RNS Number:8077J
TUI Travel PLC
13 December 2007
13 December 2007
TUI TRAVEL PLC
RELEASE OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
Highlights
* Merger of First Choice Holidays PLC and the tourism businesses of TUI
AG successfully completed on 3 September 2007
* 100 day strategic review is progressing well and the integration of
the two leading UK franchises remains on track
* Current trading remains strong with the outlook encouraging for both
Winter 2007/08 and Summer 2008 programmes; UK Mainstream revenues up 5% for
Winter and up 11% for Summer
* Pro forma underlying operating profit up 5% at �287m (2006: �274m)
which compares to a market consensus for September 2007 of �277m
* The Specialist sectors delivered 36% growth in underlying operating
profit to �129m (2006: �95m) while Mainstream profitability as anticipated is
down 12% to �162m (2006: �183m) due to cost and yield pressures in the UK and
Germany
* Acquisition of seventeen niche high growth specialist businesses for a
maximum total consideration of �227m (2006: sixteen acquisitions for maximum
consideration of �160m); the acquisition pipeline remains strong
* Based on the current outlook, the Board remains confident that it will
meet its expectations for the year ended 30 September 2008
* Interim dividend of 5.9p per share recommended for 2007
* Investor day scheduled for 29 January 2008
Peter Long, Chief Executive Officer of TUI Travel PLC, commented
"As we approach the key booking period for both Winter and Summer 2008, we are
encouraged by our performance to date and the ongoing level of demand for our
portfolio of package and specialist holidays. The integration programme
continues to advance as planned, with excellent progress made in the UK and
across other businesses. We are confident that the combination of organic and
acquisition led growth, coupled with the synergy benefits arising from
integration, will deliver superior returns for our shareholders. Furthermore,
by delivering both underlying growth and synergies, we are building a platform
from which we can deliver sustainable long-term earnings and margin growth."
Change of Year End
Following the creation, on 3 September 2007, of TUI Travel PLC via the merger of
First Choice Holidays PLC and the tourism businesses of TUI AG ("TUI Tourism"),
we now provide pro forma financial information for the new Group. This
information is provided in order to reflect the change in financial year-end of
all TUI Travel PLC's businesses. First Choice Holidays PLC and its subsidiaries
("First Choice") have moved from a 31 October to a 30 September year-end and TUI
Tourism has changed its year-end from 31 December to 30 September.
As previously highlighted, pro forma financial information provided when the
merger was announced on 19 March, and financial information provided in the
prospectus, published on 29 June, was based on a simple aggregation of these
businesses' previous October and December year-ends. Accordingly, by combining
existing forecasts for First Choice to October 2007 and TUI Tourism to December
2007 the market arrived at a consensus of �317m.
The effect of changing the year-end for TUI Travel PLC to September reduces 2007
underlying operating profit by an estimated �30m to a pro forma underlying
operating profit of �287m for the year ended 2007 (2006: �274m).
The year-end harmonisation adjustment is primarily as a result of excluding the
relevant months from the final calendar year quarter for 2007 for both
businesses and replacing them with months from the final calendar year quarter
for 2006 as follows:
Impact of change of year-end on 2007
First Choice TUI Tourism EBITA
Previous Year-end 31 Oct 07 31 Dec 07 �317m Market
consensus
Harmonisation adjustment
Deduct month(s) in Q4 2007 (Oct 07) (Oct 07)
(Nov 07)
(Dec 07) (�30m) Net impact
Add month(s) in Q4 2006 Oct 06 Oct 06
Nov 06
Dec 06
New Year-end 30 Sept 07 30 Sept 07 �287m Pro forma
This �30m reduction has principally arisen because the TUI Tourism Q4 2006
result is significantly weaker than the consensus forecast Q4 2007 performance,
with the improvement primarily driven by the benefits from the TUI AG
restructuring programme announced in December 2006, which are being realised in
Q4 2007.
Financial Highlights
* Pro forma underlying operating profit up 5% at �287m (2006: �274m)
* Pro forma underlying operating margin flat year-on-year at 2.2%
* Pro forma underlying operating profit includes profit on the sale and
leaseback of aircraft of �15m in 2007 and �20m in 2006. Excluding these gains
results in underlying operating profit of �272m (2006: �254m). To the extent
that profits of this nature arise from the asset management of aircraft in
future periods, they will not be included in underlying operating profit.
* Pro forma underlying earnings per share of 16.0p (2006: 15.7p)
Underlying Pro forma(1) results Pro forma results
�m FY07 FY06 Change FY07 FY06
Revenue 12,840 12,180 +5% 12,840 12,180
Operating profit/(loss) 287 274 +5% 56 (243)
Profit/(loss) before tax 249 248 = 18 (269)
Basic EPS 16.0p 15.7p +2% 0.6p (34.3)p
(1) The Group believes that underlying operating profit, underlying profit
before tax and underlying earnings per share provide additional guidance to the
pro forma measures on the underlying performance of the business during the
financial year. Underlying profit before tax and underlying operating profit
exclude separately disclosed items, amortisation of business combination
intangibles, impairment of goodwill and taxation of profits of the Group's joint
venture and associate. Underlying earnings exclude the same items net of tax
and minority interests
Detailed commentary on these results is included in the Business and Financial
Review of this release but the highlights are as follows:
* As anticipated, Mainstream underlying operating profit was down 12% to
�162m (2006: �183m) primarily as a result of significant cost pressures in the
UK (Air Passenger Duty ("APD") and fuel) that were not fully recovered from
the customer and yield pressures in early Summer trading in the German market.
The Nordics business delivered an excellent performance while Western Europe
delivered an �18m turnaround in pro forma underlying earnings.
* The Specialist sectors' pro forma underlying operating profit
increased by �34m (up 36%) to �129m (2006: �95m).
* Acquisitions of niche specialist businesses with a maximum
consideration of �227m were made during the year (�151m cash paid during the
year) with the acquisition pipeline remaining strong.
* Separately disclosed items of �173.8m (2006: �33.7m), further details
of which are given in Note 4 of the pro forma financial information.
Current Trading
Since the trading update announced on 8 November, the Winter 2007/08 season has
continued to trade well with customer demand for both package and specialist
holidays encouraging. For Summer 2008, early indications are also positive, even
though in a number of our source markets, brochures have only just gone on sale.
Winter 2007/08
Trading for the Winter programmes has continued to track in line with our
expectations, with all businesses now in the peak selling period for the season.
As anticipated there has been a slight slowdown in the rate of sale over the
last few weeks as a result of the exceptionally strong start to the season.
However, most importantly, load factors are still ahead of the prior year in all
key source markets.
Current Trading (1)
Winter 2007/08
y-o-y variation% Sales Customers Capacity
MAINSTREAM
Northern Europe
First Choice UK
Short-haul -3 -7 -22
Medium-haul +19 +9 -10
Long-haul +20 +14 +2
First Choice UK +17 +8 -10
TUI UK
Short-haul -15 -28 -30
Medium-haul +19 +9 +3
Long-haul -7 -17 -17
TUI UK +1 -9 -11
UK Mainstream - Total +5 -5 -11
TUI - Nordic +16 +12 +12
Northern Europe - Total +9 -1 -7
Central Europe
TUI - Germany +7 +9 -
TUI - Austria -7 -4 -
TUI - Switzerland +22 +21 -
TUI Central Europe - Total +8 +10 +2
Western Europe
TUI - France +2 -7 -
TUI - Belgium +11 +14 +10
TUI - Netherlands +17 +8 -3
TUI Western Europe +8 +2 +3
SPECIALIST +2 +2
ACTIVITY +7 n/a
ODS +55 +36
(1) These statistics are up to 2 December 2007
UK Mainstream trading remains strong with total sales up 5% on 5% lower volumes.
As we previously announced, we have significantly reduced capacity within the
short-haul segment within both brands, down by 30% in Thomson and down by 22% in
First Choice, as we continue to reduce our participation in the short-haul
segment, and primarily in the loss-making scheduled "city pair" routes operated
by Thomsonfly. Sales in TUI UK are 15% lower in short haul on lower volumes of
28%. Within First Choice, both medium haul and long haul continue to trade well
with sales up 19% and 20% on higher volumes of 9% and 14% respectively, as
consumer demand for Egypt, Cuba and Mexico remains strong. For the total UK
programme, the load factor is four percentage points further sold than last
year, with margins tracking ahead.
The Nordic region has continued to benefit from the expansion of the higher
margin long haul programme, where capacity is up 12%. Consumer demand for long
haul destinations, such as Thailand, has driven sales growth of 16% on 12%
higher volumes, with margins also ahead of last year.
In both Central Europe and Western Europe, demand is encouraging with sales up
8% in each region on capacity that is marginally up.
In the specialist sectors, Canada has continued to trade satisfactorily in a
very difficult competitive environment, while demand for Activity Holidays and
Online Destination Services has driven excellent growth with sales up 7% and 55%
respectively.
Summer 2008
Current Trading (1)
Summer 2008
y-o-y variation% Sales Customers Capacity
MAINSTREAM
Northern Europe
First Choice UK
Short-haul +12 +6 -9
Medium-haul +34 +22 -
Long-haul +12 +12 -
First Choice UK +21 +15 -3
TUI UK
Short-haul -4 -13 -30
Medium-haul +20 +13 -6
Long-haul - - +8
TUI UK +4 -3 -19
UK Mainstream - Total +11 +4 -14
TUI - Nordic +14 +9 +4
Northern Europe - Total +11 +4 -11
Central Europe
TUI - Germany +9 +9 -
TUI - Austria -22 -20 -
TUI - Switzerland +61 +61 -
TUI Central Europe - Total +8 +9 -14
Western Europe
TUI - France +23 +25 -
TUI - Belgium +22 +33 -
TUI - Netherlands (2) n/a n/a -
TUI Western Europe +23 +29 +5
SPECIALIST +13 +21
ACTIVITY +11 n/a
ODS +63 +53
(1) These statistics are up to 2 December 2007
(2) The TUI Netherlands Summer 2008 programme has just gone on sale and bookings are still in
early stages
Even though it remains very early in the booking cycle for Summer 2008, we are
pleased with trading to date.
Since the last trading update in early November, trading in the UK has continued
to track in line with our expectations. As a result, load factors are four
percentage points ahead of last year with the First Choice programme up four
percentage points and the Thomson programme three percentage points ahead. As
previously announced, we have scaled back significantly our short haul flying
programme with total capacity down 25%, including a reduction of 30% in
Thomson's short haul capacity. As a consequence, sales are down 4% on 13% lower
volumes.
The Nordic region summer programme continues to perform strongly with sales
growth of 14% on higher volumes of 9%. The programme is now one percentage point
further sold than last year, and despite ongoing cost pressures (primarily
fuel), margins are ahead of last year.
In Central Europe and Western Europe, bookings for Summer 2008 have only
recently gone on sale, but in early trading we are pleased with the promising
start. Sales are up 8% and 23% respectively.
Outlook
As we enter the key booking period for both Winter and Summer 2008, we are
encouraged by our performance to date and the ongoing level of demand for our
portfolio of package and specialist holidays.
The integration programme continues to progress as planned, with excellent
progress being made in the UK and across a number of other business lines. Based
on the current outlook, the Board remains confident that it will meet its
expectations for the current TUI Travel PLC financial period ending 30 September
2008.
We firmly believe that the combination of organic and acquisition led growth,
coupled with the synergy benefits arising from integration, will deliver
superior returns for our shareholders. Furthermore, by achieving both growth
and synergies, we are building a platform from which we can deliver sustainable
long-term earnings and margin growth.
Conference Call
A conference call for analysts will take place today at 9-00am (GMT). The
dial-in arrangements for the call are as follows:
Telephone: +44 (0) 1452 555 566
Participant Code: 27813713
A presentation to accompany the conference call will be made available via our
corporate website at 8-00 am (GMT). Please use the link below to access the
slides:
http://www.tuitravelplc.com/tuitravel/investors/presentations/
Please contact Kerry Gleeson (TUI Travel PLC Corporate Communications) on +44
(0)1293 645773 if you have any difficulty accessing either the conference call
or supporting presentation.
A recording of the conference call will be available until 3 January 2008 on:
Telephone: +44 (0) 1452 550 000
Participant Code: 27813713#
Enquiries:
TUI Travel PLC
Paul Bowtell, Chief Financial Officer Tel: 01293 645 713
Andy Jones, Director of Group Finance Tel: 01293 645 795
David Paterson, Head of Strategy & Investor Relations Tel: 01293 645 795
Lesley Allan, Corporate Communications Director Tel: 01293 645 773
Hudson Sandler
Michael Sandler / Jessica Rouleau Tel: 020 7796 4133
BUSINESS AND FINANCIAL REVIEW
Group Performance
The Group has achieved pro forma underlying profit before tax of �249.3m (2006:
�248.4m), with underlying operating profit up 5% at �287.0m (2006: �274.2m). As
previously highlighted the effect of moving all businesses in the Group to a
September year-end results in a reduction of underlying profit from the
combination of the previous year-ends of October for First Choice and December
for TUI Tourism. This is as a result of excluding the results from the three
months of October, November and December 2007 and including the results from the
three months of October, November and December 2006 in the case of TUI Tourism
and excluding the results of October 2007 and including the results of October
2006 in the case of First Choice. This change has no impact on expectations for
the 12 months to 30 September 2008.
Group pro forma revenue rose 5% to �12,840m with the underlying operating margin
remaining constant at 2.2%.
Year ended 30 September 2007 2006
Revenue �12,840m �12,180m
Underlying operating profit �287.0m �274.2m
Underlying profit before tax �249.3m �248.4m
Operating profit/(loss) �56.1m �(242.8)m
Profit/(loss) before tax �18.4m �(268.6)m
Underlying basic earnings per share 16.0p 15.7p
Basic earnings per share 0.6p (34.3)p
A reconciliation of underlying profit before tax to profit/(loss) before tax is
as follows:
2007 2006
�m �m
Underlying profit before tax 249.3 248.4
Separately disclosed items (173.8) (33.7)
Impairment of goodwill and amortisation of business combination intangible assets (54.8) (480.1)
Taxation on profits of joint ventures and associates (2.3) (3.2)
Profit/(loss) before tax 18.4 (268.6)
Acquisitions remain an integral part of our strategy and we continue to see
value-enhancing acquisitions as a driver of earnings growth going forward. This
year we have made seventeen acquisitions for a maximum total consideration of
�227m of which �151m has been paid during the year (2006: sixteen acquisitions
for a maximum consideration of �160m of which �137m had been paid).
The acquisition pipeline remains strong as we continue to identify opportunities
which demonstrate excellent growth characteristics within niche segments of
leisure travel, such as premium escorted tours, student travel, adventure
holidays and online travel.
Segmental Performance
The following financial information is presented on a pro forma basis.
Mainstream Holidays Sector
The Mainstream Holidays Sector consists of three divisions;
* The Northern Europe division comprises the distribution and tour
operation businesses in the UK, Ireland and the Nordic countries as well as
the following airlines: TUIfly Nordic, Thomsonfly and First Choice Airways.
* The Central Europe division comprises the distribution and tour
operator businesses in Germany, Switzerland, Austria and the Eastern European
markets as well as the operation of the TUIfly airline in Germany.
* The Western Europe division comprises the distribution and tour
operation businesses in France, the Netherlands and Belgium as well as the
following airlines: Corsairfly, Arkefly and Jetairfly, and a 40% share in
Jet4you.com (Morocco).
Mainstream Holidays Sector reported on underlying operating profit of �161.6m
(2006: �182.8m), down 11.6% year-on-year, primarily due to cost pressures
arising from the year on year increase in fuel and the doubling of APD in the
UK. In addition, following the rebranding of the German airlines to TUIfly.com,
a number of third party operators cancelled commitments with TUIfly.com for the
peak summer season which adversely impacted margins. As a result, the operating
margin for the sector is down thirty basis points to 1.5% (2006: 1.8%).
Mainstream Holidays 2006/07 2005/06 Change %
Passengers ('000)
Northern Europe 9,399 9,295 +1%
Central Europe 11,394 10,693 +7%
Western Europe 4,589 4,358 +5%
Total 25,382 24,346 +4%
y-o-y variation
Revenue per passenger Total
Northern Europe +1%
Central Europe -1%
Western Europe +2%
Total =
Underlying operating profit (�m)
Northern Europe 113.2 139.7 -19%
Central Europe 47.8 60.5 -21%
Western Europe 0.6 (17.4) +103%
Total 161.6 182.8 -12%
Underlying operating margin %
Northern Europe 2.4% 3.1% -70bps
Central Europe 1.1% 1.5% -40bps
Western Europe 0.0% (0.9%) +90bps
Total 1.5% 1.8% -30bps
Controlled distribution %
Northern Europe 77% 71% +6ppts
Central Europe 48% 49% -1ppts
Western Europe 51% 50% +1ppts
Total 62% 60% +2ppts
Northern Europe
The Northern Europe division generated underlying operating profit of �113.2m
(2006: �139.7m), which was 19.0% lower than prior year, due to margin pressures
in the UK from APD rises and losses incurred in the scheduled flying operation
of Thomsonfly. Revenue was 2.7% up on the prior year due to a change in mix in
travel products sold, with UK sales impacted by the growth of the lower price
seat only and accommodation only businesses.
UK
UK profitability was down 31% to �78.2m (2006: �113.8m) as a result of
significant cost pressures from the year on year increase in fuel prices and the
UK government's decision to double APD, announced in December 2006. We were
unable to fully recover the �33m increase in APD and the incremental
year-on-year fuel costs of �33m from customers, and consequently, margins were
adversely impacted for both the Winter and Summer programmes.
Thomson, in line with its previous stated strategy, cut charter capacity back by
10% in 2006/07 as it sought to expand its participation in the component led
independent travel segment by seeking to offer greater frequency within the
flying timetable and a greater range of destinations. Despite broadly flat
volumes, margins were down on the previous year as a result of yield pressures
and the competitive environment in the first half of the year. As a result, the
Thomsonfly scheduled flying operation contributed �27m of losses to the UK
result. We have recently stated that we intend, where possible and within
certain time constraints, to exit unprofitable lines of business and therefore
expect these losses to be eliminated over a period of time.
The UK business has continued to expand its differentiated content. We opened a
new Holiday Village property in the Dominican Republic in Winter 2006/07 and in
Egypt during Summer 2007. We are currently planning to open Holiday Villages in
Cyprus, Portugal and Cozumel (Mexico) in Summer 2008 and a Thomson Sensatori
product in Crete in May 2008. Following a capacity increase of 25% the First
Choice long haul programme performed extremely well. An additional six
re-configured Boeing 767s (2006: four) were added with Costa Rica, Mexico and
the Dominican Republic proving popular with our customers. In total, the UK
long-haul programme consisted of ten Boeing 767s and going forward, we are
confident we can leverage our Boeing 787 order book (23 in total) to deliver
sustainable earnings and margin growth. Controlled distribution across the
business now stands at 78% (2006: 71%) as both Thomson and First Choice continue
to benefit from investment in controlled distribution channels, most notably the
web proposition and retail estate.
Northern Europe 2006/07 2005/06 Change %
Passengers ('000)
UK 7,895 7,827 +1%
Ireland 309 325 -5%
Nordic 1,195 1,143 +5%
Total 9,399 9,295 +1%
y-o-y variation
Revenue per passenger Total
UK -1%
Ireland +7%
Nordic +14%
Total +1%
Revenue growth Total
UK =
Ireland +1%
Nordic +19%
Sub Total +2%
Other Revenues +12%
Total +3%
Underlying operating profit/(loss) (�m)
UK 78.2 113.8 -31%
Ireland 1.2 (1.3) 192%
Nordic 33.8 27.2 24%
Total 113.2 139.7 -19%
Underlying operating margin %
UK 2.0% 2.9% -90bps
Ireland 1.1% -1.2% +230bps
Nordic 5.2% 5.0% +20bps
Total 2.4% 3.1% -70bps
Controlled distribution %
UK 78% 71% +6ppts
Nordic 75% 70% +5ppts
Total 77% 71% +6ppts
Nordic
Revenue in the Nordic region increased 19% year-on-year due to strong trading in
Winter 2006/07, primarily as a result of an increase in higher margin long haul
where capacity was up 25% for the season, particularly for Thailand which proved
very popular with customers. This capacity increase was facilitated by the
redeployment of a Boeing 747-400 from Corsair that enabled the operation to
commence operating direct flights to Thailand from November 2006.
Despite higher fuel costs, the Nordic business grew underlying operating profit
to �33.8m (2006: �27.2m) with operating margins up 20 basis points to 5.2%, as
it continued to benefit from the growth in the long haul programme, controlled
distribution and differentiated content. For the Summer 2007 programme,
controlled distribution was up five percentage points to 77% with web sales
accounting for 45% of all sales (up seven percentage points), while the
differentiated Blue concept including hotels and holiday villages accounted for
32% of all product (up one percentage point).
Ireland
Despite the challenging competitive environment within Ireland, the business
delivered a turnaround in profitability to �1.2m versus a �1.3m operating loss
in 2006. However, due to the EC competition ruling, this business was divested
on 14 October 2007.
Central Europe
The Central Europe division generated underlying operating profit of �47.8m
(2006: �60.5m), which was 21% lower than prior year, on revenue growth of 6% to
�4,203m (2006: �3,979m). Profitability was primarily impacted by the
competitive environment within the German flying sector, as both TUIfly.com load
factors and margins were adversely impacted due to excess capacity in the
market, and the impact of the TUIfly rebranding on a number of the airlines'
customers.
Central Europe 2006/07 2005/06 Change %
Passengers ('000)
Germany 10,388 9,692 +7%
Switzerland 319 282 +13%
Austria 687 719 -4%
Total 11,394 10,693 +7%
y-o-y variation
Revenue per passenger Total
Germany -2%
Switzerland +29%
Austria +5%
Total -1%
Revenue growth Total
Germany +5%
Switzerland +46%
Austria =
Total +6%
Underlying operating profit/(loss) (�m)
Germany 48.7 58.4 -17%
Switzerland 3.3 2.5 +32%
Austria (4.2) (0.4) n/a
Total 47.8 60.5 -21%
Underlying operating margin %
Germany 1.3% 1.7% -40bps
Switzerland 1.5% 1.7% -20bps
Austria (1.3%) (0.1%) -120bps
Total 1.1% 1.5% -40bps
Controlled distribution% 48% 49% -1ppts
Germany
Underlying operating profit in Germany was down 17.0% to �48.7m (2006: �58.4m)
on revenue growth of 4% to �3,663m (2006: �3,506m). Despite volume growth of 7%,
which was largely driven by the expansion of the scheduled flying operation, the
business was unable to match the seat load factors achieved in 2006 following
the decision to increase capacity by four aircraft for Summer 2007. With this
level of capacity in the market, pressures on yields resulted in a dilution of
margin, particularly within April and May 2007.
In addition, following the decision in early 2007 to rebrand the airlines under
the single brand TUIfly.com, a number of third party tour operators who had
airline seat commitments with TUIfly.com, handed back a significant number of
seats which placed increased pressure on yields during the peak summer selling
season. It is estimated that this return of seats cost the operation �14m. We
have already announced that for the forthcoming Summer season, we will reduce
capacity by seven aircraft.
Switzerland & Austria
Switzerland experienced a 13% year-on-year increase in passengers, following the
introduction of the TUI Germany pricing and product model to the Swiss
mainstream market. This led to strong consumer demand for TUI holidays. A number
of competitors could not compete on price or content, and as a result margins
were up with overall underlying profitability up 32% to �3.3m (2006: �2.5m).
Austria experienced a decline in passengers and revenue in 2006/07 compared to
the previous year. Demand was good for Egypt and Turkey but bookings for Spain
declined year-on-year. The tour operator market in Austria as a whole was weak
in 2006/07.
Western Europe
The Western Europe division generated underlying operating profits of �0.6m
(2006: �17.4m loss), which represented an �18m turnaround in divisional
profitability over the prior year. This was driven by an increase in underlying
profitability in the Netherlands and Belgium.
Western Europe 2006/07 2005/06 Change %
Passengers ('000)
France 1,577 1,577 =
Netherlands 1,281 1,215 +5%
Belgium 1,731 1,566 +11%
Total 4,589 4,358 +5%
y-o-y variation
Revenue per passenger Total
France +6%
Netherlands -4%
Belgium +6%
Total +2%
Revenue growth Total
France +6%
Netherlands +1%
Belgium +17%
Total +8%
Underlying operating profit/(loss) (�m)
France (26.6) (26.7) =
Netherlands 4.8 (2.8) +271%
Belgium 22.4 12.1 +85%
Total 0.6 (17.4) +103%
Underlying operating margin %
France (3.2%) (3.4%) +20bps
Netherlands 0.8% (0.5%) +130bps
Belgium 3.5% 2.2% +130bps
Total 0.0% (0.9%) +90bps
Controlled distribution %
France 62% 67% -5ppts
Netherlands 49% 45% +4ppts
Belgium 43% 38% +5ppts
Total 51% 50% +1ppts
France
After a difficult 2006, Nouvelles Frontieres and Corsair have started to benefit
from action taken in December 2006 to restructure the business and a recovery
from the effects of the Chikungunya outbreak in La Reunion, which significantly
impacted the trading result last year.
* La Reunion, one of the most important destinations for Corsair (which
accounts for 20% of all airline volumes), has gradually recovered from the
Chikungunya effect that heavily impacted the 2006 results.
* The restructuring programme, announced in December 2006 by TUI AG, is
progressing in line with expectations. Rationalisation of the product
offering and improvements in yield management and pricing policies have
supported improved gross margin versus the prior year. Capacity has been
reduced with the phasing out of one B747-300, thereby reducing fleet capacity
by 11% and reducing the cost base of the airline. Despite this lower seat
capacity, through a more efficient flying programme, the business has kept
volumes in line with 2006.
As the benefits from the restructuring programme and the La Reunion recovery
will be realised in October to December 2007, the 2006/07 result is broadly in
line with the previous year leading to a �26.6m underlying operating loss (2006:
�26.7m loss). In addition, �4.8m of "one-off" costs (2006: �nil) relating to the
settlement of a social security tax audit has been included within the �26.6m
operating loss.
Within the tour operator, growth in controlled distribution and differentiated
content has also benefited margins. Online sales have grown significantly to 14%
in 2006/07 (up from 9% in 2005/06), and the Paladien resort product has proved
very popular. Two additional Paladien resorts were opened in 2007 and, these
products now account for 46% of all tour operator content in Nouvelles
Frontieres.
As such, it is expected that the restructuring programme, coupled with the
growth in controlled distribution and differentiated content, will continue to
drive earnings improvement and accordingly we expect the business to break-even
in the 2007/08 financial year.
Netherlands
Underlying operating profit was significantly higher at �4.8m (2006: �2.8m
loss), on revenue growth of 1% to �588m (2006: �581m). Margins have benefited
from the growth in controlled distribution and the growth in the long haul
programme.
Total volume growth of 5% was boosted by the expansion of the long haul
programme with the business increasing its market share of this segment to 25%
(2006: 21%). Web bookings rose in Summer 2007 to 9% (Summer 2006: 2%), while
total controlled distribution rose to 49% for the year (2006: 45%).
Belgium
Belgium has also benefited from the continued drive to increase share of
controlled distribution and by remixing capacity from short haul to medium and
long haul destinations. As a consequence, the business delivered underlying
operating profit of �22.4m, up 85% from the previous year, on 17% revenue growth
to �632m (2006: �541m).
With two additional aircraft utilised in Summer 2007 (total fleet up to 12
aircraft), capacity was increased by 13%. This increase in capacity, which
benefited margins, sought to expand the medium haul programme as a result of
consumer demand for destinations such as Egypt and Turkey.
Controlled distribution now stands at 43% (2006: 38%), with web sales now
accounting for 22% of all holiday sales. The resulting savings in third party
commissions and marketing costs have also driven higher margins.
Specialist Holidays Sector
The Specialist Holidays Sector operates a business model characterised by
destination and lifestyle specialism, flexible accommodation and flying
arrangements, and niche brands in each source market. The sector consists of
three key segments:
* The Destination segment comprises a number of specialist brands across
11 source markets that have become market leaders to certain destinations out
of the source markets in which they operate. This has been achieved by
focusing on a relatively small number of destinations whilst establishing a
breadth of product that is often exclusive and provides the customer with a
range of experiences in the particular destination. Brands within this
segment include Marmara, Turchese and Signature Vacations.
* The Premium segment consists of a portfolio of five brands, including
Hayes & Jarvis, Sovereign, Citalia and Meon, and these specialise in premium
leisure travel experiences, across a range of destinations in Europe, Asia
and the Caribbean.
* The Lifestages segment consists of a portfolio of businesses, which
focus on a particular customer demographic, such as the student travel and
"grey" market, segments of the leisure travel market.
Specialist Holidays 2006/07 2005/06 Change %
Passengers ('000)
Destination 1,785 1,697 +5%
Premium 149 149 =
Lifestages 139 145 -4%
Total 2,073 1,991 +4%
y-o-y variation %
Revenue per passenger Total
Destination -5%
Premium -8%
Lifestages +30%
Total -3%
Revenue growth Total
Destination =
Premium -8%
Lifestages +26%
Total +1%
Underlying operating profit (�m)
Destination 24.7 16.6 +49%
Premium 10.4 9.1 +14%
Lifestages 12.1 10.1 +20%
Total 47.2 35.8 +32%
Underlying operating margin %
Total 4.5% 3.5% +100bps
The Sector delivered 31.8% growth in underlying operating profit to �47.2m
(2006: �35.8m), with operating margin up 100 basis points to 4.5%.
This was primarily driven by a strong performance in a number of key brands
within the Destination segment, primarily Marmara, Turchese and Nazar (within
the Nordic region) as the businesses continued to benefit from strong consumer
demand for the portfolio of differentiated and destination-led travel
experiences. Demand for eastern Mediterranean and North Africa destinations
continued to grow with Marmara and Turchese particularly benefiting from
differentiated content within these destinations. In addition, the segment
benefited from the closure of Marmara Belgium and Marmara Portugal, following
poor performance in previous years, which contributed �1.2m benefit to the
operating result. We have undertaken a strategic review of the position of the
Nazar Switzerland business and as a result, from April 2008, Nazar will no
longer operate in Switzerland and the specialist Pegasos product will from
Summer 2008 be available through our leading TUI Switzerland brand.
Canada, also operating within this segment, performed strongly across all the
regions of the country despite a very competitive environment. This performance
was achieved as, we were able to successfully to manage capacity despite
weakened demand during the early part of the season with minimal impact upon
profitability.
The Premium segment, primarily operating in the UK source market, delivered a
good performance despite tough trading conditions, primarily within the premium
short-haul segment. Direct distribution now stands at 47% (up eight percentage
points) as the group evolves into a direct sell model, while retaining the
support of in-house retail agents.
Lifestages, consisting of North American student travel and our Independent
Vacations business (Your Man Tours and Europe Express) has performed well.
Results have been driven by strong organic growth in the educational travel
segment and the annualisation of a number of acquisitions within the student
travel segment.
Activity Holidays Sector
This Sector operates in three market segments, Marine, Adventure and
Experiential.
* The Marine division includes First Choice Marine, which operates the
market leading yacht-chartering brands of Sunsail and The Moorings, in
addition to Sunsail Clubs and Inland Waterways (Crown Blue Line and
Connoisseur).
* The Adventure division consists of a portfolio of 17 adventure travel
businesses, including Quark Expedition Cruising, Exodus, and Peregrine.
* The Experiential segment consists of six brands, including Travcoa and
TCS, that operate specialist escorted tours offering cultural and luxury
escorted travel experiences for the US source market.
Activity Holidays 2006/07 2005/06 Change %
y-o-y variation
Total revenue growth Total
Marine +20%
Adventure +23%
Experiential =
Total +18%
Underlying operating profit (�m)
Marine 17.2 8.8 +96%
Adventure 16.6 13.7 +21%
Experiential (1.5) (0.1) n/a
Total 32.3 22.4 +44%
Underlying operating margin %
Total 7.7% 6.3% +140bps
The Sector delivered 44.2% growth in underlying operating profit to �32.3m
(2006: �22.4m), with operating margin up 140 basis points to 7.7%. The sector
benefited from a combination of strong organic and acquisition-led growth within
the portfolio.
Within the Marine division, the integration of The Moorings and Sunsail Yachts
delivered a �5m synergy benefit in line with expectations. Sunsail Clubs
performed satisfactorily in a challenging trading environment. Le Boat
(previously reported as Inland Waterways) delivered a strong performance,
boosted by growth in occupancy levels to 61% (2006: 56%) and controlled
distribution, to 48% (2006: 44%).
The Adventure division performed well with profits up 21% to �16.6m (2006:
�13.7m). This results from a combination of strong organic and acquisition led
growth, with operating margins at 8%. Consumer demand remains high within this
segment, with many of our businesses very much focused on driving improved trip
fill to drive incremental margin.
In North America, our Experiential businesses have performed satisfactorily. The
2006/07 result is impacted by the annualisation of a number of acquisitions made
in Winter 2005, and the subsequent inclusion of losses within the 2007 result.
Online Destination Services
The Online Destination Services Sector consists of market-leading incoming
agencies that provide services such as guest assistance, transfers, excursions
and roundtrips to the group and third party tour operators and their clients.
This Sector also sells accommodation online to both consumers and businesses
through a number of B2C and B2B brands (e.g. Hotelbeds, Bedsonline, Hotelopia,
LateRooms.com) and provides specialised services to cruise lines and the
management of meetings and incentives activities for corporate clients.
Online Destination Services 2006/07 2005/06 Change %
Bednights ('000)
Hotelbeds 9,212 7,173 +28%
Bedsonline 5,654 4,190 +35%
Hotelopia 2,318 2,108 +10%
LateRooms 1,445 - n/a
Total 18,629 13,471 +38%
y-o-y variation
TTV per bednight Total
Hotelbeds +11%
Bedsonline +3%
Hotelopia +3%
LateRooms -
Total +6%
Underlying operating profit (�m)
Total 49.1 36.3 +35%
Underlying operating margin %
Total 10.8% 10.2% +60bps
The Sector delivered underlying operating profit growth of 35% to �49.1m (2006:
�36.3m). The online businesses delivered strong organic growth with recent
acquisitions in the online segment contributing �5.9m earnings growth.
Operating margins for the sector now stand at 10.8%, up 60 basis points. This
has been achieved as the online business is now starting to leverage its fixed
cost and infrastructure base to drive incremental margin.
We have continued to experience significant growth in all our online routes to
market with total online transaction value growing to �405.5m, up 36% on the
prior year. Hotelbeds, the brand that provides accommodation content online to
independent tour operators, achieved growth of 42.2% in total transaction value
("TTV") and has benefited from the successful integration of the Pacific World
group of companies (acquired in August 2006). This business, based in the Asia
Pacific, has a significant bed bank throughout China and South East Asia.
Bedsonline, which services independent travel agents, delivered total
transaction value of �149.1m (2006: �107.4m). It also benefited from strong
demand from travel agents for content primarily within short-haul destinations.
Our B2C routes to market performed well with Hotelopia growing total transaction
value by 13% to �62.6m. It has continued to benefit from strategic alliances
with a number of companies, such as easyJet, Spanair and BBVA. For example, in
summer 2007, Hotelopia launched a dynamic packaging offering with easyJet
through their portal.
We have been delighted with the performance of LateRooms.com since we acquired
the business in December 2006. LateRooms.com is a leading online price
comparator and seller of late availability hotel rooms (with particular focus on
less than 24 hours), which sold 1.4 million room nights on total transaction
value of �106.4m in 2007. Operating within a niche, specialist segment of the
online market (i.e. late availability), it primarily provides independent hotels
the opportunity to distribute late availability hotel stock. Based on a low
overhead business model with no inventory risk, it has the ability to create
high margins, strong growth and cash generation. It primarily operates in the UK
but is expanding into Europe and North America with the planned launch of
laterooms.es and laterooms.ca.
Acquisitions
In line with its acquisition strategy, TUI Travel PLC has made a number of
acquisitions in the year ended 30 September 2007 within high growth niche
segments of the leisure travel market. For the year ended 30 September 2007,
the group acquired seventeen businesses for a maximum total consideration of
�226.8m. By way of comparison, in the year ended 30 September 2006, we made
sixteen acquisitions with a maximum aggregate consideration of �160m of which
�137m was paid in 2006.
We have acquired businesses within the online, activity, premium escorted tours
and student travel segments of the market:
* Within Online Destination Services, we have strengthened our position
further in the B2C route to market with the acquisition of two leading branded
accommodation retailers. In December 2006, we acquired LateRooms.com, a leading
online price comparator and seller of late availability hotel rooms (with
particular focus on less than 24 hours) operating primarily in the UK market,
but seeking organic expansion into new European and North American markets. In
September 2007, we acquired asiarooms.com, a leading online B2C provider of
Asian hotel accommodation. Asiarooms.com has established itself as a significant
online retailer of accommodation by applying leading edge technology and web
capabilities in one of the fastest growing travel markets. These acquisitions
add to our growing position in the Asia Pacific region and online accommodation
market and build upon the group's bedbank distribution capability where we
continue to see excellent growth and margin opportunities for the Group going
forward.
* In the Activity Holidays Sector, we have acquired eight companies.
Within the premium North American escorted tours segment, we acquired Starquest,
an operator of themed luxury travel adventures by private jet, and we are now
the clear market leader within this high-growth segment of the US travel market.
Within adventure travel, we acquired seven other companies operating within
niche segments, particularly expedition polar cruising and soft adventure
travel, all of which operate at double-digit margins within a fast growing area
of the marketplace. Going forward, we are looking to further develop our
participation within these segments.
* Within North American Student Travel, we made four acquisitions in the
educational travel segment. These acquisitions will maintain our position at
the forefront of the fragmented and high growth group performance segment of the
student travel marketplace in the US.
* Within the Mainstream Sector, we acquired an online car broker and an
online independent package holiday review site. These businesses will further
enable us to meet the needs of the travel consumer for flexibility and choice in
their holiday decision-making.
The acquisition pipeline remains strong as we continue to target travel
companies, notably within the Asia Pacific region, online, activity and North
American student travel segments that exhibit excellent growth characteristics
and the ability to generate premium margins, high earnings growth and strong
cash flow.
Company Description Date Country Maximum Cash paid
consideration
Mainstream Holidays Sector
Holidays Uncovered Package holiday September 2007 UK �2.5m �2.5m
review website
MicronNexus Online car broker September 2007 Germany �0.7m �0.7m
Specialist Holidays Sector
Young Explorers Educational tours January 2007 Canada �0.8m �0.8m
operator
KSA Events High school group April 2007 USA �3.0m �1.7m
sports tours
Splashline Leisure holidays to May 2007 Austria �2.6m -
Austrian student
market
New Horizons Tour & Student travel in September 2007 USA �2.5m �1.5m
Travel Group performance
market
World Class Vacations Student travel in September 2007 USA �4.5m �3.0m
Group performance
market
Activity Holidays Sector
Western Xposure Adventure travel February 2007 Australia �2.4m �0.9m
operator
i-to-i Provider of February 2007 UK �20.6m �3.0m
meaningful travel
experiences
iExplore Premium adventure February 2007 USA �4.6m �2.0m
travel internet
portal
Quark Expeditions Expedition cruising April 2007 USA �9.8m �7.6m
specialist
Hannibal Marco Polo Danish adventure May 2007 Denmark �10.0m �10.0m
business
Australian Sports Tours Group sports tours July 2007 Australia �10.5m �3.3m
for the Australian
market
Ski Alpine Schools skiing August 2007 UK �1.3m �1.0m
business
Starquest Expeditions Round the world September 2007 USA �24.5m �16.9m
experiential
business
Online Destination Services
LateRooms.com Seller of late December 2006 UK �103.2m �83.7m
availability hotel
accommodation
Asiarooms.com Online retailer of September 2007 Singapore �23.3m �12.3m
accommodation
TOTAL �226.8m �150.9m
Acquisitions in the year are shown in the table above. Of the maximum
consideration, �150.9m was paid during the year. A further �75.9m will be paid
as deferred and contingent consideration. In addition, �2.5m of acquisition
expenses was incurred bringing the total expected consideration to �229.3m.
The cash flow effect of these acquisitions includes the cash consideration paid
in the year of �150.9m, deferred and contingent consideration of �10.1m relating
to prior year acquisitions that was paid in the year, acquisition expenses of
�2.5m and the cash acquired of �25.8m, net of proceeds of �2.5m from the
disposal of the Group's interest in Hays Travel, resulting in a total net cash
outflow for the year of �135.2m (2006: �115.8m).
The net assets of all the subsidiaries acquired during the year have been
consolidated in the Group's balance sheet at 30 September 2007.
2007 2006
Max Paid Max Paid
Acquisitions in the year �m �m �m �m
Amounts paid in the year 150.9 150.9 137.0 137.0
Deferred & contingent consideration arising 75.9 - 23.2 -
226.8 150.9 160.2 137.0
Acquisition expenses paid in the year 2.5 2.5 4.5 4.5
Total consideration 229.3 153.4 164.7 141.5
Cash acquired with acquisitions (25.8) (40.0)
Cash paid relating to prior year acquisitions 10.1 14.3
Proceeds from disposal of Hays Travel 2.5 -
Net cash outflow in the year relating to 135.2 115.8
acquisitions
Since the start of the new year we have acquired two further businesses. In the
Activity Sector we have acquired CHS Tour Services GMbH. Based in Austria and
operating principally as HTS Total Ski (formerly Hourmont Total Ski) it is the
leading operator of UK school ski holidays to Austria. In the year ended 31
October 2006 CHS had gross assets of Euro4.1m. In our Online Destination Services
Sector we have acquired Cruiselink II Ltd a shore side cruise handling business
based on the East coast of the USA which handles services for a number of the
large cruise companies in the ports of Manhattan, Brooklyn and Bayonne. In the
year ended 31 December 2006 Cruiselink had gross assets of $1.1m.
Taxation
The Group profit before tax is �18.4m (2006: �268.6m loss). The Group tax charge
on this profit was �11.5m (2006: �112.2m), representing an effective tax rate of
62.5% (2006: -41.8%). The effective tax rates in 2007 and 2006 are high as tax
relief is not available on goodwill impairment and certain separately disclosed
items.
The Group underlying effective tax rate, being tax on underlying profit before
tax, is 28.3%.
Based on the current structure of the business following merger completion,
existing local taxation rates and legislation (and known future changes), it is
expected that the underlying effective tax rate on ongoing activities (before
intangible amortisation) will be approximately 28% going forward.
Earnings per share
Underlying basic earnings per ordinary share was 16.0p (2006: 15.7p using
underlying effective tax rate of 28.3%), an improvement of 2%. This was
primarily due to the higher level of tax paid in 2006.
Dividends
The Board recommends an interim dividend per ordinary share of 5.9p.
The Group will look to maintain underlying dividend cover at just over two
times. The Company intends to continue to operate a dividend re-investment plan
as an alternative to the full cash dividend.
Cash and liquidity
The net debt position (cash and cash equivalents less loans, overdrafts and
finance leases) at the year-end was �532.3m (2006: �629.4m). This consisted of
�1,958.7m of cash and �2,260.0 of current interest-bearing loans and liabilities
and �231.0 on non-current interest-bearing loans and liabilities. The pensions
liability at the year-end was �313.7m (2006: �534.9m).
The Board is fully satisfied that the Group has access to sufficient facilities
to fund both the working capital and the investment requirements (maintenance,
development and acquisition) of the Group going forward.
Pro Forma Group income statement (unaudited)
for the years ended 30 September
Note
2007 2006
�m �m
Revenue 2 12,839.9 12,180.3
Cost of sales (11,800.4) (11,142.9)
Gross profit 1,039.5 1,037.4
Administrative expenses (993.9) (1,289.7)
Share of profits of joint ventures and associates 10.5 9.5
Operating profit/(loss) 2 56.1 (242.8)
Analysed as:
Underlying operating profit 2 287.0 274.2
Separately disclosed items 4 (173.8) (33.7)
Impairment and amortisation of goodwill and business combination (54.8) (480.1)
intangible assets
Taxation on profits of joint venture and associate (2.3) (3.2)
56.1 (242.8)
Financial income 147.4 120.1
Financial expenses (185.1) (145.9)
Net financing expenses (37.7) (25.8)
Profit/(loss) before tax 18.4 (268.6)
Taxation (11.5) (112.2)
Profit/(loss) for the year 3 6.9 (380.8)
Attributable to:
Ordinary shareholders 6.6 (383.5)
Minority interests 0.3 2.7
Profit/(loss) for the year 6.9 (380.8)
Non GAAP measures - Reconciliation of underlying operating profit
to underlying earnings
Underlying operating profit 287.0 274.2
Net financing expenses (37.7) (25.8)
Underlying profit before tax 249.3 248.4
Pro Forma Group balance sheet (unaudited)
at 30 September
Note 2007 2006
�m �m
Non-current assets
Intangible assets 7 2,655.7 2,463.4
Property, plant and equipment 8 1,405.8 1,522.7
Investments in joint venture and associate 102.7 92.9
Other investments available for sale 53.0 48.4
Trade and other receivables 9 252.6 272.0
Derivative financial instruments 4.4 -
Deferred tax assets 197.3 321.5
4,671.5 4,720.9
Current assets
Inventories 19.5 28.1
Other investments available for sale 12.4 3.7
Trade and other receivables 10 2,420.6 2,084.1
Derivative financial instruments 39.5 8.7
Cash and cash equivalents 12 1,958.7 1,160.0
Assets classified as held for sale 11 88.0 43.3
4,538.7 3,327.9
Total assets 9,210.2 8,048.8
Current liabilities
Interest-bearing loans and borrowings 12 (2,260.0) (1,218.5)
Employee benefits 15 (2.9) (3.6)
Derivative financial instruments (142.7) (62.5)
Trade and other payables 13 (3,753.6) (3,246.0)
Provisions (138.6) (109.7)
Income tax payable (38.1) (73.0)
Liabilities classified as held for sale (18.8) (25.9)
(6,354.7) (4,739.2)
Non-current liabilities
Interest-bearing loans and borrowings 12 (231.0) (570.9)
Employee benefits 15 (310.8) (531.3)
Trade and other payables 14 (110.3) (90.2)
Derivative financial instruments (19.9) -
Provisions (136.4) (154.7)
Deferred tax liabilities (120.7) (141.8)
(929.1) (1,488.9)
Total liabilities (7,283.8) (6,228.1)
Net assets 1,926.4 1,820.7
Total equity 1,926.4 1,820.7
Pro Forma Group statement of cash flows (unaudited)
for the years ended 30 September
2007 2006
�m �m
Profit/(loss) for the year 6.9 (380.8)
Adjustment for:
Financial income (147.4) (120.1)
Financial costs 185.1 145.9
Income tax expense 11.5 112.2
Non-cash items (including goodwill impairment) 296.8 686.9
Cash flows from working capital movements 8.2 4.6
Other operating cash flows (81.2) (133.8)
Cash flows from operating activities 279.9 314.9
Cash flows from purchase of property, plant and equipment (90.8) (204.7)
Other investing cash flows (129.1) (107.4)
Cash flows from investing activities (219.9) (312.1)
Receipt of shareholder loan 1,400.0 -
Cash flows from financing activities (670.6) 184.1
Net increase in cash and cash equivalents 789.4 186.9
Cash and cash equivalents at the start of the year 1,160.0 975.2
Effect of foreign exchange on cash held 35.8 (2.1)
Effect of changes in consolidation 5.8 -
Cash and cash equivalents for the cash flow statement 1,991.0 1,160.0
Less: cash included in assets held for sale (32.3) -
Cash and cash equivalents included in the balance sheet 1,958.7 1,160.0
Notes to the pro forma Group financial statements (unaudited)
1. Basis of preparation
The financial information in this pro forma financial information relating to 30
September 2007 and 30 September 2006 and the two years then ended is unaudited.
This unaudited pro forma financial information does not constitute the
statutory accounts of TUI Travel PLC within the meaning of section 240 of the
Companies Act 1985. The first set of consolidated statutory accounts of TUI
Travel PLC will be prepared in compliance with International Financial Reporting
Standards as adopted by the European Union ('Adopted IFRSs') for the year ending
30 September 2008. Nor does this unaudited pro forma financial information
comprise the interim management statement which would be required under the
Disclosure and Transparency Rules of the Financial Services Authority.
On 3 September 2007, the TUI Travel PLC group was formed through a business
combination of the tourism businesses of TUI AG ('TUI Tourism') with First
Choice Holidays PLC ('First Choice'). The business combination was effected on
3 September 2007 through the acquisition of First Choice and TUI Tourism by TUI
Travel PLC ('the Company').
The unaudited pro forma financial information has been prepared by the Directors
of the Company to illustrate the effect of the business combination as if it had
taken place prior to 1 October 2005 (the first day of the comparative accounting
period presented). This is to provide information which the Directors consider
is relevant to an understanding of the combined group.
Note that producing the unaudited pro forma financial information in this report
has required changing the financial year-end for all the businesses. In the
case of First Choice and its subsidiaries the year-end has changed from 31
October to 30 September and in the case of TUI Tourism the year-end has changed
from 31 December to 30 September.
The unaudited pro forma financial information has been prepared for illustrative
purposes only, through the aggregation of financial information of TUI Tourism,
First Choice and the holding company, TUI Travel PLC. It has not been designed
to and does not give a presentation of the profit and loss and financial
position of the Company that would have been reported in accordance with Adopted
IFRSs had the business combination actually occurred on 1 October 2005. In
particular, in order to do so, this would have required the assets of the First
Choice group to be fair valued as at that date.
The unaudited pro forma financial information has been prepared on the basis of
the Company's Adopted IFRSs accounting policies, which are disclosed in Part VII
of the TUI Travel PLC Prospectus dated 29 June 2007, with the following
exceptions:
* No adjustments have been made for the impact of acquisition accounting
in accordance with IFRS 3 Business Combinations. In particular, the assets and
liabilities of First Choice have not been restated to their fair value as at or
after 1 October 2005 and no goodwill relating to the First Choice business
combination has been recognized.
* Intra-group trading between TUI Tourism and First Choice has not been
eliminated, as required by IAS 27: Consolidated and separate financial
statements.
* The value of First Choice derivative financial instruments reported at
30 September 2006 reflects the fair value of derivative financial instruments
held by First Choice at 31 October 2006 rather than as at 30 September 2006.
* The transaction costs of the business combination have been recorded
within other debtors.
* Due to the aggregated nature of the pro forma financial information,
an analysis of equity has not been presented.
In the consolidated financial statements for TUI Travel PLC for the year ended
30 September 2008, the assets and liabilities of TUI Tourism will be accounted
for on a merger accounting basis as if TUI Travel PLC had been the parent
company throughout all periods reported on. On this basis, in this pro forma
financial information the assets and liabilities of TUI Tourism have not been
restated to their fair value as at or after 1 October 2005 and certain
transactions relating to the transfer of TUI Tourism to the Company have been
presented as if they had occurred prior to 1 October 2005.
No adjustments have been made to take account of anticipated post merger
restructuring costs or synergy benefits and cost savings which will result from
the merger.
TUI Travel PLC, the new parent company, did not trade during the period prior to
3 September 2007.
2. Segmental information
The Sector analysis is based on the Group's management and reporting structure.
Year ended 30 September 2007
Mainstream Holidays
�m Central Northern Western Mainstream Specialist Activity Online Corporate Joint Total
Europe Europe Europe Holidays Holidays Holidays Destination ventures
and Group
Services associates
External 4,203.1 4,668.3 2,058.0 10,929.4 1,037.4 417.9 455.2 - - 12,839.9
revenue
Operating 20.2 (0.9) (21.1) (1.8) 32.5 (3.2) 36.4 (18.3) 10.5 56.1
profit/(loss)
Amortisation/ - 24.0 - 24.0 3.4 18.1 9.3 - - 54.8
impairment *
Other 27.6 90.1 21.7 139.4 11.3 17.4 3.4 2.3 2.3 176.1
separately
disclosed
items
Underlying 47.8 113.2 0.6 161.6 47.2 32.3 49.1 (16.0) 12.8 287.0
operating
profit/(loss)
Net financial (37.7)
income
Profit before 249.3
tax
*of goodwill and acquisition related intangible assets
Year ended 30 September 2006
Mainstream Holidays
�m Central Northern Western Mainstream Specialist Activity Online Corporate Joint Total
Europe Europe Europe Holidays Holidays Holidays Destination ventures
and Group
Services associates
External 3,978.5 4,546.4 1,914.7 10,439.6 1,030.0 353.1 357.6 - - 12,180.3
revenue
Operating 54.9 (198.2) (172.4) (315.7) 26.3 17.1 35.8 (15.8) 9.5 (242.8)
profit/(loss)
Amortisation/ - 325.4 142.7 468.1 6.2 5.3 0.5 - - 480.1
impairment *
Other 5.6 12.5 12.3 30.4 3.3 - - - 3.2 36.9
separately
disclosed
items
Underlying 60.5 139.7 (17.4) 182.8 35.8 22.4 36.3 (15.8) 12.7 274.2
operating
profit/(loss)
Net financial (25.8)
income
Profit before 248.4
tax
*of goodwill and acquisition related intangible assets
3. Income and expenses
2007 2006
�m �m
Included in the profit/(loss) for the year are the following:
Profits from sale and leaseback transactions 14.7 20.4
Operating lease rentals 386.7 353.8
Depreciation of property, plant and equipment 215.1 194.9
Amortisation of intangible assets including software 46.6 56.7
Impairment of goodwill 37.3 469.5
4. Separately disclosed items
2007 2006
�m �m
TUI Q4 2006 restructuring 68.4 -
Merger transaction related 18.8 -
Other items 86.6 33.7
173.8 33.7
TUI Q4 2006 restructuring
These costs relate to the restructuring programme which TUI AG announced in
their Q4 2006 results, which fall into the first quarter of TUI Travel's year
ending 30th September 2007.
Merger transaction related
These are costs incurred as a result of the merger going ahead, comprising of
professional fees, bonus payments, accelerated LTIP costs and other
merger-related costs.
Other items
These costs represent �13.9m of maintenance provision costs booked in TUI UK to
bring their policy into line with that of TUI Travel plc; �9.1m of rebranding
costs in Germany in relation to the rebranding of TUIfly.com; �40.1m of
restructuring costs across the Group; �11.0m of retrospective APD costs; �5.1m
of costs related to aborted transactions and �7.4m of other separately disclosed
costs.
5. Earnings per share
The basic earnings per ordinary share is calculated by dividing the profit
attributable to ordinary shareholders by the applicable weighted average number
of ordinary shares in issue during the year, excluding those held in the
employee share ownership trusts. The underlying earnings per share measure has
been given to provide the reader of the accounts with a better understanding of
the results.
Earnings Weighted Earnings per Earnings Weighted Earnings per
2007 average share 2006 average share
�m number of 2007 �m number of 2006
shares pence shares 2006
2007 2006 pence
millions millions
Basic earnings per share 6.6 1,118.0 0.6 (383.5) 1,118.0 (34.3)
Basic underlying earnings per share 178.4 1,118.0 16.0 175.3 1,118.0 15.7
Underlying earnings per share reflects a pro forma effective tax rate of 28.3%
for both 2007 and 2006.
6. Acquisitions
Acquisitions in the year ended 30 September 2007 were:
Sector & entity Country of operation Date of acquisition Consideration
recognised
�m
Mainstream
Holidays Uncovered UK September 2007 2.5
MicronNexus Germany September 2007 0.7
Specialist
Young Explorers Canada January 2007 0.8
KSA Events USA April 2007 3.0
Splashline Austria May 2007 2.6
New Horizons Tour & Travel USA September 2007 2.5
World Class Vacations USA September 2007 4.5
Activity
WesternXposure Australia February 2007 2.4
i-to-i UK February 2007 20.6
iExplore USA February 2007 4.6
Quark Expeditions USA April 2007 9.8
Australian Sports Tours Australia July 2007 7.2
Hannibal Marco Polo Denmark May 2007 10.0
Ski Alpine UK August 2007 1.3
Starquest Expeditions USA September 2007 24.5
ODS
LateRooms.com UK December 2006 97.2
Asiarooms.com Singapore September 2007 23.3
217.5
Acquisition expenses 2.5
Total investment cost 220.0
7. Intangible assets
2007 2006
�m �m
Included within intangible assets is goodwill allocated to the following segments:
Central Europe 445.6 438.8
Northern Europe 999.7 1,029.5
Western Europe 189.1 184.0
Destinations 144.4 134.3
First Choice 761.5 554.6
2,540.3 2,341.2
In this balance sheet is �761.5m (2006: �554.6m) of goodwill allocated to First
Choice, being the goodwill arising on pre-merger acquisitions. Note that this
goodwill balance will be materially affected when acquisition accounting in
relation to the acquisition of First Choice by TUI Travel PLC is applied and the
goodwill relating to the business combination has been recognised.
8. Property, plant and equipment
2007 2006
�m �m
Property, plant and equipment comprises the following at net book value:
Aircraft and equipment 884.2 1,027.6
Other property, plant and equipment 521.6 495.1
1,405.8 1,522.7
9. Non-current trade and other receivables
2007 2006
�m �m
Advances to affiliates 2.2 1.4
Advances to third parties 1.7 0.3
Loans to third parties 13.6 31.1
Loans to TUI AG Group companies 1.6 16.6
Payments on account 122.7 71.2
Advances and loans 141.8 120.6
Other receivables from TUI AG Group companies 5.5 61.6
Other assets and prepaid expenses 105.3 89.8
Other receivables and assets 110.8 151.4
252.6 272.0
10. Current trade and other receivables
2007 2006
�m �m
Trade accounts receivable 476.1 523.1
Advances and loans 154.3 123.5
Other receivables and assets 1,790.2 1,437.5
2,420.6 2,084.1
11. Assets classified as held for sale
2007 2006
�m �m
Yachts and motor boats 0.9 0.8
Land and buildings 5.1 0.4
Aircraft 39.1 -
Disposal groups 40.4 42.1
Other 2.5 -
88.0 43.3
The disposal groups held for sale included Budget Travel in 2007 and TUI Infotec
in 2006.
12. Net debt
2007 2006
�m �m
Current assets
Cash and cash equivalents 1,958.7 1,160.0
Current liabilities
Liabilities to banks (550.3) (29.1)
Liabilities from finance leases (34.5) (19.3)
Financial liabilities due to affiliates (3.2) (3.8)
Financial liabilities due to TUI AG Group companies (1,595.9) (1,104.6)
Other financial liabilities (76.1) (61.7)
(2,260.0) (1,218.5)
Non-current liabilities
Liabilities to banks (30.7) (249.5)
Liabilities from finance leases (143.4) (189.8)
Financial liabilities due to TUI AG Group companies (53.1) (131.6)
Other financial liabilities (3.8) -
(231.0) (570.9)
Net debt (532.3) (629.4)
13. Current trade and other payables
2007 2006
�m �m
Trade accounts payable to third parties 1,354.1 1,200.5
Trade accounts payable to joint ventures and associates 23.2 13.8
Trade accounts payable to TUI AG Group companies 2.9 8.0
Trade accounts payable 1,380.2 1,222.3
Other liabilities due to TUI AG Group companies - 145.7
Advance payments received 1,263.7 1,096.0
Accruals and deferred income 546.1 585.2
Other miscellaneous liabilities 563.6 196.8
Other liabilities 2,373.4 2,023.7
3,753.6 3,246.0
14. Non-current trade and other payables
2007 2006
�m �m
Deferred income 12.7 5.0
Accruals 58.1 40.8
Other miscellaneous liabilities 39.5 44.4
110.3 90.2
15. Employee benefits
2007 2006
�m �m
Employee benefit liabilities on the balance sheet include the following pension
scheme deficits:
Thomsonfly Pilot 132.8 300.6
TUI Pension UK 67.9 137.5
Unijet scheme 3.8 11.3
Air 2000 scheme 2.2 14.0
Other schemes 107.0 71.5
313.7 534.9
Analysed as due within one year 2.9 3.6
Analysed as due after one year 310.8 531.3
313.7 534.9
INDEPENDENT REVIEW REPORT TO TUI Travel PLC
Introduction
We have been engaged by the company to review the TUI Travel PLC pro forma
financial information for the years ended 30 September 2007 and 30 September
2006, which comprises the pro forma group income statement, the pro forma group
balance sheet, the pro forma group cash flow statement and the related
explanatory notes. We have read the other information contained in the report
and considered whether it contains any apparent misstatements or material
inconsistencies with the pro forma financial information.
This report is made solely to the company in accordance with the terms of our
engagement letter dated 10 December 2007. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The TUI Travel PLC pro forma financial information is the responsibility of, and
has been approved by, the directors of TUI Travel PLC. The directors are
responsible for preparing the TUI Travel PLC pro forma financial information in
accordance with the basis set out in note 1 to the TUI Travel PLC pro forma
financial information.
Our responsibility
Our responsibility is to express to the Company a conclusion on the TUI Travel
PLC pro forma financial information, based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2400 Engagements to review Financial Statements issued by the
International Auditing and Assurance Standards Board. A review of financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the TUI Travel PLC pro forma financial information as at 30 September 2007
and 30 September 2006 and for the two years then ended has not been prepared, in
all material respects, in accordance with the basis set out in note 1.
KPMG Audit Plc
Chartered Accountants
London
13 December 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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