Increased costs puts brake on Shearings’ earnings

COACH & holidays company Shearings has said that it achieved a 3.5% increase in sales in 2011, driven by continued growth in customer numbers despite challenging market condition.

However, the firm’s earnings more than halved, with EBITDA dropping to £4.6m, compared with £9.4m in 2012.

The Wigan-based company said the drop in profits was due to a “strategic” decision to absorb short-term costs in order to keep growing customer numbers, which increased by 22% in its value brands division offering coach holidays and by 3% in its hotels market.

It said many of its customers, which include a large proportion of mature travellers, had less discretionary spend due to higher inflation and falling income from savings due to record low interest rates.

It also said that it spent £4.2m upgrading its hotels, but still managed to reduce net debt by £15.1m by its year end.

Looking ahead, the company said several new product launches, including its Diamond Jubilee Celebration cruise around the British Isles, had performed strongly and that like-for-like bookings during 2012 were 4% ahead of last year, but cautioned that uncertainty amongst its customer demographic would continue to provide a challenging sales environment.

Chief executive Denis Wormwell said: “Throughout last year, our customers encountered some fierce economic headwinds, which undoubtedly affected their willingness and ability to spend.

He added: “Our strategy of absorbing the majority of short-term cost increases experienced during 2011 ensured we increased customer volumes, while we continued to invest in across business and pay down debt.

“As a result, margins reduced in line with expectations. Further sales initiatives and cost reductions are underway, which we expect will improve the full year position for 2012.