • Further consolidation would offer larger players scale and more comprehensive product ranges

  11. OUR MARKETS Ski • The market has been in decline since the late 1980s • The majority of LEAs do not see the educational benefits of such trips, hence the industry is focused on school holiday periods • Opportunity to reposition as an educational product Competition Size Drivers • Due to the declining nature of the market, PGL’s strategy is to increase market share and build margin • STG • Ski bound • 4 other mid size operators • There are also numerous other smaller players and DIY comprising the remainder of market supply

  12. GROWTH STRATEGY Acquisitions Refurbishment Optimal strategy Organic growth • Investment in facilities and infrastructure to extend market position and potentially improve margins • Increase size of business to match PGL reputation • Developing second tier management and potentially acquire additional expertise • Understanding opportunities in the marketplace • Known acquisition targets • Identify additional sites • Develop range of services and customer relationships

  13. GROWTH STRATEGY Increase capacity • Acquisition • Increase capacity of existing sites • Partner sites Maximise gross margin • Concentrate on 500+ centres • Migrate customers to new, larger centres • Premium price at peak • Improve off peak and shoulder fill • Improve facilities to raise tariffs • Maximise on site income Grow school tours and ski market share • Acquisition • Capture share from DIY market • NPD • Grow centre based accommodation

  14. GROWTH STRATEGY Develop holidays business • New product development • Build infrastructure to cater for growing family market • Group partnerships • Consumer marketing investment Maintain, influence compliance and credibility • Lead BAHA’s influence • Ensure PGL is in vanguard of all LEA and DFES groups and working parties Recycle property asset base • Sell underperforming assets • Sell non trading property

  15. RATIONALE FOR ACQUISITIONS Consolidation • PGL currently focuses on UK residential centres for key stage 2 (8-12) • “Winners” will provide out of classroom products for wide age range PGL Brand • Opportunity to increase the size of the business to match reputation Synergies • Potential benefits in overhead reduction, market pricing, market segmentation, gross margin People • Chance to develop second tier management and acquire additional expertise Strategic Partnerships • To meet all schools residential out of classroom learning needs • Potential for investment in partnership for long term stability Broadening of brand proposition • A significant school tours business will deliver a core of 12-18yr olds Economic Model • A significant tours operation will generate cash during winter

  16. SUMMARY • Profitable and cash generative business • Established market leader • Generic brand • Growth markets • Superb reputation • Loyal customer base with significant repeat revenues • Visible income • Consolidation platform • Quality asset backing including strong freehold property • Management team with a record of success • Opportunity to grow

  17. Q&A

  18. Hotel Breaks

  19. OVERVIEW • Wide distribution platform: Market Overview *Superbreak - 40% online - 35% online - 60% agent / telephone - 65% agent / telephone * Source – The Listening Company (methods of booking foreign travel) • Maintaining gross margins / good relationships • Distancing ourselves from ‘bed banks’ • Adding ‘unique’ product to package with hotels • Changing product mix • Packaged content increased from 27% (05/06) to 40%+ (06/07) • Purchase of West End Theatre Bookings • Rail initiatives • New Web Content team (includes non hotel contractors)

  20. INTERNATIONAL Overseas hotels • Expansion of hotel product: 2,400 → 4,000 • Challenges • Traditional cities (e.g. Prague) • Margin erosion and commitments on Beach • Appeal to UK travel agents • Expansion of medium/long haul destinations • Introduction of transfers – Autumn 2007 • Continued focus on packages (ex air) • A balance for UK events + circumstances Bookit • Expansion of hotel product: Hotelletje • Integration of websites through Weekendjeweg.nl • Expansion beyond Benelux (Citytripper) • Bungalows • Expansion in South of France • Other hard walled accommodation • Vouchers • Own photographic imagery

  21. GROWTH PROSPECTS • IT investment • More stable technical platform – migration of mainframe in late 2008 • New website design; holiday reviews; theatre video streaming; voucher redemption • Content Management System • Own photographic imagery and video • Differentiation of web offering complementing product • Superbreak becoming more defensible • Bookit – product creation (15% of Dutch households) • West End Theatre • More packaging • Better margin • Ongoing review of acquisition opportunities • Embassy / Highlife • West End Theatre

  22. Q&A

  23. Adventure

  24. OVERVIEW Travel experiences for individuals and groups • Expanding portfolio • Value added: hard to recreate individually • Consumers: on trend, altruistic, experience seeking, ‘middle youth’ • Industry structure: fragmented, highly competitive, high knowledge requirement, high margin/costs • Flexible product dimension: ‘open’ and ‘closed’ groups. small groups, individuals and families • Business characteristics: low fixed costs, minimum commitments, constant innovation

  25. BRANDS AND PRODUCTS EXPLORE! • Worldwide, Family Adventures, Cycling, Beyond, School Adventures, Short Breaks, Special Interest • InStyle, Rail journey, Antarctic and Expedition cruising DJOSER nl • Worldwide, Family Adventures (Junior), Walking and Cycling, Special Interest THE TRAVELPLUS GROUP • Carpe Diem: Language Travel • Travelworks: Work & Travel, Volunteer, Internships and high school placements REGAL • Diving Red Sea and Worldwide, Shore and Liveaboards

  26. BUSINESS MIX AND MARKET Adventure small groups • Family Adventures +20%; Cycling +40%; Special Interest doubles; Antarctic & rail journeys grow Destination mix alters annually • Middle East & Egypt affected; Europe softens; South America, North & Central Asia, South & West Africa grows Learning, volunteer work & gap travel • Sector seeing strong growth in UK and European markets Market trends • Overseas holidays to grow 16% from 2006 – 2012 • Long haul to reach 10.8m holidays by 2011 (+29%) • 41% of adult population will be single in 2011 • Fastest growth in Independent Holidays • Technology creates a changing consumer mindset • ‘Middle Youth’ not ‘Middle Age’ • Green Issues – carbon offsetting, conservation, eco-awareness • APD – despite increase, air travel has never been cheaper • Luxury market grows – quality and authenticity, active days and comfortable nights

  27. GROWTH PROSPECTS • Organic initiatives • Djoser brand across N. Europe • New and continuing product development in Special Interest sectors • Travelworks (work & volunteer travel) to launch in Austria • Schools Adventures expands: potential to work with PGL • New distribution opportunities: Spirit of Adventure, Habitat for Humanity • Explore to launch ‘Independent’ holiday proposition in 2008 • Acquisitions • Opportunities exist for consolidation in markets and in specialist sectors • Targets in Europe to enhance existing distribution / add new product or expertise • Macro trends support growth • Fragmented sector – consolidation opportunities • Geopolitical events / natural disasters can have short term effect • Leverage sector market leadership in UK and Northern Europe • Real opportunities for cross-marketing of products across the group. • Flexible model allows for innovation and speed of response • Investment in technology and in house travel expertise

  28. Q&A

  29. Camping

  30. OVERVIEW Eurocamp and Keycamp • Market leading brands • Quality product with flexibility and choice • High satisfaction levels and loyalty • Strong pan-European sales and marketing • Large segmented databases • Disciplined capacity planning and yield management Eurocamp Independent • Pitch and ferry reservation service • Acquisition of Select Sites (Oct 1st) Easycamp • Value based holidays in site owned Mobile Homes • Low risk model well placed for growth Own a Holiday Home • Sales of Mobile Homes for residential use in France • Leverage customer databases and brand strength

  31. CHANGING PRODUCT MIX • Regional trends • Annual review of demand profile • Flexibility to respond • Tents in decline (10%-20% p.a.) • Operational flexibility within the season • Mobile Home capacity now broadly in line with market demand • Over 8000 Mobile Homes • Choice of styles and sizes • Look and feel of different models • Increase in larger, more luxurious Mobile Homes • Decking and air conditioning • Quality • Important for repeats and recommendations • Justifies price premiums • Disposal considerations • Stable capacity • 1000 replacements = ~ £10m net Capital Expenditure

  32. PROSPECTS • New destinations • New accommodation types • Adding value • Children’s Courier services • Soccer Service • Activity services • Exploiting PGL synergies • Activity product for camping in 2008 • Purchasing • Recruitment • Managing stable core business • Cash generative with strong profits, high margins and excellent return on capital • Maintaining market leading position • Invest in new accommodation • Exploit technology to access new customers and drive down selling cost • Innovate and develop new product options

  33. Q&A