TIDMTT.
RNS Number : 3258T
TUI Travel PLC
05 December 2011
5 December 2011
TUI Travel PLC
("TUI Travel")
Preliminary results for the year ended 30 September 2011
RECORD RESULTS AND CASH GENERATION DRIVES STRONG BALANCE SHEET
AND INCREASED DIVIDEND
Key financials
Year ended 30 September
Underlying results(1) Statutory results
GBPm 2011 2010(2) Change% 2011 2010(2)
Revenue 14,687 13,514 +9% 14,687 13,514
Operating profit 471 399 +18% 255 44
Profit / (loss) before
tax 360 289 +25% 144 (73)
Free cash flow 451 339 +33% 451 339
Basic eps (pence) 23.6 19.0 +24% 7.7 (11.1)
Dividend per share (pence) 11.3 11.0 +3% 11.3 11.0
---------------------------- ------- -------- -------- --------- ---------
(1) Underlying revenue, operating profit, profit/(loss) before
tax and eps exclude separately disclosed items, amortisation of
business combination intangibles, acquisition related expenses,
predecessor accounting for Magic Life and interest and taxation of
results of the Group's joint ventures and associates (2) Prior year
figures have been re-presented to include Jet4You which was
previously reported as a discontinued operation, and to incorporate
the results of Magic Life under predecessor accounting
Highlights
-- Record underlying operating profits of GBP471m, up 18% despite the
challenging geopolitical and economic environment.
-- Record profits delivered by the UK as a result of increased sales
of differentiated and exclusive products, with online being the biggest
channel.
-- Record profits also delivered by the Nordic region, Belgium, the
Netherlands, Canada and Austria.
-- Record cash flow generation, with free cash flow before dividends
and acquisitions of GBP451m and a GBP4m net cash position, providing
balance sheet strength.
-- Significant reduction in net separately disclosed items to GBP74m
(2010: GBP255m) contributed to a GBP211m improvement in statutory
operating profit.
-- Strong underlying earnings per share growth of 24%.
-- Business improvement target increased by GBP29m to GBP107m, to be
delivered in broadly even tranches over the next three years.
-- Johan Lundgren appointed as Deputy CEO with overall responsibility
for Mainstream.
-- Final dividend of 8.0p per share, resulting in a full year dividend
of 11.3p per share, up 3% on 2010, comfortably covered by both earnings
and free cash flow.
Peter Long, Chief Executive of TUI Travel PLC, commented
"We are very pleased with our robust performance in 2011 and
have delivered another year of profit growth, against a backdrop of
unrest in key North African destinations and weak consumer
sentiment in some source markets. The UK, Nordic region, Belgium,
the Netherlands, Canada and Austria delivered record results. These
achievements reflect the strength of our strategy to increase
differentiated and exclusive product sales, increase controlled
distribution with a focus on online to enhance our customer access
and reduce distribution costs, and our delivery of the turnaround
and cost efficiency programmes.
"We remain focused on this successful strategy and through our
new business improvement programme we have self help measures in
place to help offset the difficult macro-economic environment,
including clear plans in place for Germany and France. In addition,
we continue to strengthen our cash flow in order to fund the
dividend and growth. All of which means that, even in the current
challenging market conditions, we continue to operate from a
position of strength."
Investor and Analyst Conference Call
A presentation for analysts and investors will be held today at
9.30am (GMT) at the London Stock Exchange, 10 Paternoster Square,
London, EC4M 7LS. The presentation will also be webcast. For
details of the webcast please visit www.tuitravelplc.com.
Enquiries:
Analysts & Investors
Will Waggott, Chief Financial Officer Tel: +44 (0)1582 645 334
Andy Long, Head of Strategy & Investor Relations Tel: +44 (0)1293 645 795
Press
Lesley Allan, Corporate Communications Director Tel: +44 (0)1293 645 774
Michelle Jeffery, Corporate Communications Tel: +44 (0)1293 645 773
Manager
Michael Sandler / Kate Hough (Hudson Sandler) Tel: +44 (0)20 7796 4133
CURRENT TRADING AND OUTLOOK
Winter 2011/12
We are satisfied overall with the progress of trading for Winter
2011/12. Bookings have slowed since our previous update in some
source markets where, as expected, we are experiencing a later
booking profile, reflecting the continuing issues in North Africa
and challenging consumer environment in these markets.
YoY customer booking variation % Cumulative Bookings since previous Cumulative
bookings at 11 Sept trading statement bookings at 27 Nov
UK -11 -12 -12
Nordic region +1 Flat Flat
Germany -3 -10 -8
France tour operators -7 -14 -12
Belgium +2 +3 +2
Netherlands +31 +7 +15
---------------------------------- --------------------- ------------------------ --------------------
Current Trading(1) Winter 2011/12
YoY variation% Total ASP(2) Total Total Risk Only
Sales(2) Customers(2)
Capacity(3) Left to sell(3)
MAINSTREAM
UK +5 -7 -12 -9 -6
Nordic region +1 +1 Flat +3 +10
Northern Region +4 -4 -7
Germany +5 -3 -8 -11 -3
Austria +3 -7 -9
Switzerland -16 -16 Flat
Poland +9 +47 +35
Central Europe +4 -3 -7
France tour operators -1 -13 -12
Belgium Flat +3 +2
Netherlands +8 +24 +15
Western Europe +1 +2 Flat
SPECIALIST & ACTIVITY N/A +7 N/A
A&D(4) +4 +21 +15
(1) These statistics are up to 27 November 2011 (2) These
statistics relate to all customers whether risk or non-risk (3)
These statistics include all risk capacity programmes (4) These
statistics refer to online accommodation businesses only; sales
refer to total transaction value (TTV) and customers refers to
roomnights
In the UK capacity has been reduced by 9%. This is as a result
of a change in aircraft fleet mix, including moving aircraft within
the Group to serve higher demand in the Canadian and Nordic
markets. Most of the capacity reduction has come out of Egypt and
Tunisia. Booked load factor remains broadly in line with prior
year, at 48%. Volumes sold since our last update are down 12%,
highlighting the later booking profile compared with prior year.
This slow down is being driven by the continuing issues in North
Africa and a weaker consumer environment. Average selling prices
are up 5% which partly reflects cost inflation of approximately 4%,
as well as the higher proportion of differentiated product sales.
Differentiated product continues to book earlier and experience
higher demand, with volumes up 12% compared with last year.
In Canada we are continuing to experience strong growth in
demand and bookings are currently up 34%. Capacity has been
expanded to destinations in Mexico and the Caribbean, with sales
performing particularly well into the RIU hotel portfolio. We are
currently 37% sold in Canada.
In the Nordic region capacity has been increased, with the
expansion to destinations such as the Canaries, Cape Verde and
Mexico. This has been facilitated by the arrival of two Boeing 767s
from the UK replacing a Boeing 747 which came from Corsair (who
have now reduced their fleet) and increased third party capacity.
Volumes left to sell are currently 10% higher than prior year and
our booked load factor is 73%. Volumes overall are flat, although
within this, sales to Thailand are particularly difficult due to
the flooding in and around Bangkok, while other destinations such
as the Canaries are selling well. We have the flexibility to switch
capacity between destinations if appropriate. Differentiated
volumes continue to grow with volumes up 31% on prior year.
In Germany, capacity has been reduced by 11%, driven by lower
demand for North African destinations. Bookings to Egypt are
currently 39% behind prior year, which is in line with capacity
reductions. This is partly offset by demand for alternative
destinations such as the Canaries (up 12%). Booked load factor is
53% and average selling prices are up 5%.
The French tour operators continue to experience lower demand
for North African destinations, with volumes down 26% for Egypt,
Tunisia and Morocco. In addition, there is a trend towards later
bookings, driven by the consumer environment. However, thanks to
the planned merger, capacities are shared and managed across the
French tour operators, so that load factors for the first half of
winter are in line with prior year.
In Belgium, bookings are 2% ahead of last year and load factors
are broadly in line. The increase in volume continues to be driven
by seat only and through an increase in long haul sales as we open
up new destinations such as Thailand. In the Netherlands our strong
trading performance in Summer 2011 has continued into Winter
2011/12, with volumes up 15% and average selling price up 8%. An
increase in capacity, mainly as a result of fleet expansion, has
helped us continue to build on our market leading position.
In Specialist & Activity revenue is up 7% year on year, with
growth achieved in all divisions except Adventure, which continues
to be affected by lower demand for North Africa. Education and
North American Specialist are performing well.
In A&D bookings are up 15% versus last year, driven by the
B2B division, where bookings are up 21%. Bookings for the B2C
division are up 4%, following strong growth in 2010. We have now
launched the AsiaRooms.com website in five local languages.
Summer 2012
It is still early in the bookings cycle for Summer 2012, with
most source markets outside of the Northern Region launching their
main edition brochures in December.
Current Trading (1) Summer 2012
YoY variation% Total ASP(2) Total Total Risk Only
Sales(2) Customers(2)
Capacity(3) Left to sell(3)
UK +9 -3 -11 -9 -8
Nordic region +5 -9 -14 +1 +3
Northern Region +8 -4 -11
(1) These statistics are up to 27 November 2011 (2) These
statistics relate to all customers whether risk or non-risk (3)
These statistics include all risk capacity programmes
In the UK we have currently sold 19% of the programme. Bookings
are 11% lower than prior year, partly reflecting a reduction in
capacity, which is currently down 9%. Average selling price is up
9%, partly reflecting cost inflation of approximately 5% and the
higher proportion of differentiated products sold, which currently
account for 65% of sales, up eight percentage points on prior
year.
The Nordic region programme was launched on 20(th) October and
as such, it is very early in the bookings cycle, with only 12% sold
to date.
Fuel/Foreign exchange
We have hedged the majority of our fuel and currency
requirements for the seasons currently on sale. The following table
shows the percentage of our forecast requirement that is currently
hedged for Euros, US Dollars and jet fuel. We have previously
stated that fuel costs are expected to rise by circa 30% in
2012.
Winter 2011/12 Summer 2012
Euro 98% 92%
US Dollars 92% 80%
Jet Fuel 91% 78%
As at 1 December 2011
----------------------- --------------- ------------
Business improvement programme
We announced at the start of the year that we expected to
deliver a further GBP89m through our turnaround programme across
our Mainstream businesses, and a further GBP40m of cost savings and
efficiencies in the UK Mainstream business and Group, over a three
year period. We have delivered GBP42m of turnaround savings
(including GBP12m over delivered in Canada) and GBP21m of cost
savings during 2011, leaving a remainder of GBP78m.
Our German Mainstream business recently announced plans to
implement a cost reduction and growth programme, GET 2015, through
which it expects to improve margins. This will be achieved via
increased focus on differentiated and exclusive product, increasing
our online business through significant website developments, and
back office restructuring. These actions will take place alongside
previously announced initiatives to replace outdated IT systems,
which will drive cost reductions.
In France, as previously stated, we have initiated a project to
consolidate the tourism businesses with the aim of creating a
single French business with a long term viable future. Initial
meetings with Works Council and local employees have taken place
and the merger is progressing as anticipated.
In addition, for clarity purposes, we will from now on combine
the turnaround and cost efficiencies targets together under a new
business improvement programme.
In light of the above, we have reassessed our target from the
remainder of GBP78m and now expect incremental profits and cost
savings of GBP107m, to be delivered in broadly even tranches over
the next three years.
Outlook
As with the rest of the travel and aviation industry, we
continue to operate in a challenging geopolitical and economic
environment which is demonstrated by the later booking profile that
we are seeing in some source markets. We have adjusted our winter
capacities to reflect the current market conditions and are trading
in line with our expectations. Summer capacities will be flexed to
match profitable demand.
We remain focused on our strategy of increasing the proportion
of sales of differentiated and exclusive product, and on increasing
controlled distribution with a focus on online to enhance our
customer access and reduce distribution costs. Through our new
business improvement programme we have self help measures in place
to help offset the difficult macro-economic environment, including
clear plans in place for Germany and France. In addition, we
continue to strengthen our cash flow in order to fund the dividend
and growth. All of which means that, even in the current
challenging market conditions, we continue to operate from a
position of strength.
BUSINESS AND FINANCIAL REVIEW
Group Performance
Year ended 30 September
Underlying results(1) Statutory results
GBPm 2011 2010(2) Change% 2011 2010(2)
Revenue 14,687 13,514 +9% 14,687 13,514
Operating profit 471 399 +18% 255 44
Profit / (loss) before
tax 360 289 +25% 144 (73)
Free cash flow 451 339 +33% 451 339
Basic eps (pence) 23.6 19.0 +24% 7.7 (11.1)
Dividend per share (pence) 11.3 11.0 +3% 11.3 11.0
---------------------------- ------- -------- -------- --------- ---------
(1) Underlying revenue, operating profit, profit/(loss) before
tax and eps exclude separately disclosed items, amortisation of
business combination intangibles, acquisition related expenses,
predecessor accounting for Magic Life and interest and taxation of
results of the Group's joint ventures and associates (2) Prior year
figures have been re-presented to include Jet4You which was
previously reported as a discontinued operation, and to incorporate
the results of Magic Life under predecessor accounting
Group revenue was 9% higher than the prior year at GBP14,687m
(2010: GBP13,514m), driven by organic growth of 7%, foreign
currency translation 2% and acquisitions 1%. These were offset by
the impact in the first half of the strategic transactions in 2010
in Canada and Germany scheduled flying which reduced revenue by
1%.
The main drivers of the year on year improvement in underlying
operating profit are:
GBPm
2010 underlying operating profit 399
Non-recurrence of volcanic ash 35
Incremental synergies/cost efficiencies 26
Turnaround 42
Acquisitions including Magic Life (see Note 1(B)(ii)) 14
Trading 23
Investment in accommodation Online Travel Agents (OTAs) (10)
Provision for North African contracts (9)
France tour operator (50)
Egypt/Tunisia (excluding France tour operator) (25)
FX translation 26
2011 underlying operating profit 471
-----
Underlying operating profit improved by GBP72m to GBP471m (2010:
GBP399m). This was driven by the delivery of GBP42m of incremental
turnaround profits, strong performances by the UK, Nordic region,
Belgium, the Netherlands, Canada and Austria, and by the
non-recurrence of volcanic ash disruption. These were partially
offset by the impact of unrest in North Africa during the first
half, and continued impact during the second half on the French
tour operators.
A reconciliation of underlying operating profit to statutory
operating profit is as follows:
Year ended 30 September 2011 2010
GBPm GBPm
Underlying operating profit 471 399
Separately disclosed items - operating (Note
3) (74) (255)
Predecessor accounting for Magic Life (17) (19)
Acquisition related expenses (82) (63)
Impairment of goodwill (39) (12)
Interest and taxation on results of joint
ventures and associates (4) (6)
------ ------
Statutory operating profit 255 44
------ ------
Segmental Performance
Segmental performance is based on underlying financial
information (which excludes certain items, including separately
disclosed items, acquisition related expenses and predecessor
accounting).
As previously announced, the following changes have been made to
the prior year figures:
- With effect from 1 October 2010, the Group reorganised its
business Sectors, with the main change being the merger of the
Specialist and Activity Sectors. The segmental results for both the
current and prior periods are presented under this new
structure.
- Previously, we reported Jet4You's results as a discontinued
operation as we expected to dispose of the business in the near
term. As a sale agreement has not been reached, the prior year
figures have been re-presented to include Jet4You's results. Full
details are given in Note 1(B)(ii).
- The impact of predecessor accounting for Magic Life is
included within the revenue figures for the Hotels division. Full
details are given in Note 1(B)(ii).
In addition, the prior year revenue and underlying operating
profit used in the segmental analysis below are pro forma financial
measures before the estimated impact of the closures of Northern
European airspace during 2010 as a result of volcanic ash. A
reconciliation of revenue and underlying operating profit shown
above to the pro forma revenue and underlying operating profit
shown in this section is as follows:
Year ended 30 September Spec. Acc.
2010 N'thern Cent. West. & &
GBPm Region Eur. Eur. Activity Dest. Other Total
Statutory revenue 4,312 4,354 2,920 1,347 581 - 13,514
Impact of volcanic
ash 59 21 35 4 6 - 125
Pro forma revenue 4,371 4,375 2,955 1,351 587 - 13,639
------------------------- -------- ------ ------ ---------- ------- ------ -------
Year ended 30 September Spec. Acc.
2010 N'thern Cent. West. & &
GBPm Region Eur. Eur. Activity Dest. Other Total
Underlying operating
profit 162 85 38 77 73 (36) 399
Impact of volcanic
ash 21 7 6 1 - - 35
Pro forma underlying
operating profit 183 92 44 78 73 (36) 434
------------------------- -------- ------ ------ ---------- ------- ------ ------
Mainstream Sector
Northern Region
The Northern Region reported an underlying operating profit of
GBP250m (2010: GBP183m). All divisions improved year on year, with
particularly strong performances by the UK and Nordic region and
the completion of the turnaround programme in Canada following the
strategic venture with Sunwing.
The main drivers of the year on year change in underlying
operating profit are summarised in the following table:
Nordic Northern
GBPm UK Region Canada Hotels Region
2010 127 56 (5) 5 183
Incremental synergies/cost
efficiencies 17 - - - 17
Turnaround 4 - 23 - 27
Magic Life - - - 8 8
Egypt/Tunisia (5) (3) - - (8)
Trading 6 13 (1) 3 21
FX translation - 4 1 (3) 2
2011 149 70 18 13 250
==== ======== ======= ======= =========
Northern Region 2011 2010 Change %
Customers ('000)(1)
UK & Ireland 5,440 5,399 +1%
Nordic region 1,427 1,224 +17%
------ ------ ---------
Total 6,867 6,623 +4%
------ ------ ---------
Revenue (GBPm)
UK & Ireland 3,588 3,392 +6%
Nordic region 1,054 864 +22%
Canada(1) - 52 n/a
Hotels 29 63 -54%
------ ------ ---------
Total 4,671 4,371 +8%
====== ====== =========
Underlying operating profit /
(loss) (GBPm)
UK & Ireland 149 127 +17%
Nordic region 70 56 +25%
Canada 18 (5) n/a
Hotels 13 5 +160%
------ ------ ---------
Total 250 183 +37%
====== ====== =========
1From 14 January 2010, our Canadian operations have been
accounted for under the equity method. Canadian customer numbers
have been excluded in both periods.
UK & Ireland
The UK & Ireland businesses delivered a GBP22m improvement
in underlying operating profit to GBP149m (2010: GBP127m). We are
particularly pleased with the performance of our differentiated
products and with the outcome of Summer trading, which helped to
offset the negative impact of unrest in North Africa earlier in the
year.
The growth of higher margin differentiated products has
underpinned volume and margin performance. Differentiated products
accounted for 47% of the total product mix in 2011 for the year, up
five percentage points on 2010. Sales of unique differentiated
products such as SplashWorld, Holiday Village, Sensatori and
Couples have grown by 14% in the year whilst sales of lower margin
commodity products have declined by 5%. The Couples concept, which
was introduced in 2011, has been a particular success. All 16
hotels in this range are strictly child free. The First Choice
Holiday Village portfolio has also been expanded with a new unit in
Tenerife and a planned opening in Menorca.
In addition, exclusive products (which can only be booked via
Thomson and First Choice) accounted for a further 19% of our
customers. This, together with the growth of differentiated
product, helps to provide an enhanced and unique product offering
to our customers.
Online distribution accounted for 39% of bookings in 2011. More
customers book using our website than by any other distribution
channel. Significant enhancements were made to both the Thomson and
First Choice websites that have improved navigation, customer
experience and "look to book" ratios. Thomson is one of the top
three most visited travel websites in the UK.
The UK business delivered the final GBP5m of post merger
synergies in the first quarter, and delivered a further GBP12m of
cost efficiency savings, mainly relating to pensions and back
office cost reductions, in the remainder of the year. Our business
in Ireland delivered a turnaround of GBP4m in the year, with the
completion of the programme of capacity rationalisation and cost
savings which commenced in 2010.
Nordic Region
The Nordic region achieved an improved underlying operating
profit of GBP70m (2010: GBP56m). Excluding the impact of foreign
exchange translation, the improvement versus prior year was
GBP10m.
Volume improvements were seen across most destinations, with the
Canaries up 26% and Thailand up 30% in winter, the latter
destination benefiting from the use of a Corsair 747. In summer,
the programme was again expanded, with Greece up 17%, Turkey up 28%
and Spain up 33%.
Differentiated products accounted for 58% of the overall mix, up
thirteen percentage points on prior year. Two new Blue Villages
were launched for Summer 2011 - Blue Village Seven Seas in Turkey
(formerly Magic Life) and Blue Village Alcudia Pins in Mallorca
(shared exclusively with Thomson Family).
The Nordic region continues to successfully implement its online
strategy, with online bookings accounting for 61% of the total in
2011, up four percentage points on prior year. Traditional
brochures were not issued this year for the core tour operator
brands (Fritidsresor in Sweden, Star Tour in Norway and Finnmaktat
in Finland); instead, customers use the website as a "daily
brochure" which provides information and acts as an online shop. As
online bookings have grown, the business has further rationalised
its retail portfolio and therefore reduced further its distribution
costs.
Canada
Canada delivered an underlying operating profit of GBP18m (2010:
loss of GBP5m).
Following the completion of the joint venture with Sunwing in
January 2010, the business has successfully transformed itself to
become a market leader. The annualised benefit of synergies
(airline efficiencies and back office cost savings), coupled with
better purchasing and cost control and product improvements, have
driven the improved result which has exceeded expectations. We now
consider the turnaround to be complete and expect the business to
move into a phase of profitable growth.
Hotels
The Hotels division comprises hotel management companies and
joint ventures in hotel assets. Underlying operating profit
improved to GBP13m in 2011 (2010: GBP5m), benefitting from GBP8m
high season profits from the Magic Life acquisition which completed
at the start of the final quarter.
Central Europe
Central Europe reported an GBP11m increase in underlying
operating profit to GBP103m (2010: GBP92m). The main drivers of the
year on year change in underlying operating profit are summarised
in the following table:
Central
GBPm Germany Austria Switzer'd Poland Europe
2010 81 9 4 (2) 92
Egypt/Tunisia (6) (1) - - (7)
Trading 3 1 - - 4
FX translation 11 2 1 - 14
------------ ---------- -------------- ------------ --------
2011 89 11 5 (2) 103
============ ========== ============== ============ ========
Central Europe 2011 2010 Change %
Customers ('000)
Germany(1) 6,424 6,208 +3%
Austria 543 558 -3%
Switzerland(1) 149 161 -7%
Poland 166 116 +43%
----------- ---------- --------------
Total 7,282 7,043 +3%
=========== ========== ==============
Revenue (GBPm)
Germany 4,235 3,800 +11%
Austria 333 324 +3%
Switzerland 184 183 +1%
Poland 89 68 +31%
----------- ---------- --------------
Total 4,841 4,375 +11%
=========== ========== ==============
Underlying operating profit / (loss) (GBPm)
Germany 89 81 +10%
Austria 11 9 +22%
Switzerland 5 4 +25%
Poland (2) (2) Flat
----------- ---------- --------------
Total 103 92 +12%
=========== ========== ==============
(1) Customer figures for Germany and Switzerland have been
restated for 2010 to reflect redefined product reporting following
the implementation of a new system.
Germany
In Germany, underlying operating profit was GBP89m (2010:
GBP81m). This included GBP11m favourable impact from foreign
currency translation, partly offset by GBP6m impact of unrest in
North Africa.
The main tour operator TUI Germany experienced improved demand
in the summer versus prior year, when we were able to flex capacity
to enable customers to switch from Egypt to destinations such as
the Balearics, Greece and Turkey, albeit at lower margins than
Egypt. Margins benefited from the expansion of our differentiated
offering through the Sensimar and Puravida properties.
Differentiated product accounted for 32% of our volumes in 2011.
However, some of the specialist tour operators, such as L'TUR
Tourismus AG and Gebeco, experienced more challenging trading
conditions as a result of macro-economic and geopolitical
factors.
Online bookings accounted for 19% of the total, up two
percentage points on prior year. This was offset by a reduction in
bookings through franchised retail shops, with controlled
distribution remaining at 51% as a result of an increase in
bookings through owned retail shops.
On 29 September 2011 we announced plans to implement a strategy
and growth programme, GET 2015, through which TUI Germany expects
to improve margins. This will be achieved via increased focus on
differentiated and exclusive product, increasing our online
business through significant website developments, and back office
restructuring. These actions will take place alongside previously
announced initiatives to replace outdated IT systems, which will
drive cost reductions.
Austria
Austria reported underlying operating profit of GBP11m, GBP2m
ahead of prior year (2010: GBP9m). The downturn in demand for North
African destinations was offset by increased bookings for overland
tours. Controlled distribution improved by five percentage points
to 36%, driven by growth in the retail and online channels.
Switzerland
In Switzerland, underlying operating profit was GBP5m for the
year (2010: GBP4m). Trading was challenging as a result of the
strong Swiss Franc, which has led some customers to book holidays
from Eurozone source markets which border on Switzerland. This was
offset by cost efficiencies.
Poland
In Poland, the underlying operating loss was GBP2m (2010: GBP2m
loss), partly due to fuel surcharges from third party carriers
through the summer which could not be passed on to the customer. We
have commenced the turnaround programme in this source market and
expect the benefits to be realised from 2012.
Western Europe
Western Europe reported an underlying operating profit of GBP17m
(2010: GBP44m). The main drivers of the year on year change in
underlying operating profit are summarised in the following
table:
Southern Western
GBPm France Neth. Belgium Europe Jet4You Europe
2010 (10) 7 56 4 (13) 44
Turnaround 5 10 - - - 15
Egypt/Tunisia
(excl France
tour operator) - - (2) (1) - (3)
Provision for
North Africa
contracts (9) - - - - (9)
France tour
operator (50) - - - - (50)
Trading 9 3 1 (5) 3 11
FX translation 2 2 5 - - 9
--------- --------
2011 (53) 22 60 (2) (10) 17
======= ====== ======== ========= ======== ========
Western Europe 2011 2010 Change %
Customers ('000)
France 2,057 2,063 Flat
Netherlands 1,360 1,211 +12%
Belgium 2,012 1,861 +8%
Southern Europe 143 184 -22%
Jet4You 529 497 +6%
------ ------ ---------
Total 6,101 5,816 +5%
====== ====== =========
Revenue (GBPm)
France 1,363 1,311 +4%
Netherlands 783 668 +17%
Belgium 821 754 +9%
Southern Europe 103 131 -21%
Jet4You 81 91 -11%
------ ------ ---------
Total 3,151 2,955 +7%
====== ====== =========
Underlying operating profit
/ (loss) (GBPm)
France (53) (10) -430%
Netherlands 22 7 +214%
Belgium 60 56 +7%
Southern Europe (2) 4 n/a
Jet4You (10) (13) +23%
17 44 -61%
France 2011 2010 Change %
Underlying operating (loss)
/ profit (GBPm)
Tour Operator (43) 14 n/a
Airline (10) (24) +58%
----- ----- ---------
(53) (10) -430%
France
France reported an underlying operating loss of GBP53m (2010:
loss of GBP10m). The increase in loss was driven by the French tour
operators, partly offset by an improved performance by the airline,
Corsair.
The tour operator losses of GBP43m (2010: GBP14m profit) were
driven by lower demand for North African destinations. The French
tour operators are particularly reliant on these destinations -
historically Egypt, Tunisia and Morocco have made up around 40% of
their capacity in total, and around 65% for Marmara alone. A
provision of GBP9m has been made in respect of prepayments for
North African contracts, as a result of lower demand for holidays
in the region. Although volumes overall were flat year on year,
margins were lower as a result of customers switching to higher
cost destinations in the Western Mediterranean and Greece. In
addition, Nouvelles Frontieres, whose core competency has been in
earlier selling long haul holidays, has been impacted by the
challenging consumer environment.
As previously stated, we have initiated a project to consolidate
the businesses of the French tour operators with the aim of
creating a single business with a long term viable future. Initial
meetings with Works Council and local employees have taken place
and the merger is progressing as anticipated.
The airline result improved by GBP14m to a loss of GBP10m (2010:
loss of GBP24m). This was due partly to network planning
improvements to better serve customer demand, with a remodelled
programme to the Indian Ocean and French West Indies. In addition,
the restructuring programme is progressing as planned.
Netherlands
The Netherlands achieved a significant improvement in underlying
operating profit to GBP22m (2010: GBP7m). The increase in profit
was driven by an increase in market share, made possible by
improvements in distribution and yield management. In addition,
cost efficiency savings were made as a result of improved airline
productivity and lower accommodation costs. Online distribution
improved by three percentage points to 33%.
Belgium
Underlying operating profit in Belgium was GBP60m (2010:
GBP56m). After a good trading performance in the first half as a
result of higher volumes and better airline utilisation which
offset the impact of unrest in North Africa, summer margins were
below prior year. This was due to a higher proportion of seat only
sales as we are increasingly competing with low cost carriers to
beach destinations. The increase in seat only sales, together with
the increase in volumes sold through our direct seller, Sunjets,
increased sales through the online channel by four percentage
points to 37%, leading to a four percentage point improvement in
controlled distribution to 59%, and reduced distribution costs as a
proportion of revenue.
Southern Europe
Southern Europe, which consists of tour operators based in the
Italian and Spanish source markets, reported an underlying
operating loss of GBP2m (2010: profit of GBP4m). This reflects the
challenging consumer environment in these source markets, coupled
with a reliance on North African destinations.
Jet4You
Our Moroccan low cost airline Jet4You reported a lower
underlying operating loss of GBP10m (2010: loss of GBP13m). We have
expanded our business improvement programme to include Jet4You and
intend to bring the business to a break even result.
Emerging Markets
Emerging Markets reported an underlying operating loss of GBP12m
in 2011 (2010: loss of GBP7m). The result for this division
reflects our continued investment in brand and distribution in
Russia and the CIS. The division now has over 510,000 customers, up
6% on prior year. The Russian market is highly fragmented and
competitive, but continues to exhibit good growth characteristics
for sun and beach package holidays, with particularly good growth
prospects in the regions outside of Moscow.
We are continuing to evaluate our strategic participation
options in the Chinese market and have identified a number of
long-term growth opportunities. During 2011, we were one of three
foreign companies to be granted an outbound operating licence,
under the new pilot scheme introduced by the Chinese National
Tourism Authority. This licence creates a new source market for us
with excellent growth prospects.
We are also exploring a number of projects in India to broaden
our presence in the wider travel sector.
Emerging Markets (share of JV) 2011 2010 Change %
Underlying operating loss (GBPm) (12) (7) -71%
Specialist & Activity
Specialist & Activity reported a profit of GBP65m (2010:
GBP78m), down GBP13m, driven by the Education division. This
included GBP1m favourable impact from foreign currency translation,
GBP3m favourable impact from acquisitions (including the
annualisation impact of prior year acquisitions) and GBP2m cost
savings, partly offset by GBP3m adverse impact of unrest in the
Middle East and North Africa.
Specialist & Activity 2011 2010 Change %
Customers ('000) 1,500 1,611 -7%
Revenue (GBPm)
Adventure 208 211 -1%
North American Specialist 130 127 +2%
Education 211 228 -7%
Sport 67 92 -27%
Marine 141 134 +5%
Specialist Holiday Group 615 559 +10%
------- ------ ---------
Total 1,372 1,351 +2%
======= ====== =========
Underlying operating (loss) / profit (GBPm)
Adventure 7 8 -13%
North American Specialist 8 1 +700%
Education 14 27 -48%
Sport (1) 5 n/a
Marine 16 16 flat
Specialist Holiday Group 21 21 flat
Total 65 78 -17%
======= ====== =========
Underlying operating profit for North American Specialist has
improved to GBP8m (2010: GBP1m), driven by a switch in mix towards
lower volume, higher margin products offered by operators such as
Starquest (private jet tours) and Quark (polar expeditions), and
improved cost control.
Marine underlying operating profit was GBP16m (2010: GBP16m).
Strong cost control enabled the division to maintain its margins in
spite of inflationary pressures. During the year, our inland
waterways brand, Le Boat, launched the new 1500 series of boats,
the roll out of which will continue in the next few years. In
addition, the corporate fleet has been refreshed in Port Solent in
the UK. These improvements will significantly enhance customer
experience.
Adventure underlying operating profit was GBP7m (2010: GBP8m).
Excluding the impact of the strategic venture with Intrepid Travel
which began in April, profit decreased by GBP3m. This was driven by
lower volumes and reduced margins for travel to Australia as a
result of the strong dollar and the floods in Queensland early in
2011. In addition the result has been impacted by the unrest in the
Middle East and North Africa.
Specialist Holidays Group underlying operating profit was GBP21m
(2010: GBP21m). Profits on ski holidays were lower than prior year
due in part to the late timing of Easter and the division was
affected by unrest in the Middle East and North Africa. This was
offset by improved summer volumes in Citalia, Hayes & Jarvis
and Sovereign and reduced shop costs following the closure of
Travelmood outlets.
Education underlying operating profit was GBP14m (2010: GBP27m).
The decrease was driven by a reduction in demand for gap year
travel. The downturn in the UK economy and rise in university
tuition fees means that fewer students are taking a gap year at the
moment. In addition, the language division experienced operational
difficulties during the year. In view of this, the division is
undergoing restructuring in order to reduce back office costs and
drive operational efficiencies. The result for 2011 included GBP1m
impact from new acquisitions and the annualised impact of
acquisitions made in the prior year.
As anticipated due to the lack of major sporting events in 2011,
the Sport division reported an underlying operating loss of GBP1m
(2010: GBP5m profit). 2010 included the FIFA World Cup, which was
not offset by profits from the Ashes tour in 2011.
Accommodation & Destinations
A&D delivered an underlying operating profit of GBP72m
(2010: GBP73m). Excluding the GBP10m investment in the
accommodation OTA, profits were up GBP9m on prior year, driven by
growth in the B2B division and LateRooms UK and GBP3m favourable
impact from new acquisitions and the annualised impact of 2010
acquisitions, which offset the GBP4m adverse impact of unrest in
the Middle East and North Africa.
Accommodation & Destinations 2011 2010 Change %
Customers ('000)
B2B roomnights (Online) +20%
B2C roomnights (Online) +14%
Incoming passenger volumes +7%
Revenue (GBPm) 652 587 +11%
Underlying operating profit (GBPm) 72 73 -1%
TTV for the Sector increased by 18% to GBP2.6bn (2010:
GBP2.2bn). This was driven by growth in Hotelbeds and Bedsonline in
the B2B division, by LateRooms in the B2C division, and by our
cruise handling business, Intercruises.
Roomnights in the B2B division grew by 20% year on year.
Bookings to all core destinations and from all source markets were
up, with Americas and Asia being the key growth drivers.
The B2C division has continued its strategy of expansion and
investment in the UK, Asia and Europe. The division has invested
heavily in expanding AsiaRooms and LateRooms - the latter both in
the UK and Europe. LateRooms has continued to increase its market
share in the UK and outperformed the market with year on year
growth in commissions of 21% in 2011.
Intercruises increased the number of port calls handled by over
30%, to 8,600 (2010: 6,400). This was in part due to the expansion
of offering in North America with the acquisition of TMS
Gateway.
The North African destination services businesses were adversely
affected by the events earlier in the year, as customers chose to
travel to alternative destinations. We acquired two destination
services businesses in 2011, Lima Tours (which specialises in
creating and operating innovative and high value-added travel
experiences in Peru) and Svoy Travel Group (which provides hotel
accommodation and destination services in Russia), the latter being
through our joint venture, Togebi Holding Limited.
Acquisitions & Investments
The Group invested GBP51m in acquisitions in 2011.
In July, we acquired the operating companies that lease and
manage thirteen Magic Life clubs for EUR6 from TUI AG, reflecting
the current loss making nature of the business. The transaction has
helped us to secure exclusive access to differentiated content for
our tour operators.
In April, Specialist & Activity entered into a strategic
venture with Intrepid Travel. The transaction combines our
Adventure businesses with Intrepid to create the clear global
leader in adventure travel. The transaction was based on an
injection of businesses into the venture by both parties and has no
cash component. The Group has 60% ownership of the combined
business and fully consolidates its results. Intrepid Travel's
private shareholders own the remaining 40%. The transaction is
expected to deliver at least GBP10m per annum of cost synergies,
primarily arising from increased economies of scale, within the
first three years.
In addition, Specialist & Activity made the following bolt
on acquisitions:
-- English Language Centre (York), which provides high quality language
courses to students from 44 countries.
-- Great Atlantic Travel, a US sports tour operator.
In November, Specialist & Activity disposed of the Thomson
Al Fresco business to Homair Vacances.
In A&D, we acquired:
-- Lima Tours, a destination management business which specialises in
creating and operating innovative and high value added travel experiences
in Peru.
-- TMS Gateway, the leading supplier of port agency and ground handling
services to cruise ships on the US and Canadian West Coast.
-- Top Class, a port handling company based in France.
In Central Europe, we acquired a number of travel agencies to
support our strategy of increasing the controlled distribution
mix.
Taxation
Underlying profit before tax for the year was GBP360m. The
effective tax rate on these profits is 27%. Based on the current
structure of the business and existing local taxation rates and
legislation, it is expected that the underlying tax rate will be
maintained at this level. The actual tax rate is 44%. This differs
to the underlying tax rate due to the tax effect of separately
disclosed items (principally the non-recognition of tax losses
arising from such items), acquisition related expenses, goodwill
impairment charges and the booking of GBP17m of specific provisions
against potential tax exposures in Morocco and the UK.
The cash tax rate is expected to be lower than the underlying
income tax rate as we utilise our deferred tax assets generated
from restructuring expenditure and trading losses. In the coming
year, we envisage a cash tax rate of approximately 20% of
underlying profit before tax.
Earnings per share
Underlying basic earnings per share was 23.6p (2010: 19.0p).
Basic earnings per share was 7.7p (2010: loss per share 11.1p).
Dividends
The Board is recommending a final dividend of 8.0p per share
(2010: 7.8p). On 10 May 2011 the Board recommended an interim
dividend of 3.3p per share (2010: 3.2p), making a full year
dividend of 11.3p per share (2010: 11.0p). The final dividend will
be paid on 10 April 2012 to holders of relevant shares on the
register at 9 March 2012.
The Group's policy is to maintain underlying dividend cover at
around two times. We intend to continue to operate a dividend
re-investment plan as an alternative to receiving a cash
dividend.
Cash and liquidity
The net cash position (cash and cash equivalents less loans,
bonds, overdrafts and finance leases) at the year end was GBP4m
(2010: net debt GBP249m). This consisted of GBP902m cash and cash
equivalents and GBP898m of interest-bearing loans and liabilities.
The reduction in net debt was primarily driven by growth in
underlying profit together with lower separately disclosed items
and strong working capital management. As at 30 September 2011,
undrawn committed borrowing facilities totalled GBP1,044m (2010:
GBP984m).
Free cash flow improved by 33% to GBP451m (2010: GBP339m),
analysed as follows:
GBPm 2011 2010
Underlying operating profit (2010: pro forma) 471 434
Depreciation and amortisation included within underlying
operating profit 172 207
------ ------
Underlying EBITDA(1) 643 641
Working capital movement 218 217
Capital expenditure (net of disposals) (162) (178)
Other (248) (341)
------ ------
Free cash flow 451 339
====== ======
(1) Earnings before interest, tax, depreciation and
amortisation
On 30 April 2011 we completed the final EUR160m repayment of our
shareholder loan with TUI AG. We successfully refinanced our
banking facilities in May with the signing of new facilities
totalling GBP1.155bn. The new facilities have a four year term and
mature in 2015. Interest will be incurred at a margin above LIBOR
dependent on the proportion of the facility drawn and it is
envisaged that the average margin will be less than 2%. Our
covenants remain unchanged (net debt/EBITDA not to exceed 3 times,
fixed charges cover to exceed 1.5 times, tested half-yearly).
Separately disclosed items (SDIs)
Separately disclosed items net to a GBP74m expense in the year
(2010: GBP255m). The following table provides a breakdown of these
items.
GBPm 2011 2010
Merger related integration costs - 116
Restructuring costs 137 63
Pension (63) -
Incremental costs caused by volcanic ash disruption
in 2010 (7) 69
Aircraft and other 7 7
----- -----
Total SDIs 74 255
===== =====
Restructuring costs of GBP137m were incurred in the year. The
largest items by division were as follows:
-- GBP35m in France in relation to the ongoing restructuring of the
airline and retail network of Nouvelles Frontieres;
-- GBP32m in Germany, where we announced in September our strategy and
growth programme GET 2015;
-- GBP19m in the UK including rationalising the retail distribution
network; and
-- GBP15m in the Specialist & Activity Sector relating to back office
cost reductions.
The remaining costs related primarily to restructuring within
the A&D Sector and Group head office companies.
The above costs were partly offset by a GBP63m reduction in the
UK pension scheme liability following agreement with pension scheme
members to cap the rate of future growth of pensionable pay
(detailed below).
During the current financial year two errors have been
identified which relate to the balance sheet as at 30 September
2010. The omission of an elimination of surplus sundry payables
from the Group balance sheet resulted in an overstatement of
current liabilities of GBP38m. This was offset by an understatement
of current liabilities within Nouvelles Frontieres, the French tour
operator, of GBP45m. As both errors offset within cost of sales and
trade and other payables and do not materially change the profit,
net assets or overall financial position of the Group, the prior
year has not been restated. The correction of the errors has been
made through the profit and loss account in the year ended 30
September 2011. We have addressed the underlying causes of these
errors within the businesses concerned, and are introducing a
Group-wide compliance framework as part of our ongoing work to
improve key financial controls and procedures.
Other SDIs netted to nil. A GBP12m impairment of one of our UK
cruise ships, Island Escape, was offset by profits on disposal of
aircraft and engines.
Further information is included within Note 3.
Pension deficit
The net accounting pension deficit at the year end was GBP513m
(2010: GBP493m). The cash contribution to fund the deficit was
GBP33m in 2011 (2010: GBP64m). The increase in deficit reflects
actuarial losses arising from a reduction in the value of scheme
assets as a result of worsened stock market conditions, and an
increase in the value of scheme liabilities as a result of changes
in discount rate assumptions. These were partly offset by a GBP63m
reduction in the UK pension scheme liability. As previously
reported, during the 6-month period ended 31 March 2011, the
Company engaged in a consultation process with the members of its
defined benefit pension schemes which resulted in a restriction to
salary increases used under the rules of the pension schemes to
calculate benefits to a maximum of 2.5% in any one year. This
change resulted in a reduction in accrued pension liabilities
measured under IAS 19 of GBP63m, with a corresponding credit
recognised within separately disclosed items in the income
statement.
Consolidated income statement
for the year ended 30 September 2011
Restated
Year ended Year ended
30 September 30 September
2011 2010
Note GBPm GBPm
----------------------------------------------- ----- -------------- --------------
Revenue 1,2 14,687 13,514
Cost of sales (13,351) (12,343)
Gross profit 1,336 1,171
----------------------------------------------- ----- -------------- --------------
Administrative expenses (1,094) (1,124)
Share of profits / (losses) of joint ventures
and associates 13 (3)
Operating profit 255 44
----------------------------------------------- ----- -------------- --------------
Analysed as:
Underlying operating profit 1,2 471 399
Separately disclosed items 3 (74) (255)
Predecessor accounting for Magic Life 1 (17) (19)
Acquisition related expenses (82) (63)
Impairment of goodwill (39) (12)
Taxation on profits and interest of joint
ventures and associates (4) (6)
255 44
----------------------------------------------- ----- -------------- --------------
Financial income 4 83 69
Financial expenses 4 (194) (186)
Net financial expenses (111) (117)
----------------------------------------------- ----- -------------- --------------
Profit / (loss) before tax 144 (73)
Taxation charge 6 (57) (50)
Profit / (loss) for the year 87 (123)
----------------------------------------------- ----- -------------- --------------
Attributable to:
Equity holders of the parent 85 (123)
Non-controlling interests 2 -
----------------------------------------------- ----- -------------- --------------
Profit / (loss) for the year 87 (123)
----------------------------------------------- ----- -------------- --------------
Restated
Year ended Year ended
30 September 30 September
2011 2010
Pence Pence
------------------------------------------------- -------------- --------------
Basic and diluted earnings / (loss) per share
for profit / (loss) attributable to the equity
holders of the Company during the year
Basic earnings / (loss) per share 9 7.7 (11.1)
Diluted earnings / (loss) per share 9 7.6 (11.1)
Consolidated statement of comprehensive income
for the year ended 30 September 2011
Restated
Year ended Year ended
30 September 30 September
2011 2010
Note GBPm GBPm
--------------------------------------------------- -------- -------------- --------------
Profit / (loss) for the year 87 (123)
------------------------------------------------------------- -------------- --------------
Other comprehensive (expense) / income
Foreign exchange translation (18) (85)
Actuarial losses arising in respect of defined
benefit pension schemes (89) (42)
Cash flow hedges:
- movement in fair value 85 33
- amounts recycled to the consolidated income
statement (4) 41
Foreign exchange gains recycled through the consolidated
income statement - (6)
Share of other movements in reserves of associates
and joint ventures - 2
Available for sale financial assets
- movement in fair value (2) (4)
- amounts recycled to the consolidated income 1 -
statement
Deferred tax on items in other comprehensive
income 6(iii) (29) (9)
Other comprehensive income / (expense) for
the year net of tax (56) (70)
------------------------------------------------------------- -------------- --------------
Total comprehensive income / (expense) for
the year 31 (193)
------------------------------------------------------------- -------------- --------------
Total comprehensive income / (expense) for
the year
Attributable to:
Equity holders of the parent 26 (193)
Non-controlling interests 5 -
Total 31 (193)
------------------------------------------------------------- -------------- --------------
Consolidated balance sheet
at 30 September 2011
Restated Restated
30 September 30 September 30 September
2011 2010 2009
GBPm GBPm GBPm
--------------------------------------- ------------- -------------- --------------
Non-current assets
Intangible assets 4,642 4,659 4,737
Property, plant and equipment 1,001 1,023 975
Investments in joint ventures and
associates 242 211 112
Other investments 72 79 77
Trade and other receivables 202 156 194
Retirement benefit asset 1 1 1
Derivative financial instruments 30 21 13
Deferred tax assets 138 114 211
6,328 6,264 6,320
--------------------------------------- ------------- -------------- --------------
Current assets
Inventories 69 54 56
Other investments 22 5 40
Trade and other receivables 1,472 1,425 1,507
Income tax recoverable 62 34 30
Derivative financial instruments 185 144 271
Cash and cash equivalents 902 1,304 790
Assets classified as held for sale 13 57 126
2,725 3,023 2,820
--------------------------------------- ------------- -------------- --------------
Total assets 9,053 9,287 9,140
--------------------------------------- ------------- -------------- --------------
Current liabilities
Interest-bearing loans and borrowings (96) (757) (327)
Retirement benefits (3) (5) (3)
Derivative financial instruments (133) (122) (284)
Trade and other payables (4,622) (4,335) (4,282)
Provisions for liabilities (317) (241) (194)
Income tax payable (133) (84) (68)
Liabilities classified as held
for sale - (31) (59)
(5,304) (5,575) (5,217)
--------------------------------------- ------------- -------------- --------------
Non-current liabilities
Interest-bearing loans and borrowings (802) (796) (801)
Retirement benefits (511) (489) (498)
Derivative financial instruments (18) (23) (18)
Trade and other payables (56) (93) (108)
Provisions for liabilities (353) (307) (250)
Deferred tax liabilities (71) (28) (97)
(1,811) (1,736) (1,772)
--------------------------------------- ------------- -------------- --------------
Total liabilities (7,115) (7,311) (6,989)
--------------------------------------- ------------- -------------- --------------
Net assets 1,938 1,976 2,151
--------------------------------------- ------------- -------------- --------------
Equity
Called up share capital 112 112 112
Convertible bond reserve 85 83 -
Other reserves 2,846 2,794 2,752
Accumulated losses (1,155) (1,014) (716)
--------------------------------------- ------------- -------------- --------------
Total equity attributable to equity
holders of the parent 1,888 1,975 2,148
Non-controlling interests 50 1 3
--------------------------------------- ------------- -------------- --------------
Total equity 1,938 1,976 2,151
--------------------------------------- ------------- -------------- --------------
The financial statements were approved by a duly authorised
Committee of the Board of Directors on 4 December 2011 and signed
on its behalf by:
Peter J Long William H Waggott
Chief Executive Chief Financial Officer
Company number: 6072876
Consolidated statement of changes in equity
Other reserves
-------------------------------
Called Equity
up Convertible holders Non-
share bond Merger Translation Hedging Accumulated of controlling
capital reserve reserve reserve reserve losses parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ----------- -------- ----------- -------- ----------- -------- ----------- ------
Balance at 1
October
2009 (as
previously
reported) 112 - 2,490 360 (75) (716) 2,171 3 2,174
Adjustment in
respect
of Magic Life
(Note
1(B)(ii)) - - (11) (12) - - (23) - (23)
------------------ -------- ----------- -------- ----------- -------- ----------- -------- ----------- ------
Balance at 1
October
2009 (restated) 112 - 2,479 348 (75) (716) 2,148 3 2,151
Loss for the year
(restated) - - - - - (123) (123) - (123)
Other
comprehensive
(expense)
/ income for the
year
(as previously
reported) - - - (59) 56 (70) (73) - (73)
Adjustment in
respect
of Magic Life - - - 3 - - 3 - 3
------------------ -------- ----------- -------- ----------- -------- ----------- -------- ----------- ------
Other
comprehensive
(expense)
/ income for the
year
(restated) - - - (56) 56 (70) (70) - (70)
Total
comprehensive
(expense)
/ income for the
year
(restated) - - - (56) 56 (193) (193) - (193)
------------------ -------- ----------- -------- ----------- -------- ----------- -------- ----------- ------
Transactions with
owners
Share-based
payment - - - - - 20 20 - 20
Acquisition of
shares
by Employee
Benefit
Trust - - - - - (7) (7) - (7)
Dividends - - - - - (118) (118) (2) (120)
Issue of
convertible
bond (net of
deferred
tax) - 83 - - - - 83 - 83
Capital increase
in
Magic Life - - 42 - - - 42 - 42
------------------ -------- ----------- -------- ----------- -------- ----------- -------- ----------- ------
At 30 September
2010
(restated) 112 83 2,521 292 (19) (1,014) 1,975 1 1,976
------------------ -------- ----------- -------- ----------- -------- ----------- -------- ----------- ------
Other reserves
-----------------------------
Called Equity
up Convertible holders Non-
share bond Merger Translation Hedging Accumulated of controlling
capital reserve reserve reserve reserve losses parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------- ----------- ------- ----------- ------- ----------- -------- ------------ ------
At 1 October 2010
(restated) 112 83 2,521 292 (19) (1,014) 1,975 1 1,976
----------------------- ------- ----------- ------- ----------- ------- ----------- -------- ------------ ------
Profit for the year - - - - - 85 85 2 87
Other comprehensive
(expense)
/ income for the year - - - (3) 56 (112) (59) 3 (56)
Total comprehensive
(expense)
/ income for the year - - - (3) 56 (27) 26 5 31
----------------------- ------- ----------- ------- ----------- ------- ----------- -------- ------------ ------
Transactions with
owners
Share-based payment - - - - - 19 19 - 19
Acquisition of shares
by Employee Benefit
Trust - - - - - (7) (7) - (7)
Dividends - - - - - (122) (122) (2) (124)
Capital increase in
Magic
Life - - 2 - - - 2 - 2
Disposals to
non-controlling
interests - - - (3) - (4) (7) 46 39
Change in deferred tax
rate on equity
portion
of convertible bond - 2 - - - - 2 - 2
At 30 September 2011 112 85 2,523 286 37 (1,155) 1,888 50 1,938
----------------------- ------- ----------- ------- ----------- ------- ----------- -------- ------------ ------
Restatement
Please refer to Note 1(B)(ii) for a full explanation of the
restatement.
Consolidated statement of cash flows
for the year ended 30 September 2011
Restated
Year ended Year ended
30 September 30 September
2011 2010
Note GBPm GBPm
--------------------------------------------------- ----- -------------- --------------
Profit / (loss) for the year 87 (123)
Adjustment for:
Depreciation and amortisation 238 265
Impairment of intangible assets and property,
plant and equipment 30 15
Impairment of goodwill 39 12
Equity-settled share-based payment expenses 19 14
Loss on sale of property, plant and equipment 6 1
Share of (profit) / loss of joint ventures
and associates (13) 3
Loss on foreign exchange 38 18
Change in value of trade investment - (30)
Dividends received from joint ventures
and associates 7 9
Pension curtailment gain recognised in (64) -
consolidated income statement
Financial income 4 (83) (69)
Financial expenses 4 194 186
Loss from discontinued operation - 18
Taxation 6 57 50
Operating profit before changes in working
capital and provisions 555 369
(Increase) / decrease in inventories (9) 1
(Increase) / decrease in trade and other
receivables (68) 81
Increase in trade and other payables 140 69
Increase in provisions and employee benefits 125 91
--------------------------------------------------- ----- -------------- --------------
Cash flows from operations 743 611
Interest paid (86) (59)
Interest received 9 2
Income taxes paid (53) (34)
Cash flows from operating activities 613 520
--------------------------------------------------- ----- -------------- --------------
Investing activities
Proceeds from sale of property, plant
and equipment 148 26
Proceeds from disposal of associated undertakings
net of cash disposed of - 1
Acquisition of subsidiaries net of cash
acquired (33) (51)
Proceeds from other investments 3 9
Investment in joint ventures, associates
and other investments (18) (90)
Acquisition of property, plant and equipment (257) (164)
Acquisition of intangible assets (56) (44)
Cash flows from investing activities (213) (313)
--------------------------------------------------- ----- -------------- --------------
Financing activities
Proceeds from new loans and deposits taken 26 769
Repayment of borrowings (556) (257)
Repayment of finance lease liabilities (145) (31)
Dividends paid to ordinary and non-controlling
interests (124) (120)
Shares purchased by Employee Benefit Trust (7) (7)
Cash flows from financing activities (806) 354
--------------------------------------------------- ----- -------------- --------------
Net (decrease) / increase in cash and
cash equivalents (406) 561
Cash and cash equivalents at start of
the year 1,304 790
Effect of foreign exchange on cash held 4 (47)
Cash and cash equivalents at end of the
year 902 1,304
--------------------------------------------------- ----- -------------- --------------
Movements in cash and net debt are presented in Note 8.
Notes to the consolidated financial statements
1. Basis of preparation
(A) Statutory accounts
The financial information set out above does not constitute the
Group's statutory accounts for the year ended 30 September 2011.
Financial Statements for the year ended 30 September 2011 will be
delivered to the registrar of companies in due course.
PricewaterhouseCoopers LLP has reported on these accounts; their
report was (i) unqualified, (ii) did not include a reference to any
other matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498(2) or (3) of the Companies Act
2006.
(B) Basis of preparation
(i) Accounting policies
The accounting policies applied by the Group in its consolidated
financial statements for the year ended 30 September 2011 are in
accordance with International Financial Reporting Standards and
IFRIC interpretations as adopted by the European Union (Adopted
IFRSs) and the Companies Act 2006 applicable to companies reporting
under IFRS. The accounting policies have been applied consistently
to all periods presented in the consolidated financial
statements.
(ii) Restatement
Jet4You
The results of the Group's business of Societe d'Investissement
Aerien S.A. (Jet4You) were previously separately classified as a
discontinued operation for the comparative year ended 30 September
2010. As a result of the cessation of negotiations for the sale of
this business in the first half of the financial year, this
business ceases to qualify as held-for-sale.
In accordance with IFRS 5, the results of Jet4You are presented
in the consolidated income statement as continuing in both the
current and comparative year. For the purposes of segmental
reporting, the results of Jet4You are included within the Rest of
Western Europe segment. The balance sheets for both comparative
years have not been re-presented or remeasured, as dictated by IFRS
5. Accordingly, the comparative consolidated statement of cashflows
has not been re-presented.
The current year's balance sheet values have been remeasured to
the carrying amounts prior to the disposal group being classified
as held-for-sale, adjusted for an additional GBP1m depreciation
that would have been recognised if the disposal group had not been
classified as held-for-sale.
Magic Life
On 26 May 2011, the Group announced that it had reached
agreement with TUI AG and its subsidiary undertaking, Magic Life
GmbH & Co KG, for the Group to acquire six separate operating
companies (the "ML Companies", referred to as "Magic Life") through
which Magic Life GmbH & Co KG leases and manages 13 holiday
clubs in Turkey, Tunisia, Egypt, Greece and Spain.
The acquisition is classified under the UK Listing Rules as a
"related party transaction" as TUI AG is classified as a "related
party" as a substantial shareholder of TUI Travel PLC.
Consequently, the acquisition meets the conditions of a business
combination between entities under common control, as defined by
IFRS 3 (revised). The Group's accounting policy for business
combinations under common control is to incorporate the results of
Magic Life as if both the Group and Magic Life had always been
combined (known as "predecessor accounting"). Control passed from
TUI AG to the Group on 22 June 2011, following approval at the
Company's General Meeting on that date. The results of Magic Life
have therefore been fully included in the consolidated income
statement for both years, including the pre-control periods. The
results of Magic Life for the pre-control period have been
separately disclosed on the predecessor accounting line on the face
of the consolidated income statement, whereas the results in the
post-control period are included in underlying profit for the year.
The inclusion of Magic Life's results under predecessor accounting
has no impact on the Group's cash or distributable reserves for the
pre-control periods.
The re-presentation of Jet4You and the restatement of Magic Life
has resulted in the restatement of the comparative year's results
as follows:
Consolidated income statement
Year ended
30 September Impact of Restated
2010 Impact of the re- predecessor Year ended
as previously presentation of accounting for 30 September
reported Jet4You Magic Life 2010
GBPm GBPm GBPm GBPm
----------------------------------------------- --------------- ------------------ ---------------- --------------
Revenue 13,400 91 23 13,514
Cost of sales (12,217) (92) (34) (12,343)
----------------------------------------------- --------------- ------------------ ---------------- --------------
Gross profit / (loss) 1,183 (1) (11) 1,171
Administrative expenses (1,099) (17) (8) (1,124)
Share of (losses) / profit of joint ventures
and associates (3) - - (3)
----------------------------------------------- --------------- ------------------ ---------------- --------------
Operating profit / (loss) 81 (18) (19) 44
----------------------------------------------- --------------- ------------------ ---------------- --------------
Analysed as:
Underlying operating profit / (loss) 412 (13) - 399
Separately disclosed items (250) (5) - (255)
Predecessor accounting for Magic Life - - (19) (19)
Acquisition related expenses (63) - - (63)
Impairment of goodwill (12) - - (12)
Taxation on results of joint ventures and
associates (6) - - (6)
----------------------------------------------- --------------- ------------------ ---------------- --------------
81 (18) (19) 44
----------------------------------------------- --------------- ------------------ ---------------- --------------
There was no impact on taxation, financial income or financial
expenses following the re-presentation and the restatement. The
loss for the year ended 30 September 2010 is restated as
follows:
Year ended
30 September
2010
GBPm
------------------------------------------------------------ --------------
Loss for the year from continuing operations as previously
stated (86)
Re-presentation of Jet4You's discontinued operations
as continuing operations (18)
Restatement in respect of predecessor accounting for
Magic Life (19)
------------------------------------------------------------ --------------
Loss for the year as restated (123)
------------------------------------------------------------ --------------
Loss for the year to equity holders of the parent (123)
------------------------------------------------------------ --------------
Earnings per share
Earnings per share
-
continuing operations
-------------------------
Year ended 30 September 2010 Diluted
Basic pence pence
-------------------------------------------------- -------------- ---------
Originally reported (7.8) (7.8)
Re-presentation of Jet4You (1.6) (1.6)
Restatement in respect of predecessor accounting
for Magic Life (1.7) (1.7)
-------------------------------------------------- -------------- ---------
Restated (11.1) (11.1)
-------------------------------------------------- -------------- ---------
Consolidated balance sheet
Impact Impact
of of
predecessor predecessor
30 September accounting 30 September accounting
2009 for Restated 2010 for Restated
as previously Magic 30 September as previously Magic 30 September
reported Life 2009 reported Life 2010
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Property, plant
and equipment 964 11 975 1,012 11 1,023
Other non-current
assets 5,345 - 5,345 5,241 - 5,241
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Total non-current
assets 6,309 11 6,320 6,253 11 6,264
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Inventories 51 56
Current investments 36 5 40 5 54
Trade and other
receivables 1,482 4 1,507 49 5 5
Other current
assets 427 25 427 - 21 1,425
Cash and cash
equivalents 790 - 790 1,404 - 235
- 235 - 1,304
1,304
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Total current
assets 2,786 34 2,820 2,992 31 3,023
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Interest bearing
liabilities (327) - (327) (757) - (757)
Current trade
and other payables (4,220) (62) (4,282) (4,301) (34) (4,335)
Current provisions (189) (5) (194) (236) (5) (241)
Current income
tax payable (67) (1) (68) (84) - (84)
Other current
liabilities (346) - (346) (158) - (158)
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Total current
liabilities (5,149) (68) (5,217) (5,536) (39) (5,575)
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Non-current
liabilities (1,772) - (1,772) (1,736) - (1,736)
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Net assets 2,174 (23) 2,151 1,973 3 1,976
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
Total equity 2,174 (23) 2,151 1,973 3 1,976
---------------------- -------------- ------------- -------------- --------------- ------------- ---------------
(iii) Underlying measures of profits and losses
The Group believes that underlying operating profit, underlying
profit before tax and underlying earnings per share provide
additional guidance to statutory measures to help understand the
underlying performance of the business during the financial year.
The term underlying is not defined under IFRS. It is a measure that
is used by management to assess the underlying performance of the
business internally and is not intended to be a substitute measure
for adopted IFRSs' GAAP measures. The Group defines these
underlying measures as follows:
Underlying operating profit is operating profit or loss from
continuing operations stated before separately disclosed items
(Note 3), the impact of predecessor accounting, acquisition related
expenses, impairment of goodwill, interest and taxation on the
Group's share of the results of joint ventures and associates.
Underlying profit before tax is profit or loss from continuing
operations before taxation (Group and share of joint ventures and
associates), the impact of predecessor accounting, acquisition
related items, impairment of goodwill, the interest expense of
joint ventures and associates and separately disclosed items
included within both the operating result (Note 3) and net
financial expenses (Note 4).
Underlying earnings used in the calculation of underlying
earnings per share is profit after tax from continuing operations
excluding the impact of predecessor accounting, acquisition related
items, impairment of goodwill and separately disclosed items
included within both the operating result (Note 3) and net
financial expenses (Note 4). For the purpose of this calculation,
an underlying tax charge is used which excludes the tax effects of
separately disclosed items, acquisition related expenses, goodwill
impairment charges and separately disclosable tax items.
It should be noted that the definitions of underlying items
being used in these consolidated financial statements are those
used by the Group and may not be comparable with the term
'underlying' as defined by other companies within both the same
sector or elsewhere.
(iv) Funding and Liquidity
The Board remains satisfied with the Group's funding and
liquidity position. The main sources of debt funding are:
1 a new shareholder loan from TUI AG put in place following the
Magic Life transaction (described in Note 1(B)(ii)). This amounts
to EUR30m and is being repaid as follows: 30 April 2012: EUR20m and
31 August 2012: EUR10m;
2 a total of GBP970m syndicated bank revolving credit facilities which mature in June 2015;
3 GBP185m of bonding and letter of credit facilities which mature in June 2015;
4 a GBP350m convertible bond (due October 2014) issued in October 2009; and
5 a GBP400m convertible bond (due April 2017) issued in April 2010.
The ratio of Earnings Before Interest, Taxation, Depreciation,
Amortisation and operating lease Rentals (EBITDAR) to fixed charges
(being the aggregate amount of interest and any other finance
charges in respect of borrowings and including all payments under
operating leases) and the ratio of net debt to Earnings Before
Interest, Taxation, Depreciation and Amortisation (EBITDA), which
the Board believes to be the most useful measures of cash
generation and gearing, as well as being the main basis for the
Group's credit facility covenants, are currently well within the
covenant limits. Forecasts reviewed by the Board, including
forecasts adjusted for significantly worse economic conditions,
show continued compliance with these covenants. For both covenants,
earnings are calculated on an underlying basis as described in Note
1(B)(iii).
On the basis of its forecasts, both base case and adjusted as
described above, and available facilities, the Board has concluded
that the going concern basis of preparation continues to be
appropriate.
2. Segmental information
IFRS 8 requires segment information to be presented on the same
basis as that used for internal management reporting. Segmental
information is reported by the Group's business sectors to the
Group Management Board (GMB). The GMB consists of tour operating
and functional experts drawn from across the Group and who execute
TUI Travel's day-to-day operations and allocate resources to and
assess the performance of the operating segments. Consequently, the
GMB is considered to be the chief operating decision maker for the
purposes of IFRS 8.
Group structure
The Group presents segmental information in respect of its four
Sectors. As disclosed in the 2010 Annual Report & Accounts, on
1 October 2010, the Group reorganised its Sectors from that of last
year. The Mainstream Sector remains largely unchanged in terms of
the Regions that are within it. The remaining three Sectors were
refined and renamed to reflect the strategic priorities of TUI
Travel as it develops and are now Specialist & Activity,
Accommodation & Destinations, and Emerging Markets.
Thefour Sectors are divided into either Regions (Mainstream
Sector) or divisions (Sectors other than Mainsteam), which are
further sub-divided into operating segments. Aggregation criteria
is then used to combine certain of these operating segments into
reported segments.
The Mainstream Sector consists of three Regions: Northern,
Central Europe and Western Europe. The Northern Region comprises
the distribution, tour operating businesses and airlines in the UK
& Ireland, Canada, the Nordic Countries (comprising the markets
of Sweden, Norway, Denmark and Finland) and the Hotels division
comprising hotel management companies and joint ventures in hotel
assets.
Central Europe comprises the distribution, tour operating
businesses and airline in the source markets of Germany, Austria,
Switzerland and Poland.
Western Europe comprises the distribution, tour operating
businesses and airline in France, Belgium, the Netherlands and
Southern Europe (comprising Spain and Italy) and the Moroccan based
airline, Jet4You.
Each source market within each Region represents an operating
segment, for the purposes of segmental information.
The Specialist & Activity Sector operates under six
divisions - Adventure, Education, Marine, North American
Specialist, Sport and Specialist Holidays Group. The Sector has
over 100 specialist and activity international brands delivering a
range of unique customer experiences. The Specialist & Activity
Sector is considered to be one operating segment, in line with
internal management reporting.
The Accommodation & Destinations Sector (A&D) sells and
provides a range of services in destinations to tour operators,
travel agents, corporate clients and direct to the consumer
worldwide. A&D is structured along the following divisions -
Business to Business (B2B), Business to Customer (B2C) and
Specialist, although the A&D Sector in total is considered as
one operating segment, in line with internal management
reporting.
The Emerging Markets Sector is a growing portfolio of travel
businesses, currently focusing on the specific source markets of
Russia and Ukraine and is considered to be one operating
segment.
Reportable and reported segments
Under IFRS 8, the results of the UK & Ireland and Germany
are reported separately within the Northern Region and Central
Europe respectively due to the size and importance of these core
markets and both meet the threshold of being individual reportable
segments. The results of Nordics are shown separately from other
Northern Region segments as it exceeds the quantitative threshold
defined in IFRS 8. Canada and the Hotels division have been
reported separately as these two segments do not meet the majority
of the aggregation criteria of IFRS 8.
The results of Austria, Switzerland and Poland have been
aggregated into the Rest of Central Europe segment as these are
considered to be economically similar over the long term and their
activities are also considered to be similar in nature under the
aggregation criteria of IFRS 8.
The French Airline, Corsair, has been separately disclosed from
the Rest of Western Europe because, as a scheduled airline within
the Group, it has a different business model to the rest of the
Group's integrated tour operators. Following the re-presentation of
Jet4You as a continuing operation, this segment has also been
disclosed separately as it does not meet the aggregation criteria
of IFRS 8. Belgium, the Netherlands, Southern Europe and the French
tour operating businesses form the Rest of Western Europe as these
segments meet the aggregation criteria.
The Specialist & Activity Sector is reported separately as
this qualifies as a reportable segment under IFRS 8. The results of
Accommodation & Destinations and Emerging Market Sectors are
reported voluntarily to be consistent with internal management
reporting.
Segmental information for both the current and prior year has
been presented using this new structure, with the prior year
information being restated for the change in structure, as well as
in respect of the restatement for Magic Life and Jet4You being
re-presented as a continuing operation.
Corporate costs are in respect of central costs including
finance, human resources, legal, facility costs and some
information technology costs that do not relate to each business
segment and hence they are not allocated.
Information regarding the results of each reportable segment is
provided below. Segmental performance is evaluated based on
underlying operating profit and is measured consistently with
underlying operating profit or loss in the consolidated financial
statements and as defined in Note 1(B)(iii).
Intersegmental sales and transfers reflect arm's length prices
as if sold or transferred to third parties. Financial income and
expenses are not allocated to the reportable segments as this
activity is managed by the Group's treasury function which manages
the overall net debt position of the Group.
No one customer exceeds 10% of entity revenues in any segment.
Intangible asset impairment losses arising are recognised in the
consolidated income statement.
Segment assets comprise capital expenditure (as this is the only
measure of assets reported monthly to the GMB) and represent the
amounts purchased in the year.
Year ended 30 September 2011
Underlying
Total Operating
Intersegmental external profit
Total revenue revenue revenue / (loss)
Sector GBPm GBPm GBPm GBPm
------------------------------------ -------------- --------------- ---------- -----------
UK & Ireland 3,648 (60) 3,588 149
Canada - - - 18
Nordics 1,055 (1) 1,054 70
Hotels 184 (155) 29 13
------------------------------------ -------------- --------------- ---------- -----------
Total Northern Region 4,887 (216) 4,671 250
Germany 4,261 (26) 4,235 89
Rest of Central Europe 666 (60) 606 14
------------------------------------ -------------- --------------- ---------- -----------
Total Central Europe 4,927 (86) 4,841 103
French Airline 426 (70) 356 (10)
Jet4You 88 (7) 81 (10)
Rest of Western Europe 2,717 (3) 2,714 37
------------------------------------ -------------- --------------- ---------- -----------
Total Western Europe 3,231 (80) 3,151 17
Total Mainstream 13,045 (382) 12,663 370
------------------------------------ -------------- --------------- ---------- -----------
Specialist & Activity 1,373 (1) 1,372 65
Accommodation & Destinations 879 (227) 652 72
Emerging Markets - - - (12)
All other segments and unallocated
items - - - (24)
Total Group 15,297 (610) 14,687 471
------------------------------------ -------------- --------------- ---------- -----------
Year ended 30 September 2010
Underlying
Intersegmental Total external Operating
Total profit
revenue Revenue revenue / (loss)
Sector (restated) (restated) (restated) (restated)
GBPm GBPm GBPm GBPm
------------------------------------ ------------ --------------- --------------- ------------
UK & Ireland 3,399 (61) 3,338 108
Canada 52 - 52 (5)
Nordics 861 (2) 859 54
Hotels 171 (108) 63 5
------------------------------------ ------------ --------------- --------------- ------------
Total Northern Region 4,483 (171) 4,312 162
Germany 3,812 (29) 3,783 74
Rest of Central Europe 623 (52) 571 11
------------------------------------ ------------ --------------- --------------- ------------
Total Central Europe 4,435 (81) 4,354 85
French Airline 395 (56) 339 (25)
Jet4You 91 -- 91 (13)
Rest of Western Europe 2,503 (13) 2,490 76
------------------------------------ ------------ --------------- --------------- ------------
Total Western Europe 2,989 (69) 2,920 38
Total Mainstream 11,907 (321) 11,586 285
------------------------------------ ------------ --------------- --------------- ------------
Specialist & Activity 1,347 - 1,347 77
Accommodation & Destinations 790 (209) 581 73
Emerging Markets - - -- (7)
All other segments and unallocated
items - - -- (29)
Total Group 14,044 (530) 13,514 399
------------------------------------ ------------ --------------- --------------- ------------
Reconciliation of Group underlying operating profit to profit /
(loss) before tax
Restated
Year ended Year ended
30 September 30 September
2011 2010
Note GBPm GBPm
------------------------------------------- ------------ -------------- -------------------------
Group underlying operating profit 471 399
Separately disclosed items 3 (74) (255)
Predecessor accounting for Magic Life 1(B)(ii) (17) (19)
Acquisition related expenses (82) (63)
Impairment of goodwill (39) (12)
Taxation on profits and interest of joint
ventures and associates (4) (6)
------------------------------------------- ------------ -------------- -------------------------
Operating profit 1,2 255 44
Net financial expenses 4 (111) (117)
------------------------------------------- ------------ -------------- -------------------------
Profit / (loss) before tax 144 (73)
------------------------------------------- ------------ -------------- -------------------------
3. Separately disclosed items
Restated
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
----------------------------------------------------- -------------- --------------
Merger related integration costs - 116
Restructuring and other separately disclosed items 74 63
Aircraft and other assets - 7
Items relating to the prior year 7 -
----------------------------------------------------- -------------- --------------
Total pre-volcanic ash 81 186
Incremental costs caused by volcanic ash disruption (7) 69
Total 74 255
----------------------------------------------------- -------------- --------------
Separately disclosed financial expenses - 7
----------------------------------------------------- -------------- --------------
Separately disclosed items within operating profit are included
within the consolidated income statement as follows:
Restated
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
------------------------- -------------- --------------
Cost of sales (6) 133
Administrative expenses 80 122
Total 74 255
------------------------- -------------- --------------
Merger related integration costs
The merger related integration programme has now been completed
and no further costs are expected to arise in this category.
In 2010, these related primarily to the costs of integration of
the UK businesses. The majority of costs (GBP48m) arose from the
integration of First Choice and Thomson in the UK and, in
particular, from the formation of one airline and an integrated
retail estate. A combined Mainstream UK head office was established
in Luton in 2010 and the UK business completed the creation of a
single management information (MI) suite. The improved MI and
forecast capability which it gave the business led to the closing
out of certain foreign currency positions based on the improved
visibility of past and future requirements, resulting in a GBP20m
charge in that year.
In 2010, costs also arose from the ongoing merger of former TUI
businesses based in Continental Europe with their First Choice
counterparts (GBP4m). In the Accommodation & Destinations
Sector separate First Choice and TUI Tourism incoming agencies were
combined in a number of key destinations, notably Spain, the
Dominican Republic, Greece and Turkey (total GBP16m).
2010 costs also included amounts paid or provided for redundancy
and integration remuneration costs, property closures and onerous
lease obligations, as well as professional fees relating to the
integration project.
Restructuring and other separately disclosed items
As previously reported, during the six month period ended 31
March 2011, the Company engaged in a consultation process with the
members of its defined benefit pension schemes which resulted in a
restriction to salary increases used under the rules of the pension
schemes to calculate benefits to a maximum of 2.5% in any one year.
This change resulted in a reduction in accrued pension liabilities
measured under IAS 19 of GBP63m, which under IAS 19 is recognised
fully in the income statement in the period in which it occurs.
Therefore a GBP63m credit is included in the consolidated income
statement in relation to this curtailment, which is included as a
separately disclosed item.
Also included in the year ended 30 September 2011 are Mainstream
restructuring costs of GBP97m which principally relate to a
substantial programme to reduce costs and improve efficiencies in
the German business (GBP32m); the ongoing restructure of Corsair,
the scheduled French airline, and the retail network of Nouvelles
Frontieres in France (GBP35m in total), and further restructuring
initiatives in the UK (GBP19m) including rationalising the retail
distribution network. In addition there has been GBP15m of
restructuring costs incurred in the Specialist & Activity
Sector, GBP8m in the Accommodation & Destinations Sector and
GBP16m of restructuring costs incurred in Group head office
companies.
Costs incurred in the year ended 30 September 2010 included
restructuring programmes which were not related to the business
combination of First Choice and the Tourism businesses of TUI AG.
The principal items were GBP43m to restructure Corsair, the
scheduled French airline; GBP22m for the restructuring of hotel
operations in Turkey and GBP13m to restructure the tour operator,
retail network and hotel operations of Nouvelles Frontieres in
France. Also included was a GBP30m credit arising from the
revaluation of the investment in The Airline Group Limited, and a
GBP13m gain recognised on the disposal of the Canadian Mainstream
operation which was contributed when creating the strategic
venture. This gain was more than offset by our share of post-deal
restructuring costs and related Skyservice write-offs.
Aircraft and other assets
During the year ended 30 September 2011, the principal charge is
GBP12m in relation to a further impairment of the cruise ship, the
'Island Escape', after its dry-dock costs were more expensive than
previously anticipated and the assessment of the recoverable value
of the ship through value-in-use has been reduced as a consequence
of lower margins than anticipated being achieved in the current
summer season. This charge is completely offset by profits on the
sale and leaseback or disposal of aircraft and the disposal of
aircraft engines previously held for sale.
Included in the year ended 30 September 2010 was a GBP47m credit
relating to a combination of aircraft order cancellation credits
and compensation for delays to the delivery of aircraft, offset by
a GBP12m impairment of the cruise ship 'Island Escape', a GBP12m
charge to provide for costs relating to the Corsair fleet renewal
and a GBP7m onerous lease provision on an unused property.
Items relating to the prior year
During the current financial year two errors have been
identified which relate to the balance sheet as at 30 September
2010. The omission of an elimination of surplus sundry payables
from the Group balance sheet resulted in an overstatement of
current liabilities of GBP38m. This was offset by an understatement
of current liabilities within Nouvelles Frontieres, the French tour
operator, of GBP45m. As both errors offset within cost of sales and
trade and other payables and do not materially change the profit,
net assets or overall financial position of the Group, the prior
year has not been restated. The correction of the errors has been
made through the consolidated income statement in the year ended 30
September 2011. We have addressed the underlying causes of these
errors within the businesses concerned, and are introducing a
Group-wide compliance framework as part of our ongoing work to
improve key financial controls and procedures.
Impact of volcanic ash
Included in separately disclosed items for the prior year were
the incremental direct costs incurred by the Group in respect of
welfare costs to look after the customers who were affected by the
closure of European airspace in April 2010. These costs principally
included hotel costs for stranded inbound and outbound customers
and the cost of repatriation of inbound customers which amounted to
GBP69m. In the current year, there has been a release of GBP7m of
accruals as costs in relation to the disruption in 2010 have been
finalised with third party suppliers.
Separately disclosed financial expenses
The separately disclosed financial expenses in the year ended 30
September 2011 relate to GBP7m interest charges on the late
settlement of tax liabilities in Spain, offset by the first time
recognition of GBP7m interest receivable on loan notes owed to the
Group by The Airline Group Limited. The separately disclosed
financial expenses in the year ended 30 September 2010 related to
non-debt items, principally a GBP3m interest charge on a tax
penalty imposed by the Turkish authorities relating to financial
years up to and including 2008.
4. Net financial expenses
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
---------------------------------------------------- -------------- --------------
Financial income
Bank interest receivable 10 3
Interest on pension scheme assets 73 66
Total 83 69
---------------------------------------------------- -------------- --------------
Financial expenses
Bank interest payable on loans and overdrafts (11) (10)
Finance charges on convertible bond (62) (44)
Interest on pension scheme liabilities (84) (84)
Interest payable in respect of loans from parent (4) (15)
Finance lease charges (10) (11)
Unwinding of discount on provisions (11) (11)
Other financial expenses (12) (11)
-------------- --------------
Total (194) (186)
----------------------------------------------------
Net financial expenses (111) (117)
---------------------------------------------------- -------------- --------------
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
---------------------------------------------------- -------------- --------------
Net financial expense (as above) (111) (117)
Less separately disclosed financial expenses (Note
3) - 7
Net underlying financial expenses (111) (110)
---------------------------------------------------- -------------- --------------
5. Income, expenses and auditors' remuneration
Restated
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
---------------------------------------------------------- -------------- --------------
Included within operating profit in the consolidated
income statement for the year are the following
(credits) / charges:
Operating lease income: aircraft (54) (54)
Operating lease income: land and buildings (4) (4)
Operating lease rentals: land and buildings 198 180
Operating lease rentals: aircraft and other equipment 460 423
Depreciation of property, plant and equipment 137 171
Amortisation of intangible assets - business combination
intangibles 66 54
Amortisation of intangible assets - other intangibles 35 40
Charge for share-based payments 20 15
Loss on sale of property, plant and equipment 6 1
Loss on foreign currency retranslation 38 18
Impairment of goodwill and other intangibles 51 12
Impairment of property, plant and equipment 18 15
---------------------------------------------------------- -------------- --------------
Operating lease rentals: land and buildings, includes GBP12m
(2010: GBP15m) of costs included in separately disclosed items
(Note 3) as provisions for onerous leases, primarily related to
vacated properties in the UK and Ireland. In addition to the
operating lease rentals disclosed above, charges of GBP184m(2010:
GBP149m) were incurred in respect of hotel accommodation rentals
which are disclosed as operating leases under IFRIC 4: Determining
whether an arrangement contains a lease.
Up to 20 aircraft are 'wet leased' exclusively to another
European airline company at fixed rates. The expected income from
future minimum lease payments under non-cancellable operating
leases being leased to others is as follows:
Year ended Year ended
30 September 30 September
Minimum lease payments under non-cancellable operating 2011 2010
leases expiring: GBPm GBPm
-------------------------------------------------------- -------------- --------------
Within one year 36 40
Between one and five years 142 142
Later than five years 108 144
-------------------------------------------------------- -------------- --------------
Total 286 326
-------------------------------------------------------- -------------- --------------
Services provided by the Company's auditors and its
associates
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor and its
associates:
Restated
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
---------------------------------------------------- -------------- --------------
Fees payable to the Company's auditors for the
audit of the Parent Company and consolidated
financial statements 1 1
Fees payable to the Company's auditors and its
associates for other services:
Audit of the Company's subsidiaries pursuant to
legislation 3 4
---------------------------------------------------- -------------- --------------
Auditors' remuneration for audit services 4 5
Other services provided to comply with legislation
(including regulatory reporting) 1 1
All other services 2 3
---------------------------------------------------- -------------- --------------
The 2011 audit fees refer to fees paid to PricewaterhouseCoopers
LLP, who are now the auditors for the Group.
The 2010 Auditors' fees have been restated so as to include fees
paid to both the Group's then auditors, KPMG Audit Plc, and its
associates and also fees paid to PricewaterhouseCoopers LLP who
were then auditors of certain subsidiaries of the Group. This has
been done to make the two sets of figures directly comparable.
6. Taxation
The tax charge can be summarised as follows:
(i) Analysis of charge / (credit) in the year
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
-------------------------------------------------- -------------- --------------
Current tax charge
UK corporation tax on profit / loss for the year 24 -
Non-UK tax on profit / loss for the year 50 61
Adjustments in respect of previous years (3) (15)
-------------------------------------------------- -------------- --------------
71 46
-------------------------------------------------- -------------- --------------
Deferred tax (credit) / charge
Origination and reversal of timing differences:
Current year UK (40) (6)
Current year non-UK 41 (2)
Changes in tax rates 14 (1)
Adjustments in respect of previous years (29) 13
-------------------------------------------------- -------------- --------------
(14) 4
-------------------------------------------------- -------------- --------------
Total income tax charge in consolidated income
statement 57 50
-------------------------------------------------- -------------- --------------
(ii) Reconciliation of effective tax rate
The total tax charge (2010: charge) for the year is higher
(2010: higher) than the standard rate of corporation tax in the UK
of 27% (2010: 28%). The differences are explained below:
Year ended Year ended
30 September 2011 30 September 2010
--------------------- ---------------------
GBPm % GBPm %
--------------------------------------------- ---------- --------- --------- ----------
Profit / (loss) before tax reported
in the consolidated income statement 144 (36)
Less share of (profit) / loss in joint
ventures and associates (13) 3
--------------------------------------------- ---------- --------- --------- ----------
131 (33)
--------------------------------------------- ---------- --------- --------- ----------
Income tax on profit / (loss) before
tax excluding share of profit of joint
ventures and associates at the standard
rate of UK tax of 27% (2010: 28%) 35 27 (9) 28
Expenses not deductible for tax purposes 29 22 3 (9)
Income not taxable (14) (11) (2) 6
Tax losses not recognised as an asset 64 49 67 (203)
Utilisation of tax losses not previously
recognised (30) (23) - -
Higher tax rates on overseas earnings
/ losses (3) (2) (3) 9
Lower tax rates on overseas earnings
/ losses - - (3) 9
Changes in tax rates 8 6 (1) 3
Adjustments to taxation in respect
of previous periods (32) (24) (2) 6
--------------------------------------------- ---------- --------- --------- ----------
Total income tax charge in income statement 57 44 50 (151)
--------------------------------------------- ---------- --------- --------- ----------
The underlying effective rate of taxation for the year ended 30
September 2011 is calculated based on the underlying profit before
tax (excluding separately disclosed items, acquisition related
expenses and goodwill impairment charges) and is calculated at 27%.
The actual tax rate of 44% differs from the underlying effective
tax rate due to the tax effect of separately disclosed items
(principally the non-recognition of tax losses arising from such
items), acquisition related expenses, goodwill impairment charges
and the booking of GBP17m of specific provisions against potential
tax exposures in Morocco and the UK.
(iii) Deferred tax recognised outside of the consolidated income
statement
The following taxation charge has been recognised outside of the
consolidated income statement:
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
---------------------------------------------------- -------------- --------------
Tax relating to components of other comprehensive
income
Cash flow hedges 22 9
Defined benefit pension plans 3 (9)
Other 4 9
---------------------------------------------------- -------------- --------------
Total tax debited to other comprehensive income 29 9
Tax (credited) / debited directly to equity
Equity settled transactions (share-based payments) - (4)
Convertible bonds (2) 31
Total tax (credited) / debited to equity (2) 27
---------------------------------------------------- -------------- --------------
Total 27 36
---------------------------------------------------- -------------- --------------
(iv) Factors affecting future tax charge
A) On 22 June 2010, the UK Government announced a phased
reduction in the main UK corporation tax rate from 28% to 24%, with
the first 1% reduction taking effect from 1 April 2011 (having been
substantively enacted on 20 July 2010). The March 2011 UK Budget
Statement announced an additional 1% reduction in the main UK
corporation tax rate to 26% taking effect from 1 April 2011.
At the balance sheet date, the second 1% reduction has been
substantively enacted confirming that the main UK corporation tax
rate will be 25% from 1 April 2012. Therefore, at 30 September
2011, deferred tax assets and liabilities have been calculated
based on a rate of 25% where the temporary difference is expected
to reverse after 1 April 2012.
The remaining proposed reductions of the main rate of
corporation tax by 1% per year to 23% by 1 April 2014 are expected
to be enacted separately each year. These further changes had not
been substantively enacted at the balance sheet date and are
therefore not included in these financial statements.
This may reduce the Group's future current tax charge
accordingly. It has not yet been possible to quantify the full
anticipated effect of the announced further 2% rate reduction,
although this should further reduce the Group's future current tax
charge and reduce the Group's deferred tax liabilities / assets
accordingly.
B) The Spanish tax authorities are auditing parts of the Group's
Spanish operations for the years 2002 through 2006. During 2010,
the Spanish tax authorities formally notified the Group that they
disagreed with the Spanish corporate income tax treatment of two
separate transactions that were undertaken during the period under
audit. The Group has had extensive discussions with the Spanish tax
authorities to explain the nature of the transactions and seek to
agree the Spanish tax treatment of these.
The original tax deduction arising from the transactions being
challenged by the Spanish tax authorities was approximately EUR28
million. In prior years, the Directors recorded a tax creditor for
their best estimate of the tax that they believe may become payable
in the event that the Spanish tax authorities are successful in
their challenge. This creditor continues to be held at 30 September
2011, within income taxes payable. In continuing to challenge these
transactions, the tax authorities may seek to pursue a judicial
process with the possibility of interest and penalties, the outcome
of which at this stage is not certain. On the basis of independent
legal advice taken, the Group firmly believes that in the event of
any such case, it could be defended robustly. It is likely that the
resolution of this matter will take a number of years to reach a
final conclusion.
C) Other factors which may affect the future tax charge include
the mix of jurisdictions with different tax rates in which profits
and losses arise, changes in tax rates and the potential future
recognition of tax losses for which a deferred tax asset has not
been recognised at the year end.
7. Dividends
The following dividends which relate to ordinary shares have
been deducted from equity in the year:
Year ended Year ended
30 September 30 September
Pence per 2011 2010
share GBPm GBPm
----------------------------------------- ---------- -------------- --------------
Dividends relating to the year ended 30
September 2009
Interim dividend (paid October 2009) 3.0 - 33
Final dividend (paid April 2010) 7.7 - 85
----------------------------------------- ---------- -------------- --------------
10.7 - 118
----------------------------------------- ---------- -------------- --------------
Dividends relating to the year ended 30
September 2010
Interim dividend (paid October 2010) 3.2 36 -
Final dividend (paid April 2011) 7.8 86 -
----------------------------------------- ---------- -------------- --------------
11.0 122 -
----------------------------------------- ---------- -------------- --------------
The interim dividend in respect of the year ended 30 September
2011 of 3.3p per share was paid on 3 October 2011 and this dividend
of GBP36m will be recognised as a deduction from equity in the year
ending 30 September 2012.
Subsequent to the balance sheet date, the Directors have
proposed a final dividend of 8.0p per share (2010: final dividend
of 7.8p per share) payable on 10 April 2012 to the holders of
relevant shares on the register at 9 March 2012. The final proposed
dividend amounts to GBP125m and will, after approval by
shareholders, be recognised in the consolidated financial
statements for the year ending 30 September 2012. The final
ordinary dividend of 8.0p per share, together with the interim
dividend of 3.3p per share, makes a total dividend of 11.3p per
share relating to the year ended 30 September 2011.
A dividend reinvestment plan is in operation. Those shareholders
who have not elected to participate in this plan, and who would
like to participate with respect to the 2011 final dividend, may do
so by contacting Equiniti directly on 0871 384 2030 or via the
overseas helpline on +44 121 415 7047. The last day for election
for the final proposed dividend is 23 March 2012 and any requests
should be made in good time ahead of that date.
8. Movements in cash and net debt
Amounts
Cash due to Other
and cash Convertible related Bank Loan Finance financial
equivalents bonds parties loans notes leases liabilities Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------------- ------------ --------- ------- ------- -------- ------------- ------
At 1 October
2009 790 - (840) (51) (6) (192) (39) (338)
Cash movement 561 (750) 222 13 4 31 - 81
Non-cash movement - 117 - - - (121) - (4)
Foreign exchange (47) - 43 2 - 13 1 12
------------------- ------------- ------------ --------- ------- ------- -------- ------------- ------
At 30 September
2010 1,304 (633) (575) (36) (2) (269) (38) (249)
Cash movement (406) - 530 5 1 145 (6) 269
Non-cash movement - (21) - - - (7) (1) (29)
Foreign exchange 4 - 9 1 - (1) - 13
At 30 September
2011 902 (654) (36) (30) (1) (132) (45) 4
------------------- ------------- ------------ --------- ------- ------- -------- ------------- ------
The 2011 non-cash movements of GBP21m in convertible bonds
relates to the accretion of the equity portion of the convertible
bonds. The 2010 non-cash movements relate to the inception of new
finance leases arising on capital expenditure and the equity
portion on issuance of the convertible bonds.
The Group also acquired 40% of Intrepid Travel Pty Limited for
total consideration of GBP39m, which was a non-cash
transaction.
9. Earnings / (loss) per share
The basic earnings / (loss) per share is calculated by dividing
the result attributable to ordinary shareholders by the applicable
weighted average number of shares in issue during the year,
excluding those held in the employee benefit trusts. The diluted
earnings / (loss) per share is calculated on the result
attributable to ordinary shareholders divided by the adjusted
potential weighted average number of ordinary shares, which takes
account of the outstanding share awards and the impact of the
conversion of the convertible bonds, where their conversion is
dilutive. The additional underlying earnings per share measures
have been presented to provide the reader of the accounts with a
better understanding of the results.
Basic and diluted earnings / (loss) per share is as follows:
Weighted Weighted
average average Restated
no. Earnings Restated no. loss
of shares per share loss of shares per share
Earnings 2011 2011 2010 2010 2010
2011 Millions Pence GBPm Millions Pence
---------------------------- --------- ----------- ----------- --------- ----------- -----------
Basic earnings / (loss)
per share 85 1,107 7.7 (123) 1,107 (11.1)
----------- -----------
Effect of dilutive options - 11 - -
----------- -----------
Diluted earnings / (loss)
per share 85 1,118 7.6 (123) 1,107 (11.1)
---------------------------- --------- ----------- ----------- --------- ----------- -----------
The 2010 loss per share (basic and diluted) figures have been
restated as described in Note 1(B)(ii). The impact of the
restatement on basic and diluted loss per share is to increase the
loss by 1.6p in respect of the re-presentation of Jet4You and by
1.7p for the inclusion of Magic Life under predecessor accounting.
The total of 3.3p increases the restated loss (basic and diluted)
per share from 7.8p to 11.1p.
For the 2010 statutory measure of diluted loss per share, the
effects of the options and the convertible bonds are anti-dilutive.
The anti-dilutive effect is not included in the calculation and the
restated basic loss per share and restated diluted loss per share
are therefore both disclosed as 11.1p. Had these been taken into
account in 2010, the fully diluted weighted average number of
shares on a statutory basis would have been 1,262 million.
For the 2011 statutory measure of diluted earnings per share,
the effects of including the convertible bonds (only) are
anti-dilutive and therefore this is not included within the
calculation. Had this been taken into account in 2011, the fully
diluted weighted average number of shares on a statutory basis
would have been 1,323 million.
Alternative measures of earnings / (loss) per share
Weighted Weighted Restated
average Restated average loss /
Earnings no. Earnings (loss) no. (earnings)
/ of shares per share / of shares per share
(loss) 2011 2011 Earnings 2010 2010
GBPm Millions Pence 2010 Millions Pence
----------------------------- --------- ----------- ----------- ---------- ----------- ------------
Basic and diluted earnings
/ (loss) per share 85 1,107 7.7 (123) 1,107 (11.1)
----------------------------- --------- ----------- ----------- ---------- ----------- ------------
Acquisition related
expenses and impairment
of goodwill 121 - 75 -
Predecessor accounting
for Magic Life 17 - 19 -
Separately disclosed
items 74 - 262 -
Tax base difference (36) - (23) -
----------------------------- --------- ----------- ----------- ---------- ----------- ------------
Basic underlying earnings
per share 261 1,107 23.6 210 1,107 19.0
Effect of dilutive options - 11 - 11
Effect of convertible
bond (net of tax) 45 205 32 144
Diluted underlying earnings
per share 306 1,323 23.1 242 1,262 19.2
----------------------------- --------- ----------- ----------- ---------- ----------- ------------
The tax base difference primarily represents the difference
between the actual charge in the consolidated income statement and
the Group's underlying tax charge, as disclosed in Note 6. The
dilutive effect of the convertible bonds is included solely to
calculate diluted underlying earnings per share.
The 2010 underlying loss per share (basic and diluted) figures
have been restated as described in Note 1(B)(ii) and to include the
impact of volcanic ash in the calculation.
Reconciliation of profit / (loss) for the year from continuing
operations attributable to ordinary shareholders from continuing
operations
Restated
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
--------------------------------------------------------- -------------- --------------
Profit / (loss) attributable to ordinary shareholders
from continuing operations 85 (123)
Result attributable to non-controlling interests 2 -
from continuing operations
Profit / (loss) for the year from continuing operations 87 (123)
--------------------------------------------------------- -------------- --------------
2010 numbers have been restated as described in Note
1(B)(ii).
Non-GAAP measure
Reconciliation of underlying operating profit to underlying
earnings
Restated
Year ended Year ended
30 September 30 September
2011 2010
Note GBPm GBPm
------------------------------------------- ----- -------------- --------------
Underlying operating profit 471 399
Net underlying financial expenses 4 (111) (110)
Underlying profit before tax 360 289
Underlying tax charge at 27% (2010: 27%) (97) (79)
Underlying profit for the year 263 210
Attributable to ordinary shareholders 261 210
Attributable to non-controlling interests 2 -
Underlying profit for the year 263 210
------------------------------------------- ----- -------------- --------------
The 2010 reconciliation has been restated as described in Note
1(B)(ii). The underlying numbers shown are as described in Note
1(B)(iii) and exclude GBP35m, being the impact of the volcanic ash
in 2010, and include the re-presentation from discontinued
operations of the results of Jet4You as described in Note
1(B)(ii).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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