TIDMTT.
RNS Number : 1306V
TUI Travel PLC
06 January 2012
TUI TRAVEL PLC
ANNUAL REPORT & ACCOUNTS
& NOTICE OF 2012 ANNUAL GENERAL MEETING
TUI Travel PLC ("the Company") announces that its Annual General
Meeting will be held on Tuesday 7 February 2012 at 10.30am at the
offices of Herbert Smith, Exchange House, Primrose Street, London
EC2A 2HS. In connection with this, the following documents have
been posted or made available to shareholders today:
Notice of 2012 Annual General Meeting ("AGM Notice");
Annual Report & Accounts for the year ended 30 September
2011 ("Annual Report & Accounts"); and
Proxy Form for the 2012 Annual General Meeting.
In accordance with Listing Rule 9.6.1, copies of the AGM Notice
and Annual Report & Accounts have also been submitted to the
National Storage Mechanism website and will shortly be available
for inspection at: www.hemscott.com/nsm.do.
The AGM notice and the Annual Report & Accounts are
available on the Company's website:
http://www.tuitravelplc.com/investors-media/shareholder-centre/annual-general-meeting
Pursuant to DTR 6.1.2R, the Company confirms that at the 2012
Annual General Meeting it is proposed that the Company's articles
of association are amended with effect from the conclusion of the
meeting. The proposed amendments are set out in the AGM Notice. In
accordance with LR 13.8.10R, the Company confirms that copies of
the new articles of association and blacklined articles of
association showing the changes from the current articles of
association are available at the offices of Herbert Smith, Exchange
House, Primrose Street, London EC2A 2HS until the close of the
Annual General Meeting.
The appendices to this announcement contain additional
information which has been extracted from the Annual Report &
Accounts for the purposes of compliance with the Disclosure and
Transparency Rules ("DTR") and should be read together with the
Final Results Announcement, which can be downloaded from the
Company's website:
http://www.tuitravelplc.com/investors-media/shareholder-centre/annual-general-meeting
This announcement should be read in conjunction with, and is not
a substitute for, reading the full Annual Report & Accounts.
Together these constitute the information required by DTR 6.3.5
which is required to be communicated to the media in full unedited
text through a Regulatory Information Service.
APPENDICES
Appendix A: Directors' responsibility statement
The following responsibility statement is repeated here solely
for the purpose of complying with DTR 6.3.5. This statement relates
to, and is extracted from, page 50 of the Annual Report &
Accounts. Responsibility is for the full Annual Report &
Accounts not the extracted information presented in this
announcement or the Preliminary Results Announcement:
'The Directors in office at the date of approval of the Annual
Report & Accounts each confirm that to the best of their
knowledge:
-- The group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the group; and
-- The Directors Report includes a fair review of the
development and performance of the business and position of the
group, together with a description of the principal risks and
uncertainties that it faces.
The Statement of Directors' responsibilities was approved by a
duly authorised Committee of the Board of Directors on 4 December
2011 and signed on its behalf by William Waggott, Chief Financial
Officer.
Appendix B: Principal Risks
A description of the principal risks that the Company faces is
extracted from pages 20-23 of the Annual Report & Accounts.
Political Volatility, Natural Catastrophes, Outbreaks
Providers of holiday and travel services are exposed to the inherent risk of domestic and/or
international incidents affecting some of the countries/destinations within its operations
"We have a clear strategy and road map for delivering our strategic growth initiatives. As
trading in the new financial year progresses, it is apparent that customers in some source
markets are booking later than usual and that the recovery in demand for North African destinations
will be slow for some considerable time. 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" - see Chief Executive's statement on page 9.
Risk Mitigation
Large scale events causing operational * Ensure a balanced destination mix to minimise
disruption; future reduction concentration and introduce flexible supplier
in destination desirability; agreements to allow for capacity to be switched if
inability to operate efficiently required
Potential Impact
* Minimise the impact of any negative events through
Significant losses (holiday the effective execution of established incident
cancellations, repatriation management policy and utilisation of experienced
of customers and decline in leadership teams to support and repatriate stranded
consumer demand, possible increase customers
in insurance premiums)
Strategic Initiative * Promote the benefits of travelling with a recognised
and leading tour operator to increase consumer
* Product confidence throughout source markets
* Operational Efficiency
* Monitor actively the political situation in volatile
destinations and act upon security intelligence
advice
* Maintain strong relationships with local tourism
bodies and travel industry associations and ensure
government guidance is obtained and used as required
* Liaise with aviation industry stakeholders and
meteorology service providers to ensure efficient
emergency response plans in the event of adverse
weather conditions
Economic Conditions
Spending on travel and tourism is discretionary and price sensitive. The economic outlook
remains uncertain with different markets at different points in the recovery cycle. Consumers
are also waiting longer to book their trips in order to assess their financial situation
"We are 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. 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 customer access and reduce distribution costs, and the delivery of our
turnaround and cost efficiency programmes" - see page 2 of Preliminary Results announcement
dated 5 December 2011.
Risk Mitigation
Sustained decline in consumers' propensity to travel; * Enhance the portfolio of products within the
continuation of later booking patterns; Mainstream Sector that increase competitive advantage
inability to respond to short-term changes in consumer command a premium margin and attract greater customer
demand loyalty
Potential Impact
* Optimisation of the business model ensuring the
Lower short-term growth rates and reduced margins flexibility to reduce capacity in order to protect
margins
Strategic Initiative
* Product * Manage actively capacity through use of sophisticated
capacity and yield management systems to improve
efficiency and drive margin improvements
* Distribution
* Operational Efficiency * Continue to drive controlled distribution strategy
which provides customers with greater access to lower
costs and value for money
Consumer Preferences & Demands
Consumers are increasingly turning online to research and book holidays. Social media, price
and product play a key part in the decision-making process. Customers are increasingly booking
holidays nearer the time of travel
"We continue to differentiate ourselves by offering a greater choice of unique products and
destinations as well as looking to new markets for growth" - see Market overview on pages
12-13
"We remain focused in our efforts to provide our customers with easy-to-access information
combined with easy-to-use booking engines" - see Market overview on pages 12-13
Risk Mitigation
Failure to anticipate changes * Enhance the portfolio of products within Mainstream
in consumer preferences; inability Sector that increase competitive advantage, command a
to keep up with latest technological premium margin and attract greater customer loyalty
developments; difficulty to
engage efficiently in seasonal
planning
* Increase hotel inventory within Accommodation &
Destinations Sector as a major growth driver for
Potential Impact online accommodation business
Market positions come under
pressure, lower short to medium-term
growth rates, reduced margins * Consolidate the market leading positions in
Specialist & Activity Sector and continue to look for
innovative products and attractive markets for future
Strategic Initiative growth
* Product
* Appointed a Director of Online for the Mainstream
* Distribution Sector
* Operational Efficiency
* Leverage new technologies in order to compete with
key industry players
* Focus on online presence, increase participation in
social media and move towards an online driven
company culture
* Implement a tailored distribution strategy within
each source market to meet different customer
preferences and market dynamics
Global Financial Factors
Cross-border element of trading exposes the business to fluctuations in exchange rates and
complex and technical tax laws. A significant proportion of operating expenses are in relation
to aircraft fuel which is also unstable. Pressure on the banking industry is set to continue
due to the Eurozone debt crisis and the introduction of Basel III.
"We have hedged the majority of our fuel and currency requirements for the seasons currently
on sale" - see page 4 of Preliminary Results announcement dated 5 December 2011
"We continue to focus on cash performance and ended the year with a net cash position of GBP4m
(2010: net debt of GBP249m). We have a number of cash management initiatives across the Group
and the improvement in working capital as a result of these initiatives has helped us to end
the year in a net cash position" - see Chief Executive's statement on page 9
Risk Mitigation
Volatility of exchange rates * Ensure hedging cover is taken out ahead of customer
and fuel prices may have a negative booking profiles in order to provide certainty of
impact on unhedged balances; input costs prior to pricing
rising input costs could increase
cost of product offering and
leave the Group competitively
disadvantaged; increase in tax * Monitor the appropriateness of the Group's hedging
authorities taking more frequent policies in relation to fuel and foreign currency
and intrusive tax audits of
the Group's business operations;
lack of available funding to
secure additional facilities, * Track closely the foreign exchange and fuel markets
if needed, and at a reasonable to ensure possession of most up-to-date market
cost intelligence
Potential Impact
* Minimise uncertainty through recording of provisions
Reduced demand due to increased to reflect potential tax exposures
costs, reduced margins, negative
impact on cash flow, lengthy
tax litigation processes, possible
reduction in Group's after-tax * Develop and maintain high quality relationships with
earnings, increased cost of tax authorities, including communication of the
borrowing Group's business operations
Strategic Initiative
* Ensure key facilities are refinanced well ahead of
* Operational Efficiency maturity. The Group's key bank facilities were
refinanced in May 2011 by a new GBP1,155m revolving
credit facility committed until 2015
* Monitor actively compliance with the covenants
contained within the Group's financing facilities
* Develop and maintain high quality relationships with
the Group's key financiers.
Regulatory Environment
Industries in which the Group operates are highly regulated, particularly
in relation to consumer protection, aviation and the environment
"We work with national Governments and the EU to ensure that our
position is understood and respected and our opinion remains that
a level playing field across the industry is a necessary requirement
to allow good companies to flourish" - see Chief Executive's statement
on page 9
Risk Mitigation
Failure in safety due diligence * Address issues affecting the industry and its
processes; customers through utilisation of skilled public
non-compliance to applicable affairs team working closely with governments and
regulations; regulators
negative perception of product
offering due to increased costs
and/or increase in awareness of
environmental issues. * Develop more sustainable holidays by reducing the
environmental impact at each stage of the customer's
Potential Impact journey supported by experienced sustainable
development team working closely with business
Harm or injury to customers, and management (see Sustainable development on page 28)
or/employees, limitations on
operational
flexibility, possible exposure
to legal or regulatory sanctions, * Deliver the carbon management strategy which has a
associated reputational damage commitment to reducing TUI Travel's Airlines' per
and increased costs passenger carbon emissions by 6% by 2013/2014
(against a baseline of 2007/2008 - see Sustainable
development on page 28)
Strategic Initiative
* Product
* Submitted TUI Travel's 2010 airline data, which has
been externally verified by PwC, to relevant
* Operational Efficiency authorities in preparation for the EU Emission
Trading Scheme (applicable from January 2012 - see
Sustainable development on page 27)
* Introduced a new decentralised responsibility for
Health & Safety management, enabling Sectors to focus
on specific risks in the context of bespoke operating
and legal environments
* Continue to raise awareness of and compliance with
the provisions of the Bribery Act 2010
Business Improvement Opportunities
The Group is heavily reliant on legacy systems, processes and
structures which, in some cases, are outdated, complex and inefficient.
"We remain focused on 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 our business improvement
programme. We have self-help measures in place to help offset
the difficult macro-economic environment. In addition, we continue
to strengthen our cash flow in order to fund the dividend and
growth" - see Chief Executive's statement on page 9
Risk Mitigation
Weaknesses or inefficiencies in IT * Continue to deliver cost savings and efficiencies
and financial control processes; through the implementation of the business
misreporting of financial results; improvement programme
inefficient cost structures; failure
in systems causing operational disruption;
* Implement strategy and growth plan in German
Potential Impact Mainstream focusing on differentiated and exclusive
products, integration of online and offline
Higher costs due to inefficiencies, businesses and back-office restructuring. Initiatives
failure to optimise business performance, already underway to replace outdated IT systems
impact on day-to-day, loss of revenue
Strategic Initiative * Transform business processes used to create, book and
process holiday products within the UK business
* Distribution through replacement of core IT systems
* Operational Efficiency
* Consolidate tour operator businesses in French
Mainstream to create a single business with a
long-term viable future
* Reposition French airline as scheduled carrier
specialising in long haul through delivery of
Corsairfly transformation project
* Improve cost efficiency in the Group's Airline
operations
* Embed a COSO control framework in the UK & Ireland to
strengthen financial controls as part of an
initiative to implement a Group-wide COSO compliance
framework
* Continue to implement business continuity management
across the Group to improve capability and reduce
exposure
* Drive efficiencies through the co-ordination of key
procurement activities across the Group
* Review key service providers to assess financial
standing and levels of health & safety, quality and
sustainability standards
* Minimise levels of pre-payments to hoteliers and
other third party service providers
Emerging Markets, Acquisitions & Investments
The Group continues to look into new markets as the traditional mainstream markets mature.
Niche businesses and the BRIC countries represent a significant opportunity to participate
in longer-term travel growth trends and have higher growth potential
"We believe the BRIC (Brazil, Russia, India & China) economies, with high-growth forecasts,
will be the key driver of long-term travel growth. TUI Travel already has a presence in Russia
and Ukraine which we plan to increase from the existing platform and we continue to determine
our participation strategy in Brazil, India and China"- see Market overview on pages 12-13
Risk Mitigation
Inability to identify * Established a significant presence in the fast
appropriate growing Russian and Ukrainian markets
opportunities; failure of
acquisitions
to deliver expectations;
limited * Investigate opportunities to build on existing
experience in new markets; presence in Brazil, China and India supported by
possible significant market research
difficulty in integrating
operations
and systems
* Completed a number of successful acquisitions within
the Specialist and Activity and Accommodation &
Potential Impact Destinations Sectors during 2010/2011
Potential lower long-term
growth
and reduced margins, impact
on
anticipated cash flows,
significant
diversion of management time
Strategic Initiative
* Product
* Operational Efficiency
Talent Management
The Group's success depends on its ability to retain key management and it relies on having
good relations with its employees
"We believe that engaged and happy colleagues are key to both superior customer service and
the Group's continued success and profitability. With people who believe in our products and
services, and the right approach, we will continue to be our customers' automatic choice for
leisure travel" - see People on page 24
Risk Mitigation
Inability to attract new and * Continue to focus on current capability needs and
retain key managers and personnel; gain insight in to future skills required
difficulty transferring talent
within a diverse and international
business; failure to build future
leadership capability * Ensure succession plans in place for all identified
business critical roles in particular emergency
successors for all Sector board roles
Potential Impact
Adverse effect on the business,
operating results and financial * Review succession plans every six months
performance of the Group
Strategic Initiative * Introduced Group-wide initiatives to develop talent
and ensure continued investment in international and
* Operational Efficiency tailored graduate programmes
* Implemented a Group-wide leadership framework to be
used for development and recruitment of all senior
roles
Appendix C: Related party transactions
The following description of related party transactions of the
Company is extracted from pages 132 to 133 of the Annual Report
& Accounts.
Apart from with its own subsidiaries which are included in the
consolidated financial statements, TUI Travel PLC, in carrying out
its ordinary business activities, maintained direct and indirect
relationships with related parties including consolidated or
related companies of its ultimate parent company, TUI AG. These
companies delivered services to companies in the Group.
The Group also undertook transactions with its joint ventures
and associated companies. These transactions related primarily to
incoming agencies and hotel companies used by the Group's tour
operators. The income and expenses arising from transactions with
associates and joint ventures are included within the appropriate
sector revenue or costs as presented in the segmental analysis.
All transactions with related parties were executed on an arm's
length basis and under normal conditions of trade with independent
third parties.
Shareholder loan
A shareholder loan was advanced to the Company by TUI AG on 3
September 2007. The loan bore interest at EURIBOR plus a margin of
1.9% per annum. The Company could make voluntary repayments at any
time during the term of the loan subject to a minimum repayment of
EUR10m and the giving of 30 days' notice. The loan was repaid
during the year, and had a drawn balance of EURnil at 30 September
2011 (30 September 2010: EUR669m), not including accrued interest
payable.
A further shareholder loan was advanced to the Company by TUI AG
on 13 July 2011, in respect of acquiring Magic Life. The loan bears
interest at EURIBOR plus a margin of 2.75% per annum. The Company
can make voluntary repayments at any time during the term of the
loan subject to a minimum repayment of EUR1m and the giving of 10
days' notice. The drawn balance of the loan at 30 September 2011
was EUR30m, not including accrued interest payable. It is repayable
in two instalments: 30 April 2012: EUR20m and 31 August 2012:
EUR10m.
Hotel Framework Agreement
As part of the relationship arrangements between the Company and
TUI AG at the time of the business combination, both parties
entered into the Hotel Framework Agreement, which governed the
commercial relationship between TUI AG and the Company in respect
of the distribution of hotel beds forming part of the hotel
portfolio interests retained by TUI AG. Under the Hotel Framework
Agreement, TUI Deutschland (TUI Travel PLC's German tour operating
business) continued to have access to the Robinson hotel portfolio
and to the distribution of such portfolio's hotel beds in Europe.
The original Hotel Framework Agreement expired on 31 October 2011
and a new agreement has been negotiated which sets the room rates
TUI Deutschland is charged by Robinson. These rates have been set
at current market rates, but the contract does not contain any
commitment from TUI Deutschland.
Trademark Licence Agreement
The Trademark Licence Agreement incorporates trademark licences
granted from TUI AG to members of the TUI Tourism Group in relation
to TUI Tourism's use of the TUI name and logo and other trademarks
from within TUI AG's portfolio of trademarks used in the former TUI
Tourism's business. Licence fees payable under each licence are an
annual fee equal to 0.02 percent of the average annual gross
turnover of the relevant licensee under the relevant trademarks
measured over a three-year period. Total licence fees charged for
the year ended 30 September 2011 were GBP3m (2010: GBP3m). Each
licence's standard terms are for five years with an option for the
relevant licensee to extend for a further five years on the same
terms.
Details of transactions with related parties and balances
outstanding at the balance sheet date are set out in the tables
below:
Revenue Expenses
------------------------------ ------------------------------
Restated
Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
------------------------------------ -------------- -------------- -------------- --------------
Related party
Ultimate parent TUI AG 6 11 34 70
Hotel and resort subsidiaries of
TUI AG 11 13 319 423
Other subsidiaries, joint ventures
and associates of TUI AG 10 7 74 98
Joint ventures and associates of
the Group 42 10 114 120
------------------------------------ -------------- -------------- -------------- --------------
Total 69 41 541 711
------------------------------------ -------------- -------------- -------------- --------------
Receivables outstanding Payables outstanding
------------------------------ ------------------------------
Restated
Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
------------------------------------ -------------- -------------- -------------- --------------
Related party
Ultimate parent TUI AG 5 385 45 594
Hotel and resort subsidiaries of
TUI AG - 4 37 66
Other subsidiaries, joint ventures
and associates of TUI AG 9 4 15 12
Joint ventures and associates of
the Group 34 31 28 10
------------------------------------ -------------- -------------- -------------- --------------
Total 48 424 125 682
------------------------------------ -------------- -------------- -------------- --------------
Payables outstanding with related parties are reported in Notes
19 and 20 and receivables outstanding are reported in Note 16.
Included within the amount payable to TUI AG of GBP45m (2010:
GBP594m) is a shareholder loan of GBP26m (2010: GBP575m). Included
within the amount payable to joint ventures and associates of the
Group of GBP28m (2010: GBP10m) is a loan to a joint venture of
GBP10m (2010: GBPnil). The GBP385m receivable balance outstanding
from the ultimate parent TUI AG at 30 September 2010 included a
GBP370m cash deposit, which was used in the year as part of
settling the prior year shareholder loan from TUI AG.
Details regarding the investment in Sunwing Travel Group Limited
and Togebi Holdings Limited are included in Note 12. Details on
interest rate and liquidity risks in respect of balances with
related parties are included in Notes 25(E) and 25(F)
respectively.
In accordance with IAS 24, key management functions within the
Group (the GMB and the Directors of the Company) were related
parties whose remuneration had to be listed separately. The
compensation paid in respect of key management personnel (including
Directors) was as follows:
Year ended Year ended
30 September 30 September
2011 2010
GBPm GBPm
------------------------------ -------------- --------------
Short-term employee benefits 9 15
Post-retirement benefits 2 2
Share-based payments 10 9
Total 21 26
------------------------------ -------------- --------------
Details of Directors' Remuneration are given in the Remuneration
Report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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