TIDMTT.
RNS Number : 6577J
TUI Travel PLC
09 August 2012
9 August 2012
TUI Travel PLC
("TUI Travel")
Interim management statement and results for
the third quarter and nine months ended 30 June 2012
(unaudited)
Key financials
Third quarter ended 30 June 2012
Underlying results(1) Statutory results
GBPm Q3 12 Q3 11 Change Q3 12 Q3 11
Revenue 3,690 3,774 -2% 3,690 3,774
Operating profit/(loss) 74 88 -16% 32 39
Underlying operating margin % 2.0% 2.3% -0.3pp 0.9% 1.0%
------------------------------- ------- ------- -------- --------- ---------
1Underlying operating profit excludes separately disclosed
items, amortisation of business combination intangibles,
acquisition related expenses, predecessor accounting for Magic Life
in Q3 11, interest and taxation of results of the Group's joint
ventures and associates
Highlights
-- Third quarter underlying operating profit of GBP74m (Q3 11: GBP88m),
reflecting the timing of Easter in the second quarter.
-- Very encouraging trading for Summer 2012 high season, with less left
to sell versus the prior year.
-- UK continues to outperform the market, achieving strong lates margins
and load factors.
-- Summer 2012 - continued high demand for differentiated product:
- UK 63% of bookings - up seven percentage points on prior year
- Nordics 76% of bookings - up five percentage points on prior year
-- France continues to underperform our expectations in a very challenging
market.
-- In A&D, Summer 2012 bookings are up 9% and sales (TTV) up 17% versus
the prior year.
-- Encouraging start to Winter 2012/13 trading.
-- Cashflow improvement of GBP52m in the third quarter compared with
the same period last year.
-- The business improvement programme is progressing to plan with GBP11m
of cost savings delivered in the nine-month period.
Peter Long, Chief Executive of TUI Travel PLC, commented
"We are pleased with our performance, driven by our strategy of
differentiated and exclusive product with a focus on online
distribution. We are significantly outperforming the market in the
UK.
"Summer 2012 volumes have improved in most key markets since our
last update. We are seeing strong demand and lates margins for the
peak Summer period. Our Winter 2012/2013 programme has had an
encouraging start.
"We are confident of exceeding our full year expectations based
on like for like exchange rates, however, the impact of
retranslation of fourth quarter Eurozone profits at current
exchange rates leaves us to believe we will perform in line with
our expectations for the full-year."
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 Code: 11593902
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 Code: 11593902
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 645 790
Mike Ward, External Communications Manager Tel: +44 (0)1293 645 776
Michael Sandler / Katie Matthews (Hudson Sandler) Tel: +44 (0)20 7796 4133
CURRENT TRADING AND OUTLOOK
Summer 2012
Trading for summer has been very encouraging since our last
update on 8 May 2012. The cumulative booked position has improved
in most of our key source markets, reflecting a strong lates
performance.
YoY customer booking variation % Cumulative Bookings since previous trading Cumulative
bookings at 29 April statement bookings at 29 July
UK -6 -3 -5
Nordic region +3 +12 +6
Germany +3 -1 +2
France tour operators -16 +9 -6
Belgium +2 +11 +5
Netherlands +1 +7 +3
---------------------------------- ---------------------- ----------------------------------- ---------------------
Current Trading(1) Summer 2012
YoY variation% Total ASP(2) Total Total Risk Only
Sales(2) Customers(2)
Capacity(3)
MAINSTREAM
UK +9 +4 -5 -6
Nordic region +3 +8 +6 +4
Northern Region +8 +5 -3
Germany +3 +5 +2 -7
Austria +2 -2 -3
Switzerland -6 +5 +12
Poland +5 +39 +32
Central Europe +3 +5 +2
France tour operators +2 -4 -6
Belgium -3 +2 +5
Netherlands +4 +7 +3
Western Europe Flat +2 +1
SPECIALIST & ACTIVITY N/A +3 N/A
A&D(4) +7 +17 +9
(1) These statistics are up to 29 July 2012 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 accommodation businesses
only; Sales refer to total transaction value (TTV) and customers
refers to roomnights
In the UK, we continue to outperform the industry with a strong
improvement in demand since our last announcement. Volumes are
trending above the capacity reduction of 6% and we have 12% less
left to sell versus last year as we enter the late booking period.
To date we have sold 88% of the programme. We continue to be
pleased with our price performance, especially during the lates
period, with average selling prices up by 9% and improved load
factors.
In the UK, our strategy of focusing on differentiated and
exclusive product distributed increasingly online is delivering
superior performance. Differentiated products now account for 63%
of holidays sold to date, up seven percentage points on the prior
year. All inclusive products make up 52% of all holidays sold so
far for Summer, an increase of six percentage points on the prior
year. Online sales continue to grow, accounting for 45% of Summer
2012 holidays booked, up by five percentage points on the prior
year. As a result, 90% of holidays booked so far this Summer have
been through controlled channels, up six percentage points on prior
year.
In the Nordic region, trading has been strong since our last
announcement with volumes up 6% and the programme is now 90% sold.
Demand for differentiated content continues to be strong and
accounts for 76% of bookings to date, up by five percentage points
on the prior year.
In Germany, where the programme is 84% sold, trading has been in
line with expectations since our last update. Demand for Greece has
improved, with volumes up by 4% since the last statement as a
result of competitive pricing.
In France, volumes are up by 9% since our last announcement on
weak comparatives. Bookings were adversely impacted during the same
period last year due to the bombings in Marrakech. We continue to
encounter a later bookings curve in challenging market conditions.
Whilst demand for North Africa has seen some recovery, it remains
slower than anticipated. To date we have sold 83% of the
programme.
In Belgium, where the programme is now 86% sold, trading since
our last announcement has been strong. In the Netherlands where the
programme is now 82% sold, volumes have improved since the last
trading statement.
In the Accommodation & Destinations sector (A&D),
bookings are up 9% and sales (TTV) are up 17% versus the prior
year. This was driven by both Accommodation Wholesaler (previously
referred to as B2B) where bookings were up 11% and Accommodation
OTA (previously referred to as B2C) where bookings increased by
6%.
Trading in the Specialist & Activity sector remains
positive, with sales up 3%. The performance in the Sport division
has been strong due to events such as the Olympics and the 2012
UEFA European Championships. Trading within the Education and
Adventure divisions continues to remain difficult, reflecting
overall weak demand.
Winter 2012/13
We have had an encouraging start to the Winter 2012/13
season.
In the UK, bookings are flat, in line with capacity. So far we
have sold 22% of our Winter programme in the UK. Average selling
price is up 3% and sales of differentiated product are up 9%
compared with this time last year.
In the Nordic region, we have remixed the programme with less
emphasis on long-haul and an increased capacity to medium-haul
destinations which tend to book later. As a result of this, as
anticipated volumes are down 2%. Booked load factor is currently
29%.
Fuel/Foreign exchange
We are largely hedged for the current financial year, which
gives us certainty of costs when planning capacity and pricing. The
following table shows the percentage of our forecast requirement
that is currently hedged for Euros, US Dollars and jet fuel. As
previously indicated, jet fuel costs account for approximately 10%
of our cost base and at current market rates we estimate our fuel
costs would increase by circa 10% for 2013.
Summer 2012 Winter 2012/13 Summer 2013
Euro 98% 90% 64%
US Dollars 96% 84% 52%
Jet Fuel 96% 83% 61%
As at 3 August 2012
--------------------- ------------ --------------- ------------
Cash and liquidity
The movement in operating cashflow for the third quarter ended
30 June 2012 improved by GBP52m, to an inflow of GBP666m (3-month
period ended 30 June 2011: inflow of GBP614m). This was primarily
driven by increased customer deposit levels.
The net debt position (cash and cash equivalents less loans,
overdrafts and finance leases) at 30 June 2012 was GBP556m (30 June
2011: GBP555m). This consisted of GBP502m of cash and GBP82m of
current interest-bearing loans and liabilities and GBP976m of
non-current interest-bearing loans and liabilities.
Outlook
We are pleased with the development of trading since our last
update, with the exception of France where we continue to take
actions to deliver our turnaround plan. Our strategic focus on
differentiated and exclusive products continues to build as
anticipated, particularly in the UK and Nordics where we are also
benefiting from the strength of our controlled distribution and
customers increasingly booking online with us. Overall we have less
left to sell than this time last year and margins are in line with
our expectations.
We remain confident in the flexibility and resilience of our
business model that has enabled us to absorb the impact from a
turbulent Greek political and economic situation as well as the
continued weakness of North African destinations. We are confident
of exceeding our full year expectations based on like for like
exchange rates, however, the impact of retranslation of fourth
quarter Eurozone profits at current exchange rates leaves us to
believe we will perform in line with our expectations for the
full-year.
THIRD QUARTER BUSINESS AND FINANCIAL REVIEW
Group Performance
Third quarter ended 30 June 2012
GBPm Q3 12 Q3 11 Change %
Revenue 3,690 3,774 -2%
Underlying operating profit/(loss)(1) 74 88 -16%
Underlying operating margin % 2.0% 2.3% -0.3pp
--------------------------------------- ------ ------ ---------
9-month period ended 30 June 2012
GBPm 9-month period ended 30 June 2012 9-month period ended 30 June 2011 Change %
Revenue 9,137 8,981 +2%
Underlying operating
profit/(loss)(1) (243) (219) n/a
Underlying operating margin % -2.7% -2.4% -0.3pp
----------------------------------- ---------------------------------- ---------------------------------- ---------
1Underlying operating profit excludes separately disclosed
items, amortisation of business combination intangibles,
acquisition related expenses, predecessor accounting for Magic Life
in Q3 11, interest and taxation of results of the Group's joint
ventures and associates
Group revenue decreased by 2% to GBP3,690m in Q3 12, driven by
foreign currency translation of (5%), partially offset by organic
growth of +3%. There was a negligible impact from acquisitions
during the quarter.
The Group's underlying operating profit decreased by GBP14m
against the prior year's quarterly period to GBP74m (Q3 11: profit
of GBP88m). The main drivers of the year on year change in
underlying operating profit were:
GBPm Q3 9M
Q3 11 underlying operating profit/(loss) 88 (219)
Magic Life +4 (17)
----- ------
Q3 11 underlying operating profit/(loss) incl Magic Life 92 (236)
Trading (13) +18
Easter (13) -
French tour operators +3 (3)
Corsair - (16)
Flooding in Thailand - Nordics - (13)
Investment in accommodation OTAs (2) (6)
North Africa (excluding France) - (4)
Business improvement +7 +11
FX translation - +6
----- ------
Q3 12 underlying operating profit/(loss) 74 (243)
A reconciliation of underlying operating loss to statutory
operating loss for the nine-month period ended 30 June 2012 is as
follows:
9M 12 9M 11
GBPm GBPm
Underlying operating profit/(loss) (243) (219)
Separately disclosed items (75) +28
Impairment of available for sale financial (10) -
asset
Predecessor accounting for Magic Life - (17)
Acquisition related expenses (46) (55)
Interest and taxation on results of joint ventures
and associates (1) (1)
------ ------
Statutory operating profit/(loss) (375) (264)
------ ------
Quarterly Segmental Performance
Segmental performance is based on underlying financial
information (which excludes certain items, including separately
disclosed items and acquisition related expenses).
Northern Central Western Total Emerging Specialist Total
Region Europe Europe M'stream Markets & Activity A&D Group Group
Customers ('000)
Q3 12 1,843 2,040 1,641 5,524 - 463 - - -
Q3 11(2) 1,993 2,011 1,638 5,642 - 454 - - -
Change % -8% +1% Flat -2% - +2% - - -
Revenue (GBPm)
Q3 12 1,224 1,189 733 3,146 - 347 197 - 3,690
Q3 11 1,232 1,268 782 3,282 - 308 184 - 3,774
Change % -1% -6% -6% -4% - +13% +7% - -2%
Underlying operating profit / (loss) (GBPm)(1)
Q3 12 69 17 (30) 56 (4) 13 16 (7) 74
Q3 11(1) 80 26 (37) 69 (4) 11 18 (6) 88
Change % -14% -35% +19% -19% Flat +18% -11% -17% -16%
Underlying operating margin%
Q3 12 5.6% 1.4% -4.1% 1.8% n/a 3.8% 8.1% n/a 2.0%
Q3 11 6.5% 2.1% -4.7% 2.1% n/a 3.6% 9.8% n/a 2.3%
Change % -0.9pp -0.7pp +0.6pp -0.3pp n/a +0.2pp -1.7pp n/a -0.3pp
(1) Underlying operating profit/(loss) excludes separately
disclosed items, amortisation of business combination intangibles,
acquisition related expenses, predecessor accounting for Magic Life
in Q3 11 and interest and taxation of results of the Group's joint
ventures and associates
(2) Customer figures for Germany and Switzerland have been
restated for Q3 2011 to reflect redefined product reporting
following the implementation of a new system
Mainstream Sector
The Mainstream sector reported an underlying operating profit of
GBP56m (Q3 11: GBP69m).
Northern Region
Underlying operating profit in the Northern Region reduced by
GBP11m to GBP69m (Q3 11: GBP80m).
In the UK, the result was lower than the prior year primarily
driven by the earlier timing of Easter. During the period there was
a four percentage point increase in UK controlled distribution
compared with the prior year and strong load factors.
The Nordics result was slightly behind than that of the prior
year, whilst the Hotels result was flat year-on-year. The strategic
venture with Sunwing in Canada continues to perform well,
delivering a slightly improved year on year result.
Central Europe
Central Europe reported a profit of GBP17m in Q3 12 (Q3 11:
GBP26m). The result in Germany was impacted by an earlier Easter
trading period and challenging market to Greece. The result for the
other source markets is in line with last year. The business
improvement programme delivered an improvement of GBP3m in the
quarter.
Western Europe
In Western Europe, the underlying operating loss improved by
GBP7m to GBP30m (Q3 11: loss of GBP37m). This was driven by an
underlying trading improvement in both the French tour operators
and the airline Corsair. Whilst trading conditions remain
challenging, we saw demand pick up for both Tunisia and Morocco,
particularly in the later part of the season. The business
improvement programmes in France and Jet4You delivered a GBP4m
improvement in the quarter.
Emerging Markets Sector
Emerging Markets reported an operating loss of GBP4m in Q3 12
(Q3 11: loss of GBP4m). The result reflects our continued
investment in brand and distribution.
Accommodation & Destinations (A&D) Sector
A&D reported an operating profit of GBP16m in Q3 12 (Q3 11:
GBP18m). The underlying result was flat year-on-year, but was
driven down due to GBP2m of further investment in the Accommodation
OTA (AsiaRooms). Summer 2012 bookings remain strong in both the
Accommodation Wholesaler (+11%) and Accommodation OTA (+6%)
businesses.
Specialist & Activity Sector
The sector delivered an operating profit of GBP13m in Q3 12, up
GBP2m against the prior year (Q3 11: GBP11m). Performance was
driven by the Sports division due to events such as the Olympics
and the 2012 UEFA European Championships. However, trading within
the North American Specialist and Adventure divisions remained
difficult, reflecting overall market demand and the on-going issues
in North Africa.
Separately Disclosed Items (SDIs)
Separately disclosed items net to a charge of GBP23m in the
period (Q3 11: charge of GBP30m). This is primarily due to
restructuring costs being incurred in a number of businesses,
notably in the Specialist & Activity sector from a write-down
of specific ski chalet assets as they are prepared for sale and
further restructuring costs in Germany and France.
Impairment of available for sale financial asset
The Group's investment in Air Berlin PLC is carried at fair
value, determined by reference to its equity share price at the
balance sheet date. Due to the significant and prolonged decline in
the equity share price of Air Berlin PLC, combined with its large
operating losses and the restructuring programme it has commenced,
it is considered that the investment is now impaired. In accordance
with IAS39, the diminution in value of the investment of GBP10m
(GBP7m of which was previously charged to the consolidated
statement of comprehensive income) has now been charged to the
consolidated income statement.
Financing
We remain satisfied with our funding and liquidity position. We
have three main sources of long-term debt funding - these include
the external bank revolving syndicated credit facilities totalling
GBP970m which mature in June 2015, a GBP350m convertible bond (due
October 2014) issued in October 2009, and a GBP400m convertible
bond (due April 2017) issued in April 2010. The external bank
revolving facility is used to manage the seasonality of the Group's
cash flows and liquidity.
Condensed consolidated income statement for the 9-month period
ended 30 June 2012
9-month 9-month
period ended period ended Year ended
30 June 30 June 30 September
2012 2011 2011
-------------------------------------------- ----- -------------- -------------- --------------
Note GBPm GBPm GBPm
-------------------------------------------- ----- -------------- -------------- --------------
Revenue 9,137 8,981 14,687
Cost of sales (8,663) (8,486) (13,351)
-------------------------------------------- ----- -------------- -------------- --------------
Gross profit 474 495 1,336
-------------------------------------------- ----- -------------- -------------- --------------
Administrative expenses (852) (774) (1,094)
Share of profit of joint ventures
and associates 3 15 13
-------------------------------------------- ----- -------------- -------------- --------------
Operating (loss) / profit (375) (264) 255
-------------------------------------------- ----- -------------- -------------- --------------
Analysed as:
Underlying operating (loss) / profit (243) (219) 471
Separately disclosed items 2 (75) 28 (74)
Impairment of available for sale financial
asset 3 (10) - -
Predecessor accounting for Magic Life - (17) (17)
Acquisition related expenses (46) (55) (82)
Impairment of goodwill - - (39)
Taxation on profits and interest of
joint ventures and associates (1) (1) (4)
-------------------------------------------- ----- -------------- -------------- --------------
(375) (264) 255
-------------------------------------------- ----- -------------- -------------- --------------
Financial income 67 76 83
Financial expenses (146) (167) (194)
-------------------------------------------- ----- -------------- -------------- --------------
Net financial expenses (79) (91) (111)
-------------------------------------------- ----- -------------- -------------- --------------
(Loss) / profit before tax (454) (355) 144
Taxation 167 91 (57)
-------------------------------------------- ----- -------------- -------------- --------------
(Loss) / profit for the period / year (287) (264) 87
-------------------------------------------- ----- -------------- -------------- --------------
Attributable to
Ordinary shareholders (284) (264) 85
Non-controlling interests (3) - 2
-------------------------------------------- ----- -------------- -------------- --------------
(Loss) / profit for the period / year (287) (264) 87
-------------------------------------------- ----- -------------- -------------- --------------
Notes to the interim results for the nine months to 30 June
2012
1. Basis of preparation
The unaudited financial information in this report relates to
the 9 month periods ended 30 June 2012 and 30 June 2011. This
unaudited financial information does not constitute the statutory
accounts of TUI Travel PLC within the meaning of section 434 of the
Companies Act 2006.
The unaudited financial information relating to the income
statement for the 9 month periods ended 30 June 2012 and 30 June
2011 has been prepared on the basis of the Company's Adopted IFRSs
accounting policies, which are disclosed in Note 1 of the
consolidated financial statements for the year ended 30 September
2011, except that the Group has adopted a number of amendments to
existing standards that have become effective in the current
period. These have not had an impact on the financial information
contained in this report.
2. 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.
9-month 9-month
period ended period ended Year ended
30 June 2012 30 June 2011 30 September 2011
GBPm GBPm GBPm
--------------------------------------------------------- -------------- -------------- -------------------
Separately disclosed items in operating (loss) / profit
Restructuring and other separately disclosed items 84 (28) 74
Aircraft and other assets (9) 7 -
Items relating to the prior year - - 7
--------------------------------------------------------- -------------- -------------- -------------------
Total pre-volcanic ash 75 (21) 81
Incremental costs caused by volcanic ash disruption - (7) (7)
Total 75 (28) 74
--------------------------------------------------------- -------------- -------------- -------------------
Separately disclosed financial expenses - 6 -
--------------------------------------------------------- -------------- -------------- -------------------
Restructuring and other separately disclosed items
Mainstream restructuring costs account for GBP66m of the total
incurred in the 9-month period ended 30 June 12 and principally
relate to: the restructuring programme in France where a single
tour operating business, TUI France, is being created and the
airline is also being restructured; the restructure of the Moroccan
airline Jet4You; and the ongoing restructure of the German
business.
In addition there has been a total of GBP12m restructuring costs
incurred across the Specialist & Activity and Accommodation
& Destinations Sectors as their programmes near completion.
GBP6m of this total represents the write-down of specific ski
chalet assets which are now being actively marketed for disposal
and where transactions are expected to complete within 12 months. A
total of GBP6m of costs have been incurred in Group head office
companies, being primarily to support the various restructuring
programmes around the Group.
During the 9-month period ended 30 June 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 credit of
GBP63m was included in the consolidated income statement in
relation to this curtailment, which was included as a separately
disclosed item.
Also included in the comparative 9-month period ended 30 June
2011 were restructuring costs of GBP35m. Within Mainstream the
principal items related to the ongoing restructure of Corsair, the
scheduled French airline, and the retail network of what was
Nouvelles Frontieres in France (GBP10m cost in total); the UK
(GBP9m) and Turkey (GBP5m). Outside of Mainstream the principal
items were GBP14m of restructuring costs incurred in Group head
office companies, offset by a GBP9m credit on the change in value
of unhedged foreign currency derivative instruments.
Aircraft and other assets
During the 9-month period ended 30 June 2012, profit on the sale
and leaseback of aircraft amounted to GBP9m.
During the 9-month period ended 30 June 2011, the principal
charge was 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. This charge was offset by
GBP5m profit on the sale and leaseback of aircraft and the disposal
of aircraft engines previously held for sale.
Impact of volcanic ash
During the 9-month period ended 30 June 2011, there was a
release of GBP7m of accruals as costs in relation to the disruption
in 2010 were finalised with third party suppliers.
Separately disclosed financial expenses
There have been no items of a separately disclosable nature
within financial expenses or financial income during the 9-month
period ended 30 June 2012.
The separately disclosed financial expenses in the 6 months
ended 30 June 2011 related to interest charges on the late
settlement of tax liabilities in Spain.
3. Impairment of available for sale financial asset
The Group's investment in Air Berlin PLC is carried at fair
value, determined by reference to its equity share price at the
balance sheet date. Due to the significant and prolonged decline in
the equity share price of Air Berlin PLC, combined with its large
operating losses and the restructuring programme it has commenced,
it is considered that the investment is now impaired. In accordance
with IAS39, the diminution in value of the investment of GBP10m
(GBP7m of which was previously charged to the consolidated
statement of comprehensive income) has now been charged to the
consolidated income statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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