RNS Number : 2978B
TUI Travel PLC
14 August 2008
14 August 2008
TUI Travel PLC
Interim management statement and results for the
third quarter and nine months ended 30 June 2008 (unaudited)
Key financials
Third quarter ended 30 June 2008
�m Q3 08 Q3 071 Change %
Revenue 3,615.8 3,321.1 +9%
Underlying operating profit2 65.4 47.0 +39%
Underlying operating margin % 1.8% 1.4% +0.4pp
Nine months ended 30 June 2008
�m 9M 08 9M 071 Change %
Revenue 8,778.3 8,054.4 +9%
Underlying operating loss2 (185.1) (274.3) +33%
Underlying operating margin % (2.1%) (3.4%) +1.3pp
1 Comparative information is presented on a pro forma basis
2 Underlying operating profit / loss exclude separately disclosed items, amortisation of IFRS 3 intangibles, goodwill impairment and
taxation of results of the Group's joint ventures and associates
Highlights
� Strong results with Group underlying operating profit up by �18.4m and �89.2m for the third quarter and nine-months respectively.
� Mainstream sector: underlying profit in the quarter improved by �17.5m to �30.7m (Q3 07: �13.2m), driven by strong trading in the
UK and Germany, and UK merger synergies.
� Specialist sectors: underlying operating profit in the quarter improved by �5.4m to �39.1m (Q3 07: �33.7m).
� Consumer demand for package holidays remains strong across all source markets. As anticipated, with significantly less left to sell
for Summer 2008, UK sales are now up 5%. Average selling price (excluding scheduled flying) is up 13%.
� Winter 2008/09 and Summer 2009 have started positively, with UK average selling prices (excluding scheduled flying) up 8% and 12%.
� Integration continues to progress well and we have already completed the actions necessary to deliver the majority of next year*s
synergy target of �80m. We remain confident of delivering at least �150m of synergy benefits.
� The Group will make further reductions to capacity in Summer 2009, particularly in the UK and Germany, with year-on-year capacity
reductions of 15% and 6% respectively.
� The Group is largely hedged with respect to fuel and foreign exchange exposures for both 2008 and 2009.
Peter Long, Chief Executive Officer of TUI Travel PLC, commented
''I am delighted with our trading for the Summer 2008 season across all our source markets. Our customers continue to place enormous
value on their holidays and we are seeing no evidence to suggest that demand is slowing for any of our seasons on sale. In addition, we are
currently recovering input cost inflation for all open seasons across our source markets.
While the evidence to date suggests that consumers view holiday spending as a high priority, we continue to prepare the business to deal
with any consequences of the current economic climate. Accordingly, we are taking out capacity for the coming seasons where it makes sense
to do so and retain significant flexibility to adjust supply further if demand trends change. The diversity of our portfolio of businesses
provides further protection from risks arising from specific geographies or products. Next year will also see substantial merger synergy
benefits delivered, based on work we have already completed.
For these reasons, and based on current trading, I am confident that the Board's expectations for the years ending 30 September 2008 and
30 September 2009 can be achieved."
Conference Call
A conference call for analysts will take place today at 9.00am (BST). The dial-in arrangements for the call are as follows:
Telephone: +44 (0) 1452 555 566
Participant Code: 58895517
A presentation to accompany the conference call will be made available via our corporate website at 8.00 am (BST). Please use the link
below to access the slides:
http://www.tuitravelplc.com/tuitravel/investors/presentations/
A recording of the conference call will be available on:
Telephone: +44 (0) 1452 550 000
Participant Code: 58895517�
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
CURRENT TRADING AND OUTLOOK
Trading for all seasons on sale, especially in the UK, continues to be buoyant despite the challenging economic conditions. Our trading
metrics are showing no evidence that consumers are trading down or curtailing their holiday plans. There has been no deterioration in
cancellation rates, average durations or accommodation mix, although we have experienced a slight shift from long-haul to medium-haul
destinations and have altered capacity accordingly by removing a B767 aircraft from the long-haul Summer 2009 programme.
The strength, flexibility and diversity of our business model gives us confidence that, despite significantly increased fuel costs, Euro
strength and the more challenging economic environment, we will deliver a strong operating profit performance in the financial years 2008
and 2009. Our confidence is based on (i) our ability to recover increases in input costs, (ii) our flexible business model, (iii) delivery
of merger synergies, and (iv) diversity of the Group's businesses.
(i) Input cost recovery
The most significant elements of the Group's input cost increases are jet fuel prices and foreign exchange movements.
The Group is well hedged for fuel and foreign exchange for all open seasons and operates relevant and effective hedging policies in each
source market. We have continued to hedge well ahead of the booking curve to give us certainty of cost when setting our pricing.
Group Hedged Position
Summer 2008 Winter 2008/09 Summer 2009
Fuel 98% 86% 65%
FX Euro 96% 93% 81%
FX USD 96% 90% 72%
As at 8 August
UK Hedged Position
Summer 2008 Winter 2008/09 Summer 2009
Fuel 99% 90% 88%
FX Euro 97% 96% 90%
FX USD 97% 97% 94%
As at 8 August
Based on the achieved hedged rates and the current forward rates, we expect the Group to spend approximately $1.8bn on jet fuel in the
current financial year, representing approximately 8% of Mainstream revenues. The hedged rate achieved is lower than the current market
rates in all open seasons, despite the recent falls in oil prices. If we were to close out our exposure at current forward rates, our
financial year 2009 effective fuel rates would be 28% above financial year 2008 in local currency terms.
To illustrate the impact of higher jet fuel prices in the UK source market for Summer 2009, the increased fuel cost on a per passenger
basis is as follows:
UK Increased fuel cost
Increased fuel cost per % of Summer 2008 average selling price
pax
Short-haul �11 3.0%
Medium-haul �20 4.2%
Long-haul �59 5.9%
Total �16 3.3%
To recover fuel, exchange rate and all other cost inflation in financial year 2009, our average prices would need to rise by c.6% in the
UK, and 2-4% in most other mainstream source markets, with the UK cost inflation exaggerated by the strengthening of the Euro versus the
Pound. In our European source markets, the strength of the Euro is partially mitigating the increase in Dollar denominated fuel prices.
Whilst input cost pressures are significant, our current trading statistics for Winter 2008/09 and Summer 2009 show that we are
achieving more than the necessary increases in average selling prices.
(ii) Capacity Management and Flexible Business Model
The flexibility within our model provides considerable scope to adjust supply as market conditions develop to ensure we achieve our
target margins. Our options include, but are not limited to:
* removal of capacity from the Group, through lease attrition, early termination of leases, leasing out aircraft and reduction in
third-party flying; and
* reallocation of capacity within the Group, such as shifting capacity between segments (e.g. long-haul to medium-haul) or between
source markets.
As part of our capacity management procedures, we are making further supply reductions for next year, primarily in the UK source market:
* Our UK business is now planning to reduce capacity by 21% in Winter 2008/09 and by 15% in Summer 2009 through a reduction of our
third-party flying programme and the removal of a further long-haul aircraft next summer. We are now planning to operate six fewer aircraft
in Winter 2008/09 and eleven fewer aircraft in Summer 2009 than in the current year.
* In Germany, we are planning to operate at least three fewer aircraft in Summer 2009, representing 6% reduction in capacity.
Effective capacity management results in fewer holidays to sell in the lates market. This is the period when traditionally it is more
difficult to recover cost increases. Shifting the mix of sales away from the lates market is a driver of higher average prices and improved
margins. Our capacity reductions, coupled with continued strong demand for holidays, result in us having:
* 20% fewer holidays left to sell than prior year in the UK for Winter 2008/09.
* 15% fewer holidays left to sell than prior year in the UK for Summer 2009. This is similar to Summer 2008.
(iii) Synergy delivery
Our synergy delivery is on track and integration is progressing well. We have now completed the necessary actions to deliver the
full-year synergy target of �25m, �11m of which has been delivered in the nine-months to 30 June 2008.
Actions undertaken to date are expected to deliver an exit run-rate for the current financial year of �56m, meaning that the majority of
next year's synergy target of �80m is already in place. Detailed plans are in place to achieve the remainder of the target. We remain
confident of delivering at least �150m of synergy benefits.
Synergy phasing
�m FY08 FY09 FY10
P&L benefit 25 80 138
Incremental P&L benefit 25 55 58
Exit rate 56 125 150
In the quarter, we achieved a number of key milestones, including:
* Integration of our UK airlines, which are now operating under one licence for Summer 2008;
* Implementation of a single overseas management team operating in resort; and
* The transition of our HR function to the UK head office in Luton. In the quarter, we also commenced the consolidation of our
Mainstream call centres and customer service operations, which we expect to finalise in October.
(iv) Diversity of the Group's businesses
The wide portfolio of businesses within the Group reduces risk associated with any one geography or product. In the financial year to 30
September 2007, non-UK businesses represented 63%1 of Group underlying operating profit and the non-Mainstream businesses contributed 43%1
of the total.
Underlying operating profit by geography
% of Group underlying operating profit1
UK 37%
Continental Europe 48%
US 5%
Other 10%
1 Based on Pro-forma results to 30 September 2007
Summer 2008
Summer 2008 trading has remained strong across all sectors since the last trading update on 13 May 2008.
Current Trading 1
Summer 2008
y-o-y variation% ASP3 Sales Customers Capacity
MAINSTREAM
Northern Europe
Short-haul +21 -3 -20 -24
Medium-haul +14 +15 +1 -4
Long-haul +3 +8 +5 +2
UK - Total +15 +5 -9 -13
Nordic +3 +3 flat +3
Northern Europe - Total +14 +5 -8 -11
Germany +5 +1 -4
Austria +4 -17 -20
Switzerland +1 +9 +8
Central Europe - Total +4 Flat -4 -12
France +8 -3 -10
Belgium +4 +8 +4
Netherlands +4 +7 +3
Western Europe - Total +5 +3 -2 +1
SPECIALIST +6 +5 -1
ACTIVITY n/a +1 n/a
ODS 2 +2 +23 +21
1 These statistics are up to 3 August 2008
2 These statistics relate to the online businesses only
3 Average selling price
As expected, the rate of sale has slowed down as we have significantly less capacity left to sell and sales in the UK are now up 5%, on
capacity reductions of 13%. The medium-haul destinations of Egypt, Turkey and Greece have all experienced growth significantly ahead of the
prior year. The increased popularity of Greece is largely due to the strong performance of our new Thomson Sensatori resort in Crete, which
is exclusively available to our customers. The UK Summer 2008 programme is now 84% sold, 4pp ahead of prior year and our UK business now has
18% fewer holidays left to sell in the remainder of the season than at the same point last year.
The strong consumer demand for holidays, coupled with the elimination of loss making capacity, resulted in our UK business having
significantly fewer holidays left to sell as we entered the lates period for Summer 2008. This has enabled us to reduce the level of
discounts offered in the lates period compared to prior year, resulting in strong pricing trends. The average selling price for the season
is now 15% higher than prior year and, in the last six-week period, was 20% higher. The average selling price for UK charter holidays
(excluding scheduled flying) is up 13%, on 4% lower capacity.
Nordics sales are up 3% as a result of higher average selling prices. Demand for our differentiated Blue Concept holidays has been
particularly strong, with volumes up 9% on prior year. Turkey, Cyprus, Italy and Egypt have experienced most growth.
As in the UK, Germany has benefited from capacity management, which has resulted in a strong lates market. This has helped to deliver 5%
higher average prices for the season. Central European bookings are down just 4%, on capacity reductions of 12%, resulting in 14% less
product left to sell.
Within Western Europe, the Netherlands and Belgium continue to perform well, with pricing and volumes ahead of last year. In France, we
have continued to focus on improving margins as opposed to the rate of sale and we continue to remain confident that the Nouvelles
Frontieres business will breakeven in this financial year.
Trading in the Specialist sector is encouraging, with overall sales up 5%. Sales and bookings are well ahead of prior year in the UK and
European premium travel businesses such as Hayes & Jarvis, Citalia, Turchese and Aventuria. However, bookings in our US travel businesses
have remained lower than expected.
In the Activity sector, our Polar cruising business is performing extremely well with sales up almost 50%. Total sector sales are up 1%,
with growth in certain Adventure businesses affected by concerns regarding specific local political and security issues in Kenya and Tibet.
This appears to be resulting in customers delaying their trips by a few months, evidenced by strong sales growth reported for Winter
2008/09.
ODS continues to trade well, with total transaction values up 23% versus prior year.
Winter 2008/09
Current Trading 1
Winter 2008/09
y-o-y variation% ASP Sales Customers Capacity
MAINSTREAM
Northern Europe
Short-haul +26 -8 -27 -37
Medium-haul +15 +9 -5 -15
Long-haul +5 +1 -4 -12
UK - Total +13 +2 -10 -21
Nordic +5 -3 -8 Flat
Northern Europe - Total +11 +2 -8 -15
SPECIALIST +2 +2 Flat
ACTIVITY n/a +11 n/a
1 These statistics are up to 3 August 2008
Trading in our Northern Europe sector continues to be strong for the coming winter season. Pricing is particularly strong, with the
average selling price up 13% and 5% in the UK and Nordics respectively. The average selling price for UK charter holidays (excluding
scheduled flying) is up 8% in the UK. The UK is now 26% sold, with the load factor 3pp higher than prior year. The winter sun destinations
of Egypt, Mexico and the Dominican Republic are experiencing the largest increases in demand and our ski businesses are performing well
ahead of prior year.
The other Mainstream divisions have only just launched their Winter 2008/09 programmes and early indications are that trading has
started well.
The Specialist and Activity sectors have started the season positively, with sales up 2% and 11% respectively.
Summer 2009
The UK Summer 2009 programme is 7% sold (in line with the prior year) and initial indications of demand strength are encouraging. In
particular, we are achieving average selling prices for charter holidays (excluding scheduled flying) up 12%.
Most other source markets are yet to go on sale.
Germanwings/TUIfly
We continue to hold substantive discussions with Lufthansa regarding the plans to merge Eurowings Luftverkehrs, Germanwings GmbH,
Hapag-Lloyd Flug GmbH and Hapag-Lloyd Express GmbH under a joint and independent holding company and intend to update the market in due
course. The discussions are complex in nature and, as a result, have taken longer to conclude than we initially anticipated. However, as a
result of the ongoing discussions we have now decided to account for the relevant assets as assets held for sale and have therefore written
down goodwill relating to TUIfly by �111.7m in the quarter.
Outlook
We are satisfied with the current trading situation with regards to the financial years 2008 and 2009. Current demand for Winter 2008/09
and Summer 2009 continues to underpin our belief that the holiday is a high priority in consumers' spending plans. In Germany and the UK,
our two largest source markets, we have significantly reduced capacity and believe that our flexible business model should allow us to
counteract any pressures on consumer demand that may materialise over the coming months.
The Group is well hedged with respect to fuel and foreign exchange exposures for all open seasons and we continue to believe that we are
well placed to recover incremental costs in both financial years 2008 and 2009.
We are confident that we can meet the Board's expectations for the financial years 2008 and 2009.
THIRD QUARTER BUSINESS AND FINANCIAL REVIEW
Group Performance
Group revenue rose 9% to �3,615.8m in Q3 08 versus prior year. The Group's underlying operating profit improved by �18.4m to �65.4m (Q3
07: �47.0m). This results in a cumulative loss for the nine-months ended 30 June 2008 of �185.1m, which represents an improvement of �89.2m
over the prior year loss of �274.3m.
Third quarter ended 30 June 2008
�m Q3 08 Q3 071 Change %
Revenue 3,615.8 3,321.1 +9%
Underlying operating profit2 65.4 47.0 +39%
Underlying operating margin % 1.8% 1.4% +0.4pp
Nine months ended 30 June 2008
�m 9M 08 9M 071 Change %
Revenue 8,778.3 8,054.4 +9%
Underlying operating loss2 (185.1) (274.3) +33%
Underlying operating margin % (2.1%) (3.4%) +1.3pp
1 Comparative information is presented on a pro forma basis
2 Underlying operating profit / loss exclude separately disclosed items, amortisation of IFRS 3 intangibles, goodwill impairment and
taxation of results of the Group's joint ventures and associates
Segmental Performance
Northern Europe Central Western Europe Total Mainstream Specialist Activity ODS Group and JVs Total
Europe Group
Customers ('000)
Q3 08 2,475 2,918 1,542 6,935 370 - - - -
Q3 07 2,753 3,204 1,526 7,483 336 - - - -
Change % -10% -9% +1% -7% +10% - - - -
Revenue (�m)
Q3 08 1,256.1 1,207.9 710.3 3,174.3 189.8 107.9 143.8 - 3,615.8
Q3 07 1,169.6 1,162.5 592.4 2,924.5 161.5 97.9 137.2 - 3,321.1
Change % +7% +4% +20% +9% +18% +10% +5% - +9%
Underlying operating profit (�m)
Q3 08 13.6 37.5 (20.4) 30.7 11.0 10.7 17.4 (4.4) 65.4
Q3 07 (1.4) 33.0 (18.4) 13.2 8.3 9.2 16.2 0.1 47.0
Change % nmf +14% -11% +133% +33% +16% +7% nmf +39%
Underlying operating margin%
Q3 08 1.1% 3.1% (2.9%) 1.0% 5.8% 9.9% 12.1% - 1.8%
Q3 07 (0.1%) 2.8% (3.1%) 0.5% 5.1% 9.4% 11.8% - 1.4%
Change % +1.2pp +0.3pp -0.2pp +0.5pp +0.7pp +0.5pp +0.3pp - +0.4pp
nmf - not meaningful
Northern Europe
The Northern Europe sector achieved a �15.0m improvement in underlying operating profit to �13.6m (Q3 07 loss: (�1.4m)), representing a
1.2 percentage point improvement in underlying operating margin. The quarterly improvement was driven by merger synergies of �7.0m and a
�8.0m increase in underlying margin.
�m Northern Europe
Q3 07 (1.4)
Underlying margin enhancement 8.0
Synergies 7.0
Q3 08 13.6
The underlying margin enhancement largely resulted from better trading in the shoulder months in the UK, where we achieved strong
pricing as a result of having significantly fewer holidays left to sell during the period, and the continuation of our reduction of
loss-making scheduled flying.
Capacity in the city pairs flying routes was 38% lower in the quarter, resulting in a �3.0m improvement in operating profit versus prior
year.
Performance in the Nordics business, however, was weaker year-on-year primarily as a result of Easter timing. In the prior year, the
long-haul flying programme extended into the third quarter as Easter fell in April in 2007, whereas in 2008 the programme concluded in
March.
Central Europe
The Central Europe division reported an underlying operating profit of �37.5m in Q3 08 (Q3 07: �33.0m).
The improvement was driven by strong trading in Germany which, similar to the UK, achieved better pricing as a result of reducing
airline capacity by eight aircraft for the Summer 2008 programme.
Western Europe
Western Europe reported an underlying operating loss of �20.4m, (Q3 07: loss of �18.4m).
The timing of Easter had some impact on the Western Europe result in the quarter, as some programmes that were continued into April in
2007 were concluded in March in 2008.
Specialist Holidays Sector
The sector delivered an improvement of �2.7m in underlying operating profits to �11.0m in the third quarter (Q3 07: �8.3m), with all
segments contributing to this growth.
Customers and revenue were up 10% and 18% respectively, driven by strong demand for our key Premium brands, which include Hayes &
Jarvis, Citalia, Turchese and Sovereign.
Volumes and profitability growth resulted from the continued expansion of the sector's direct sales model, and certain brands, such as
Sovereign, benefited from a move away from the traditional 7/14 nights model to now offering greater flexibility to the customer.
Activity Holidays Sector
The Activity sector continued its strong performance in the current financial year, delivering a 10% increase in revenue and 16%
increase in underlying operating profit in the quarter.
Growth came from across the sector, with positive contributions from each of the Marine, Adventure and Experiential divisions, with
particularly strong performance by the Marine division.
Online Destination Services
ODS reported an underlying profit of �17.4m in Q3 08, an improvement of �1.2m over prior year (Q3 07: �16.2m). This was mainly due to a
strong performance in the online businesses, with the offline business performing in line with prior year.
Separately disclosed items
Separately disclosed items are set out in note 3 and principally comprise losses from the restructuring of the Group's fleet of
aircraft, integration costs and restructuring expenditure.
Sale and leaseback transaction
The Group entered into a sale and leaseback transaction of 19 owned aircraft within the TUI Travel fleet for proceeds of $526m. The book
value of the assets included in the transaction was $689m at the date of the sale and the resulting loss on disposal, equating to �80.5m,
has been treated as a separately disclosed item. As a result of this transaction, we have also recognised maintenance liabilities of �17.5m,
which have also been treated as separately disclosed items.
The transaction enables the Group to further increase the flexibility of its business model while securing continued access to a modern
and fuel-efficient aircraft such as the Boeing 737-800. The Group has used the disposal proceeds to pay down existing debt. The Group will
continue to operate all 19 aircraft on operating leases with one- to seven-year terms within TUIfly, Thomsonfly and TUIfly Nordic.
Acquisitions
In the three months ended 30 June 2008, the Group acquired four businesses for a maximum consideration of �64.8m. The total maximum
consideration for acquisitions in the nine months to 30 June 2008 was �106.2m.
In the Activity sector, we acquired three businesses in the quarter. We strengthened our sports tours capability with the purchase of
Sports World, which specialises in hospitality and travel packages for a wide range of top sporting events, currently ranging from the
Wimbledon Tennis Championships to the British Lions tour of South Africa. We also enhanced our schools-travel portfolio with the acquisition
of World Challenge, which offers 'education through experience' expeditions, and increased our gap year travel offering with the acquisition
of Real Travel.
In the Specialist sector, we acquired Travelmood, an Australia and New Zealand destination specialist. The business will be integrated
with our existing AusTravel business, generating synergy benefits.
Cash and Liquidity
The net debt position (cash and cash equivalents less loans, overdrafts and finance leases) at 30 June 2008 was �160.8m, excluding
finance lease liabilities of �123.8m included in liabilities held for sale. Net debt consisted of �1,282.1m of cash and �1,442.9m of
interest-bearing loans and liabilities. The net debt position at 31 March 2008 was �895.5m. The reduction is primarily a result of the sale
and leaseback transactions, as described above, and cash flow from operating activities, which is seasonally high in the third quarter.
TUI AG Reporting
TUI AG, our majority shareholder, is today issuing its second quarter results for the three-months to 30 June 2008. 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.
Restatement of Pro-forma Results
In the Pro-forma results for the 12 months ending 30 September 2007 that we issued on 13 December 2007, we included profits on sale &
leaseback transactions (as disclosed on 13 December 2007) and gains on financial derivatives instruments in relation to changes in the
interest element of the fair value of certain forward contracts in 'underlying operating profit'. As these items do not reflect the core
operating activities of the Group, during the course of the 2007/08 financial year we have made the decision to exclude these items from
underlying profit for the financial year to 30 September 2008, and all financial years thereafter. Consequently, we have decided to restate
the Pro-forma comparative underlying operating results.
The effect of this is to reduce the underlying operating profit for the year to 30 September 2007 from �287.0m to �260.5m. There is no
impact on the comparative information for the six-months to 31 March as provided in our Interim Results. The comparative underlying
operating profit for the third quarter is reduced by �4.2m.
�m Q1 07 Q2 07 Q3 07 Q407 FY07
Previous underlying operating (117.7) (203.7) 51.2 557.2 287.0
profit
Sale & leaseback profits - (4.8) (6.6) (3.3) (14.7)
Derivatives losses / (profits) 4.2 0.7 2.4 (19.1) (11.8)
Re-stated underlying operating (113.5) (207.8) 47.0 534.8 260.5
profit
Condensed consolidated income statement (unaudited)
for the 9 month period ended 30 June 2008
Notes Pro forma
9 months to
9 months to 30 June 30 June
2008 2007
�m �m
Revenue 2 8,778.3 8,054.4
Cost of sales (8,470.5) (7,801.8)
Gross profit 307.8 252.6
(915.0) (643.3)
Administrative expenses
Share of profits of joint ventures 1.8 3.4
and associates
Operating loss 2 (605.4) (387.3)
Analysed as:
Underlying operating loss 2 (185.1) (274.3)
Separately disclosed items 3 (233.1) (100.0)
Amortisation of IFRS 3 intangibles (75.1) (12.2)
Impairment of goodwill (111.7) -
Taxation on profits of joint (0.4) (0.8)
ventures and associates
(605.4) (387.3)
Financial income 116.0 112.2
Financial expenses (184.1) (136.2)
Net financial expenses (68.1) (24.0)
Loss before tax (673.5) (411.3)
Taxation 157.3 75.9
Loss for the period (516.2) (335.4)
Attributable to:
Ordinary shareholders (518.7) (333.8)
Minority interests 2.5 (1.6)
Loss for the period (516.2) (335.4)
Condensed consolidated balance sheet (unaudited)
at 30 June 2008 and 30 September 2007
30 30
June September
2008
2007
�m �m
Non-current assets
Intangible assets 4,160.3 4,138.2
Property, plant and equipment 920.2 1,373.9
Investments in joint ventures and associates 114.3 102.7
Other investments available for sale 53.8 53.0
Trade and other receivables 427.2 252.6
Derivative financial instruments 59.6 6.4
Deferred tax assets 180.8 188.8
5,916.2 6,115.6
Current assets
Inventories 50.6 39.7
Other investments available for sale 8.9 12.4
Trade and other receivables 2,062.2 1,465.2
Derivative financial instruments 272.5 37.5
Cash and cash equivalents 1,282.1 1,958.7
Assets classified as held for sale 349.7 88.0
4,026.0 3,601.5
Total assets 9,942.2 9,717.1
Current liabilities
Interest-bearing loans and borrowings (287.7) (419.0)
Employee benefits (0.9) (2.9)
Derivative financial instruments (119.1) (137.1)
Trade and other payables (4,380.1) (3,350.2)
Provisions (222.6) (159.0)
Income tax payable (0.7) (42.9)
Liabilities classified as held for sale (490.7) (18.8)
(5,501.8) (4,129.9)
Non-current liabilities
Interest-bearing loans and borrowings (1,155.2) (2,072.0)
Employee benefits (344.6) (310.8)
Trade and other payables (175.3) (110.3)
Derivative financial instruments (117.0) (25.5)
Provisions (144.5) (131.4)
Deferred tax liabilities (189.1) (285.2)
(2,125.7) (2,935.2)
Total liabilities (7,627.5) (7,065.1)
Net assets 2,314.7 2,652.0
Total equity 2,314.7 2,652.0
Notes to the condensed interim financial statements (unaudited)
1. Basis of preparation
Accounting policies
The unaudited financial information relating to the income statement for the 9 month period ended 30 June 2008, and the balance sheets
as at 30 June 2008 and 30 September 2007, 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.
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 ('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 for the 9 month period ended 30 June 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 relevant to an
understanding of the combined group, but may not be entirely comparable to the result for the 9 month period ended 30 June 2008 because it
does not fully reflect the acquisition accounting following the acquisition of First Choice PLC. 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 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.
Unaudited financial information
The financial information in this report relating to the 9 month periods ended 30 June 2008 and 30 June 2007, and the balance sheets at
30 June 2008 and 30 September 2007, is unaudited. 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.
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 intangibles, impairment of goodwill 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. Segmental information
The Sector analysis is based on the Group's management and reporting structure.
9 months ended 30 June 2008
�m Northern Europe Central Europe Western Europe Mainstream Holidays Specialist Holidays Activity
Holidays Online Destination Corporate Joint ventures and Total
Services associates Group
External revenue 3,210.3 2,881.7 1,616.9 7,708.9 406.9
359.4 303.1 - - 8,778.3
Operating (loss)/profit (323.9) (219.5) (65.9) (609.3) 2.1
10.8 5.3 (16.1) 1.8 (605.4)
Separately disclosed items 171.1 52.5 1.6 225.2 3.4
2.8 3.4 (1.7) - 233.1
Amortisation* 57.7 - 1.4 59.1 2.8
4.9 8.3 - - 75.1
Impairment of goodwill - 111.7 - 111.7 -
- - - - 111.7
Tax on profits of joint ventures - - - - -
- - - 0.4 0.4
Underlying operating (loss)/profit (95.1) (55.3) (62.9) (213.3) 8.3
18.5 17.0 (17.8) 2.2 (185.1)
* of IFRS 3 intangibles
9 months ended 30 June 2007 (Pro forma)
�m Northern Europe Central Europe Western Europe Mainstream Holidays Specialist Holidays Activity
Holidays Online Destination Corporate Joint ventures and Total
Services associates Group
External revenue 3,017.1 2,694.8 1,428.5 7,140.4 345.9
279.5 288.6 - - 8,054.4
Operating (loss)/profit (213.7) (75.6) (101.4) (390.7) 5.2
(1.9) 9.5 (12.8) 3.4 (387.3)
Separately disclosed items 60.3 15.5 19.4 95.2 1.5
2.1 0.2 1.0 - 100.0
Amortisation* - - - - 2.1
3.3 6.8 - - 12.2
Tax on profits of joint ventures - - - - -
- - - 0.8 0.8
Underlying operating (loss)/profit (153.4) (60.1) (82.0) (295.5) 8.8
3.5 16.5 (11.8) 4.2 (274.3)
* of IFRS 3 intangibles
3. Separately disclosed items
Pro forma
9 months
9 months to 30 June to 30 June
2008 2007
�m �m
Restructuring expenses 16.1 83.0
Merger related integration costs 97.9 1.0
Aircraft 119.1 6.1
Other - 9.9
233.1 100.0
Restructuring expenses
These costs relate primarily to restructuring programmes that were already underway pre merger (2007 pro forma 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.
Aircraft
These costs relate to the restructuring of the aircraft fleet. They include sale and leaseback losses of �105.1m, write-downs on
aircraft held for sale of �18.5m, net financial derivative credits of �10.0m and other costs of �5.5m.
4. Acquisitions in the period ended 30 June 2008
The acquired businesses in the nine-month period and their acquisition dates were:
Sector and entity Country of operation Acquisition date
Specialist Holidays
National Events USA November 2007
Travelmood UK June 2008
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
Real Gap UK April 2008
World Challenge UK May 2008
SportsWorld UK May2008
Online Destination Services
Cruiselink II Limited USA November 2007
Destination Florida USA January 2008
5. 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
Goodwill arising on acquisition of First choice 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
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