Turmoil in the travel industry has taken its toll on the British tour operator First Choice.

The company said profits before tax and financial charges for the year to late September were �79.6m ($50m), down 8.9% compared with the previous year.

The firm said the decline reflected deteriorating market conditions, describing the past year as one of the "toughest and most challenging" the travel industry had ever faced.

However, the company said forward bookings for winter and summer breaks next year had improved.

First Choice chief executive Peter Long added that the firm had maintained its profit margins by cutting costs.

City investors reacted cautiously, bidding First Choice shares up 3.5p to 102p in early trade.

Tourism woes

The global travel industry has been hit hard by a fall-off in lucrative long-haul holidays since the 11 September attacks, with many holidaymakers opting for short city breaks instead.

First Choice said recent market conditions had been the most challenging since the 1991 Gulf War.

Recent casualties have included First Choice's closest competitor MyTravel, which lost more than half its market value in October after warning that weak sales and accounting problems would dent profits.

There has been speculation that First Choice could try to buy out its enfeebled rival.

A takeover attempt would turn the tables on MyTravel, formerly known as Airtours, which tried to buy First Choice three years ago.

That bid was blocked on competition grounds by the European Commission, but the European Union's highest court has since ruled that the deal would not have breached EU competition rules after all.