MyTravel in danger after third warning

£232m wiped off value of UK's biggest tour operator after more accounting errors found

SHARES IN MyTravel, Britain's biggest tour operator, plunged more than 60 per cent yesterday after it stunned the City by issuing its third profits warning in five months, axing its dividend and admitting that there were problems with its accounts.

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Shares in MyTravel, Britain's biggest tour operator, plunged more than 60 per cent yesterday after it stunned the City by issuing its third profits warning in five months, axing its dividend and admitting that there were problems with its accounts.

The group, better known as Airtours, saw £232m wiped from its market capitalisation as its share price collapsed by 47p to 28.5p. It blamed yesterday's warning, the second in two weeks, on a combination of accounting errors and dismal trading in September. This prompted analysts to slash their forecasts for the year just ended by nearly two-thirds to about £35m from £90m.

Analysts said MyTravel risked losing all credibility with holidaymakers as well as with the City. "People just won't want to book with this company," Jamie Rollo, at Morgan Stanley, said.

The group, which ousted its chief executive, Tim Byrne, last week, said £12m of the profits shortfall was caused by management overestimating holiday sales in September. This in turn was compounded by the introduction of a new computer system last year. In addition, MyTravel said a further downgrade of £8m related to "a problem with reconciling the UK accounts".

The group also said it had "identified amounts representing potential revisions to accounting estimates which are initially estimated in the range £15m to £30m". These additional amounts, which are expected to be non-recurring, non-cash items may lead to a further downgrade, it added.

"After the last profits warning, the company wanted to draw a line in the sand regarding its accounts so it decided to move to more conservative procedures. The board now felt it could be more prudent to the tune of £50m," a spokesperson said.

While the company insisted that it was not in danger of breaching banking covenants, analysts were less sure, pointing to interest cover of just over one times. Net debt, which was £20m last September is estimated to have risen to £152m.

In addition, MyTravel is in the middle of crucial negotiations to refinance its debt. Banking sources said the group had postponed its £250m syndicated loan. It matures next March, by which time the banks will have a better idea of where MyTravel stands. The group is also paying off a £250m convertible bond due for repayment by January 2004.

David Crossland, the group's founder and chairman who had intended to retire next month, said he had "instigated a comprehensive review of our commercial activities and financial processes". This was being done in conjunction with the group's finance director, David Jardine, who has so far resisted shareholder calls for him to step down. Mr Jardine, a former Andersen partner, has been with the group since March 2000.

Mr Crossland also said the group was looking into "a number of enquiries" about the possible disposal of non-core assets, which could fetch up to £80m. The group could also realise up to £100m through sale-and-leaseback deals on some of its hotels.

MyTravel said Mr Byrne had been replaced by Peter McHugh, who previously headed the group's North American operations. Mr McHugh, though a leisure industry veteran, has only been with MyTravel since April 2000.