Shearings saw its profits almost halve from £9.4 million to £4.6 million in 2011 as customers faced “fierce economic headwinds”.
The company said many of its customers, which include a large proportion of mature travellers, had been hit particularly hard by a “triple whammy” of rising prices due to higher inflation, falling income from savings due to record low interest rates and generally weak confidence levels, causing many to rein in spending on discretionary purchases.
Pressure in margins hit the escorted tours specialist, although its value brands saw passenger numbers rise by 22% and by 3% in its hotels division.
Overall revenues rose by 3.5% to £193.7 million for the year to December.
The company said summer 2012 bookings are ahead of this time last year by 4% helped by the Queen’s Diamond Jubilee and national tourist board promotions designed to encourage domestic holidays.
But Shearings cautioned that uncertainty amongst its customer demographic would continue to provide a challenging sales environment.
The Wigan-based group said its value-focused brands National Holidays and Caledonian Travel, where customer numbers increased 22%, had made a particularly strong contribution to overall growth last year.
It cited National Holidays’ new entertainment-led short break programme, Showtime, as a star performer, having sold 40,000 holidays in its first year.
Shearings’ 50-strong hotel portfolio, operating under the Bay and Coast & Country brands, also improved sales by 3%, selling 2 million bed nights during the period and increasing its occupancy rate to 81.9%. Facilities and rooms across the estate were further upgraded during 2011 as part of a wider £4.2 million investment programme.
The company, which provides UK and overseas holidays by coach, air and rail, as well as ocean and river cruises, described the performance of its operations as “resilient” in the face of challenging conditions.
Shearings, which operates a fleet of 260 coaches, said rising prices – including fuel, utilities, food and inflation-adjusted costs such as property rental – had impacted on its margins during the first half of last year. It absorbed in full the government-imposed VAT increase of 2.5% to protect its customers from price increases.
The downward pressure on margins had started to reverse in the latter half thanks to a number of on-going profit improvement programmes, the company said.
Chief executive Denis Wormwell said: “Throughout last year, our customers encountered some fierce economic headwinds, which undoubtedly affected their willingness and ability to spend.
“Despite this, our brands showed continued resilience, thanks to a combination of further investment in product, a strong focus on value and the enduring appeal of escorted tours and holiday breaks to our target customer group.
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.
“With a market leading position as the number one escorted tour operator and a leading leisure hotel operator in the UK, an increased customer base of loyal holidaymakers and our strongest-ever line up of products, we’re in a strong position to capitalise as conditions improve.”
Debt was reduced by £2 million in 2011 to £15.1 million.
Looking ahead, the company said several new product launches, including its Diamond Jubilee Celebration cruise around the British Isles, had performed strongly.
It has also extended its 2012 programme to include new destinations such as Morocco, Cambodia, Egypt, Australia and New Zealand, as well as expanding its collection of Grand Tourer luxury holidays.
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