REG - TUI Travel PLC - Interim Mgt Statement and Results for 3rd Quarter

Thu Aug 9, 2012 2:01am EDT

* Reuters is not responsible for the content in this press release.

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 results1

Statutory results

£m

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 £74m (Q3 11: £88m), 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 £52m in the third quarter compared with the same period last year.

 

·   

The business improvement programme is progressing to plan with £11m 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 at 29 April

Bookings since previous trading statement

Cumulative
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 Trading1

Summer 2012

 
 


 
 
 

YoY variation%

Total ASP2

Total
Sales2

Total
Customers2

 
Risk Only
Capacity3







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&D4

+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 £52m, to an inflow of £666m (3-month period ended 30 June 2011: inflow of £614m). 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 £556m (30 June 2011: £555m). This consisted of £502m of cash and £82m of current interest-bearing loans and liabilities and £976m 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



£m

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

 

 

£m

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 £3,690m 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 £14m against the prior year's quarterly period to £74m (Q3 11: profit of £88m). The main drivers of the year on year change in underlying operating profit were:

 

£m

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

£m

9M 11

£m

Underlying operating profit/(loss)

(243)

(219)

Separately disclosed items

(75)

+28

Impairment of available for sale financial asset

(10)

-

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 Region

Central

Europe

Western Europe

Total M'stream

Emerging Markets

Specialist & Activity

A&D

Group

Total

Group











Customers ('000)

Q3 12

1,843

2,040

1,641

5,524

-

463

-

-

-

Q3 112 

1,993

2,011

1,638

5,642

-

454

-

-

-

Change %

-8%

+1%

Flat

-2%

-

+2%

-

-

-

Revenue (£m)

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) (£m)1

Q3 12

69

17

(30)

56

(4)

13

16

(7)

74

Q3 111

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


1Underlying 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

2Customer 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 £56m (Q3 11: £69m).

 

Northern Region

 

Underlying operating profit in the Northern Region reduced by £11m to £69m (Q3 11: £80m).

 

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 £17m in Q3 12 (Q3 11: £26m). 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 £3m in the quarter.


Western Europe

 

In Western Europe, the underlying operating loss improved by £7m to £30m (Q3 11: loss of £37m). 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 £4m improvement in the quarter.

 

Emerging Markets Sector

 

Emerging Markets reported an operating loss of £4m in Q3 12 (Q3 11: loss of £4m). The result reflects our continued investment in brand and distribution.

 

Accommodation & Destinations (A&D) Sector

 

A&D reported an operating profit of £16m in Q3 12 (Q3 11: £18m). The underlying result was flat year-on-year, but was driven down due to £2m 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 £13m in Q3 12, up £2m against the prior year (Q3 11: £11m). 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 £23m in the period (Q3 11: charge of £30m). 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 £10m (£7m 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 £970m which mature in June 2015, a £350m convertible bond (due October 2014) issued in October 2009, and a £400m 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  period ended 

30 June 2012 

9-month 

period ended 

30 June 2011 

Year ended 

30 September  2011 


Note

£m 

£m 

£m 






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


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 

 period ended 

30 June 2012 

9-month 

period ended 

30 June 2011 

Year ended 

30 September  2011 


£m 

£m 

£m 

Separately disclosed items in operating (loss) / profit




Restructuring and other separately disclosed items

84

(28)

74 

Aircraft and other assets

(9)

Items relating to the prior year

- 

- 

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 £66m 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 £12m restructuring costs incurred across the Specialist & Activity and Accommodation & Destinations Sectors as their programmes near completion.  £6m 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 £6m 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 £63m, which under IAS 19 is recognised fully in the income statement in the period in which it occurs. Therefore a credit of £63m 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 £35m. Within Mainstream the principal items related to the ongoing restructure of Corsair, the scheduled French airline, and the retail network of what was Nouvelles Frontières in France (£10m cost in total); the UK (£9m) and Turkey (£5m). Outside of Mainstream the principal items were £14m of restructuring costs incurred in Group head office companies, offset by a £9m 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 £9m.

 

During the 9-month period ended 30 June 2011, the principal charge was £12m 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 £5m 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 £7m 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 £10m (£7m of which was previously charged to the consolidated statement of comprehensive income) has now been charged to the consolidated income statement.


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