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MYTRAVEL is to cut capacity next year by up to 25%, invest in its Going Places network and extend its specialist businesses portfolio.

Announcing full-year results, group chief executive Peter McHugh said capacity would continue to be cut "to bring it in line with demand for brochured holidays".

Meanwhile, McHugh hinted at a move into dynamic packaging, achieving "greater flexibility" by aligning product "more closely to changing market requirements" and increasing online sales.

Investment in Going Places will aim to improve the shopping experience and update store interiors. McHugh refused to reveal how much would be spent but said there were no plans to reduce the size of the 650-shop network.

At the same time MyTravel plans to increase online sales and has invested £2 million this year on upgrading websites.

The specialist portfolio will be expanded, following the launch of cruise retail business the Cruise Store. McHugh refused to reveal details but said "we are looking to do more in that area".

The group posted an operating profit of £8.3 million for the 12 months to the end of September, but an operating loss of £17.5 million for the 13 months to October 31 2004 – the new end of its financial year.

Losses before tax for the 13 months to October 31 2004 have been to reduced to £190.3 million from £910.9 million in 2003.

McHugh said the UK performance is improving "but there is still much work to be done". He predicted the operator would make "industry-standard margins of 3.5%" in 2007.

• The High Court will rule on Monday whether MyTravel’s £800 million debt-for-equity swap deal can go ahead. Shareholders and creditors have backed the deal but bondholders, who receive 2% of the stock in return for their £216 million bonds, hope to block the move.

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