TIDMTT.
RNS Number : 1708A
TUI Travel PLC
27 January 2011
27 January 2011
TUI Travel PLC ("TUI Travel")
INVESTOR STRATEGY DAY & TRADING UPDATE
TUI Travel is today holding a presentation to investors and
analysts to update on its strategy. To coincide with this event,
TUI Travel is issuing a trading update.
Highlights
-- Underlying operating result improved by over GBP20m
in the first quarter of the financial year;
-- Result driven by continued turnaround progress, particularly
in Canada, and improved trading;
-- Encouraging trading trends have continued for Summer
2011:
- Overall bookings up between 8 - 16% in key markets;
- Strong customer demand for differentiated product,
for which bookings are up 26%, 46% and 21% in the
UK, Nordics and Germany respectively;
- Remain cautious given the uncertain economic and geopolitical
environment.
-- Clear plan to deliver the previously announced GBP89m
turnaround opportunity by 2013, and this is underpinned
by GBP60m of cost savings;
-- Further cost savings identified in the UK business
and central functions.
Peter Long, Chief Executive of TUI Travel commented:
"In the three years since the formation of TUI Travel, we have
achieved a number of key successes against a challenging background
of economic uncertainty and substantial volatility of foreign
exchange and fuel rates.
We have made good progress at delivering the turnaround of our
underperforming businesses and have clear plans in place to deliver
the remaining turnaround in the coming three years. With two-thirds
of the GBP89m opportunity underpinned by cost initiatives I am
increasingly confident that we will achieve our target. In addition
to the cost actions, the remaining turnaround opportunity is driven
by our product and distribution strategies.
Our outperformance in key source markets shows that our strategy
of developing differentiated holiday concepts is working. These
healthy trading trends are a direct result of many years of product
investment which improves customer satisfaction, loyalty, booking
profiles and ultimately margins. We are accelerating the roll out
of differentiated products across all source markets to drive the
shift in mix away from commodity products, which will continue to
experience margin pressure.
There is a clear trend for our customers to book their holidays
online. We currently have a leading online presence and plan to
expand this highly efficient channel to drive greater control of
distribution, and reduce costs, in our Mainstream businesses.
Additionally, we are investing in our accommodation only OTA
businesses, particularly in Asia where we are utilising the
LateRooms.com infrastructure and content to build our presence in
this attractive market through our AsiaRooms.com brand.
We are also investing in technology to ensure we maximise the
efficiency of our operations and we offer the best customer
experience when booking amending or paying for a holiday.
Replacement of core systems in the major source markets of UK,
Germany and France facilitates increased levels of automation which
will improve customer self-service options and simplify our back
office processes.
I continue to believe that TUI Travel has excellent potential to
deliver substantial growth and look forward to the next three years
of our journey. Whilst the economic environment remains uncertain,
the progress in the first quarter and our forward bookings
represent an encouraging start to 2011."
Enquiries:
Analysts and Investors
Paul Rushton, Director of Investor Relations Tel: 01293 645 795
Press:
Lesley Allan, Corporate Communications Director Tel: 01293 645 774
Michelle Jeffery, Corporate Communications Tel: 01293 645 776
Manager
Michael Sandler / Kate Hough (Hudson Sandler) Tel: 020 7796 4133
Investor Strategy Day
The Chief Executive and Chief Financial Officer, together with
the Managing Directors responsible for the Northern Region, Central
Europe, Western Europe, Specialist & Activity Sector and
Accommodation & Destinations Sector, will provide an update on
strategy.
The update will explain the Group's strategic priorities to
achieve sustainable profit growth:
-- Accelerate the shift to differentiated products and
further increase duration flexibility;
-- Drive controlled distribution of our Mainstream products
through online channels;
-- Utilise technology to improve customer experiences
and drive operating efficiencies;
-- Invest in our existing accommodation only OTA business,
with an emphasis on Asia;
-- Drive organic growth from our market leading portfolio
of high margin, high growth businesses in the Specialist
& Activity Sector; and
-- Leverage our existing platform to increase our presence
in Russia and continue to examine opportunities in
other emerging markets.
Presentational materials will be made available at
www.tuitravelplc.com.
Cost Efficiencies
As highlighted in the preliminary results announcement, we have
continued to review our cost base. We have identified initiatives
that will drive GBP100m per annum of cost efficiencies over the
next three years.
Of these cost efficiencies, GBP60m are in our turnaround
businesses, including Corsair, Germany, Nouvelles Frontieres and
Netherlands and will support the GBP89m of turnaround opportunities
already announced.
The further GBP40m of initiatives are in the UK and central
functions and should drive incremental profits. In the UK, the
efficiencies are driven by the replacement of core reservation
systems which reduce support costs and simplify back office
processing, and also includes the remaining GBP5m of merger synergy
benefits. The central savings include the benefits from
consolidating the Specialist and Activity Sectors as well as Group
head office costs.
The future restructuring costs to support the GBP100m of cost
efficiencies are expected to total c.GBP150m, of which
approximately two-thirds will fall in the current financial
year.
We are also addressing legacy cost bases in Group airlines and
progressing detailed plans to mitigate legacy pension costs.
First Quarter Results
We will announce detailed results for the first quarter ended 31
December 2010 on 3 February.
Trading Update
Winter 2010/11
We have continued to see positive recent trading trends across
most source markets.
YoY customer Cumulative Bookings since Cumulative
booking variation bookings at 21 previous trading bookings at 16
% Nov statement Jan
UK +5 -1 +3
Nordic Region +31 +13 +28
Germany +9 -2 +5
France Tour
Operators +10 -3 +7
Belgium +12 +11 +12
Netherlands +14 +6 +11
------------------- ------------------ ----------------- ------------------
Current Trading Winter 2010/11
Total Total
y-o-y variation% Total ASP Sales Customers Risk Only
Capacity Left to sell
MAINSTREAM
UK +10 +14 +3 +5 +7
Nordic Flat +28 +28 +23 -23
Northern Region +7 +18 +11
Germany +3 +9 +5 +6 Flat
Austria +8 +3 -4
Switzerland -3 -5 -2
Poland -11 +4 +16
Central Europe +3 +8 +5
France Tour
Operators Flat +7 +7
Belgium -1 +11 +12
Netherlands +6 +18 +11
Western Europe +1 +11 +10
SPECIALIST &
ACTIVITY NA +5 NA
A&D +6 +28 +21
1These statistics are up to 16 January 2011 2These statistics
relate to all customers whether risk or non-risk 3These statistics
include all risk capacity programmes
4These statistics refer to Accommodation Wholesale and
Accommodation OTA businesses only and sales refer to total
transaction value (TTV)
In the UK, booking volumes for near term departures were
affected by the snow disruption in December. Online sales benefited
from the adverse weather conditions; the subsequent reduced
footfall in our shops, however, coupled with the well-publicised
airport disruption, affected booking volumes, especially for
December and early January departures. Booking activity has
recovered since the weather improved, with volumes up 14% so far in
January. Following the UK Government's advice to its citizens not
to travel to Tunisia, we have cancelled flights to the country
since 15 January. Despite these impacts, cumulative volumes are 3%
higher than the prior year and the UK source market remains on
track to meet our expectations for the winter season.
In the Nordic region, cumulative bookings are 28% higher than
the prior year, driven by demand for our Blue Village concept
holidays and for our market leading Thailand programme. Load factor
is over 90% despite adding further third party airline capacity to
satisfy the higher demand.
In Germany, booking volumes for our committed products are ahead
of capacity, leading to a two percentage point increase in load
factor versus the prior year to 76%. Similar to the UK, booking
volumes for near term departures slowed in December due to the
disruption caused by adverse weather conditions.
In Western Europe, trading to date is ahead of last year. In
France, demand for our differentiated Nouvelles Frontieres Hotel
Clubs is good, although booking volumes in Marmara have slowed due
to the civil unrest in Tunisia, which is a significant destination
for the business. Whilst not included in the above statistics,
Corsair is trading in line with our expectations. Sales in the
Netherlands and Belgium remain well ahead of the prior year.
In the Specialist & Activity Sector, all divisions have
experienced higher sales to date versus the prior year. Our private
jet tours businesses have experienced a strong rebound in booking
activity as the number of tours has increased following the
reduction in 2009/10. There has also been good growth in Crystal,
our market leading ski business.
In A&D, the strong trading for online accommodation
experienced in 2010 has continued with booking volumes, transaction
values and margins all higher than the prior year. Whilst core
European markets continue to experience good growth trends, the
highest growth is coming from our new markets in Latin America,
North America and Asia.
Summer 2011
Trading for Summer 2011 is good across all regions. This has
been driven by strong demand for our differentiated holidays, which
have continued to outperform commodity products. Overall booking
volumes are up 8%, 12% and 15% in the UK, Nordics and Germany
respectively, with bookings for differentiated products up 26%, 46%
and 21% respectively.
YoY customer Cumulative Bookings since Cumulative
booking variation bookings at 21 previous trading bookings at 16
% Nov statement Jan
UK +7 +11 +8
Nordic Region +13 +6 +12
------------------- ------------------ ----------------- ------------------
In the UK, booking volumes have strengthened since our last
update and are now up 8% versus the prior year, driven by demand
for our differentiated product and increased duration flexibility.
Bookings for differentiated products are currently up 26% and we
expect these products to represent half of all holidays sold over
the full season. We have increased the flexibility in holiday
durations significantly and have experienced strong demand for
non-seven and fourteen night durations. Load factor is now 27%, up
one percentage point versus the prior year. Margins also remain
ahead of last year.
In the Nordic region, booking volumes are up 12%, again driven
by our portfolio of differentiated products. Differentiated
products represent three quarters of Summer 2011 sales to date.
In Germany, trading has started strongly for Summer 2011, with
booking volumes ahead for most destinations with particular
strength in our differentiated products in Spain. Load factor is
currently 26%, up three percentage points versus the prior
year.
In France, volumes are significantly ahead in the initial
trading, helped by an earlier programme launch by Marmara. Changes
in product mix mean that overall average selling prices are lower
following a shift from higher priced long haul destinations to
lower priced short haul destinations. As in 2010, trading has made
a slower start in Belgium and an increased mix of overland sales
has led to a lower average selling price.
In the Specialist & Activity Sector, all divisions are
trading well with particularly strong demand experienced by
Sovereign and Hayes & Jarvis, our UK specialist operators, and
our Education businesses.
In A&D, the strong trends experienced in the winter season
have continued in early trading for Summer 2011.
Current Trading Summer 2011
Total Total
y-o-y variation% Total ASP Sales Customers Risk Only
Capacity Left to sell
UK +4 +13 +8 +1 -1
Nordic +1 +13 +12 +5 +4
Northern Region +4 +13 +8
Germany +2 +18 +15 +3 -1
Austria +7 +9 +2
Switzerland -4 -3 +1
Poland -4 +42 +47
Central Europe +2 +17 +15
France Tour
Operators -3 +12 +16
Belgium -3 -7 -4
Netherlands +2 +27 +24
Western Europe Flat +9 +9
SPECIALIST &
ACTIVITY NA +11 NA
A&D +14 +46 +29
1These statistics are up to 16 January 2011 2These statistics
relate to all customers whether risk or non-risk
3These statistics include all risk capacity programmes
4 These statistics relate to our Accommodation Wholesale
business only
Fuel/Foreign Exchange
We are largely hedged for the current financial year, providing
certainty of cost when planning capacity and pricing.
Winter 2010/11 Summer 2011
Euro 90% 88%
USD 93% 87%
Jet Fuel 87% 87%
As at 20 January 2011
----------------------- --------------- ------------
For a number of years we have incurred substantial rises in
input costs as a result of foreign currency and jet fuel rates. In
the UK source market alone, input costs have risen by over GBP500m
since our merger in 2007. Our achieved hedged rates, however, leave
us confident that our input cost inflation in the UK will be
negligible in Summer 2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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