RNS Number : 2601U
TUI Travel PLC
13 May 2008
13 May 2008
TUI Travel PLC
Interim results for the six months ended 31 March 2008 (unaudited)
Highlights
* The Group had a strong first half of the year, with Winter 2007/08 continuing to trade strongly, resulting in a £71m improvement
in underlying operating loss (H1 08: loss of £250m; H1 071: loss of £321m):
* * The strong result in the first half was primarily due to margin enhancement; synergies were in line with management expectations
and contributed just £4m of the £71m improvement versus prior year. * Mainstream sector: underlying operating loss significantly
improved by £65m to £244m (H1 071: loss of £309m) driven by strong trading in the UK and Nordics, and a significant turnaround in France.
* Specialist sectors: underlying operating profit improved by £9.6m to £4.7m in the first half (H1 071: loss of £4.9). * Underlying
loss before tax improved by 13% to £294m (H1 071: loss of £339m).
Underlying results 1,2 Reported results1
£m H1 08 H1 07 Change H1 08 H1 07
Revenue 5,163 4,733 +9% 5,163 4,733
Operating loss (250) (321) +22% (373) (411)
Loss before tax (294) (339) +13% (417) (429)
1Comparative information is presented on a pro forma basis, refer to note 1 to the condensed interim financial statements
2 The Group believes that underlying operating loss and underlying loss before tax provide additional guidance to the statutory measures
on the underlying performance of the business during the financial year. Underlying operating loss and underlying loss before tax exclude
separately disclosed items, amortisation of IFRS 3 intangibles and taxation of results of the Group's joint ventures and associates
· Integration across both our UK leading brands, First Choice and Thomson, and in other areas of the Group is progressing well, and
we are on track to deliver at least £150m synergy benefits.
· Acquisition of ten niche specialist businesses in the year to date for a maximum consideration of £85.2m, and we continue to
explore a significant number of opportunities.
· Discussions are ongoing with Lufthansa regarding a potential merger of Germanwings and TUIfly and we intend to update the market
in due course.
· Consumer demand for our portfolio of differentiated package holidays and specialist leisure travel experiences remains strong
across the Group, particularly in the UK:
o Current trading for Summer 2008 remains strong, with UK Mainstream sales up 8%, 21% less product left to sell and strong pricing
achieved over the last six weeks.
o Trading for the Winter 2008/09 programme, although early in the season and only on sale for Northern Europe, has started strongly
with sales up 15% in the UK on 16% less capacity.
· The Group is eliminating loss making flying capacity, particularly in the UK, which will operate with six fewer aircraft in Winter
2008/09 and ten fewer aircraft in Summer 2009 compared to prior year.
· The Group is well hedged with respect to fuel and foreign exchange exposures for all open seasons and we believe that we are well
placed to recover incremental costs in both 2008 and 2009.
· The Board proposes to pay a second interim dividend of 2.8p per share.
The Board remains confident that it will meet its expectations for the year ended 30 September 2008.
Peter Long, Chief Executive Officer of TUI Travel PLC, commented
''We are delighted with our financial performance in the first six months of the newly merged business. Demand for Summer 2008 is strong
with less holidays left to sell. We see no evidence of deteriorating consumer sentiment in our booking patterns, in the average holiday
duration booked, average selling price or cancellation rates. This confirms our research that the annual holiday is an important component
of the family budget. Our integration plans are progressing well and we are confident of delivering at least £150 million of synergies. We
are well positioned to deal with a more challenging economic environment through a combination of strong management, the elimination of loss
making flying capacity, the flexibility in our business model and market leading tour operator brands. I remain confident that the group
will meet the Board's financial expectations for the year ended 30 September 2008."
A presentation for analysts and investors will be held today at 9.30am (GMT) at City Conference Centre, 80 Coleman Street, London EC2R
53J. For details of the webcast please visit www.tuitravelplc.com.
Enquiries:
TUI Travel PLC
Paul Bowtell, Chief Financial Officer Tel: 01293 645 713
Andy Jones, Director of Finance & Investor Relations 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
Jessica Rouleau /Kate Hough Tel: 020 7796 4133
Overview
The good progress achieved in Q1 continued into the second quarter and as a result the H1 08 underlying operating loss improved by £71m
to £250m (H1 07: loss of £321m). This improvement has primarily been achieved as a result of strong performances in the UK and Nordics and
a significant turnaround in France. The integration of our UK Mainstream businesses, Thomson and First Choice, is making excellent progress
and we remain confident of delivering synergy benefits of at least £150m, which was increased by 50% at the end of January.
Detailed commentary on these results is included in the Business and Financial Review of this release.
It should be noted that in many markets the Winter season runs from October to April, so the first half results include contributions
from both Winter and Summer seasons.
Current Trading
The Winter 2007/08 season is now complete for all source markets, and closed out in line with our expectations and with the last trading
update on 18 March 2008. We are pleased with Summer 2008 trading which continues to be buoyant, particularly in the UK. The Winter 2008/09
season is only on sale in the UK and Nordics, where early trading is encouraging, particularly the UK where sales are 15% ahead of prior
year on 16% less capacity.
Summer 2008
Summer 2008 trading has remained strong since the last trading update on 18 March 2008, particularly in the UK where sales for the last
six weeks were 9% ahead of prior year. The total UK programme is now 61% booked (up six percentage points on last year). The continental
European businesses are between 45% and 65% booked, with load factors ahead in all key programmes.
Current Trading1
Summer 2008
y-o-y variation% Sales Customers Capacity
MAINSTREAM
Northern Europe
Short-haul +1 -13 -23
Medium-haul +21 +9 -4
Long-haul +8 +8 +2
UK* Total +8 -2 -13
Nordic +3 +1 flat
Northern Europe* Total +7 -2 -11
Germany +4 +1
Austria -22 -20
Switzerland +12 +11
Central Europe* Total +3 flat -14
France -6 -10
Belgium +7 +3
Netherlands +6 +2
Western Europe- Total +1 -2 flat
SPECIALIST +9 +2
ACTIVITY +4 n/a
ODS2 +32 +24
1These statistics are up to 4 May 20082These statistics relate to the online businesses only
In the UK the rate of sale has been strong over the last six weeks and sales are 8% up versus prior year on 2% lower volumes. Our medium
and long haul destinations continue to perform strongly with sales up 21% and 8% on higher volumes of 9% and 8% respectively, in particular
for Greece, Turkey, Egypt, US, Dominican Republic and Mexico. Demand for our premium products, such as our differentiated Holiday Villages
and Thomson Gold, remains strong. We see no evidence of deteriorating consumer sentiment in our booking patterns or in metrics such as
average holiday duration booked, average selling price or cancellation rates.
Capacity in the UK is 13% lower than last year and load factors continue to be well ahead of last year for all departure months. The
total UK summer programme is six percentage points further sold than at this point last year and we have 21% less product left to sell. We
have significantly less product left to sell as we start to enter the lates market for the peak season departure months. Currently we are
achieving strong pricing on May and June departures.
Summer 2008 trading in Germany continues to be positive and prices are ahead of prior year, with sales up 4% on higher volumes of 1%.
Capacity remains 14% lower than last year and we have 11% less product left to sell. Western Europe is trading well with Belgium and the
Netherlands performing strongly. In France, due to less discounting of the Nouvelles Frontieres product for Summer 2008, volumes and sales
are both down versus last year. However margins continue to improve over Summer 2007 due to product rationalisation and focus on
differentiated content and we remain confident that the business will break even in the current financial year.
Trading in the specialist sectors for Summer 2008 continues to be positive. Total sales are up 9% and 4% for Specialist Holidays and
Activity Holidays respectively, while total transaction values are 32% ahead in ODS.
Winter 2008/09
For Winter 2008/09, the UK and Nordic businesses are the only mainstream programmes that are currently on sale and we are encouraged by
the strong trading to date, particularly in the UK.
UK sales and volumes are up 15% and 6% on the prior year, respectively. Load factors are ahead of last year across the majority of
departure months in the season and the total UK programme is three percentage points further sold. We are reducing our airline fleet by six
for Winter 2008/09, a 16% capacity reduction, and in Summer 2009 we will reduce the fleet by a further four aircraft. This means that in
Summer 2009 we will be operating ten fewer aircraft, a 12% reduction in capacity compared to Summer 2008, as we continue to eliminate
loss-making capacity.
Current Trading 1
Winter 2008/09
y-o-y variation% Sales Customers Capacity
MAINSTREAM
Northern Europe
Short-haul -5 -9 -25
Medium-haul +15 +9 -13
Long-haul +6 +2 -4
UK - Total +15 +6 -16
Nordic +1 -4 +2
Northern Europe - Total +9 +2 -12
1 These statistics are up to 4 May 2008
Within the Activity sector, trading for a number of our premium escorted tours programmes for Winter 08/09 has been excellent, with
several programmes fully sold out for the season.
Fuel/Foreign Exchange
In the current environment, there are a number of challenges to manage across the cost base. These are driven, primarily, by the
volatility in fuel and foreign exchange prices. The Group is well hedged for all open seasons and operates relevant and effective hedging
policies in each source market. Pricing within each source market for package holidays is highly dynamic, allowing us to reflect changes in
input costs, as well as responding to changes in demand, on a daily basis.
Our UK source market has greater cost pressure due to its exposure to the Euro. Approximately 70% of its destination portfolio is within
Euro denominated countries where approximately 40% of costs relate to accommodation. Given this volatility, we have hedged well ahead of the
booking curve using a variety of instruments such as options on top of forward contracts, giving us both certainty of cost and flexibility
if there is a decrease in fuel prices or a strengthening of Sterling in the coming months.
UK Hedged Position
Summer 2008 Winter 2008/09 Summer 2009
Fuel 90% 69% 65%
FX Euro 90% 80% 75%
FX USD 94% 86% 70%
As at 6 May 2008
Based on the achieved hedged rates and the current forward rates, we expect the Group will spend approximately £900m on jet fuel in the
current financial year, representing approximately 8% of Mainstream revenues.
Our current hedged position and our ability to adjust prices on a frequent basis coupled with our tightening of supply in the market
place through capacity reductions, particularly in the UK and Germany, means that we have every opportunity to recover the incremental cost
in both 2008 and 2009.
Integration
Integration in the UK is progressing well, with a number of significant milestones met in the second quarter. We have recently launched
our UK Summer 2009 programme on one reservation platform, thereby enabling us to optimise our yield management capability across the entire
programme. The airlines have received approval from the CAA for a single Air Operating Certificate, one month earlier than anticipated, and
have effectively been operating as a single airline since 1 May 2008. In addition, in April we successfully transferred all of our airline
operations at Gatwick, our largest UK gateway, into the North terminal, with no operational impact to customers or our flying programme.
Our retail estate is now operating on one foreign exchange platform, which we expect will deliver enhanced margins. We have also
completed the integration and relocation of the majority of the airline and tour operating support functions into our new UK head office in
Luton.
Integration outside the UK Mainstream business is also progressing well, with opportunities for product rationalisation, back office
synergies and cost savings being implemented. We have gained increasing confidence and clarity on cost saving opportunities outside the UK
Mainstream business over recent months.
As a consequence of all these measures, we remain confident of delivering at least £150m of synergy benefits.
Germanwings/TUIfly
On 29 January, we announced the signing of a Memorandum of Understanding with Deutsche Lufthansa AG and Albrecht Knauf
Industriebeteiligung GmbH. The MOU allowed the parties to proceed with plans to merge Eurowings Luftverkehrs, Germanwings GmbH, Hapag-Lloyd
Flugeselleschaft GmbH and Hapag-Lloyd Express GmbH under a joint and independent holding company. We continue to hold substantive
discussions with Lufthansa and intend to update the market in due course.
S-Group Capital Management and TUI Travel PLC Joint Venture
S-Group Capital Management Limited, Cyprus and TUI Travel PLC announced in April that they have signed a Memorandum of Understanding to
jointly develop a Russian and CIS leisure tourism presence. Under the terms of the agreement, a joint venture company will be established as
the investment vehicle of the parties with the objective of becoming a leading player in the fast growing Russian and CIS leisure tourism
markets.
Outlook
The Group is well hedged with respect to fuel and foreign exchange exposures for all open seasons and we believe that we are well placed
to recover incremental costs in both 2008 and 2009.
While the economic environment is challenging in certain markets, our customers are proving resilient and booking patterns and trading
metrics show no indication that customers are trading down or altering their holiday plans as a result of economic conditions. Continued
strong trading across the portfolio for Summer 2008 and the positive start to the Winter 2008/09 programme in the UK and Nordics leaves the
Board confident that the Group will meet the Board's expectations for the current TUI Travel PLC financial year ending 30 September 2008.
BUSINESS AND FINANCIAL REVIEW
Group Performance
The Group's H1 08 underlying operating loss was £250.5m, an improvement of £70.8m on the prior year (H1 07: loss of £321.3m). Group
revenue rose 9% to £5,163m.
Underlying results 2 Reported results
Pro forma1 Pro forma1 Statutory
£m H1 08 H1 07 Change H1 08 H1 07 H1 07
Revenue 5,163 4,733 +9% 5,163 4,733 4,240
Operating loss (250) (321) +22% (373) (411) (167)
Loss before tax (294) (339) +13% (417) (429) (167)
Loss per share (p) (19.1) (25.2) +24% (26.9) (30.8) (12.4)
1 Comparative information is presented on a pro forma basis, refer to note 1 to the condensed interim financial statements
2 The Group believes that underlying operating loss and underlying loss before tax provide additional guidance to the statutory measures
on the underlying performance of the business during the financial year. Underlying operating loss and underlying loss before tax exclude
separately disclosed items, amortisation of IFRS 3 intangibles and taxation of results of the Group's joint ventures and associates
A reconciliation of underlying loss before tax to loss before tax is as follows:
Six months ended Pro forma Statutory
31 March 31 March 30 June
2008 2007 2007
£m £m £m
Underlying loss before tax (294.5) (339.2) (148.5)
Separately disclosed items (58.7) (82.3) (18.2)
Amortisation of IFRS 3 intangibles (62.3) (7.5) -
Taxation on losses of joint ventures and (1.2) 0.4 (0.6)
associates
Loss before tax (416.7) (428.6) (167.3)
Separately disclosed items are further detailed in note 4 of the condensed interim financial statements, and principally comprise
restructuring and integration costs and gains on specific derivative financial instruments. Amortisation of IFRS 3 intangibles arising on
the merger of 3 September 2007 amounted to £59.9m and is included within the H1 08 total charge of £62.3m.
Segmental Performance
Segmental performance is based on underlying financial information (which excludes separately disclosed items and amortisation of IFRS
intangibles). Underlying financial information is an additional measure to the segmental statutory results. Segmental statutory results are
set out in note 3 of the condensed interim financial statements.
All H1 07 underlying financial information in the segmental performance analysis is presented on the pro forma basis set out in note 1
to the condensed interim financial statements. An analysis of the current period against the statutory comparative six months to 30 June
2007 has not also been prepared. Such a comparison would not be as meaningful as the statutory comparative period does not include the
results of First Choice and is for a different six-month period in a highly seasonal business.
The basis of the Group's segmental information has been changed to reflect the new management structure. Accordingly, Marmara is now
reported within France and Canada is now reported within Northern Europe.
Mainstream Sector
The Mainstream Sector consists of three divisions:
* The Northern Europe division comprises the distribution and tour operation businesses in the UK, Ireland, Canada (Signature Vacations)
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 (Nouvelles Frontieres and Marmara), 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 an underlying operating loss of £244.0m in H1 08, an improvement of £64.7m over the prior year (H1
07: loss of £308.7m).
Mainstream H1 08 H1 07 Change %
Customers (*000)
Northern Europe 3,422 3,525 -3%
Central Europe 4,200 3,968 +6%
Western Europe 2,034 1,936 +5%
Total 9,656 9,429 +2%
y-o-y variation
Revenue per customer Total
Northern Europe +9%
Central Europe +3%
Western Europe +3%
Total +5%
Underlying operating loss (£m)
Northern Europe (108.7) (152.0) +28%
Central Europe (92.8) (93.1) flat
Western Europe (42.5) (63.6) +33%
Total (244.0) (308.7) +21%
Northern Europe
The Northern Europe division achieved a 28% improvement in underlying operating loss to £108.7m (H1 07: loss of £152.0m). As outlined
in the table below, the primary driver behind the improvement in performance was margin enhancement, driven by the reduction of loss making
capacity, with synergies contributing just £4.2m in the first half out of the total £43.3m improvement.
UK Nordics Canada Northern Europe
H107 (176.6) 13.1 11.5 (152.0)
Underlying margin enhancement 34.3 14.2 (9.4) 39.1
Synergies 4.2 - - 4.2
H1 08 (138.1) 27.3 2.1 (108.7)
Northern Europe H1 08 H1 07 Change %
Customers (*000)
UK 2,635 2,810 -6%
Nordic 574 506 +13%
Canada 213 209 2%
Total 3,422 3,525 -3%
y-o-y variation
Revenue per customer Total
UK +10%
Nordic +5%
Canada flat
Total +9%
Revenue growth
UK +3%
Nordic +20%
Canada +2%
Total +6%
Underlying operating (loss)/profit (£m)
UK (138.1) (176.6) +22%
Nordic 27.3 13.1 +108%
Canada 2.1 11.5 -82%
Total (108.7) (152.0) +28%
Controlled distribution %
UK 76% 76% flat
Nordic 77% 71% +6ppts
Canada 16% 17% -1ppt
Total 73% 71% +2ppts
UK and Ireland
The UK reported an underlying loss of £138.1m, an improvement of £38.5m over the prior year (H1 07: loss of £176.6m). This
improvement was achieved through a combination of exiting loss making capacity, strong customer demand for higher margin medium and long
haul products, cost savings achieved from the implementation of pre-merger plans and synergy benefits delivered in Q2.
The UK cut capacity by 51% in its Winter 2007/08 programme for city pairs scheduled flying routes, which resulted in a £6m improvement
versus prior year. This capacity management combined with strong customer demand in Winter 2007/08 for medium and long haul package holidays
led to significant improvements in load factors and margins across the period. In particular the margins in the lates market showed
significant improvement year on year due to the business having significantly less product left to sell. The UK business also benefited from
cost savings achieved through the implementation of pre-merger plans to rationalise the retail estate and call centres and to generate
efficiencies in back office operations. Additionally, synergy benefits arising from the UK integration programme contributed £4.2m to the
UK result in H1, with a further £17m expected to be achieved in H2.
Nordics
The Nordic business grew underlying operating profit to £27.3m in H1 08, a significant improvement over the prior year profit of
£13.1m. Customer and revenue growth during the period was 13% and 20% respectively. This growth was driven by the expansion of the high
margin long haul programme, particularly to Thailand, and the success of the differentiated Blue Concept hotels and holiday villages in long
haul, together with the medium haul destinations of Canary Islands and Egypt. Blue Concept customers accounted for 31% of total customers in
H1 08, up two percentage points versus prior year. Margins also benefited from continued growth in controlled distribution, which was up six
percentage points in the period.
Canada
As previously announced, the performance of the Canadian mainstream business was adversely impacted by the extremely competitive market
environment. This situation continued into Q2, resulting in a £9.4m deterioration in the first half. Significant overcapacity in the market
led to reduced prices and margin erosion from high levels of discounting. Canada remains strategically important due to the counter cyclical
deployment of aircraft to and from the UK in their respective low / high seasons.
Central Europe
The Central Europe division reported an underlying operating loss of £92.8m in H1 08 (H1 07: loss of £93.1m), primarily as a result of
over capacity in the Winter season. Within Germany, the business performed satisfactorily despite margin pressures due to excess capacity.
As previously announced, we have already cut airline capacity by eight aircraft for the Summer 2008 programme. Discussions with Lufthansa
regarding a potential merger of Germanwings and TUIfly are ongoing. Switzerland performed well in H1 08 and continued to benefit from strong
customer demand and from offering its product at better value German prices to the Swiss market. Results were also improved through cost
efficiencies arising from the turnaround programme implemented in the previous financial year.
Central Europe H1 08 H1 07 Change %
Customers (*000) 4,200 3,968 +6%
Revenue per customer growth +3%
Revenue growth % +9%
Underlying operating loss (£m) (92.8) (93.1) flat
Controlled distribution % 41% 41% flat
Western Europe
Western Europe achieved a significant improvement in the underlying operating loss to £42.5m (H1 07: loss of £63.6m), primarily driven
by the performance of our French business.
Western Europe H1 08 H1 07 Change %
Customers (*000)
France 966 967 flat
Netherlands 450 434 +4%
Belgium 618 535 +16%
Total 2,034 1,936 +5%
y-o-y variation
Revenue per customer Total
France +7%
Netherlands +5%
Belgium -3%
Total +3%
Revenue growth
France +7%
Netherlands +9%
Belgium +13%
Total +8%
Underlying operating loss (£m)
France (18.4) (35.6) +48%
Netherlands (12.2) (13.9) +12%
Belgium (11.9) (14.1) +16%
Total (42.5) (63.6) +33%
Controlled distribution %
France 50% 49% +1ppt
Netherlands 53% 52% +1ppt
Belgium 46% 41% +5ppts
Total 49% 48% +1ppt
France
France delivered an underlying operating loss of £18.4m, an improvement of £17.2m on the prior year (H1 07: loss of £35.6m). The
business benefited from the rationalisation of the tour operator product offering to focus on a more profitable portfolio of destinations
and improvements in pricing and yield management. In the airline, the fleet was reduced by one aircraft thereby reducing operating costs.
However volumes were maintained year on year through efficient rationalisation of the flight programme to focus on the French West Indies
and Indian Ocean destinations. The airline also benefited in Q1 08 from the recovery of La Reunion (one of Corsair's key destinations) which
was heavily impacted in Q1 07 by the outbreak of the Chikungunya disease.
Netherlands
The Netherlands reported an improvement of £1.7m in underlying operating loss for H1 08 to £12.2m (H1 07: loss of £13.9m). Customer
volumes and revenue grew by 4% and 9%, respectively, driven by the popularity of the medium and long haul destinations of Egypt and the
Caribbean. During the Winter season, the business absorbed costs of £4m from accidental damage to a number of 767 aircraft which affected
the profitability of the business.
Belgium
Belgium also improved its performance in H1 08 with an underlying operating loss of £11.9m (H1 07: loss of £14.1m). Volume growth was
strong during the period with a 16% increase in customers. There was particularly strong demand in H1 08 for the medium and long haul
destinations of Morocco and Egypt. Margins also benefited from the growth in controlled distribution (mainly web bookings), which accounted
for 46% of total bookings in the period (H1 07: 41%).
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 7 source markets that have become market leaders to specific
destinations. 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.
* 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.
The Sector reported underlying operating losses for the six months of £2.7m (H1 07: profit of £0.5m). The businesses operating within
the Destination segment delivered an improved performance over prior year, with demand particularly strong during the period for the
destination of Egypt. Within the Premium segment our long haul brand Hayes & Jarvis performed well in H1 08. Volumes were 10% higher than
last year, combined with a seven percentage points increase in web bookings. The Premium short haul businesses did not perform as well as in
2007, although were in line with our expectations given the ongoing repositioning of the brands in this segment and additional costs
incurred in the launching of new brochures (such as the Citalia Ireland brochure). In the Lifestages segment, the H1 08 result is impacted
by the inclusion of losses on acquisitions made during 2007, coupled with softening in the leisure segment of the Student Travel division.
Specialist Holidays H1 08 H1 07 Change %
Customers (*000)
Destination 396 388 +2%
Premium 52 47 +11%
Lifestages 125 109 +15%
Total 573 544 +5%
y-o-y variation
Revenue per customer Total
Destination +27%
Premium +6%
Lifestages -8%
Total +13%
Revenue growth
Destination +29%
Premium +17%
Lifestages +5%
Total +18%
Change £m
Underlying operating (loss)/profit (£m)
Destination (1.8) (4.2) 2.4
Premium (0.6) (0.1) (0.5)
Lifestages (0.3) 4.8 (5.1)
Total (2.7) 0.5 (3.2)
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 Le Boat (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, TCS and Starquest, that operate specialist escorted tours
offering cultural and luxury escorted travel experiences for the US source market.
The Sector delivered a significant improvement in performance in H1 08, achieving revenue growth of 38% and reporting underlying profits
of £7.8m (H1 07: loss of £5.7m). The Sector benefited from a combination of strong organic and acquisition-led growth across the
portfolio.
The Marine division performed well with an improvement in underlying operating loss of £0.5m to £8.8m (H1 07: loss of £9.3m). The
Adventure division achieved underlying profits of £10.8m, up 135% (H1 07: £4.6m) through strong organic growth in its leading adventure
brands together with acquisition led growth. The acquisition of Quark Expeditions in April 2007 and the integration of this business with
our existing polar cruising business has been very successful, with margins benefiting from our market leading position in this segment. In
addition, the UK schools travel and adventure group performed well in the first half as a result of strong demand and recent acquisitions.
In North America, the Experiential division reported underlying profits of £5.8m, an improvement of £6.8m on the prior year (H1 07:
loss of £1.0m). This result was achieved through a combination of strong organic growth and the acquisition of Starquest Expeditions in
September 2007. TCS Expeditions, our other business in the luxury private jet segment, also delivered strong organic growth in the half
year.
Activity H1 08 H1 07 Change %
y-o-y variation
Total revenue growth Total
Marine -6%
Adventure +52%
Experiential +69%
Total +38%
Change £m
Underlying operating profit/(loss) (£m)
Marine (8.8) (9.3) 0.5
Adventure 10.8 4.6 6.2
Experiential 5.8 (1.0) 6.8
Total 7.8 (5.7) 13.5
Online Destination Services
The Online Destination Services (ODS) 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.
ODS reported an underlying loss of £0.4m in H1 08 (H1 07: profit of £0.3m). Our online businesses performed well during the period and
delivered growth over the prior year. All of the online routes to market achieved strong volume growth in core source markets such as the UK
and Spain and through expansion into new source markets such as France, Germany, Italy and Brazil. The H1 08 result is impacted by the
inclusion of losses on acquisitions made during the period April 2007 and March 2008. The H108 result for the offline business was behind
the prior year, due to a slight softening in volumes from some of the continental source markets to North African destinations where our
offline agencies have operations, particularly in Morocco.
Online Destination Services H1 08 H1 07 Change %
Bednights (*000)
Hotelbeds 4,027 3,165 +27%
Bedsonline 2,210 1,527 +45%
Hotelopia 1,329 1,123 +18%
LateRooms 994 404 +146%
Total 8,560 6,219 +38%
y-o-y variation
TTV per bednight Total
Hotelbeds +12%
Bedsonline +22%
Hotelopia +19%
LateRooms +6%
Total +24%
Change £m
Underlying operating (loss)/profit (£m)
Total (0.4) 0.3 (0.7)
Acquisitions
In the six months ended 31 March 2008, the Group acquired eight businesses within high growth niche segments for a maximum total
consideration of £41.4m. A further two acquisitions were completed since 31 March for a total maximum consideration of £43.8m.
In the Activity Sector we completed five acquisitions during the period. We acquired two escorted adventure operators, Australian
Pinnacle Tours and Planet Perth. We further bolstered our UK school-focused businesses through the acquisition of CHS Tour Services, the
leading operator of UK school ski holidays to Austria. We also acquired two UK sports tour operators - Gullivers Sports Travel (specialising
in cricket and rugby events) and Your Sporting Challenge (specialising in football and rugby league events). In the Specialist Sector we
acquired National Events, which provides travel services for high school performing art groups in the US. Within Online Destination Services
we acquired Cruiselink II Ltd and Destination Florida, shore side cruise handling businesses based on the east coast of the USA and in
Miami, respectively. See note 9 of the condensed interim financial statements for further details on these acquisitions.
Since 31 March 2008 we have acquired two further businesses within the Activity Sector. We further developed our UK school-focused
portfolio with the acquisition of World Challenge and we increased our offering in volunteer and gap year travel in the UK with the
acquisition of Real Travel.
The acquisition pipeline remains strong as we continue to target travel companies, notably within the Asia Pacific region, emerging
markets, 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.
Dividends
On 13 December 2007, the date of the announcement of the company's Proforma Results for the year ended 30 September 2007, the Board
recommended an interim dividend amounting to 5.9 pence per share payable on 7 April 2008 to holders of relevant shares on the register at 7
March 2008.
The Board recommends a second 2008 interim dividend per ordinary share of 2.8p, payable to holders of relevant shares on the register at
5 September 2008. This will be paid on 1 October 2008.
The Group will look to maintain underlying dividend cover at around two times. The Company intends to continue to operate a dividend
re-investment plan as an alternative to the full cash dividend.
Loss per share
Underlying basic loss per ordinary share was 19.1p (H1 07 underlying pro forma: 25.2p) using underlying effective tax rate of 28% and
weighted average shares in issue of 1118.0m), an improvement of 24%.
Basic loss per share was 26.9p (H1 07 pro forma: 30.8p; H1 07 statutory: 12.4p).
Cash and Liquidity
The net debt position (cash and cash equivalents less loans, overdrafts and finance leases) at 31 March 2008 was £895.5m (30 September
2007: £532.3m). This consisted of £1,025m of cash and £277m of current interest-bearing loans and liabilities and £1,643m of non-current
interest-bearing loans and liabilities.
TUI AG Reporting
TUI AG, our majority shareholder, is issuing its Q1 report and accounts on 15 May 2008 to the German market in line with German
regulatory requirements. This report contains financial information relating to TUI Travel PLC. However, this information is not directly
comparable due to different presentation and treatment of certain items.
Responsibility statement of the Board of Directors in respect of the condensed interim financial statements
These condensed consolidated interim financial statements for the six-month period ended 31 March 2008 have been prepared by the
Directors.
We confirm that to the best of our knowledge that:
* the condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the requirements of the Disclosure and Transparency Rules of the UK Financial Services Authority
* other than in respect of the comparative pro forma financial information, the accounting policies applied by the Group in these
condensed consolidated financial statements are in accordance with International Financial Reporting Standards as adopted by the European
Union (*Adopted IFRSs*) and are the same as those accounting policies which wereapplied by the Group in Part VII of its listing prospectus
dated 29 June 2007
* the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial position or performance of the entity during that period.
The Board of Directors
Dr. Michael Frenzel
Sir Michael Hodgkinson
Peter Long
Paul Bowtell
William Waggott
Christoph Mueller
Dr. Volker Bcher
Johan Lundgren
Rainer Feuerhake
Tony Campbell
Clare Chapman
Bill Dalton
Jeremy Hicks
Giles Thorley
Harold Sher
Dr Albert Schunk
Dr Erhard Schipporeit
12 May 2008
Condensed consolidated income statement (unaudited)
for the 6 month period ended 31 March 2008
Notes 6 months to 30 June
Pro forma
6 months 2007
6 months to to 31 £m
31 March March
2008 2007
£m £m
Revenue 3 5,162.5 4,733.3 4,239.6
Cost of sales (5,043.0) (4,742.8) (4,157.4)
Gross profit/(loss) 119.5 (9.5) 82.2
(491.5) (401.9) (251.8)
Administrative expenses
Share of (losses)/profits of (0.7) 0.7 2.2
joint ventures and associates
Operating loss 3 (372.7) (410.7) (167.4)
Analysed as:
Underlying operating loss 3 (250.5) (321.3) (148.6)
Separately disclosed items 4 (58.7) (82.3) (18.2)
Amortisation of IFRS 3 (62.3) (7.5) -
intangibles
Taxation on (losses)/profits (1.2) 0.4 (0.6)
of joint ventures and
associates
(372.7) (410.7) (167.4)
Financial income 82.2 72.7 67.4
Financial expenses (126.2) (90.6) (67.3)
Net financial (44.0) (17.9) 0.1
(expenses)/income
Loss before tax (416.7) (428.6) (167.3)
Taxation 6 116.6 79.1 31.4
Loss for the period (300.1) (349.5) (135.9)
Attributable to:
Ordinary shareholders (300.9) (344.9) (138.6)
Minority interests 0.8 (4.6) 2.7
Loss for the period (300.1) (349.5) (135.9)
Basic and diluted loss per 7 (26.9)p (30.8)p (12.4)p
ordinary share
Underlying basic and diluted 7 (19.1)p (25.2)p (11.3)p
loss per ordinary share
Condensed consolidated balance sheet (unaudited)
at 31 March 2008 and 30 September 2007
31 30
March September
2008
Notes 2007
£m £m
Non-current assets
Intangible assets 4,249.0 4,138.2
Property, plant and equipment 1,436.4 1,373.9
Investments in joint ventures and associates 110.4 102.7
Other investments available for sale 56.3 53.0
Trade and other receivables 283.5 252.6
Derivative financial instruments 26.4 6.4
Deferred tax assets 204.0 188.8
6,366.0 6,115.6
Current assets
Inventories 45.4 39.7
Other investments available for sale 9.7 12.4
Trade and other receivables 1,742.8 1,465.2
Derivative financial instruments 287.6 37.5
Cash and cash equivalents 1,024.9 1,958.7
Assets classified as held for sale 15.6 88.0
3,126.0 3,601.5
Total assets 9,492.0 9,717.1
Current liabilities
Interest-bearing loans and borrowings (277.2) (419.0)
Employee benefits (4.4) (2.9)
Derivative financial instruments (126.6) (137.1)
Trade and other payables (3,684.4) (3,350.2)
Provisions (245.0) (159.0)
Income tax payable - (42.9)
Liabilities classified as held for sale - (18.8)
(4,337.6) (4,129.9)
Non-current liabilities
Interest-bearing loans and borrowings (1,643.2) (2,072.0)
Employee benefits (225.1) (310.8)
Trade and other payables (128.4) (110.3)
Income tax payable (22.6) -
Derivative financial instruments (142.7) (25.5)
Provisions (192.7) (131.4)
Deferred tax liabilities (218.4) (285.2)
(2,573.1) (2,935.2)
Total liabilities (6,910.7) (7,065.1)
Net assets 2,581.3 2,652.0
Equity
Share capital 111.8 111.8
Other reserves (12.8) (12.8)
Retained earnings 2,472.1 2,539.8
Equity attributable to equity holders of the 2,571.1 2,638.8
parent
Minority interest 10.2 13.2
Total equity 8 2,581.3 2,652.0
Condensed consolidated statement of cash flows (unaudited)
For the 6 month period ended 31 March 2008
6 months to 31 6 months to 30 June
March 2007
2008
£m £m
Loss for the period (300.1) (135.9)
Adjustment for:
Depreciation and amortisation 153.8 94.7
Equity settled share-based 5.7 -
payment expenses
Loss on sale of property, 1.4 2.0
plant and equipment
Share of losses/(profits) of 0.7 (2.2)
joint ventures and associates
Financial income (82.2) (67.4)
Financial expense 126.2 67.3
Income tax credit (116.6) (31.4)
Cash flow from operations (211.1) (72.9)
before changes in working
capital and provisions
Increase in inventories (7.8) (5.1)
Increase in trade and other (164.4) (364.1)
receivables
Increase in trade and other 200.1 1,014.0
payables
Increase/(decrease) in 13.0 (96.1)
provisions and employee
benefits
Cash flows from operations (170.2) 475.8
Net interest paid (17.2) (31.1)
Income taxes paid (22.8) (17.6)
Cash flows from operating (210.2) 427.1
activities
Investing activities
Proceeds from sale of 67.7 21.2
property, plant and equipment
Disposal of subsidiaries (5.6) 5.1
including cash disposed of
Acquisition of subsidiaries, (47.0) (27.8)
net of cash acquired
Investment in joint ventures (9.5) -
Acquisition of property, plant (82.8) (68.0)
and equipment
Cash flows from investing (77.2) (69.5)
activities
Financing activities
Repayment of borrowings (751.7) (84.4)
Ordinary and minority interest (4.3) (27.5)
dividends paid
Cash flows from financing (756.0) (111.9)
activities
Net (decrease)/increase in (1,043.4) 245.7
cash and cash equivalents
Cash and cash equivalents at 1,958.7 1,187.3
start of period
Effect of foreign exchange on 109.6 43.1
cash held
Cash and cash equivalents at 1,024.9 1,476.1
end of period
Cash and cash equivalents for
the cash flow statement
comprise:
Cash and cash equivalents 1,024.9
shown on the balance sheet
Cash and cash equivalents for 1,024.9
the cash flow statement
Condensed consolidated statement of recognised income and expense (unaudited)
For the 6 month period ended 31 March 2008
6 months to 31 6 months to 30 June
March
2008 2007
£m £m
Foreign exchange translation 79.7 (1.5)
Actuarial gains arising in
respect of defined benefit 62.1 116.5
pension schemes (net of tax)
Movements in cash flow hedges 94.3 40.7
(net of tax)
Net expense recognised 236.1 155.7
directly in equity
Loss for the period (300.1) (135.9)
Total recognised expense for (64.0) 19.8
the period
Attributable to:
Ordinary shareholders (65.7) 17.1
Minority interest 1.7 2.7
(64.0) 19.8
Notes to the condensed interim financial statements (unaudited)
1. Basis of preparation
Statement of compliance
These condensed unaudited consolidated interim financial statements for the six-month period ended 31 March 2008 have been prepared in
accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. They do not include all the information required
for full annual financial statements. The Group will publish its first full annual consolidated financial statements for the year ended 30
September 2008 in December 2008. These condensed unaudited consolidated interim financial statements were approved by the Board of
Directors on 12 May 2008.
Accounting policies
Other than in respect of the comparative pro forma financial information, the accounting policies applied by the Group in these
condensed consolidated financial statements are in accordance with International Financial Reporting Standards as adopted by the European
Union ('Adopted IFRSs') and are the same as those accounting policies which were applied by the Group in Part VII of its listing prospectus
dated 29 June 2007. The same accounting policies are anticipated to be applied for the year ended 30 September 2008. The Group's listing
prospectus, dated 29 June 2007, is available at www.tuitravel.com.
Comparative financial information
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 (now First Choice Holidays Limited) ('First Choice'). The business combination was effected on 3
September 2007 by way of TUI Travel PLC, a subsidiary of TUI AG, acquiring both TUI Tourism and First Choice. On a consolidated basis, TUI
Tourism is considered to be the acquirer of First Choice.
The comparative financial information presented in the income statement, cash flow statement and statement of recognised gains and
losses represents the six-month period from 1 January 2007 to 30 June 2007 for the TUI Tourism businesses only. The Directors consider this
to be the appropriate statutory comparative as it represents the first six months of the previous statutory reporting period of the TUI
Tourism business. The subsequent acquisition of First Choice and the seasonality of the business of the Group as a whole will mean that this
period is not directly comparable to the current period.
The unaudited pro forma financial information for the six-month period ended 31 March 2007 has been prepared by the Directors of the
Company on a pro forma basis to illustrate the effect of the business combination as if it had taken place prior to 1 October 2006 (the
first day of the comparative accounting period presented). This is to provide information which the Directors consider is a meaningful
comparative, but it is not entirely comparable to the result for the six-month period ended 31 March 2008 because it does not reflect the
acquisition accounting following the business combination of First Choice. 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 First Choice business combination actually occurred before 1 October 2006. 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.
This unaudited 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.
Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from
these estimates.
Use of non-GAAP profit and loss measures
The Group believes that underlying operating profit/(loss) and underlying profit/(loss) before tax provide additional guidance to the
statutory measures on the performance of the business during the financial period. Underlying operating profit/(loss) and underlying
profit/(loss) before tax exclude separately disclosed items, amortisation of IFRS 3 intangible assets and taxation of results of the Group's
joint ventures and associates. Underlying profit/(loss) is not defined under Adopted IFRS and therefore may not be directly comparable with
other companies' adjusted profit measures. It is not intended to be a substitute for or superior to Adopted IFRS measurements of profit.
2. Seasonality
The Group's travel leisure business is subject to significant seasonal fluctuations between the Winter and Summer seasons. The Group
mitigates this seasonal impact through operating a broad range of holiday products in both the Winter and Summer seasons and in different
global holiday markets which have different annual cycles.
The seasonality is a relevant factor when comparing the current six-month period to 31 March 2008, and the statutory comparative period
which is included in these condensed financial statements, which covers the six months to 30 June 2007.
3. Segmental information
The Sector analysis is based on the Group's management and reporting structure. The contribution of acquisitions in the period is set
out in note 9.
6 months ended 31 March 2008
£m Central Europe Northern Europe Western Europe Mainstream Holidays Specialist Holidays Activity
Holidays Online Destination Corporate Joint ventures and Total
Services associates Group
External revenue 1,673.8 1,954.2 906.6 4,534.6 217.1
251.5 159.3 - - 5,162.5
Operating (loss)/profit (94.1) (224.0) (44.4) (362.5) (7.0)
3.7 (6.5) 0.3 (0.7) (372.7)
Separately disclosed items 1.3 63.5 1.0 65.8 2.5
1.7 0.7 (12.0) - 58.7
Amortisation* - 51.8 0.9 52.7 1.8
2.4 5.4 - - 62.3
Tax on losses of joint ventures - - - - -
- - - 1.2 1.2
Underlying operating (loss)/profit (92.8) (108.7) (42.5) (244.0) (2.7)
7.8 (0.4) (11.7) 0.5 (250.5)
* of IFRS 3 intangibles
6 months ended 31 March 2007 (Pro forma)
£m Central Europe Northern Europe Western Europe Mainstream Holidays Specialist Holidays Activity
Holidays Online Destination Corporate Joint ventures and Total
Services associates Group
External revenue 1,532.3 1,847.5 836.1 4,215.9 184.4
181.6 151.4 - - 4,733.3
Operating (loss)/profit (108.6) (196.0) (81.3) (385.9) (2.4)
(10.0) (4.2) (8.9) 0.7 (410.7)
Separately disclosed items 15.5 44.0 17.7 77.2 1.9
2.1 0.2 0.9 - 82.3
Amortisation* - - - - 1.0
2.2 4.3 - - 7.5
Tax on profits of joint ventures - - - - -
- - - (0.4) (0.4)
Underlying operating (loss)/profit (93.1) (152.0) (63.6) (308.7) 0.5
(5.7) 0.3 (8.0) 0.3 (321.3)
*of IFRS 3 intangibles
3. Segmental information (continued)
6 months ended 30 June 2007
£m Central Europe Northern Europe Western Europe Mainstream Holidays Specialist Holidays Activity
Holidays Online Destination Corporate Joint ventures and Total
Services associates Group
External revenue 1,847.1 1,434.4 879.1 4,160.6 -
- 79.0 - - 4,239.6
Operating (loss)/profit (42.0) (95.3) (39.0) (176.3) -
- 6.7 - 2.2 (167.4)
Separately disclosed items (0.4) 15.0 3.6 18.2 -
- - - - 18.2
Tax on profits of joint ventures - - - - -
- - - 0.6 0.6
Underlying operating (loss)/profit (42.4) (80.3) (35.4) (158.1) -
- 6.7 - 2.8 (148.6)
4. Separately disclosed items
6 months to 30 June
Pro forma 2007
6 months £m
6 months to to 31
31 March March
2008 2007
£m £m
Restructuring expenses 12.9 74.6 1.8
Merger related integration 65.5 - 1.0
costs
Gains on derivative financial (28.1) - -
instruments
Other items 8.4 7.7 15.4
58.7 82.3 18.2
Restructuring expenses
These costs relate primarily to restructuring programmes that were already underway pre merger (2007 pro forma primary costs relate to
TUI Tourism's restructuring programme).
Merger related integration costs
These relate primarily to the costs of integration of the UK businesses, combined with other one-time costs incurred as a result of the
merger.
Gains on derivative financial instruments
The financial derivative gain relates to changes in the interest element of the fair value of certain forward currency contracts that is
required to be recognised immediately in the income statement. It arises from hedges taken out against the Group's forward aircraft order
book and has been separately disclosed as it does not arise from core operating activities.
Other items
This includes gains and losses on the sale and leaseback of aircraft.
5. Dividends
No dividends were paid during the period.
On 13 December 2007, the date of the announcement of the Company's Pro-forma Results for the year ended 30 September 2007, the Board
recommended a 2007 interim dividend amounting to 5.9 pence per share paid on 7 April 2008 to holders of relevant shares on the register at 7
March 2008. That dividend will be recognised as a deduction from equity in the year ending 30 September 2008.
The Board recommends a 2008 interim dividend per ordinary share of 2.8p payable to holders of relevant shares on the register at 5
September 2008. This will be paid on 1 October 2008. The Company intends to continue to operate a dividend re-investment plan as an
alternative to the full cash dividend.
6. Taxation
The Group's underlying effective tax rate, being tax on underlying profit before tax, and full effective tax rate for the six months
ended 31 March 2008 are both 28%. These rates are based on the Group's estimated effective tax rate for the year ended 30 September 2008.
7. Loss per ordinary share
The basic loss per ordinary share for the six-month period to 31 March 2008 is calculated by dividing the loss attributable to ordinary
shareholders by the applicable weighted average number of ordinary shares in issue during the period, excluding those held in the employee
share ownership trusts.
Loss Weighted Loss per share
average no. of
shares
2008 2008 2008
£m Millions Pence
Basic loss per ordinary share (300.9) 1,118.0 (26.9)
Amortisation of business 44.7 - 4.0
combination intangibles (net
of tax)
Basic loss per share before (256.2) 1,118.0 (22.9)
amortisation of business
combination intangibles
Separately disclosed items 42.3 - 3.8
(net of tax)
Basic underlying loss per (213.9) 1,118.0 (19.1)
ordinary share before
derivative gains
Had the TUI Travel share structure of 1,118 million shares been in place during the pro forma comparative period for the six months to
31 March 2007, the basic loss per share and basic underlying loss per share calculated on the same basis as above would have been 30.8p and
25.2p respectively.
Had the TUI Travel share structure of 1,118 million shares been in place during the statutory comparative period for the six months to
30 June 2007, the basic loss per share and basic underlying loss per share calculated on the same basis as above would have been 12.4p and
11.3p respectively.
In accordance with IAS 33: Earnings Per Share, the calculation of diluted basic loss per ordinary share and diluted underlying loss per
ordinary share has not included anti-dilutive potential ordinary shares. Therefore there is no difference between the calculation of basic
and diluted measures in the six-month periods.
8. Capital and reserves
Own share reserve £m Equity holders of
Share capital Retained earnings parent Minority
£m £m £m interests
Total
£m £m
At 1 October 2007 111.8 (12.8) 2,539.8 2,638.8 13.2 2,652.0
Total recognised (expense)/ - - (65.7) (65.7) 1.7 (64.0)
income for the period
Share based payment - - 5.7 5.7 - 5.7
Acquisition of minority - - (7.7) (7.7) (0.4) (8.1)
interest
Minority interest dividend - - - - (4.3) (4.3)
At 31 March 2008 111.8 (12.8) 2,472.1 2,571.1 10.2 2,581.3
9. Acquisitions
(a) Acquisitions in the period ended 31 March 2008
The acquired businesses in the six-month period and their acquisition dates were:
Sector and entity Country of operation Acquisition date
Specialist Holidays
National Events USA November 2007
Activity Holidays
CHS Tour Services UK December 2007
Australia Pinnacle Tours Australia December 2007
Planet Perth Australia January 2008
Gullivers Sport Travel UK February 2008
Your Sporting Challenge UK March 2008
Online Destination Services
Cruiselink II Limited USA November 2007
Destination Florida USA January 2008
Acquisition consideration payable 41.4
Acquisition expenses 0.4
Total investment cost 41.8
100% of the shareholdings were purchased in all acquisitions in the period.
The fair value of net assets/(liabilities) acquired and residual goodwill arising was as follows:
Fair value of
Book value net assets/
prior to Fair value (liabilities)
acquisition adjustments acquired
£m £m £m
Intangible fixed assets - 10.3 10.3
Tangible fixed assets 2.4 - 2.4
Current assets (excluding cash) 6.4 - 6.4
Cash 8.7 - 8.7
Current liabilities (11.4) - (11.4)
Non-current liabilities (0.9) (2.7) (3.6)
Total net assets acquired 5.2 7.6 12.8
Total investment cost (as above) 41.8
Net assets acquired (as above) (12.8)
Provisional goodwill arising 29.0
9. Acquisitions (continued)
(a) Acquisitions in the period ended 31 March 2008 (continued)
All acquisitions arising in the six-month period have been accounted for using the purchase method as required by IFRS 3. A consistent
process is undertaken for each acquisition to identify the fair value of separable assets and liabilities acquired, including the fair value
of intangible assets, being brands, order books and customer databases. The residual goodwill on acquisition represents the value of assets
and earnings that do not form separable assets under IFRS but which nevertheless are expected to contribute to the future results of the
Group. Residual goodwill includes: integration synergies; the involvement and knowledge of the acquired workforce; and the ability to sell
acquired product through existing channels and existing product through acquired channels.
It should be noted that certain fair values have necessarily been prepared on a provisional basis and experience may result in revisions
in the subsequent accounting period.
The consideration payable is made up of:
£m
Cash 33.0
Deferred and contingent consideration 8.4
Acquisition consideration payable 41.4
(b) Income statement
The contribution to Group revenue and profit after tax of acquisitions made in the period was £13.5 million and £0.7 million
respectively, after charging £0.5 million of amortisation of acquisition related intangible assets net of the related deferred tax credit.
If the businesses that were acquired at various times during the six-month period ended 31 March 2008 had been part of the Group since 1
October 2007, the estimated impact on revenue and profit after tax would have been approximately £20.4 million (total Group revenue of
£5,182.9 million) and £1.1 million (total Group loss after tax of £299.0 million) respectively.
(c) Acquisition of First Choice
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 (now First Choice Holidays Limited) ('First Choice'). The business combination was effected through
TUI Travel PLC (a subsidiary of TUI AG) issuing shares in exchange for 100% of the issued share capital of First Choice. On a consolidated
basis, TUI Tourism is considered to be the acquirer of First Choice.
The total acquisition consideration for First Choice (excluding acquisition costs) was £1.5 billion, settled through the issue of
shares. The fair value of equity shares issued as consideration is based on the published market value of the First Choice shares acquired
on 3 September 2007.
Intangible assets arising on acquisition amounted to £0.6 billion in total and are being amortised over periods between 7 months and 20
years. IFRS 3 amortisation charged in the six months to 31 March 2008 relating to First Choice amounted to £59.9 million. The residual
goodwill arising amounted to £1.6 billion.
Fair values relating to First Choice, which have been recorded in the balance sheets at 30 September 2007 and 31 March 2008, have
necessarily been prepared on a provisional basis since 3 September 2007 and subsequent experience may result in revisions during the first
year post acquisition.
(d) Acquisitions after the balance sheet date
Subsequent to 31 March 2008, the Group has acquired a further two businesses within the Activity Sector, World Challenge and Real
Travel. The estimated total maximum consideration payable is £44m.
10. Capital and operating lease commitments
The following amounts have been contracted but not provided for at the balance sheet date:
31 March 30 June
2008 2007
£m £m
Capital commitments 2,253.6 1,598.8
Group obligations under operating lease contracts at 31 March 2008 and 30 June 2007 are as follows:
Land Aircraft, Land Aircraft,
and yachts and and yachts and
buildings equipment buildings Equipment
2008 2008 2007 2007
£m £m £m £m
Total commitments under
non-cancellable operating
leases expiring:
Within one year 117.3 370.4 83.0 349.6
Between one and five years 342.6 903.0 256.1 764.3
Thereafter 282.7 159.2 187.4 85.5
742.6 1,432.6 526.5 1,199.4
11. Related party transactions
(a) Ultimate controlling party
The Group's ultimate controlling party is TUI AG, a company registered in Berlin and Hanover (Federal Republic of Germany).
(b) Related party transactions
On 29 June 2007 the Company entered into the Shareholder Loan Agreement with its ultimate controlling party, TUI AG. Under the terms of
this loan TUI AG will lend a maximum amount of EUR2 billion (£1.4 billion) to the Company for general corporate purposes. At the beginning
of the period, the net balance owed to TUI AG under the Agreement was EUR1.35 billion (£0.9 billion). The facility has remained in place
throughout the period and the net balance at 31 March 2008 was EUR1.4 billion (£1.1 billion) including accrued interest of £22 million.
The Group also held receivables of £213 million and payables of £170 million with TUI AG and its subsidiaries, which arose through the
normal course of business. During the current and prior period the Group transacted with its joint ventures and associates in the normal
course of business. These did not have a significant impact on the result for the period.
12. Contingent liabilities
The Group is at any time defending a number of actions against it arising in the normal course of business.
Provision is made for these actions where it is deemed more likely than not that a settlement will be payable and the settlement amount
is reliably estimable. The Directors consider that adequate provision has been made for all known liabilities.
Contingent liabilities and claims have not significantly impacted the results for the six-month period.
13. Balance sheet at 30 September 2007
The balance sheet at 30 September 2007 has been updated from the balance sheet of the same date presented in the TUI Travel PLC Pro
forma financial statements published on 13 December 2007, to reflect the application of acquisition accounting in accordance with IFRS 3
Business Combinations.
The table below shows the resulting movements in net assets:
30 September
2007
£m
Pro forma net assets reported 1,926.4
Acquisition accounting for First Choice
Goodwill arising on acquisition 1,590.9
First Choice fair value and acquisition adjustments, and (810.4)
working capital/debt settlement relating to TUI Tourism
Other adjustments, from statutory to pro forma basis (54.9)
Consolidated net assets 2,652.0
INDEPENDENT REVIEW REPORT TO TUI Travel PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six
months ended 31 March 2008 which comprises the consolidated income statement; consolidated balance sheet; consolidated statement of
recognised income and expense; consolidated cash flow statement and the related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the Group will be prepared in accordance with IFRSs as adopted by the EU. The
condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review
of interim 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 (UK and Ireland) 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.
The pro forma financial information for the six months ended 31 March 2007 and the financial information for the six months ended 30
June 2007 has not previously been published and has not been subject to a review report by an independent auditor.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 31 March 2008 is not prepared, in all material respects, in accordance with IAS 34 as
adopted by the EU and the DTR of the UK FSA.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square, London, EC4Y 8BB
12 May 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
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