TIDMTT.
RNS Number : 7989Q
TUI Travel PLC
10 August 2010
10 August 2010
TUI Travel PLC
Interim management statement and results for
the third quarter and nine months ended 30 June 2010 (unaudited)
Key financials
Third quarter ended 30 June 2010
+-----------------------------------+----------+---------+----------+
| | |
+-----------------------------------+-------------------------------+
| GBPm | Pro | Q3 09 | Change % |
| | forma | | |
| | Q3 102 | | |
+-----------------------------------+----------+---------+----------+
| Revenue | 3,416 | 3,575 | -4% |
+-----------------------------------+----------+---------+----------+
| Underlying operating profit1 | 103 | 102 | +1% |
+-----------------------------------+----------+---------+----------+
| Underlying operating margin % | 3.0% | 2.9% | +0.1pp |
+-----------------------------------+----------+---------+----------+
1 Underlying operating profit excludes separately disclosed items,
amortisation of IFRS 3 intangibles and taxation of results of the Group's joint
ventures and associates
2 Pro forma revenue and underlying operating profit are financial measures
for the period reported before the estimated financial impact of the closures of
Northern European airspace as a result of volcanic ash
Highlights
+-------+----------+--------------------------------------------------------------+
| · | Underlying operating profit excluding the volcanic ash impact |
| | is in line with the prior year at GBP103m; however, |
| | incremental synergy benefits have been offset by a weaker |
| | trading result. |
| | |
+-------+-------------------------------------------------------------------------+
| · | The total impact of the volcanic ash disruption, including the |
| | impact of further airspace closures in May, is estimated to be |
| | GBP105m and almost 400,000 of our customers were affected. |
| | |
+-------+-------------------------------------------------------------------------+
| · | Summer 2010 trading: |
| | |
+-------+-------------------------------------------------------------------------+
| | - | Booking volumes have been strong across our source markets |
| | | over the last twelve weeks with the exception of the UK and |
| | | the Netherlands: Nordics up 14%, Germany up 12%, France up |
| | | 5%, Belgium up 15%, UK down 2%, Netherlands down 3%; |
| | | |
+-------+----------+--------------------------------------------------------------+
| | - | Whilst our bookings to date are up 2% in the UK, the market |
| | | has been particularly affected by the disruption caused by |
| | | airspace closures, good weather and the uncertainty around |
| | | the emergency budget, resulting in a later booking pattern |
| | | which has adversely affected profitability; |
| | | |
+-------+----------+--------------------------------------------------------------+
| | - | The German market has seen strong booking volumes during the |
| | | period but in lower margin product; |
| | | |
+-------+----------+--------------------------------------------------------------+
| | - | Following the difficult trading conditions in these markets |
| | | and an anticipated adverse foreign exchange translation |
| | | impact in the final quarter we now expect our full year |
| | | results to be at the lower end of expectations. |
| | | |
+-------+----------+--------------------------------------------------------------+
| · | Early Winter 2010/11 and Summer 2011 trading has started |
| | positively. |
| | |
+-------+----------+--------------------------------------------------------------+
Peter Long, Chief Executive of TUI Travel PLC, commented
"The strong booking trends experienced up until the volcanic ash disruption in
mid-April and the subsequent rebound in early May were not sustained throughout
the early summer period. This was particularly marked in the UK source market
where trading was affected by further airspace closures, good weather and post
election uncertainty regarding the emergency budget. All of these factors have
had an impact on consumers' booking patterns. Consequently, the booking curve
has shortened and the mix of lates market sales for Summer 2010 has increased.
The higher than expected proportion of sales in the lower margin lates period
will inevitably affect UK profitability. Additionally in Germany, although
volumes have been good, there is continued price pressure in commodity segments.
When we take the later booking curve and the adverse impact of foreign exchange
translation into account, we believe that the results for the year will be at
the lower end of the range of expectations. Furthermore, it remains difficult to
predict how the later booking pattern will change over the next 12-18 months in
the light of the current economic environment. We are, therefore, taking a more
prudent view of the outlook, including the timeline for the delivery of our
margin roadmap. Nevertheless, I have a strong belief that our continued focus on
differentiated product, turning around underperforming businesses and growth
initiatives will enable us to achieve our medium term margin targets".
Investor and Analyst Conference Call
A conference call for investors and analysts will take place today at 8.15am
(BST). The dial-in arrangements for the call are as follows:
+-----------------+------------------------------------------------+
| Telephone: | +44 (0) 1452 555 566 |
+-----------------+------------------------------------------------+
| Participant | 92946889 |
| Code: | |
+-----------------+------------------------------------------------+
A presentation to accompany the conference call will be made available at 8.00
am (BST) via our corporate website:
http://www.tuitravelplc.com
A recording of the conference call will be available for one month on:
+-----------------+------------------------------------------------+
| Telephone: | +44 (0) 1452 550 000 |
+-----------------+------------------------------------------------+
| Participant | 92946889# |
| Code: | |
+-----------------+------------------------------------------------+
Enquiries:
+------------------------------------------+------------------------+
| TUI Travel PLC | |
+------------------------------------------+------------------------+
| Paul Bowtell, Chief Financial Officer | Tel: 01293 645 713 |
+------------------------------------------+------------------------+
| Andy Jones, Director of Finance & | Tel: 01293 645 795 |
| Investor Relations | |
+------------------------------------------+------------------------+
| Paul Rushton, Head of Investor Relations | Tel: 01293 645 795 |
+------------------------------------------+------------------------+
| Lesley Allan, Corporate Communications | Tel: 01293 645 774 |
| Director | |
+------------------------------------------+------------------------+
| Michelle Jeffery, Corporate | Tel: 01293 645 776 |
| Communications Manager | |
+------------------------------------------+------------------------+
| | |
+------------------------------------------+------------------------+
| Hudson Sandler | |
+------------------------------------------+------------------------+
| Michael Sandler /Jessica Rouleau /Kate | Tel: 020 7796 4133 |
| Hough | |
+------------------------------------------+------------------------+
CURRENT TRADING AND OUTLOOK
Summer 2010
+-------------+------------+-----------+------------+
| YoY |Cumulative | Bookings | Cumulative |
| customer | bookings | since | bookings |
| booking | at 2 May | previous | at 1 |
| variation | | trading | August |
| % | |statement | |
+-------------+------------+-----------+------------+
| | | | |
+-------------+------------+-----------+------------+
| UK | +4 | -2 | +2 |
+-------------+------------+-----------+------------+
| Nordic | +19 | +14 | +17 |
| Region | | | |
+-------------+------------+-----------+------------+
| Germany | -2 | +12 | +3 |
+-------------+------------+-----------+------------+
| France | +13 | +5 | +10 |
+-------------+------------+-----------+------------+
| Belgium | -3 | +15 | +2 |
+-------------+------------+-----------+------------+
| Netherlands | -4 | -3 | -4 |
+-------------+------------+-----------+------------+
+-------------+--------+--------+------------+--------+--------+--------+
| Current | Summer 2010 | | | |
| Trading | | | | |
| 1 | | | | |
+-------------+------------------------------+--------+--------+--------+
| | | | |
+-------------+------------------------------+--------+-----------------+
| YoY | Total | Total | Total | | Risk Only |
| variation% | ASP2 |Sales2 |Customers2 | | |
+ + + + + +-----------------+
| | | | | | Capacity3 |
+-------------+--------+--------+------------+--------+-----------------+
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| MAINSTREAM | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Northern | | | | | |
| Region | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Short-haul | +11 | -2 | -12 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Medium-haul | +6 | +15 | +9 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Long-haul | +8 | +29 | +19 | | |
+-------------+--------+--------+------------+--------+-----------------+
| UK | +10 | +12 | +2 | | +3 |
+-------------+--------+--------+------------+--------+-----------------+
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Nordic | +1 | +18 | +17 | | +15 |
| Region | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Northern | +9 | +13 | +4 | | |
| Region | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Germany | -2 | +1 | +3 | | -5 |
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Austria | -1 | -3 | -2 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Switzerland | -2 | +1 | +3 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Poland | -5 | +20 | +27 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Central | -2 | +1 | +3 | | |
| Europe | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| France | Flat | +10 | +10 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Belgium | -3 | -1 | +2 | | |
+-------------+--------+--------+------------+--------+-----------------+
| Netherlands | +3 | -1 | -4 | | |
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| Western | Flat | +3 | +3 | | +3 |
| Europe | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| | | | | | |
+-------------+--------+--------+------------+--------+-----------------+
| SPECIALIST | +4 | Flat | -4 | | |
+-------------+--------+--------+------------+--------+-----------------+
| ACTIVITY | NA | +4 | NA | | |
+-------------+--------+--------+------------+--------+-----------------+
| A&D4 | +4 | +34 | +28 | | |
+-------------+--------+--------+------------+--------+-----------------+
| | | | | | |
+-------------+--------+--------+------------+--------+--------+--------+
1 These statistics are up to 1 August 2010 and are shown on a constant currency
basis
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 businesses only; Sales refers to total
transaction value (TTV) and customers refers to roomnights
In the UK, the market has slowed markedly following the recurrence of airspace
closures, the emergency budget and subsequent austerity measures, and the better
than average UK weather, combined with quiet trading during the World Cup. Since
our last update, industry booking volumes were c.10% down on the prior year.
Within this difficult market context we traded relatively well, but nevertheless
have experienced slower booking trends (2% lower in the period) compared to the
strong trading seen before April. This has resulted in more stock left to sell
in the lates period, leading to lower booked margins than previously expected.
Whilst demand has improved in recent weeks, margins are lower than previously
forecast and load factor is now 83%, one percentage point lower than the prior
year.
Trading in the Nordic region has been consistently strong and we are almost
fully sold. We expect the business to deliver record summer profits despite the
best weather experienced in over 100 years across much of the region. This
reflects the success of our differentiated product strategy.
In Germany, we have seen good booking volumes in recent months (up 12% since our
last update) but this has been offset by a shift in demand to lower value
products which attract lower margins. We also experienced growth in less
profitable overland tours following the airspace closures as customers were
concerned about a recurrence of the disruption. Load factor is now 84%, one
percentage point higher than prior year.
In France, Nouvelles Frontieres is trading ahead of the prior year which was
affected by civil unrest in a number of key destinations. Demand for its new
concept clubs continues to be strong. Marmara is likewise seeing strong volume
growth and its three new clubs in Taba (Egypt), Marbella and Sardinia have also
proved successful in their first summer of operation.
We have appointed Pascal de Izaguirre, formerly Executive Vice President, Ground
Operations at Air France, as the new Managing Director of Corsair and the new
management team is finalising plans for a business that can operate on a viable
basis in the future. The scheduled flying market continues to be highly
competitive, but there are signs of a more stable yield environment and Corsair
is benefitting accordingly.
In Belgium, trading has strengthened since our last update and we are
outperforming in a weak market, particularly in medium haul destinations. An
increased flying programme from regional airports and strong customer demand for
our recently enlarged 'comfort class', which offers an extra two inches of leg
room, are contributing to our success.
In the Netherlands, demand was slow during the country's World Cup campaign but
has strengthened since the tournament ended.
Booking volumes in the Specialist sector, excluding our emerging markets
businesses, are now 4% down compared with the prior year, due to continued
weakness in sales of long haul packages on scheduled flights. Booking activity
in our Russian and Ukrainian businesses continues to be strong, with volumes up
30% on the prior year, although margins remain subdued due to the high levels of
competition in the market.
In the Activity sector, sales to date are up 4%, representing greater demand for
Adventure holidays.
Strong volume growth in the B2C and B2B online businesses in the A&D sector has
continued, with roomnights up 28%. Margins remain ahead of the prior year in
this segment offsetting the volume decline seen in the offline business.
Volcanic Ash Impact
As a result of the widespread closures of European airspace following concerns
related to volcanic ash in the atmosphere, almost 400,000 of our customers were
affected by either having their holidays cancelled or being stranded in resort.
Throughout the crisis, we prioritised the needs of our customers, providing
industry leading levels of support and making enormous efforts to repatriate
stranded customers by all methods at our disposal.
We now have greater clarity of the total impact of the disruption and now expect
the total cost of welfare, repatriation and cancelled flights to total GBP95m.
The disruption is estimated to have cost a further GBP10m due to lost
contribution in the period immediately following the closures coupled with the
further closures and disruption in May, particularly in the UK. The welfare and
repatriation costs of GBP67m are reported as separately disclosed items in the
income statement and the impact of lost contribution of GBP38m is excluded from
our pro forma operating profit, as identified in the income statement.
We are very disappointed that national governments and the EU are refusing to
contemplate compensating the industry for an unjustified airspace closure that
was entirely beyond our control.
Winter 2010/11
Early trading for this period has started positively in all source markets.
In the UK, cumulative bookings are up 3% and bookings in the last four weeks are
up 22%. As a result of improved productivity of our fleet in our winter flying
programme and a change in the fleet mix in Canada from B757s to B737-800s, there
is a capacity increase in the UK for Winter 2010/11. It is currently too early
in the booking cycle to determine whether we will achieve a margin benefit from
these actions given the current economic environment.
In the Nordic region, bookings have started strongly across all four countries.
The load factor is ahead of the prior year at 35% despite an increase in
capacity following the reduction implemented last year and after the strong
demand seen in Summer 2010. The planned capacity increase has partly been
achieved through the use of additional long haul aircraft from our airlines in
the UK and France to take advantage of higher returns than are currently
available in those markets.
Foreign Exchange Translation
The underlying operating profit in the third quarter was GBP3m lower due to a
foreign exchange translation impact following the recovery of Sterling against
the Euro. With exchange rates at current levels we anticipate an adverse impact
on the full year result of approximately GBP10m to GBP15m, primarily due to the
translation of high season profits from Eurozone source markets.
Integration Synergies
During the quarter we delivered GBP28m of incremental synergy benefit, with
GBP24m in the UK Mainstream and GBP4m in other source markets. Total synergies
achieved since merger are GBP174m, including an incremental benefit of GBP54m in
the current financial year. We now expect GBP75m of incremental benefit in the
full year, giving a total benefit of GBP195m delivered since merger.
Outlook
The later booking pattern in the UK source market means that we have more stock
left to sell in the lates market and accordingly expect margins to be lower than
previously forecast. We are accelerating the remaining synergy delivery to help
mitigate the trading impact but, nevertheless, we do not now believe that the UK
source market will fully recover the incremental losses incurred in the winter
period. This, coupled with an anticipated adverse foreign exchange translation
impact, means we now envisage the Group's full year results to be at the lower
end of expectations.
Whilst encouraged by early trading for the upcoming winter season, we remain
cautious on the outlook for demand beyond this financial year given the
uncertain economic environment facing many of our customers and therefore we are
taking a more prudent view of the timeline for the delivery of our margin
roadmap. However, with a continued focus on offering more unique holiday
experiences and improving the profitability of our poorer performing businesses
we remain confident that we can still achieve our medium term margin targets.
THIRD QUARTER BUSINESS AND FINANCIAL REVIEW
Group Performance
Third quarter ended 30 June 2010
+------------+--------+--------+--------+
| | |
+------------+--------------------------+
| GBPm | Pro | Q3 09 | Change |
| | forma | | % |
| | Q3 | | |
| | 102 | | |
+------------+--------+--------+--------+
| Revenue | 3,416 | 3,575 | -4% |
+------------+--------+--------+--------+
| Underlying | 103 | 102 | +1% |
| operating | | | |
| profit1 | | | |
+------------+--------+--------+--------+
| Underlying | 3.0% | 2.9% | +0.1pp |
| operating | | | |
| margin % | | | |
+------------+--------+--------+--------+
Nine months ended 30 June 2010
+------------+--------+--------+--------+
| | |
+------------+--------------------------+
| GBPm | Pro | 9M 09 | Change |
| | forma | | % |
| | 9M | | |
| | 102 | | |
+------------+--------+--------+--------+
| Revenue | 8,349 | 8,954 | -7% |
+------------+--------+--------+--------+
| Underlying | (211) | (187) | -13% |
| operating | | | |
| loss1 | | | |
+------------+--------+--------+--------+
| Underlying | (2.5%) | (2.1%) | -0.4pp |
| operating | | | |
| margin % | | | |
+------------+--------+--------+--------+
1Underlying operating profit / loss excludes separately disclosed items,
amortisation of IFRS 3 intangibles and taxation of results of the Group's joint
ventures and associates.
2 Pro forma revenue and underlying operating profit are financial measures for
the period reported before the estimated financial impact of the closures of
Northern European airspace as a result of volcanic ash
Group revenue (pro forma) declined by 4% to GBP3,416m in Q3 10. Organic revenue
was 2% higher in the quarter, while foreign currency translation reduced revenue
by 4% and the net impact from acquisitions and disposals reduced revenue by 2%
following the strategic actions in Canada and scheduled flying in Germany.
The Group's pro forma underlying operating profit was GBP103m (Q3 09: GBP102m),
with the result primarily driven by incremental integration synergies being
offset by difficult trading conditions in the UK and Germany.
The main drivers of the year on year change in Q3 underlying operating profit
are:
+--------------+--------+
| GBPm | |
+--------------+--------+
| Q3 09 | 102 |
| underlying | |
| operating | |
| profit | |
+--------------+--------+
| Incremental | +28 |
| synergies | |
+--------------+--------+
| Acquisitions | -2 |
| (low-season | |
| losses) | |
+--------------+--------+
| Emerging | -2 |
| Markets | |
+--------------+--------+
| FX | -3 |
| Translation | |
+--------------+--------+
| Trading | -20 |
+--------------+--------+
| Q3 10 | 103 |
| underlying | |
| operating | |
| profit | |
| (pro | |
| forma) | |
+--------------+--------+
| | |
+--------------+--------+
Segmental Performance
Segmental performance measures are reported on a pro forma basis, before the
estimated financial impact of the closures of Northern European airspace as a
result of volcanic ash.
+-------------+----------+---------+-----+---+-------------+------------+----------+--------+--------+--------+--------+
| | Northern | Central | Western | Total | Specialist | Activity | A&D | Group | Total |
| | Region | | Europe | Mainstream | | | | | Group |
| | | Europe | | | | | | | |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| | | | | | | | | | |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Customers ('000) | | | | | | | | |
+------------------------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 10 | 1,905 | 1,965 | 1,419 | 5,289 | 269 | - | - | - | - |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 092 | 1,885 | 2,114 | 1,407 | 5,406 | 293 | - | - | - | - |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Change % | +1% | -7% | +1% | -2% | -8% | - | - | - | - |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Revenue (GBPm) | | | | | | | |
+----------------------------------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 10 | 1,167 | 1,041 | 691 | 2,899 | 191 | 184 | 142 | | 3,416 |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 09 | 1,032 | 1,277 | 718 | 3,027 | 208 | 181 | 159 | - | 3,575 |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Change % | +13% | -18% | -4% | -4% | -8% | +2% | -11% | | -4% |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Underlying operating profit / (loss) | | | | | | |
| (GBPm)1 | | | | | | |
+--------------------------------------------+-------------+------------+----------+-----------------+--------+--------+
| Q3 10 | 49 | 32 | (2) | 79 | 3 | 9 | 18 | (6) | 103 |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 09 | 38 | 41 | (16) | 63 | 8 | 21 | 16 | (6) | 102 |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Change % | +29% | -22% | -88% | +25% | -63% | -57% | +13% | - | +1% |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Underlying operating margin% | | | | | | | |
+----------------------------------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 10 | 4.2% | 3.1% | -0.3% | 2.7% | 1.6% | 4.9% | 12.7% | - | 3.0% |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Q3 09 | 3.7% | 3.2% | -2.2% | 2.1% | 3.8% | 11.6% | 10.1% | - | 2.9% |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| Change % | +0.5pp | -0.1pp | +1.9pp | +0.6pp | -2.2pp | -6.7pp | +2.6pp | - | +0.1pp |
+-------------+----------+---------+---------+-------------+------------+----------+-----------------+--------+--------+
| | | | | |
+----------------------------------------+-----------------------------------------+--------+--------+-----------------+
| | | | | | | | | | | | |
+-------------+----------+---------+-----+---+-------------+------------+----------+--------+--------+--------+--------+
1Underlying operating profit / (loss) excludes separately disclosed items,
amortisation of IFRS 3 intangibles and taxation of results of the Group's joint
ventures and associates. Segmental results include the Group's share of results
from joint ventures and associates
2 Prior year customer numbers have been restated to reflect strategic
transactions in Canada and Germany
Northern Region
The Northern Region increased profit by GBP11m to GBP49m. In the UK, incremental
synergy benefits of GBP24m were partially offset by lower trading profits
following the slowdown in UK bookings and the increase in the proportion of
lates market sales. Performance in the Nordic region was in line with
expectations. In Canada, we continue to benefit from Sunwing's profitable summer
programme following our strategic venture and now expect full year profits to be
c.GBP20m better than the prior year.
Central Europe
Central Europe reported a profit of GBP32m in Q3 10 (Q3 09: GBP41m). The result
was adversely affected by lower load factors in June driven by the World Cup and
lost sales following the volcano disruption, price pressure on commodity product
and by a shift in mix towards lower priced holidays.
Western Europe
Western Europe reported a loss of GBP2m, an improvement of GBP14m (Q3 09
GBP16m). The reduction in losses was driven by a better trading result across
all source markets, including non-recurrence of the social unrest in the French
West Indies in 2009 which affected Nouvelles Frontieres (NF). NF's new clubs
continue to be well received in the market and the tour operator achieved higher
volumes and margins in the quarter. New destinations launched this summer by
Marmara added profitable volume in their first season. Jetair in Belgium
benefited from increased market share after competitors reduced capacity and
exited from certain regional airports.
Specialist & Emerging Markets
The sector delivered a profit of GBP3m in the third quarter, down GBP5m (Q3 09:
GBP8m) due to lower trading profits and increased investment in our emerging
markets presence. Trading profits reduced by GBP3m due to lower volumes in our
long-haul, scheduled specialists and reduced demand for spring break trips in
our US student business. Start up costs in our Russia & Ukraine joint ventures
reduced profits by GBP2m in the quarter.
Activity
The Activity sector delivered a profit of GBP9m in Q3 10 (Q3 09: GBP21m).
Profits were affected by lower volumes in the polar cruising business (partly
due to a planned reduction in the number of tours and partly due to lower
occupation rates) as fixed costs were not recovered. Additionally, profitability
in the Ski division was reduced due to lower volumes in the profitable Easter
period following substantial capacity reductions for the whole season. In the
Sport division, differences in timing of major events versus last year has
shifted profits from Q3 to Q4.
Accommodation & Destinations (A&D)
A&D reported a profit of GBP18m in Q3 10 (Q3 09: GBP16m). The increase was
driven by growth generated from destination management services in new source
markets in Latin America and Asia, including cruise handling operations, and
from strong volume growth in LateRooms.com and Asiarooms.com.
TUI AG Reporting
TUI AG, our majority shareholder, is issuing its third quarter results for the
three months to 30 June 2010 tomorrow, 11 August. This report contains financial
information relating to TUI Travel PLC. However, this information is not
directly comparable due to different presentation and treatment of certain
items.
August 2010
TUI Travel PLC
Interim results for the nine months ended 30 June 2010
Condensed consolidated income statement for the 9-month period ended 30 June
2010
+-------------------------------+------+---------+------------+---------+---------+-----------+
| | | Pro | Pro | 9-month | 9-month | Year |
| | | forma | forma | | | ended |
| | | results | impact | period | period | 30 |
| | | 9-month | of | ended | ended | September |
| | | | volcanic | 30 | 30 June | 2009 |
| | | period | ash | June | 2009 | |
| | | ended | disruption | 2010 | | |
| | | 30 | | | | |
| | | June | | | | |
| | | 2010 | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| |Note | GBPm | GBPm | GBPm | GBPm | GBPm |
| | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Continuing operations | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Revenue | 1 | 8,349 | (125) | 8,224 | 8,954 | 13,863 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Cost of sales | | (7,838) | 20 | (7,818) | (8,467) | (12,705) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Gross profit | | 511 | (105) | 406 | 487 | 1,158 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Administrative expenses | | (862) | - | (862) | (838) | (1,130) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Share of (loss) / profit of | | (4) | - | (4) | 4 | 9 |
| joint ventures and associates | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Operating (loss) / profit | | (355) | (105) | (460) | (347) | 37 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Analysed as: | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Underlying operating (loss) / | | (211) | (38) | (249) | (187) | 443 |
| profit | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Separately disclosed items | 2 | (97) | (67) | (164) | (117) | (340) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Acquisition related items | | (44) | - | (44) | (42) | (56) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Impairment of goodwill | | - | - | - | - | (7) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Taxation on results of joint | | (3) | - | (3) | (1) | (3) |
| ventures and associates | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| | | (355) | (105) | (460) | (347) | 37 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Financial income | | 62 | - | 62 | 52 | 72 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Financial expenses | | (142) | - | (142) | (116) | (161) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Net financial expenses | | (80) | - | (80) | (64) | (89) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Loss before tax | | (435) | (105) | (540) | (411) | (52) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Taxation | | 124 | 29 | 153 | 115 | 42 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Loss for the period / year | | (311) | (76) | (387) | (296) | (10) |
| from continuing operations | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Discontinued operation | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Loss from discontinued | | (22) | - | (22) | (8) | (14) |
| operation | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Loss for the period / year | | (333) | (76) | (409) | (304) | (24) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Attributable to | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Ordinary shareholders | | (333) | (76) | (409) | (305) | (25) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Non-controlling interests | | - | - | - | 1 | 1 |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| Loss for the period / year | | (333) | (76) | (409) | (304) | (24) |
+-------------------------------+------+---------+------------+---------+---------+-----------+
| | | | | | | |
+-------------------------------+------+---------+------------+---------+---------+-----------+
Notes to the condensed consolidated financial statements
1. Basis of preparation
The financial information in this report relating to the 9 month periods ended
30 June 2010 and 30 June 2009 is unaudited. The unaudited financial
information relating to the income statement for the 9 month periods ended 30
June 2010 and 30 June 2009 has been prepared on the basis of the Company's
adopted IFRS accounting policies.
Pro forma financial information
An unaudited pro forma income statement for the year ended 30 September 2010 has
been prepared by the Directors, on the pro forma basis described below. This is
to illustrate the estimated financial effect on the consolidated income
statement in the current year of the unprecedented closure of UK and European
airspace, following the eruption of the Eyjafjallajokull volcano in Iceland in
April 2010. During this period of closure and the period to resumption of a
full flying schedule, from 15 April 2010 to c. 23 April 2010, the Group's
ability to earn revenue from package holidays and flights was severely impacted
and the Group incurred costs associated with disruption caused to holidays in
progress and stranded passengers.
The unaudited pro forma information is included within the consolidated income
statement. This is to provide information which the Directors consider helps to
provide a better understanding of the underlying performance of the business.
The differences between the unaudited pro forma income statement information and
the consolidated statutory income statement for the year are summarised as
follows:
· The pro forma income statement excludes the estimated 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. These costs
principally include hotel costs for stranded inbound and outbound customers, and
the cost of repatriation of inbound customers. The estimated costs amount to
GBP67m.
· The pro forma income statement includes the estimated revenue (GBP93m) and
estimated attributable cost of sales and administrative expenses (GBP65m) from
holidays and flights which were both booked and paid for prior to the closure of
the airspace but which were cancelled and unable to depart during the affected
period (a foregone gross profit contribution of GBP28m).
· The pro forma income statement also includes an estimated reduction in
holiday and flights sales of GBP32m and cost of sales of GBP22m in the immediate
period after 23 April 2010, as a result of the uncertainty from both the
original closure of airspace and further additional closures and disruption in
May, particularly in the UK. This impact, in terms of foregone gross profit
contribution, is estimated at GBP10m.
A detailed analysis of the impact on the pro forma income statement of the
impact of volcanic ash disruption is shown in the table below:
+-----------------------+---------------+-----------+-------------+--------+
| | | Estimated | | |
+-----------------------+---------------+-----------+-------------+--------+
| | Cancellations | impact | Incremental | |
+-----------------------+---------------+-----------+-------------+--------+
| | 15-23 | post 23 | costs | Total |
| | April | April | | |
+-----------------------+---------------+-----------+-------------+--------+
| | GBPm | GBPm | GBPm | GBPm |
+-----------------------+---------------+-----------+-------------+--------+
| | | | | |
+-----------------------+---------------+-----------+-------------+--------+
| Revenue | (93) | (32) | - | (125) |
+-----------------------+---------------+-----------+-------------+--------+
| Cost of sales | 65 | 22 | (67) | 20 |
+-----------------------+---------------+-----------+-------------+--------+
| Gross profit | (28) | (10) | (67) | (105) |
+-----------------------+---------------+-----------+-------------+--------+
| | | | | |
+-----------------------+---------------+-----------+-------------+--------+
| Separately disclosed | - | - | (67) | (67) |
| item (SDI) | | | | |
+-----------------------+---------------+-----------+-------------+--------+
| Non-SDI | (28) | (10) | - | (38) |
+-----------------------+---------------+-----------+-------------+--------+
| | (28) | (10) | (67) | (105) |
+-----------------------+---------------+-----------+-------------+--------+
Certain customers whose holidays and / or flights were cancelled will have
subsequently re-booked their holiday once full holiday and flying operations
commenced again after 23 April 2010. It is not possible to reliably track such
re-bookings. It is also not possible to demonstrate that the re-booked holiday
capacity would not otherwise have been sold and made a positive contribution,
given the ability of the Group to sell and distribute holidays up until the date
of departure. Consequently no adjustment has been made to reflect an estimate
of such possible re-bookings in the pro forma financial information.
The pro forma income statement does not include the estimated benefit of lost
revenue and positive contribution which would have arisen from the sale of
further holidays during the affected period from 15-23 April 2010 in the 'lates'
market which would otherwise have departed during this period.
The closure of UK and European airspace had no effect on the comparative year to
30 September 2009 and therefore no pro forma income statement is presented for
this period.
Separately disclosed items
Separately disclosed items are those significant items which in management's
judgement are highlighted by virtue of their size or incidence to enable a full
understanding of the Group's financial performance. Such items are included
within the income statement caption to which they relate (Note 2).
Acquisition related items
Acquisition related items comprise amortisation of business combination
intangibles, acquisition related expenses and amortisation of contingent
consideration.
2. Separately disclosed items
+---------------+---------+---------+-----------+
| | 9-month | 9-month | Year |
| | | | ended |
| | period | period | 30 |
| | ended | ended | September |
| | 30 | 30 June | 2009 |
| | June | | |
| | 2010 | 2009 | |
+---------------+---------+---------+-----------+
| | GBPm | GBPm | GBPm |
+---------------+---------+---------+-----------+
| Separately | | | |
| disclosed | | | |
| items in | | | |
| operating | | | |
| (loss) / | | | |
| profit | | | |
+---------------+---------+---------+-----------+
| Merger | 61 | 87 | 144 |
| related | | | |
| integration | | | |
| costs | | | |
+---------------+---------+---------+-----------+
| Restructuring | 36 | 30 | 72 |
| expenses | | | |
+---------------+---------+---------+-----------+
| Aircraft | - | - | 124 |
| impairment | | | |
+---------------+---------+---------+-----------+
| Total | 97 | 117 | 340 |
| pre | | | |
| volcanic | | | |
| ash | | | |
+---------------+---------+---------+-----------+
| Incremental | 67 | - | - |
| costs | | | |
| caused by | | | |
| volcanic | | | |
| ash | | | |
| disruption | | | |
+---------------+---------+---------+-----------+
| Total | 164 | 117 | 340 |
+---------------+---------+---------+-----------+
| | | | |
+---------------+---------+---------+-----------+
| Separately | 2 | 8 | 12 |
| disclosed | | | |
| financial | | | |
| expenses | | | |
+---------------+---------+---------+-----------+
Merger related integration costs
These relate primarily to the costs of integration of the UK businesses. The
majority of costs arise 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 has been established in Luton.
On completion of the integration of IT systems in the UK tour operator, a review
of legacy system-generated balances has occurred. This has led to the
identification of a number of small receivable balances which have built up
over an extended period of time at the rate of c. GBP4m a year over a 7-year
period. Management no longer believes that these items are recoverable and
therefore they have written off GBP29m in the current year.
The business has also now completed the creation of a single management
information (MI) suite in the UK business. The improved MI and forecast
capability which it has given the business has now led to the closing out of
certain foreign currency positions based on the improved visibility of past and
future requirements, resulting in a GBP17m charge in the period.
Included in the 9-month period ended 30 June 2010 is a GBP44m credit which
relates to a combination of aircraft order cancellation credits and compensation
for delays to the delivery of aircraft.
Costs in the comparative periods also arise from bringing together former
Thomson Specialist businesses with the former First Choice Activity and
Specialist Sectors, notably Ski and UK specialist brands.
In the Accommodation & Destinations Sector separate First Choice and TUI Tourism
incoming agencies have been combined in a number of key destinations, notably
Spain.
Restructuring expenses
Costs incurred in the 9-month period ended 30 June 2010 relate to restructuring
programmes which are not related to the business combination of First Choice and
the TUI Tourism businesses. The principal items are GBP22m for the
restructuring of our hotel operations in Turkey and GBP5m for restructuring of
the Canadian business as a consequence of the strategic venture transaction with
Sunwing Travel Group Inc.
The main cost incurred in the comparative 9-month period ended 30 June 2009 was
GBP15m due to the closure of the Sunsail Clubs in Turkey and the Caribbean.
In the full year ended 30 September 2009 restructuring costs also included
GBP40m in relation to transaction costs and associated restructuring in the
German source market due to the transaction to sell TUIfly's city charter
business to Air Berlin PLC, and GBP13m for the ongoing restructuring of the
French tour operator, Nouvelles Frontières.
Aircraft impairment
In the year ended 30 September 2009 there was a GBP124m impairment charge
principally in respect of asset write downs of Boeing 747s operated by Corsair.
Volcano impact
Included in separately disclosed items are the estimated 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. These
estimated costs principally include hotel costs for stranded inbound and
outbound customers, and the cost of repatriation of inbound customers. These
costs amount to an estimated GBP67m and are shown in the 'Pro forma impact of
volcanic ash disruption' column on the face of the condensed consolidated income
statement on page 9.
Separately disclosed financial expenses
The separately disclosed financial expenses in the 9 months ended 30 June 2010
relate to charges in respect of bank guarantees for merger integration costs.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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