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Investor Workshop. 17 September 2004. THE STRATEGIC CHALLENGE. Trading Environment changing rapidly Performance of Holidaybreak and business portfolio Outlook for 2005 Longer term prospects and strategy. HOLIDAY BREAK DEFINED. Travel sector. Balanced portfolio of specialist

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Investor Workshop

17 September 2004

the strategic challenge
THE STRATEGIC CHALLENGE
  • Trading Environment changing rapidly
  • Performance of Holidaybreak and business portfolio
  • Outlook for 2005
  • Longer term prospects and strategy
holiday break defined
HOLIDAYBREAK DEFINED

Travel sector

Balanced portfolio of

specialist

holiday businesses

Decentralised structure

HOLIDAYBREAK

Primarily UK market basedbut European aspirations

trading environment
TRADING ENVIRONMENT
  • Demographics
  • Socio-Economic trends
  • Travel Industry – structural upheaval
  • Travel Consumer trends
demographics
DEMOGRAPHICS

More Middle Aged and Older People

Fewer YoungerFamilies

Smaller FamilyUnits

DEMOGRAPHICS

More OneParent Households

More Divorces/Children from Different Marriages

key socio economic trends
KEY SOCIO-ECONOMIC TRENDS

Increasing disposableincome/spend on leisure

SOCIAL & ECONOMICCHANGES

Increasing ‘grey’ consumer power

Changing patterns of work - Work more intensive but more short span leisure opportunities

- More women in employment

Increase in pace/pressure of modern living

expenditure on travel
EXPENDITURE ON TRAVEL

Source: Mintel (2003)

key socio economic trends8
KEY SOCIO-ECONOMIC TRENDS

Increasing disposableincome/spend on leisure

SOCIAL & ECONOMICCHANGES

Increasing ‘grey’ consumer power

Changing patterns of work - Work more intensive but more short span leisure opportunities

- More women in employment

Increase in pace/pressure of modern living

time pressure
TIME PRESSURE

Source: The Henley Centre: Planning for Consumer Change, 1991 - 2000

travel industry structural changes
TRAVEL INDUSTRY STRUCTURAL CHANGES

High Street Travel

Agents

No Frills Airlines

Above the line more fragmented and less cost effective

More Channels

Internet

DistributionFragmenting

PackagesUnbundling

Sector lessProfitable

TRAVEL INDUSTRYCHANGE

Decline of GlobalVertically IntegratedOperators

travel industry consumer change
TRAVEL INDUSTRY CONSUMER CHANGE

More Frequent,Shorter Holidays

More Independent andTailor Made Travel

Later Bookings/Shorter Lead Times

TRAVEL CONSUMERTRENDS

Competing for share

of time as wellas share of wallet

multiple holiday taking
MULTIPLE HOLIDAY TAKING

“ Holidaymakers are taking fewer two-week summer breaks than ever, according to one of the country’s largest travel agencies.

“ The Co-operative Travel Trading Group has found that bookings for fortnight-long holidays are 10 per cent down this summer, with people taking week-long breaks so they can afford two or three weekend escapes at other times of the year.”

TIMES : 20/8/04

travel industry consumer change14
TRAVEL INDUSTRY CONSUMER CHANGE

More Frequent,Shorter Holidays

More Independent andTailor Made Travel

Later Bookings/Shorter Lead Times

TRAVEL CONSUMERTRENDS

Competing for share

of time as wellas share of wallet

inclusive vs independent
INCLUSIVE VS INDEPENDENT

Source: Mintel (2003)

travel sector growth markets
TRAVEL SECTOR GROWTH MARKETS

TRAVEL MARKET

DOMESTIC HOLIDAYS

- Up 21% (1991-2003)

- 64% short breaks and share growing

- 2002/3 strong years post FMD, 9/11, Iraq war etc

OVERSEAS

- Up 103% (1991-2003)

- 15% short breaks and share growing

- Still grew (at lower rates) in 2002/3

GROWTH AREAS

- Grey market

- Activity/special interest

- Cruise- Overseas property ownership- VFR

activity holidays abroad
ACTIVITY HOLIDAYS ABROAD

m

Source: Mintel (2003)

holiday break plc performance and business portfolio
HOLIDAYBREAK PLCPERFORMANCE AND BUSINESS PORTFOLIO
  • Consistent earnings growth and cash generation
  • Rapid growth of Hotel Breaks means business portfolio more balanced
  • Three high quality businesses well placed to benefit from changing travel sector environment
  • Very different products and business models
  • Important common qualities and shared characteristics
three business types hotel breaks
THREE BUSINESS TYPES HOTEL BREAKS

Agents

Customer

Ancillaries

SUPERBREAK- Efficient cost distribution at reasonable yields for suppliers - High service levels, convenience and value for customers and agents

Accommodation

VALUE ADDED DISTRIBUTION

three business models adventure
THREE BUSINESS MODELS ADVENTURE

Accommodation

Tour Content

Transport

Customers

  • EXPLORE
  • - Tour origination and operation
  • - High value added
  • Very difficult for DIY
  • customer to replicate

CLASSIC TOUR OPERATING MODEL

three business types camping
THREE BUSINESS TYPESCAMPING

Transport Operators

Camp-sites

Customers

Equipment Suppliers

  • EUROCAMP/KEYCAMP- On site service
  • Accommodation
  • Access to best sites
  • Strongly branded
  • Effective distribution

HYBRID MODEL – PART TOUR OPERATOR, PART PRINCIPAL

holiday break businesses common qualities shared characteristics
HOLIDAYBREAK BUSINESSESCOMMON QUALITIES & SHARED CHARACTERISTICS
  • Strong management teams – focus and commitment
  • Market leading brands
  • Service and product quality
  • Healthy margins
  • Cash generation
  • Resilience
eps growth
EPS* GROWTH

Pence

+4.5%

+11.6%

+12.0%

+16.0%

+9.3%

* Before goodwill amortisation, impairment and exceptional operating costs

operating cash generation
OPERATING CASH GENERATION

Operating cash generation after capex but before interest, dividends, tax and acquisitions

outlook for 2005
OUTLOOK FOR 2005
  • Macro-economy
  • Reversal of trend to UK holidays (weather!)
  • Hotel Breaks and Adventure have strong momentum and are well placed to benefit from travel sector trends
  • Camping has purpose, direction and leadership - sector developments give opportunities
  • Positive start to 2005 booking campaigns
strategic direction
STRATEGIC DIRECTION
  • Holidaybreak = portfolio of specialist travel businesses not otherwise available to investors in quoted businesses
  • Maximising potential and value of existing businesses an imperative
  • Further acquisitions a possibility
  • Must continue to add value for customers, suppliers and shareholders
  • Targetting further growth andcontinued cash generation
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