TIDMTT.
RNS Number : 2327T
TUI Travel PLC
02 October 2014
2 October 2014
TUI Travel PLC
("TUI Travel")
Pre-Close Trading Update
TUI Travel PLC announces the following update on current trading
prior to entering a close period ahead of reporting its Preliminary
results for the year ended 30 September 2014 on 4 December
2014.
Peter Long, Chief Executive of TUI Travel PLC, commented:
"We are very pleased with our trading during the Summer 2014
peak season, particularly in the UK and Germany, with most of our
programmes now almost fully sold. Our strong trading and market
performance continues to be driven by increased customer demand for
unique holidays and higher conversion rates from our web platforms,
driven by our digital transformation strategy.
Our flexible and resilient business model is enabling us to
deliver sustainable, profitable growth against a backdrop of more
competitive trading in the commodity space and an increase in
airline capacity. As a result of our successful strategy, we are
confident of achieving full year underlying(1) operating profit
growth of at least 9% on a constant currency basis(2) , versus our
previous guidance of 7% to 10%."
Highlights
-- Mainstream model driving outperformance
* Full year underlying(1) operating profit growth of at
least 9% on a constant currency basis(2) , versus our
previous guidance of 7% to 10%.
* Strong high-season Summer 2014 trading closing out as
expected, with higher average selling prices across
Mainstream overall.
* Pleased with UK yield performance (ASP +1%) and flat
bookings, despite tough comparatives
* Strong trading in Germany since the end of the World
Cup with package holidays up by 22% (overall bookings
up 9%) and margins ahead of last year
* For Winter 2014/15, we have sold approximately 38% of
the overall Mainstream programme with overall
bookings up by 2%.
* Encouraging start to Summer 2015 trading with UK
bookings up by 11%.
-- Unique holidays and online focus delivering results
* High demand for unique holidays continues - accounts
for 70% of overall Mainstream Summer 2014 bookings,
up three percentage points on prior year.
* Strong online performance with Mainstream Summer 2014
online bookings up by 9%, accounting for 37% of
holidays booked, up by three percentage points on
prior year.
* Germany performance particularly encouraging with
online bookings up by 19%.
-- Online Accommodation growth
* Accommodation Wholesaler continues to consolidate its
global leadership position with double-digit TTV
growth of 17% for Summer 2014
(1) Underlying operating profit/loss excludes separately
disclosed items, acquisition related expenses, impairment of
goodwill and interest and taxation of results of the Group's joint
ventures and associates.
(2) Constant currency basis assumes that constant foreign
exchange translation rates are applied to the underlying operating
result in the current and prior year
CURRENT TRADING
Summer 2014
Summer programmes across our Mainstream markets are now almost
fully sold. The season is ending with higher average selling prices
across the Sector. Overall Mainstream bookings have traded broadly
in line with the same period last year, despite strong year-on-year
comparatives.
Unique holidays account for 70% of all Mainstream bookings, up
three percentage points compared with this time last year, whilst
online sales continue to grow, accounting for 37% of Summer
holidays booked, up by three percentage points.
Specialist & Activity is closing out in line with our
expectations and we continue to see strong trading in Accommodation
Wholesaler with TTV up by 17%.
Current Trading(1) Summer 2014
YoY variation% Total Total Total Programme sold (%)
ASP(2) Sales(2) Customers(2)
MAINSTREAM
UK +1 +1 Flat 98%
Nordics Flat -4 -4 100%
Germany Flat Flat Flat 97%
France tour operators +3 -10 -12 98%
Other(3) Flat +2 +1 97%
Total Mainstream +1 Flat -1 98%
Accommodation Wholesaler(4) +1 +17 +16 N/A
(1) These statistics are up to 28 September 2014 and are shown
on a constant currency basis
(2) These statistics relate to all customers whether risk or non
risk
(3) Other includes Austria, Belgium, Netherlands, Poland and
Switzerland
(4) These statistics refer to online accommodation businesses
only; Sales refer to total transaction value (TTV) and customers
refers to roomnights
Winter 2014/15
We remain pleased with Winter 2014/15 trading. To date,
approximately 38% of the overall Mainstream Winter programme has
been sold, in line with this time last year.
In the UK, bookings are up 5% and average selling prices are up
2%. We continue to see strong demand for our unique holidays, which
have increased by 7% and account for 84% of bookings, up three
percentage points. In particular, we are seeing high demand for
long-haul destinations such as Jamaica and Mexico, driven by the
expansion of our 787 Dreamliner fleet. Online bookings for Winter
2014/15 are up 11%, accounting for 47% of bookings, up three
percentage points on prior year. To date, approximately 34% of the
Winter programme has been sold.
In the Nordics, we have reduced capacity to strengthen our
competitive position in what remains a challenging trading
environment. A reduction in bookings of 5% reflects capacity cuts
and we are encouraged by a 2% increase in average selling prices
over the same period last year. Sales of unique holidays account
for 92% of bookings, in line with last year. Online bookings
account for 67% of bookings, up two percentage points on prior
year. To date, approximately 52% of the Winter programme has been
sold.
In Germany, bookings are up 4% and average selling prices are
down 3%. Our core unique holiday product continues to deliver in
line with expectations. To date, approximately 37% of the Winter
programme has been sold.
Accommodation Wholesaler continues to grow strongly with TTV up
by 15%, driven by the Latin American and Asian markets. We remain
encouraged by the trading performance in Specialist & Activity
with sales up 6%.
Summer 2015
We are encouraged by the strong start to UK trading for Summer
2015, with bookings up by 11%. Average selling prices are up 2%,
reflecting strong pricing in the prior year comparative. Sales of
unique holidays are up 12% compared with this time last year,
accounting for 84% of holidays sold to date, broadly in line with
the prior year. To date 16% of the programme has been sold.
FUEL/FOREIGN EXCHANGE
Our strategy of hedging the majority of our fuel and currency
requirements for future seasons, as detailed below, remains
unchanged. This 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.
Summer 2014 Winter 2014/15 Summer 2015
Euro 98% 89% 51%
US Dollars 97% 84% 66%
Jet Fuel 100% 86% 60%
As at 26 September 2014
------------------------- ------------ --------------- ------------
For the full year, we expect a negative translation impact from
the movement in the Euro and other non-Euro denominated currencies
versus Sterling of approximately GBP40m.
OTHER RECENT DEVELOPMENTS
Given the ongoing challenging trading environment for tour
operators located in the Russian and Ukrainian source markets, a
provision of GBP27m has been booked in the fourth quarter against
the loans made to our joint venture entity. This non-cash,
non-underlying item will be included within "Impairment of
financial assets."
As previously disclosed, during the fourth quarter agreement has
been reached with the Trustees of our UK defined benefit pension
schemes to make available to the members the option on retirement
to exchange non-statutory future increases in their pension with a
higher annual pension which increases only in line with inflation.
Notification to the members of this option which will be available
on their retirement occurred in September and will generate a
one-off reduction in pension liabilities of c. GBP30m. Consistent
with the similar pension transaction which concluded in the UK in
the first half of this year, this non-cash credit will be included
within separately disclosed items.
OUTLOOK
We are very pleased with our Summer 14 performance, especially
within the UK and Germany, which are on target to deliver record
profits. We also remain pleased with Winter 2014/15 trading with
Mainstream bookings up by 2% and are encouraged by a strong start
to UK trading for Summer 2015. In addition, Accommodation
Wholesaler continues to deliver double-digit top line growth.
Strong demand for our unique holidays, as well as positive
momentum in our digital transformation strategy, is helping to
drive record customer satisfaction levels. Our flexible and
resilient business model is enabling us to deliver sustainable,
profitable growth against a backdrop of more competitive trading in
the commodity space and an increase in airline capacity. As a
result of our successful strategy, we are confident of achieving
full year underlying(1) operating profit growth of at least 9% on a
constant currency basis(2) , versus our previous guidance of 7% to
10%.
(1) Underlying operating profit/loss excludes separately
disclosed items, acquisition related expenses, impairment of
goodwill and interest and taxation of results of the Group's joint
ventures and associates.
(2) Constant currency basis assumes that constant foreign
exchange translation rates are applied to the underlying operating
result in the current and prior year
Investor and Analyst Call
A brief conference call for investors and analysts will take
place today at 8.30am (BST). The dial-in arrangements for the call
are as follows:
Telephone +44 (0)1452 555 566
Participant code 1299 1805
A recording of the conference call will be available for 30 days
on:
Telephone +44 (0)1452 550 000
Participant code 1299 1805
Preliminary Results
TUI Travel will announce its preliminary results for the year
ended 30 September 2014 on 4 December 2014.
Statement of proposed merger of TUI Travel and TUI AG
Further to the announcements made by TUI Travel and TUI AG on 27
June 2014 and 25 July 2014, the Independent Directors of TUI Travel
and the Executive Board (Vorstand) of TUI AG announced on 15
September 2014 that they have reached agreement on the terms of a
recommended all-share nil-premium merger of TUI Travel and TUI AG,
which is to be implemented by way of a Scheme of Arrangement of TUI
Travel. Further announcements will be made as required.
Enquiries:
Analysts & Investors
Andy Long, Director of Strategy & Investor Tel: +44 (0)1293 645 831
Relations
Tej Randhawa, Investor Relations Manager Tel: +44 (0)1293 645 829
Sarah Coomes, Investor Relations Manager Tel: +44 (0)1293 645 827
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 (Hudson Sandler) Tel: +44 (0)20 7796 4133
APPENDIX 1
Part A
Profit Estimate
Under the City Code on Takeovers and Mergers (the "Code") the
following statement for the year ended 30 September 2014 is treated
as a profit estimate (the "Profit Estimate"):
"Full year underlying operating profit growth of at least 9% on
a constant currency basis
1 Underlying operating profit/loss excludes separately disclosed
items, acquisition related expenses, impairment of goodwill and
interest and taxation of results of the TUI Travel Group's joint
ventures and associates.
2 Constant currency basis assumes that constant foreign exchange
translation rates are applied to the underlying operating result in
the current
and prior year."
Notes
The Profit Estimate is based on:
-- the unaudited interim results of TUI Travel for the six month
period ended 31 March 2014 included in the interim results
announcement issued by TUI Travel on 13 May 2014;
-- the unaudited results of TUI Travel for the three month
period ended 30 June 2014 included in the third quarter results
announcement and interim management statement issued by TUI Travel
on 8 August 2014;
-- the unaudited management accounts of TUI Travel for the two
month period ended 31 August 2014: and
-- TUI Travel management's estimate of the results of TUI Travel
for the month ended 30 September 2014.
The basis of accounting used is consistent with the accounting
policies of TUI Travel.
Reports
As required by Rule 28.1(a) of the Code, PricewaterhouseCoopers
LLP, as reporting accountants to TUI Travel, have provided a report
stating that, in their opinion, the Profit Estimate has been
properly compiled on the basis stated and the basis of accounting
used is consistent with TUI Travel's accounting policies. In
addition Lazard & Co., Limited, as financial adviser to the
Independent Directors of TUI Travel, has provided a report stating
that, in its opinion, and subject to the terms of such reports, the
Profit Estimate has been prepared with due care and
consideration.
Copies of these reports are set out below. Each of
PricewaterhouseCoopers LLP and Lazard & Co., Limited has given
and not withdrawn its consent to the publication of its report in
the form and context in which it is included.
Part B
Report from PricewaterhouseCoopers LLP
The Independent Directors and Peter Long
TUI Travel PLC
TUI Travel House
Crawley Business Quarter
Fleming Way
Crawley
West Sussex
RH10 9QL
Lazard & Co., Limited
50 Stratton Street
London
W1J 8LL
(the "Financial Adviser")
2 October 2014
Dear Sirs
TUI Travel PLC
We report on the profit estimate made by TUI Travel PLC (the
"Company") and its subsidiaries (together the "Group") comprising
the statement of underlying operating profit at constant currency
for the year ended 30 September 2014 (the "Profit Estimate"). The
Profit Estimate and the basis on which it is prepared is set out in
Appendix 1 Part A of the announcement of the Pre-Close Trading
Update issued by the Company dated 2 October 2014 (the
"Announcement").
This report is required by Rule 28.1(a)(i) of the City Code on
Takeovers and Mergers issued by the Panel on Takeovers and Mergers
(the "City Code") and is given for the purpose of complying with
that rule and for no other purpose. Accordingly, we assume no
responsibility in respect of this report to TUI AG (the "Offeror")
or any other person connected to, or acting in concert with, the
Offeror or to any other person who is seeking or may in future seek
to acquire control of the Company (an "Alternative Offeror") or to
any other person connected to or acting in concert with an
Alternative Offeror.
Responsibilities
It is the responsibility of the independent directors of the
Company (the "Independent Directors") to prepare the Profit
Estimate in accordance with the requirements of the City Code. In
preparing the Profit Estimate the Independent Directors are
responsible for correcting errors that they have identified which
may have arisen in unaudited financial results and unaudited
management accounts used as the basis of preparation for the Profit
Estimate.
It is our responsibility to form an opinion as required by Rule
28.1(a)(i) of the City Code as to the proper compilation of the
Profit Estimate and to report that opinion to you.
Save for any responsibility which we may have to those persons
to whom this report is expressly addressed and for any
responsibility arising under Rule 28.1(a)(i) of the City Code to
any person as and to the extent therein provided, to the fullest
extent permitted by law we do not assume any responsibility and
will not accept any liability to any other person for any loss
suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and
given solely for the purposes of complying with Rule 23.3(b) of the
City Code, consenting to its inclusion in the Document.
Basis of Preparation of the Profit Estimate
The Profit Estimate has been prepared on the basis stated in
Appendix 1 Part A of the Announcement and is based on unaudited
interim results for the six months ended 31 March 2014, the
unaudited results for the three months ended 30 June 2014, the
unaudited management accounts for the two months ended 31 August
2014 and management's estimate for the month ended 30 September
2014. The Profit Estimate is required to be presented on a basis
consistent with the accounting policies of the Group.
Basis of Opinion
We conducted our work in accordance with the Standards for
Investment Reporting issued by the Auditing Practices Board in the
United Kingdom. Our work included evaluating the basis on which the
historical financial information for the three months ended 30 June
2014 included in the Profit Estimate has been prepared and
considering whether the Profit Estimate has been accurately
computed using that information and whether the basis of accounting
used is consistent with the accounting policies of the Group.
We planned and performed our work so as to obtain the
information and explanations we considered necessary in order to
provide us with reasonable assurance that the Profit Estimate has
been properly compiled on the basis stated.
However, the Profit Estimate has not been audited. The actual
results reported, therefore, may be affected by revisions required
to accounting estimates due to changes in circumstances, the impact
of unforeseen events and the correction of errors in the management
accounts. Consequently we can express no opinion as to whether the
actual results reported will correspond to those shown in the
Profit Estimate and the difference may be material.
Our work has not been carried out in accordance with auditing
standards generally accepted in the United States of America or
auditing standards of the Public Company Accounting Oversight Board
(United States) and accordingly should not be relied upon as if it
had been carried out in accordance with those standards.
Opinion
In our opinion, the Profit Estimate has been properly compiled
on the basis stated and the basis of accounting used is consistent
with the accounting policies of the Group.
Yours faithfully
PricewaterhouseCoopers LLP
Chartered Accountants
PricewaterhouseCoopers LLP is a limited liability partnership
registered in England with registered number OC303525. The
registered office of PricewaterhouseCoopers LLP is 1 Embankment
Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised
and regulated by the Financial Conduct Authority for designated
investment business
Part C
Report from Lazard & Co., Limited
The Independent Directors
TUI Travel PLC
TUI Travel House
Crawley Business Quarter
Fleming Way
Crawley,
West Sussex
RH10 9QL
2 October 2014
Ladies and Gentlemen,
Recommended all-share nil-premium merger of TUI Travel PLC ("TUI
Travel") and TUI AG ("TUI AG") (the "Merger")
We report on the profit estimate made by TUI Travel in the
announcement dated 2 October 2014 comprising an estimate of the
underlying operating profit at constant currency for the year ended
30 September 2014 (the "Profit Estimate"). The Profit Estimate and
the basis on which it is prepared is set out in Appendix 1 Part A
of the announcement of the Pre-Close Trading Update issued by the
Company dated 2 October 2014 (the "Announcement").
We have discussed the Profit Estimate and the bases and
assumptions on which it has been prepared with you as directors of
TUI Travel, the senior management of TUI Travel and with PwC, TUI
Travel's auditors. We have assumed with your consent that the
Profit Estimate reflects the best currently available estimates and
judgments of the management of TUI Travel for the period to which
it relates. We have also discussed the accounting policies and
bases of calculation for the Profit Estimate with the directors and
the senior management of TUI Travel and with PwC. We have also
considered PwC's report of today's date addressed to you and us on
this matter. You have confirmed to us that all information relevant
to the Profit Estimate has been disclosed to us.
For purposes of rendering this letter, we have, with your
consent, relied upon and assumed the accuracy and completeness of
all the financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or review by, us, without
any independent verification thereof.
On the basis of the foregoing, we consider that the Profit
Estimate, for which you as directors of TUI Travel are solely
responsible, has been made with due care and consideration.
This letter is provided to you solely in connection with Rule
28.1(a)(ii) of the City Code on Takeovers and Mergers (the "Code")
and for no other purpose. We are acting exclusively as financial
adviser to the independent directors of TUI Travel and no one else
in connection with the Merger; no person other than the independent
directors of TUI Travel can rely on the contents of this letter
and, to the fullest extent permitted by law, we assume no
responsibility and will not accept any liability to any person
other than the independent directors of TUI Travel in respect of
this letter or the work undertaken by us in connection with this
letter.
This letter is not an opinion regarding, and we express no view
as to, the reasonableness or achievability of the TUI Travel Profit
Estimate. Instead, this letter will address solely the matters
required to be addressed by Rule 28.1(a)(ii) of the Code and does
not address any other matter; it does not address, among other
things, the relative merits of the Merger as compared to any other
transaction or business strategy, the merits of the decision by TUI
Travel to engage in the Merger, the fairness to TUI Travel
shareholders of the exchange ratio in the Merger, or the price at
which TUI Travel's shares or the shares of TUI AG would trade at
any time.
Furthermore, this letter has been prepared independent of
publication of the Profit Estimate and may not be relied on by you
in recommending that TUI Travel shareholders vote to approve the
Merger. This letter is not intended to and does not constitute a
recommendation to any shareholder as to how such shareholder should
vote or act with respect to the Merger or any matter related
thereto.
Yours faithfully,
For and on behalf of
Lazard & Co., Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
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