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TUI Travel PLC (TT.)

  Print      Mail a friend       Annual reports

Tuesday 10 May, 2011

TUI Travel PLC

Interim Results for six months ended 31 Mar 11

RNS Number : 2505G
TUI Travel PLC
10 May 2011
 



10 May 2011

 

TUI Travel PLC

("TUI Travel")

 

Interim results for the six months ended 31 March 2011

 

Key Financials

 

Underlying results1

Statutory results

£m

H1 11

H1 102

Change

H1 11

H1 102

Revenue

5,205

4,969

+5%

5,205

4,969 

Operating loss

(307)

(322)

+5%

(282)

(377)

Loss before tax

(364)

(375)

+3%

(345)

(432)

1Underlying operating loss and underlying loss before tax above exclude separately disclosed items, amortisation of business combination intangibles,  acquisition related expenses and taxation of results of the Group's joint ventures and associates

2Prior year figures have been re-presented to include Jet4You which was previously reported as a discontinued operation

 

Highlights

 

·     

First half underlying operating loss improved by £15m, driven by:

 

 

-

Excellent turnaround progress, especially in Canada; and

 

 

-

Stronger underlying trading, particularly in the Nordics and Corsair.

 

·     

Improved operating result achieved despite the impact from North Africa and the later timing of Easter.

 

·     

Trading for Summer 2011 remains satisfactory:

 

 

-

Differentiated product continues to outperform;

 

 

-

Overall booking volumes remain ahead of prior year; and

 

 

-

Margins are in line with expectations.

 

·     

Net debt reduced by £171m following continued focus on cash flow initiatives.

 

·     

Agreed measures to reduce future pension liabilities.

 

·     

The Board proposes an interim dividend of 3.3p per share, an increase of 3%.

 

Peter Long, Chief Executive of TUI Travel PLC, commented

 

"I am pleased to report an improved first half operating result, particularly given the significant headwinds from political events in Egypt and Tunisia, the weak UK economic environment and the shift of the Easter peak period from Q2 to Q3 this year.

 

This result demonstrates our continued success in turning around underperforming businesses and shows the strength of our differentiated products which have allowed us to outperform the market.

 

Furthermore, our continued focus on cash flow has resulted in a good cash performance in the period. The flexibility of our business model has allowed us to react quickly to mitigate the impact of the events in North Africa in the upcoming summer season. We have re-shaped our programmes across all source markets to satisfy the shift in demand to alternative destinations, including Spain, Greece and Turkey.

 

The first half performance and our current booking position for the summer season leave us well placed to deliver the Board's expectations for the year. At this stage of the booking cycle, however, we remain cautious given the uncertain economic and geopolitical outlook".

 

A presentation for analysts and investors will be held today at 9.30am (BST) at Deutsche Bank, 1 Great Winchester Street, London EC2N 2DB. For details of the webcast please visit www.tuitravelplc.com.

 

Enquiries:

 

Analysts and Investors

 

Will Waggott, Chief Financial Officer

Tel: +44 (0)1582 645 334

Paul Rushton, Director of Investor Relations

Tel: +44 (0)1293 645 795

Press

 

Lesley Allan, Corporate Communications Director

Tel: +44 (0)1293 645 774

Michelle Jeffery, Corporate Communications Manager

Tel: +44 (0)1293 645 776

Michael Sandler / Kate Hough (Hudson Sandler)

Tel: +44 (0)20 7796 4133

 

 

CURRENT TRADING & OUTLOOK

 

Current Trading

Winter 2010/11

The winter season finished in line with expectations, with planned load factors achieved in all destinations apart from Egypt and Tunisia.

 

Current Trading 1

Winter 2010/11

 
 


 
 
 

YoY variation%

Total ASP2

Total
Sales2

Total
Customers2

 
Risk
Capacity3







MAINSTREAM






UK

+8

+13

+4


+5

Nordic region

Flat

+25

+25


+25

Northern Region

+6

+16

+9









Germany

+4

+9

+5


+6

Austria

+9

-2

-10



Switzerland

-4

-12

-8



Poland

-8

+2

+10



Central Europe

+3

+8

+5









France - tour operators

-1

+1

+1



Belgium

Flat

+11

+11



Netherlands

+6

+17

+10



Western Europe

Flat

+7

+7









SPECIALIST & ACTIVITY

N/A

+4

N/A



A&D4

+4

+23

+18









1 These statistics are up to 1 May 2011 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

Summer 2011

Trading for summer remains satisfactory, with differentiated products continuing to outperform. Since our last trading update, total Mainstream bookings are up 1% against the prior year.

YoY  customer booking variation %

Cumulative
bookings at 27 March

Net bookings since previous statement1

Cumulative
bookings at  1 May

UK

+2

-3

Flat

Nordic region

+9

+16

+10

Germany

+11

+1

+9

France - tour operators

-6

Flat

-6

Belgium

-1

+20

+2

Netherlands

+14

+14

+14

1 UK adjusted for impact of volcanic ash re-bookings and Egypt & Tunisia cancellations; including these factors bookings were 10% down

Current Trading 1

Summer 2011

 
 


 
 
 

YoY variation%

Total ASP2

Total
Sales2

Total
Customers2

 
Risk Only
Capacity3
Left to sell3








MAINSTREAM







UK

+4

+3

Flat


+1

+2

Nordic region

Flat

+10

+10


+5

-2

Northern Region

+3

+4

+1











Germany

+3

+12

+9


+6

+2

Austria

+3

Flat

-3




Switzerland

-9

-18

-10




Poland

-4

+48

+55




Central Europe

+2

+10

+8











France - tour operators

+3

-3

-6




Belgium

-2

+1

+2




Netherlands

+4

+19

+14




Western Europe

+2

+5

+3











SPECIALIST & ACTIVITY

N/A

+6

N/A




A&D4

+5

+30

+23











1 These statistics are up to 1 May 2011 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, booking volumes have slowed since our last update, with net bookings in the period 3% lower than the prior year (adjusted for the effect of re-bookings of cancelled winter holidays for summer following the closure of airspace as a result of the volcanic ash cloud and cancellations for Egypt and Tunisia this year). Since 17 April (date of the volcanic ash cloud in 2010), however, there has been a positive booking trend.

 

Total bookings to date are now flat against the prior year. Within this, our differentiated products continue to outperform, with booking volumes up 16%. Our customers also continue to appreciate the excellent value all inclusive holidays offer, which enable them to accurately budget the full holiday cost at the time of purchase. These products account for 46% of bookings to date, up from 43% last year. In the context of the difficult economic environment some customers are reducing their holiday durations with bookings for seven and 10/11 night durations increasing by 6% and 24% respectively, against a 7% reduction in 14 night holidays.

 

The Nordic region continues to trade well, with bookings driven by differentiated products, particularly the Blue Village family concept. Differentiated product volumes are currently 49% ahead of the prior year.

 

In Germany, the solid economic backdrop has helped holiday demand to remain strong. There is particularly high demand for Western Mediterranean destinations, especially the Balearics, which complements our strength in these locations. In addition, booking volumes for Greece have bounced back after civil unrest in the country affected demand in the prior year. Despite the 6% increase in capacity, load factor is currently higher than the prior year.

 

Trading remains challenging for the French tour operators, which are particularly reliant on North African destinations, and this will significantly impact profitability in the source market. The unrest has also affected bookings for holidays to Morocco and the recent terrorist incident in Marrakech has further weakened demand. In Corsair, which is not included in the above table, some of the first half trading improvement is expected to reverse in the second half as an aircraft will be taken out of service for maintenance checks and a cabin refit.

 

In the Netherlands trading remains strong with volumes tracking well ahead of capacity. After a slow start, and against a difficult market environment, our Belgian tour operator has seen a sustained improvement in booking activity in recent months. Morocco is a relatively important destination for this source market, however, and this may impact bookings in the short term.

 

Sales in the Specialist & Activity sector are up 6%, with good booking volumes in the Education division and the Specialist Holiday Group, which includes Sovereign, Hayes & Jarvis and Citalia.

 

Accommodation & Destinations (A&D) has continued to see strong growth in its wholesale and Online Travel Agency (OTA) accommodation businesses, with transaction values currently up 30%. In both segments, bednights and margins are ahead of the prior year.

 

Fuel/Foreign Exchange

 

We have hedged the majority of our fuel and currency requirements for the seasons currently on sale. The following table shows the percentage of our forecast requirement that is currently hedged for Euros, US Dollars and jet fuel. As previously indicated, at current rates, we estimate that fuel costs will increase by circa 30% in 2012.

 


Summer 2011

Winter 2011/12

Euro

92%

68%

US Dollars

97%

76%

Jet Fuel

94%

62%

As at 6 May 2011



 

Foreign exchange translation improved the underlying operating result by £8m in the first half, primarily due to the recovery of Sterling against the Euro. If exchange rates remain at current levels we anticipate that the impact on the full year will be positive.

 

Outlook

 

The second half of the year has started well, with April benefitting from the later timing of Easter. Whilst the economic environment is difficult in certain source markets, including the UK, the Group benefits from its geographical diversity (with 27 source markets and approximately two-thirds of profits generated outside of the UK).

 

The flexibility inherent in our business model means that we were able to react quickly to the situation in Egypt and Tunisia by re-shaping our summer programmes and mitigating the potential impact to the Group. In addition, our turnaround of underperforming businesses is progressing well.

 

All of the above coupled with our good first half performance, leaves us well placed to deliver the Board's expectations for 2011. At this stage of the booking cycle, however, we remain cautious given the uncertain economic and geopolitical outlook.

 

BUSINESS AND FINANCIAL REVIEW

 

Group Performance

 

Group revenue increased by 5% to £5,205m (H1 10: £4,969m).Organic revenue growth was 8%, driven by higher volumes and average selling prices in many source markets. This was partially offset by foreign exchange translation (-2%) and the strategic transaction in Canada, where we now account for the business as an associate (-1%).

 

The Group's underlying operating loss in the period was £307m (H1 10: loss of £322m), with the improvement primarily driven by delivery of the turnaround plan. This, combined with the final merger synergies, foreign exchange translation benefits and better underlying trading, offset the negative impact of the North Africa situation and the later timing of Easter.

 

The main drivers of the year on year change in underlying operating loss are summarised as:

 

               



£m

Underlying operating loss H1 10



(322)

Turnaround



+34

Incremental synergies/cost efficiencies



+10

Egypt/Tunisia



-29

Easter



-17

Trading



+9

FX translation



+8

Underlying operating loss H1 11



(307)

 

A reconciliation of underlying loss before tax to loss before tax is as follows:

 

Six months ended

31 March

2011

£m

31 March

2010

£m

Underlying loss before tax

(364)

(375)

Separately disclosed items - operating expenses

58

(24)

Separately disclosed items - financial expenses

(6)

(2)

Acquisition related expenses

(32)

(29)

Taxation on losses of joint ventures and associates

(1)

(2)

Loss before tax

(345)

(432)

 

Separately disclosed items and acquisition related expenses are further detailed in Notes 5 and 6 respectively.

 

Re-presentation of Jet4You

 

Jet4You is a low cost airline operating out of the Moroccan source market. Previously, we reported Jet4You's results as a discontinued operation as we expected to dispose of the business in the near term. A sale agreement has not yet been reached, however, so we now consider it appropriate to reclassify the business as a continuing operation. As such, the prior year figures have been re-presented to include Jet4You's results. The effect on the results for the six months ended 31 March 2010 and the year ended 30 September 2010 is summarised below:

 

6-month period ended 31 March 2010

£m

Previously Presented

Jet4You Adjustment

Re-presented

Underlying operating loss

(314)

(8)

(322)

Statutory operating loss

(364)

(13)

(377)

Underlying loss per share (pence)

(24.3)

(0.7)

(25.0)





 

Year ended 30 September 2010

£m

Previously Presented

Jet4You Adjustment

Re-presented

Underlying operating profit

447

(13)

434

Statutory operating profit

81

(18)

63

Underlying earnings per share (pence)

22.0

(1.1)

20.9





 

Segmental Performance

 

Segmental performance is based on underlying financial information (which excludes certain items, including separately disclosed items and acquisition related expenses).

 

As previously announced, with effect from 1 October 2010, the Group reorganised its business sectors, with the main change being the merger of the Specialist and Activity sectors. The segmental results for both the current and prior periods are presented under this new structure.

 

Mainstream Sector

 

The Mainstream sector reported an underlying operating loss of £295m (H1 10: £310m).

 

Mainstream

H1 11


H1 10


Change %




 



Customers ('000)1






Northern Region

2,151


2,026


+6%

Central Europe

2,622


2,693


-3%

Western Europe

2,140


2,000


+7%

Total

6,913


6,719


+3%







Revenue (£m)






Northern Region

1,585


1,439


+10%

Central Europe

1,652


1,654


Flat

Western Europe

1,093


1,023


+7%

Total

4,330


4,116


+5%







Underlying operating loss (£m)






Northern Region

(137)


(147)


+7%

Central Europe

(82)


(73)


-12%

Western Europe

(76)


(90)


+16%

Total

(295)


(310)


+5%







1 Following the strategic venture with Sunwing, customer numbers excludes Canada in both periods.

 

Northern Region

 

The Northern Region reported an underlying operating loss of £137m (H1 10: £147m). The improved result was driven by the turnaround delivered in Canada following the strategic venture with Sunwing and improved trading in the Nordic Region, offset by the impact from North Africa in the second quarter and the later timing of Easter.

 

The main drivers of the year on year change in underlying operating loss are summarised in the following table:

 

£m

UK


Nordic Region


Canada


Hotels


Northern Region

H1 10

(161)


29


(5)


(10)


(147)

Incremental synergies/cost efficiencies

+8 


-




+8 

Turnaround


-


+23 



+23 

Egypt/Tunisia

-5 


-3




-8 

Easter

-7 


-2




-9 

Trading

-8 


+9


           -


-7


-6 

FX translation

-


-


       +1


+1


         +2

H1 11

(173)


33


19 


(16)


(137)











 

Northern Region

H1 11


H1 10


Change %




 



Customers ('000)1






UK & Ireland

1,566


1,558


+1%

Nordic Region

585


468


+25%

Total

2,151


2,026


+6%







Revenue (£m)






UK & Ireland

1,065


976


+9%

Nordic region

510


401


+27%

Canada1

-


52


-100%

Hotels

10


10


Flat

Total

1,585


1,439


+10%







Underlying operating profit / (loss) (£m)






UK & Ireland

(173)


(161)


-7%

Nordic Region

33


29


+14%

Canada

19


(5)


n/a

Hotels

(16)


(10)


-60%

Total

(137)


(147)


+7%







1 From 14 January 2010, our Canadian operations have been accounted for under the equity method.  Canadian customer numbers have been excluded in both periods

 

UK & Ireland

 

The UK & Ireland businesses delivered an underlying operating loss of £173m (H1 10: £161m). The trading result was affected by two cruise ships being in extended dry dock during the first quarter. In addition, the second quarter result includes the impact of the later timing of Easter and events in Egypt and Tunisia. This was partly offset by the delivery of the final £5m of incremental synergies and £3m of further cost efficiencies in the first quarter.

 

Nordic Region

 

The Nordic Region achieved an improved underlying operating profit of £33m (H1 10: £29m), with stronger trading more than offsetting the impact of Egypt and the later timing of Easter. Volumes improved by 25% as a result of increased market share, driven by its portfolio of differentiated product and additional capacity to Thailand through the use of an aircraft transferred from the French source market.

 

Canada

 

Canada improved significantly in the first half, reporting an underlying operating profit of £19m (H1 10: loss of £5m). As anticipated, the strategic venture with Sunwing, which completed in January 2010, delivered a significant improvement in profitability during the winter months. In addition, the venture is realising its synergy plan (primarily network planning benefits and actions to remove duplicated resources) more quickly than initially anticipated. In the second half, Sunwing has initiated a new transatlantic summer programme, including flights to London, Paris and Rome.

 

Hotels

 

The Hotels division, which was previously reported within the Nordic Region due to its historic geographical focus, is reported separately as its operations now serve a number of source markets. The division comprises hotel management companies and joint ventures in hotel assets. The increased loss compared with the comparative period is due to the inclusion of winter losses for the hotel management businesses established in Turkey in 2010.

 

Central Europe

 

Central Europe reported a £9m increase in underlying operating loss to £82m (H1 10: £73m). The main drivers of the year on year change in underlying operating loss are summarised in the following table:

 

£m

Germany


Austria


Switzer'd


Poland


Central Europe

H1 10

(58)


(7)


(4)


(4)


(73)

Turnaround

-


-


-


+1


+1

Egypt/Tunisia

-6


-1


-


-


-7

Easter

-4


-


-


-


-4

Trading

-2


-1


+1


-


-2

FX translation

+3


-


-


-


+3

H1 11

(67)


(9)


(3)


(3)


(82)











 

 

Central Europe

H1 11


H1 10


Change %




 



Customers ('000)






Germany

2,375


2,453


-3%

Austria

81


86


-6%

Switzerland

129


124


+4%

Poland

37


30


+23%

Total

2,622


2,693


-3%







Revenue (£m)






Germany

1,493


1,489


Flat

Austria

67


77


-13%

Switzerland

74


70


+6%

Poland

18


18


Flat

Total

1,652


1,654


Flat







Underlying operating loss (£m)






Germany

(67)


(58)


-16%

Austria

(9)


(7)


-29%

Switzerland

(3)


(4)


+25%

Poland

(3)


(4)


+25%

Total

(82)


(73)


-12%







 

Germany

 

Germany reported an underlying operating loss of £67m (H1 10: £58m), with the increase driven by the impact of North Africa, the later Easter timing and the exit from city-pairs scheduled flying in October 2009, as these operations contributed profits in H1 2010.

 

Underlying profitability, after adjusting for these items, improved as a result of a stronger trading performance. Excluding the city-pairs flying customers in the prior year, volumes increased by 4% in the period. There was also a £3m foreign exchange translation gain in the period.

 

Other Central European businesses

 

The other Central European businesses of Austria, Switzerland and Poland performed largely in line with the prior year. Poland continued its turnaround progress following strong volume growth as the business took share in an improving market.

 

Western Europe

 

Western Europe reported an underlying operating loss of £76m (H1 10: £90m). The main drivers of the year on year change in underlying operating loss are summarised in the following table:

 

£m

France


Neth.


Belgium


Southern Europe


Jet4You


Western Europe

H1 10

(51)


(16)


(15)



(8)


(90)

Turnaround

+5 


+5 





+10 

Egypt/Tunisia

-8 



-2 


-1 



-11 

Easter

-1 



-1 




-2 

Trading

+15 


+1 


+4 


-3 


-2 


+15 

FX translation

+1 



+1 




+2 

H1 11

(39)


(10)


(13)


(4)


(10)


(76)













 

Western Europe

H1 11


H1 10


Change %







Customers ('000)






France

752


729


+3%

Netherlands

433


396


+9%

Belgium

646


577


+12%

Southern Europe

51


60


-15%

Jet4You

258


238


+8%

Total

2,140


2,000


+7%

 

 






Revenue (£m)






France

530


491


+8%

Netherlands

244


223


+9%

Belgium

243


224


+8%

Southern Europe

40


49


-18%

Jet4You

36


36


Flat

Total

1,093


1,023


+7%







Underlying operating loss (£m)






France

(39)


(51)


+24%

Netherlands

(10)


(16)


+38%

Belgium

(13)


(15)


+13%

Southern Europe

(4)


-


n/a

Jet4You

(10)


(8)


-25%


(76)


(90)


+16%







 

France

H1 11


H1 10


Change %







Underlying operating loss (£m)






Tour Operator

(36)


(28)


-29%

Airline

(3)


(23)


+87%


(39)


(51)


+24%







 

France

 

France reported an underlying operating loss reduced by £12m to £39m (H1 10: £51m). The improvement was driven by Corsair, which benefited from network planning improvements and an improved trading performance. The French tour operators have been heavily affected by events in North Africa, which is a key destination for this source market.

 

Netherlands

 

Netherlands reported an underlying operating loss of £10m, an improvement of £6m against the prior year (H1 10: £16m). This result was driven by cost reductions, airline operating efficiencies and better market conditions.

 

Belgium

 

Belgium reported an underlying operating loss of £13m (H1 10: £15m), benefiting from better airline utilisation and higher volumes.

 

Southern Europe

 

North Africa is a significant destination for our Southern European businesses, particularly for Turchese, which specialises in Egypt. This, combined with the difficult economic environment in these source markets, resulted in an operating loss of £4m (H1 10: £nil).

 

Jet4You

 

The underlying performance of the business was in line with prior year as the 2011 result includes £1m relating to 2010 depreciation following the reclassification from a discontinued to continuing operation.

 

Emerging Markets

 

The result reflects our continued investment to grow our brand presence and distribution platform in the Russian source market. The market remains highly competitive but continues to exhibit good growth characteristics and we are developing our market position to leave us well placed to take advantage of this growth.

 

Emerging Markets (share of JV)

H1 11


H1 10



Change %




 



Underlying operating loss  (£m)

(6)


(4)


-50%







 

Specialist & Activity

 

The sector reported a loss of £1m (H1 10: profit of £3m). In the first half, the timing of Easter had an adverse impact of £2m, principally affecting the Ski and Education businesses, and events in North Africa had a £1m adverse impact, predominately in the Adventure division. North American Specialist performed well following the reintroduction of tours in the private jets business following the programme reduction last year. This was offset, however, by softer demand for gap-year travel within the Education division.

 

Specialist & Activity

H1 11


H1 10


Change %







Customers ('000)

699


717


-2%







Revenue (£m)






Adventure

73


86


-15%

North American Specialist

81


71


+14%

Education

82


90


-9%

Sport

30


25


+20%

Marine

44


42


+5%

Specialist Holiday Group

319


318


Flat

Total

629


632


Flat







Underlying operating (loss) / profit (£m)





Adventure

(1)



n/a

North American Specialist



n/a

Education

(3)



n/a

Sport



Flat

Marine

(11)


(9)


-22%

Specialist Holiday Group



-22%

Total

(1) 



n/a







 

Accommodation & Destinations

 

A&D increased profits to £7m (H1 10: £3m) following continued strong volume growth in both its wholesale and OTA online accommodation business.

 

The accommodation wholesaler experienced a 19% increase in bednights as a result of strong trading in Latin America, particularly Brazil, and Asia. The accommodation OTA delivered a 17% increase in roomnights, driven by continued growth in the LateRooms.com business in the UK as well as encouraging progress in AsiaRooms. In destination management, our cruise handling business, Intercruises, delivered a good performance in the US and Canada.

 

Accommodation & Destinations

H1 11


H1 10


Change %




 



Customers ('000) 






B2B roomnights (Online)

4,956


4,148


+19%

B2C roomnights (Online)

2,673


2,281


+17%

Incoming passenger volumes

3,794


3,668


+3%







Revenue (£m)

246


221


+11%







Underlying operating profit  (£m)

7


3


+133%







 

Acquisitions and Investments

 

In the six months ended 31 March 2011, the Group invested £12m on acquisitions. In A&D, we acquired Lima Tours, a destination management business which specialises in creating and operating innovative and high value-added travel experiences in Peru, supporting the sector's strategic plan to expand in high growth emerging destinations. In Central Europe, we acquired 27 travel agencies to support our strategy of increasing the controlled distribution mix.

 

Strategic venture with Intrepid Travel

 

In April, we entered into a strategic venture with Intrepid Travel. Intrepid, based in Melbourne, handles over 100,000 customers per annum, drawn from all the key adventure source markets in the world. The transaction combines our Adventure businesses with Intrepid to create the clear global leader in adventure travel. 

 

The transaction was based on an injection of businesses into the venture by both parties and has no cash component. The Group has 60% ownership of the combined business and will fully consolidate its results. Intrepid Travel's private shareholders own the remaining 40%. The transaction is expected to drive cost synergies, primarily arising from increased economies of scale, of at least £10m per annum within the first three years.

 

Magic Life transaction

 

Magic Life is an all-inclusive club concept in the German and Austrian source markets and is an important part of the differentiated product offerings of our tour operators in these markets. It has 13 high quality clubs in prime locations in Turkey (6), Tunisia (3), Egypt (2), Greece (1) and Spain (1). We intend to acquire the operating companies that lease and manage the Magic Life clubs for a de minimis consideration of €6, which reflects the current loss making nature of the business.

 

The key strategic rationale of the transaction is to secure exclusive access to these differentiated products.  Differentiated products typically enjoy higher margins as a result of an earlier booking profile, higher customer satisfaction, more repeat bookings and an increased share of customers' total holiday spend due to the all-inclusive nature of the product. Increasing our mix of differentiated product is a key strategic imperative across all our source markets.

 

As well as securing access for our German and Austrian tour operators, we also intend to use these attractive products in our other source markets to help drive our strategy of differentiation. This will be under both the Magic Life brand and under local concepts. For example, we intend to operate two of the Turkish clubs as a Holiday Village (the family concept from the UK source market) and a Blue Village (the family concept from the Nordic source market) rather than under the Magic Life brand. We believe that this will increase the yield and occupancy ratio of the clubs and maximise the end-to-end profitability.

 

Magic Life is currently owned by TUI AG. The business has recently generated operating losses (financial year 2010 underlying operating loss: £9m) and has previously been highlighted by TUI AG as a non-core asset which may be subject to disposal. We believe that, as a result of restructuring undertaken by TUI AG prior to disposal and operating changes we plan to implement, the business will achieve a minimum break-even result by 2012. Given the related party nature of the transaction, we will seek prior approval from our minority shareholders through an Extraordinary General Meeting, in line with UKLA rules.

 

Pensions update

 

We have agreed future service benefit reductions with the members of the UK defined benefit pension schemes, the most material of which is to cap the rate of future growth of pensionable pay to a maximum of 2.5% per annum. This reduces the forecast future liability by £63m and reduces the ongoing service cost by £10m per annum.

 

We are also in advanced discussions with the Trustees of our six UK defined benefit pension schemes on a package of measures to address the ongoing funding and management of the pension schemes. These include a merger of four of the smaller schemes, and the funding of up to £275m of the aggregate deficits of the schemes utilising a partnership arrangement backed by the Thomson and First Choice brands. These measures would potentially reduce the cash funding requirement by £25m per annum.

 

Dividends

 

The Board recommends an interim dividend per ordinary share of 3.3p (H1 10: 3.2p), payable to holders of relevant shares on the register at 2 September 2011. This will be paid on 3 October 2011.

 

We intend to continue to operate a dividend re-investment plan as an alternative to the cash dividend.

 

Separately disclosed items

 

Separately disclosed items net to a £58m credit in the period (H1 10 expense: £24m). This primarily represents the £63m reduction in the UK pension scheme liability following agreement with pension scheme members to cap the rate of future growth of pensionable pay, as described above. This benefit is partially offset by restructuring costs relating primarily to our turnaround actions in the French source market, plus certain other smaller items. Further information is included in Note 5. 

 

Cash and liquidity

 

The net debt position (cash and cash equivalents less loans, overdrafts and finance leases) at 31 March 2011 was £1,182m (31 March 2010: £1,353m). This consisted of £378m of cash and £313m of current interest-bearing loans and liabilities and £1,247m of non-current interest-bearing loans and liabilities. The reduction is primarily due to a better working capital performance resulting from cash management initiatives and positive forward bookings.

 

Consolidated income statement

for the 6-month period ended 31 March 2011

 



6-month 

 period  ended 

 31 March  2011 

6-month 

 period  ended 

 31 March  2010 

(re-presented)

Year  ended 

30 September  2010 

(re-presented)


Note

£m 

£m 

£m 






Revenue

4

5,205 

4,969 

13,491 

Cost of sales


(5,011)

(4,841)

(12,309)

Gross profit


194 

128 

1,182 

Administrative expenses


(491)

(500)

(1,116)

Share of profit / (loss) of joint ventures and associates


15 

(5)

(3)

Operating (loss) / profit

4

(282)

(377)

63 

Analysed as:





Underlying operating (loss) / profit

4

(307)

(322)

399 

Separately disclosed items

5

58 

(24)

(255)

Acquisition related expenses

6

(32)

(29)

(63)

Impairment of goodwill

7

- 

- 

(12)

Taxation on results of joint ventures and associates


(1)

(2)

(6)



(282)

(377)

63 

Financial income


48 

41 

69 

Financial expenses


(111)

(96)

(186)

Net financial expenses


(63)

(55)

(117)

Loss before tax


(345)

(432)

(54)

Taxation

8

91 

113 

(50)

Loss for the period / year


(254)

(319)

(104)






Attributable to





Equity holders of the parent


(255)

(320)

(104)

Non-controlling interests


-  

Loss for the period / year


(254)

(319)

(104)

 

 

 







Pence 

Pence 

Pence 

Basic and diluted loss per share (pence) for loss attributable to the equity holders of the company during the period / year





- basic and diluted

10

(23.0)

(28.9)

(9.4) 











 

 

Consolidated statement of comprehensive income

for the 6-month period ended 31 March 2011

 



6-month 

 period  ended 

 31 March  2011 

6-month 

 period  ended 

 31 March  2010 

Year ended 

30 September  2010 



£m 

£m 

£m 

Loss for the period / year


(254)

(319)

Other comprehensive income / (expense)





Foreign exchange translation


81 

50 

(88)

Actuarial gains / (losses) arising in respect of defined benefit pension schemes


73 

(27)

(42)

Cash flow hedges:





- movement in fair value


210 

147 

33 

- amounts recycled through the consolidated income statement


(11)

41 

Foreign exchange gains recycled through the consolidated income statement


-  

(6)

(6)

Share of other movements in reserves of joint ventures and associates


-  

Changes in the fair value of available for sale financial assets


1  

 - 

(4)

Deferred tax on other comprehensive income / (expense)


(78) 

(34)

(9)

Other comprehensive income / (expense) for the period / year net of tax


276 

134 

(73)

Total comprehensive income / (expense) for the period / year


22 

(185)

(177)





Total comprehensive income / (expense) for the period / year





Attributable to:





Equity holders of the parent


21 

(186)

(177)

Non-controlling interests


Total


22 

(185)

(177)

 

 

Consolidated balance sheet

at 31 March 2011

 



31 March  2011 

31 March  2010 

(restated)

30 September  2010 


Note

£m 

£m 

£m 

Non-current assets





Intangible assets


4,680

4,758 

4,659 

Property, plant and equipment


1,004

960 

1,012 

Investments in joint ventures and associates


239

209 

211 

Other investments


80

69 

79 

Trade and other receivables


288

266 

156 

Retirement benefit asset


14

Derivative financial instruments


43

39 

21 

Deferred tax assets


181

277 

114 



6,529

6,579 

6,253 

Current assets





Inventories


70

46 

49 

Other investments


‑ 

-  

Trade and other receivables


1,739

1,667 

1,404 

Income tax recoverable


68

65 

34 

Derivative financial instruments


360

210 

144 

Cash and cash equivalents


378

402 

1,304 

Assets classified as held for sale


9

54 

57 



2,624

2,445 

2,992 






Total assets


9,153

9,024 

9,245 






Current liabilities





Interest-bearing loans and borrowings


(313)

(796)

(757)

Retirement benefits


(2)

(2)

(5)

Derivative financial instruments


(122)

(147)

(122)

Trade and other payables

13

(4,386)

(4,026)

(4,301)

Provisions


(257)

(148)

(236)

Income tax payable


(78)

(63)

(84)

Liabilities classified as held for sale


‑ 

(34)

(31)



(5,158)

(5,216)

(5,536)

Non-current liabilities





Interest-bearing loans and borrowings


(1,247)

(959)

(796)

Retirement benefits


(365)

(498)

(489)

Derivative financial instruments


(10)

(7)

(23)

Trade and other payables


(71)

(83)

(93)

Provisions


(317)

(261)

(307)

Deferred tax liabilities


(110)

(96)

(28)



(2,120)

(1,904)

(1,736)






Total liabilities


(7,278)

(7,120)

(7,272)






Net assets


1,875 

1,904 

1,973 






Equity





Share capital


112 

112 

112 

Convertible bond reserve


83 

36 

83 

Merger and other reserves


2,998 

2,935 

2,772 

Retained deficit


(1,320)

(1,181)

(995)

Total equity attributable to equity holders

of the parent


1,873 

1,902 

 

1,972 

Non-controlling interests


Total equity


1,875 

1,904 

1,973 

 

 

Consolidated statement of cash flows

for the 6-month period ended 31 March 2011

 



6-month 

 period  ended 

 31 March  2011 

6-month 

 period  ended 

 31 March  2010 

Year 

ended 

 30 September  2010 



£m 

£m 

£m 

Loss for the period / year


(254)

(319)

(104)

Adjustment for:





Depreciation and amortisation


113 

124 

261 

Impairment of intangible assets and property, plant and equipment


27 

Equity-settled share-based payment expenses


14 

(Profit) / loss on sale of property, plant and equipment


(7)

(2)

Share of (profit) / loss of joint ventures and associates


(15)

(Gain) / loss on foreign exchange


(16)

(13)

14 

Change in value of trade investment


(30)

Dividends received from joint ventures and associates


10 

Pension curtailment


(63)

Financial income


(48)

(41)

(69)

Financial expenses


111 

96 

186 

Loss from discontinued operation


13 

18 

Taxation


(91)

(113)

50 

Operating (loss) / profit before changes in working capital and provisions


(252)

(242)

 

380 

(Increase) / decrease in inventories


(20)

(Increase) / decrease in trade and other receivables


(351)

(159)

34 

(Decrease) / increase in trade and other payables


(58)

(371)

100 

Increase / (decrease) in provisions and employee benefits


29 

(35)

93 

()

Cash flows from operations


(652)

(802)

608 






Net interest paid


(36)

(34)

(57)

Income taxes paid


(40)

(22)

(34)

Cash flows from operating activities


(728)

(858)

517 

Investing activities





Proceeds from sale of property, plant and equipment


59 

16 

26 

Proceeds from disposal of investments


1 

Acquisition of subsidiaries, net of cash acquired


(16)

(22)

(51)

Proceeds from other investments


Investment in joint ventures and associates


(9)

(87)

(90)

Acquisition of property, plant and equipment and intangible assets


(129)

(113)

(204)

Cash flows from investing activities


(93)

(199)

(309)

Financing activities





Proceeds from new loans and deposits taken


471 

733 

768 

Repayment of borrowings


(448)

(11)

(257)

Payment of finance lease liabilities


(39)

(12)

(31)

Ordinary and non-controlling interest dividends paid


(122)

(35)

(120)

Acquisition of shares for share-based payments


(7)

Cash flows from financing activities


(138)

675 

353 

Net (decrease) / increase in cash and cash equivalents


(959)

(382)

561 

Cash and cash equivalents at start of period / year


1,304 

790 

790 

Reclassification to cash from assets classified as held for sale


10 

Effect of foreign exchange on cash held


23 

(6)

(47)

Cash and cash equivalents at end of period / year


378 

402 

1,304 

 

 

Consolidated statement of changes in equity for the 6-month period ended 31 March 2011

 







Equity 

Non



Share 

Merger 

Convertible

Other 

Retained 

holders

controlling



capital 

reserve 

bond

reserves

deficit 

of parent

interests

Total 


£m 

£m 

£m

£m 

£m 

£m 

£m 

£m 

At 1 October 2010

112 

2,490 

83 

282 

(995)

1,972 

1,973 

Total comprehensive income / (expense) for the period









(Loss) / profit

(255)

(255)

(254)

Other comprehensive income









Foreign exchange translation

81 

81 

81 

Actuarial gains arising in respect of defined benefit pension schemes

49 

49 

49 

Cash flow hedges

145 

145 

145 

Changes in the fair value of available for sale financial assets

Total other comprehensive income

226 

50 

276 

276 

Total comprehensive income / (expense) for the period

226 

(205)

21 

22 

Transactions with owners recorded directly in equity









Share-based payment

11 

11 

11 

Own share transactions

(9)

(9)

(9)

Dividends

(122)

(122)

(122)

Total transactions with owners

(120)

(120)

(120)

At 31 March 2011

112 

2,490 

83 

508 

(1,320)

1,873 

1,875 

 

Consolidated statement of changes in equity for the 6-month period ended 31 March 2010

 







Equity 

Non



Share 

Merger 

Convertible

Other 

Retained 

holders

controlling



capital 

reserve 

bond

reserves

deficit 

of parent

interests

Total 


£m 

£m 

£m

£m 

£m 

£m 

£m 

£m 

At 1 October 2009

(as previously reported)

112 

2,490 

 

285 

(604)

2,283 

2,286 

Restatement (Note 1)

(112)

(112)

(112)

Restated balance at 1 October 2009

112 

2,490 

285 

(716)

2,171 

2,174 

Total comprehensive income / (expense) for the period









(Loss) / profit

(320)

(320)

(319)

Other comprehensive income / (expense)









Foreign exchange translation

50 

50 

50 

Actuarial losses arising in respect of defined benefit pension schemes

(20)

(20)

(20)

Cash flow hedges

110 

110 

110 

Foreign exchange gains recycled through consolidated income statement

(6)

(6)

(6)

Total other comprehensive income / (expense)

160 

(26)

134 

134 

Total comprehensive income / (expense) for the period

160 

(346)

(186)

(185)

Transactions with owners recorded directly in equity









Share-based payment

13 

13 

13 

Own share transactions

(14)

(14)

(14)

Dividends

(118)

(118)

(2)

(120)

Issue of convertible bond

36 

‑ 

36 

‑ 

36 

Total transactions with owners

36 

(119)

(83)

(2)

(85)

At 31 March 2010

112 

2,490 

36 

445 

(1,181)

1,902 

1,904 


Notes to the consolidated interim financial statements

 

1. Basis of preparation

 

Statement of compliance

These consolidated interim financial statements for the 6-month period ended 31 March 2011 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard (IAS) 34 'Interim financial reporting' as adopted by the EU The consolidated interim financial statements should be read in conjunction with the Company's published consolidated financial statements for the year ended 30 September 2010, which were prepared in accordance with IFRS as adopted by the European Union.   

 

The consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2010 were approved by the Board of Directors on 1 December 2010 and delivered to the Registrar of Companies. The report of KPMG Audit plc, the auditors for that financial year end, was (i) unqualified, (ii) did not include a reference to any matters to which they drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

 

These consolidated interim financial statements were approved by the Board of Directors on 9 May 2011.

 

Accounting policies

 

As required by the Disclosure and Transparency Rules of the Financial Services Authority, this interim financial information has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 30 September 2010, except as noted below:

 

Taxes in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings.

 

a)     New and amended standards adopted by the Group

 

The following accounting standards and interpretations issued by the International Accounting Standards Board (IASB) or IFRS Interpretations Committee (IFRIC) have been adopted by the Group from 1 October 2010 with no significant impact on the consolidated results or financial position:

 

·   

IFRIC 17 - Distributions of Non-cash assets to owners

·   

IFRIC 18 - Transfers of assets from customers

·   

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments

·   

Amendment to IAS 32 - Financial instruments: Presentation on classification or rights

·   

Amendment to IFRS 2 -  Group Cash-settled Share-based Payment Transactions

·   

Various IFRSs - Annual improvements (2009)

 

These adoptions have not had a significant impact on the current or prior period's / year's results or balance sheet positions, and therefore no restatement of the prior period's / year equity or profit / (loss) has been presented.

 

b)     New and amended standards which are not relevant to the Group

 

·   

Amendment to IFRS 1 - First time adoption on Financial instrument disclosures

·   

Amendment to IFRS 1 - First time adoption on additional exemptions

·   

IFRIC 15 - Agreements for the Construction of Real Estate

  

c)     New interpretations and amendments to standards and interpretations that have been issued but are not yet effective

The following further new accounting standards, amendments to existing standards and interpretations are not yet effective and have not been early adopted:  

·     

Amendment to IFRS 1 - First time adoption on hyperinflation and fixed dates

·     

Amendment to IFRS 7 - De-recognition disclosures

·     

Amendment to IAS 12 - Income taxes on deferred tax

·     

Amendment to IFRIC 14 - Prepayments of a Minimum Funding Requirement

·     

IFRS 9 - Financial instruments, on Classification and measurement of financial assets

·     

IAS 24 (revised) - Related Party Disclosures

·     

Various IFRSs - Annual improvements (2010)

The Group does not currently believe the adoption of the above standard, interpretations and amendments will have a material impact on the consolidated results or financial position of the Group.

 

Restatement of prior period balance sheet

 

As disclosed on pages 70-71 of the 2010 Annual Report and Accounts, the Group restated its cumulative results for the periods ended 30 September 2009 by £112m.  The net impact of this restatement on the 30 September 2009 balance sheet was to reduce current trade and other receivables by £54m and increase current trade and other payables by £58m. 

 

The balance sheet at 30 September 2010 contained in the 2010 Annual Report and Accounts reflected this change and accordingly no restatement of that balance sheet is necessary. However, the consolidated balance sheet at 31 March 2010 has not been published since this restatement was announced. As such, the consolidated balance sheet as at 31 March 2010 is now restated for this change. The net impact of this restatement on the balance sheet is to reduce current trade and other receivables by £54m and increase current trade and other payables by £58m as at 31 March 2010. 

 

Re-presentation of prior periods' results

 

The results of the Group's business of Société d'Investissement Aérien S.A. (Jet4You) were previously separately classified as a discontinued operation for the period ended 31 March 2010 and year ended 30 September 2010. As a result of the cessation of current negotiations for the sale of this business, this business ceases to qualify as held-for-sale.

 

In accordance with IFRS 5, the results of Jet4You are presented in the consolidated income statement as continuing in both the current and comparative periods and this has resulted in the re-presentation of the comparative periods as follows:

 


6-month 

 period ended 

 31 March 2010  as previously  reported 

Impact of  the re- 

presentation of  Jet4You 

6-month 

 period ended 

 31 March 2010  as re-presented 


£m 

£m 

£m 





Revenue

4,933 

36 

4,969 

Cost of sales

(4,802)

(39)

(4,841)

Gross profit/(loss)

131 

(3)

128 

Administrative expenses

(490)

(10)

(500)

 

Operating loss

 

(364)

 

(13)

 

(377)





Analysed as:




Underlying operating loss

(314)

(8)

(322)

Separately disclosed items

(19)

(5)

(24)

Acquisition related expenses

(29)

(29)

Taxation on results of joint ventures and associates

(2)

(2)

 

Loss before tax from continuing operations

 

(419)

 

(13)

 

(432)

 

Loss after tax from continuing operations

 

(306)

 

(13)

 

(319)

 


Year ended 

 30 September  2010  as previously  reported 

Impact of  the re- 

presentation of  Jet4You 

Year ended 

 30 September   2010 as 

re-presented 


£m 

£m 

£m 





Revenue

13,400 

91 

13,491 

Cost of sales

(12,217)

(92)

(12,309)

Gross profit/(loss)

1,183 

(1)

1,182 

Administrative expenses

(1,099)

(17)

(1,116)

 

Operating profit/(loss)

 

81 

 

(18)

 

63 





Analysed as:




Underlying operating (loss) / profit

412 

(13)

399 

Separately disclosed items

(250)

(5)

(255)

Acquisition related expenses

(63)

(63)

Impairment of goodwill

(12)

(12)

Taxation on results of joint ventures and associates

(6)

(6)

 

Loss before tax from continuing operations

 

 

(36)

 

 

(18)

 

 

(54)

 

Loss after tax from continuing operations

 

 

(86)

 

 

(18)

 

 

(104)

* Refer to 'Basis of Preparation' within Note 1 of the consolidated financial statements within the 2010 Annual Report & Accounts for details

 

For the purposes of segmental reporting, the results of Jet4You are included within the Rest of Western Europe segment.

 

In accordance with IFRS 5, the current period balance sheet has been re-measured to the carrying amounts prior to the disposal group being classified as held-for-sale, adjusted for additional £1m depreciation that would have been recognised if the disposal group had not been classified as held-for-sale.

 

The balance sheet for both comparative periods have not been re-presented or re-measured, as dictated by IFRS 5. Accordingly, the comparative consolidated statement of cashflows has not been re-presented.

 

Estimates and judgements

 

The preparation of interim financial statements requires management to make estimates, judgements and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

 

Underlying measures of profit / loss

 

The Group believes that underlying operating profit / loss, underlying profit / loss before tax and underlying earnings / loss per share provide additional guidance to statutory measures to help understand the underlying performance of the business during the financial period / year.  The term underlying is not defined under International Financial Reporting Standards.  It is a measure that is used by management to assess the underlying performance of the business internally and is not intended to be a substitute measure for Adopted IFRSs' GAAP measures.  The Group defines these underlying measures as follows:

 

Underlying operating profit / loss is operating profit or loss from continuing operations stated before separately disclosed items (Note 5), the pro-forma impact of volcanic ash, acquisition related items, impairment of goodwill and taxation on the Group's share of the results of joint ventures and associates. 

 

Underlying profit / loss before tax is profit or loss from continuing operations before taxation (Group and share of joint ventures and associates), the pro-forma impact of volcanic ash, acquisition related items, impairment of goodwill and separately disclosed items included within both the operating result and net financial expenses.

 

Underlying earnings / loss used in the calculation of underlying earnings / loss per share is profit / loss after tax from continuing operations excluding the pro-forma impact of volcanic ash, acquisition related items, impairment of goodwill and separately disclosed items included within both the operating result and net financial expenses (net of related taxation).

 

It should be noted that the definitions of underlying items being used in these consolidated financial statements are those used by the Group and may not be comparable with the term "underlying" as defined by other companies within both the same sector or elsewhere.

 

Further details of the impact of the volcano, which occurred in the second half of the 2010 financial year can be found on page 72 of the Group's Annual Report and Accounts.  A reconciliation of underlying operating profit to underlying profit before tax, taking into account the impact of the volcano and the re-presentation of Jet4You, is as follows:

 


6-month 

 period ended 

 31 March 2011 

6-month 

period ended 

31 March 2010 

Year ended 

30 September  2010 


£m 

£m 

£m 

Underlying operating (loss) / profit as previously presented


(314)

447 

Impact of the re-presentation of Jet4You 


(8)

(13)

Underlying operating (loss) / profit in segmental analysis (as re-presented)


(322)

434 

Pro-forma impact of volcanic ash


(35)

Underlying operating (loss) / profit

(307)

(322)

399 

Net underlying financial expenses

(57)

(53)

(110)

Underlying (loss) / profit before tax

(364)

(375)

289 

 

Separately disclosed items

 

Separately disclosed items are those significant items which in management's judgement are highlighted by virtue of their size or incidence to enable a full understanding of the Group's financial performance.  Such items are included within the income statement caption to which they relate (Note 5).

 

Acquisition related expenses

 

Acquisition related items comprise amortisation of business combination intangibles, other acquisition related expenses and remuneration for post-combination services.

 

Funding, liquidity and going concern

 

The Directors have considered the funding and liquidity position of the Group. 

 

The Board remains satisfied with the Group's funding and liquidity position.  The main sources of debt funding as at 31 March 2011 are:

 

1.

the shareholder loan from TUI AG of €160 million which is fully drawn. This was fully repaid on 30 April 2011;

2.

the external bank £1,060 million revolving syndicated credit facilities which mature in June 2012;

3.

a £350 million convertible bond (due 2014) issued on 1 October 2009 and received on 5 October 2009;

4.

a £400 million convertible bond (due 2017) issued on 22 April 2010 and received on 27 April 2010; and

5.

Bonding and letter of credit facilities of £120 million, maturing in June 2012 except £40m which matures in September 2011.

 

The ratio of Earnings Before Interest, Taxation, Depreciation, Amortisation and operating lease Rentals (EBITDAR) to fixed charges (being the aggregate amount of interest and any other finance charges in respect of borrowings and including all payments under operating leases) and the ratio of net debt to EBITDA, which the Board believes to be the most useful measures of cash generation and gearing, as well as being the main basis for the Group's credit facility covenants, are currently well within the covenant limits.  Forecasts reviewed by the Board, including forecasts adjusted for significantly worse economic conditions, show continued compliance with these covenants.  EBITDA is Earnings Before Interest, Taxation, Depreciation and Amortisation.  For both covenants earnings are calculated on an underlying basis as described previously.

 

On the basis of its forecasts, both base case and adjusted as described above, and available facilities, the Board has concluded that the going concern basis of preparation continues to be appropriate.

 

2. Seasonality

 

The Group's travel leisure business is subject to significant seasonal fluctuations between the Winter and Summer seasons, resulting in losses being expected in the first half and profits being expected in the second half of the year.  The Group mitigates this seasonal impact through operating a broad range of holiday products in both the Winter and Summer seasons and in different global holiday markets which have different annual cycles.  There are appropriate sources of debt funding to match the seasonality of the Group's cash flows, as described in Note 1.

  

3. Principal risks and uncertainties

 

The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. The principal risks and uncertainties faced by the Group for the remainder of the financial year and which are unchanged from the prior year, are listed below: 

 

·     

Global financial factors, such as exchange rates, fuel prices and tax laws and the global  economic environment

·     

Political volatility, natural catastrophes and outbreaks

·     

Regulatory environment, particularly in relation to aviation taxes and environmental and consumer protection

·     

Changing consumer preferences

·     

Reliance on IT systems

·     

Investment into niche businesses and emerging markets

·     

Supply chain, such as dependency on the provision of services by hotel operators and airline services

 

Further details of the Group's risk profile analysis can be found on pages 20 to 23 of the Group's Annual Report and Accounts for the year ended 30 September 2010, available from the Group website: www.tuitravelplc.com.

 

4. Segmental information

 

The Group adopted IFRS 8: Operating Segments for the first time in the year ended 30 September 2010. Information regarding the identification of the chief operating decision-maker and operating segments together with the basis of measurement for the year ended 30 September 2010 is disclosed on page 82 of the Group's Annual Report and Accounts.

 

With effect from 1 October 2010, the Group reorganised its business Sectors. The main change was the merger of the Specialist and Activity sectors and simultaneously some of the European specialist businesses transferred to the Mainstream and A&D sectors. As part of the restructure, the Emerging Markets Sector now operates as a standalone entity. 

 

Segmental information for both the current and prior periods have been presented using this new structure, with the prior period information being re-presented for both this and for Jet4You classified as a continuing operation (Note 1).

 

6-month period ended 31 March 2011

 

Sector

 

Total revenue

Inter-segmental revenue

 

Total external  revenue 

 

Underlying  operating   (loss) / profit 


£m 

£m 

£m 

£m 

UK

1,102 

(37)

1,065 

(173) 

Canada

19  

Rest of Northern Region

542 

(22)

520 

17  

Total Northern Region

1,644 

(59)

1,585 

(137) 






Germany

1,503 

(10)

1,493 

(67) 

Rest of Central Europe

178 

(19)

159 

(15) 

Total Central Europe

1,681 

(29)

1,652 

(82) 






French Airline

213 

(48)

165 

(3) 

Rest of Western Europe

934 

(6)

928 

(73) 

Total Western Europe

1,147 

(54)

1,093 

(76) 






Total Mainstream

4,472 

(142)

4,330 

(295) 






Specialist & Activity

630 

(1)

629 

(1) 

Emerging Markets

-  

-  

(6) 

Accommodation and Destinations

319 

(73)

246 

7  






All other segments and unallocated items

(12) 






Total Group

5,421 

(216)

5,205 

(307) 

 

6-month period ended 31 March 2010

 

Sector

 

Total revenue (re-presented)

 

Inter-segmental revenue

 

 

Total external revenue

(re-presented)

 

Underlying operating  (loss) / profit

(re-presented)


£m 

£m 

£m 

£m 

UK

1,014 

(38)

976

(161) 

Canada

52 

52

(5) 

Rest of Northern Region

432 

(21)

411

19  

Total Northern Region

1,498 

(59)

1,439

(147) 






Germany

1,495 

(6)

1,489

(58) 

Rest of Central Europe

181 

(16)

165

(15) 

Total Central Europe

1,676 

(22)

1,654

(73) 






French Airline

183 

(35)

148

(23) 

Rest of Western Europe

877 

(2)

875

(67) 

Total Western Europe

1,060 

(37)

1,023

(90) 






Total Mainstream

4,234 

(118)

4,116

(310) 






Specialist & Activity

633 

(1)

632

3  

Emerging Markets

(4) 

Accommodation and Destinations

280 

(59)

221

3  






All other segments and unallocated items

-

(14) 






Total Group

5,147 

(178)

4,969

(322) 

  

Year ended 30 September 2010

Sector

 

Total revenue

(re-presented)

 

Inter-segmental  revenue 

Total external revenue

(re-presented)

Underlying  operating   profit / (loss)

(re-presented)


£m

£m 

£m 

£m 

UK

3,453

(61)

3,392

127 

Canada

52

-  

52

(5)

Rest of Northern Region

967

(63)

904

61 

Total Northern Region

4,472

(124)

4,348

183 






Germany

3,829

(29)

3,800

81 

Rest of Central Europe

627

(52)

575

11 

Total Central Europe

4,456

(81)

4,375

92 






French Airline

399

(56)

343

(24)

Rest of Western Europe

2,625

(13)

2,612

68 

Total Western Europe

3,024

(69)

2,955

44 






Total Mainstream

11,952

(274)

11,678

319 






Specialist & Activity

1,351

1,351

78 

Emerging Markets

-

-

(7)

Accommodation and Destinations

796

(209)

587

73 






All other segments and unallocated items

-

-

(29)






Total Group

14,099

(483)

13,616

434 

 

Reconciliation of segmental revenues to statutory revenues


6-month 

 period ended 

 31 March 2011 

6-month 

period ended 

31 March 2010 

Year ended 

30 September  2010 


£m 

£m 

£m 

Total external revenue in segmental analysis (re-presented)

5,205

4,969 

13,616 

Pro-forma impact of volcanic ash

-

(125)

Statutory revenue (re-presented)

5,205

4,969 

13,491 

Re-presentation of Jet4You revenue

-

(36)

(91)

Statutory revenue (as previously stated)

5,205

4,933 

13,400 

 

Reconciliation of underlying operating (loss) / profit in segmental analysis to operating (loss) / profit


6-month 

 period ended 

 31 March 2011 

6-month 

period ended 

31 March 2010 

Year ended 

30 September  2010 


£m 

£m 

£m 

Underlying operating (loss) / profit in segmental analysis (re-presented)

(307)

(322)

434 

Pro-forma impact of volcanic ash

(35)

Underlying operating (loss) / profit (re-presented)

(307)

(322)

399 

Separately disclosed items

58 

Acquisition related items

(32)

Impairment of goodwill

Taxation on joint ventures and associates

(1)

(2)

(6)

Operating (loss) / profit

(282)

(377)

63 

 

5. Separately disclosed items

 


6-month 

 period ended 

 31 March 2011 

 

6-month 

period ended 

31 March 2010 

(re-presented)

Year ended 

30 September  2010 

(re-presented)


£m 

£m 

£m 

Separately disclosed items in operating (loss) / profit




Merger related integration costs

34 

116 

Restructuring and other separately disclosed items

(53)

34 

63 

Aircraft and other assets

(1)

(44)

Total pre volcanic ash

(54)

24 

186 

Incremental costs caused by volcanic ash disruption

(4)

69 

Total

(58)

24 

255 

 




Separately disclosed financial expenses

2  

 

Merger related integration costs

 

The merger related integration programme has now been completed and no further costs are expected to arise in this category. 

 

Costs incurred in the comparative periods relate primarily to the costs of integration of the UK businesses and, in the Accommodation & Destinations Sector, separate First Choice and TUI Tourism incoming agencies were combined in a number of key destinations, notably Spain.

 

Restructuring and other separately disclosed items

 

During the 6-month period ended 31 March 2011, the Company engaged in a consultation process with the members of its defined benefit pension schemes to seek ways to limit future liabilities for the Company in order to help make the schemes affordable, sustainable and competitive for the future.  One of the changes which has been agreed with the members is 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 has resulted in a reduction in accrued pension liabilities measured under IAS 19 of £63m.  Under IAS 19, introducing a restriction to the extent that future salary increases are linked to the benefits payable for past service is a curtailment which is recognised fully in the Income Statement in the period in which it occurs.  Therefore in this period a £63m credit is included in the Income Statement in relation to this curtailment and it is included as a separately disclosed item. 

 

The introduction of the salary cap has also led to a change in withdrawal assumptions where it is now less beneficial for members to remain in certain schemes.  The change in this assumption has the impact of increasing the liabilities of the scheme by £15m.  Under IAS19 a change in assumption is recognised within actuarial gains and losses in the statement of changes in equity and is not in the income statement.

 

Also included in the 6-month period ended 31 March 2011 are Mainstream restructuring costs of £10m which principally relate to the ongoing restructure of Corsair, the scheduled French airline, and the retail network of Nouvelles Frontières in France.  In addition there has been £1m of restructuring costs in the Specialist and Activity sector and £7m 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.

 

Costs incurred in the 6-month period ended 31 March 2010 relate principally to £22m for the restructuring of hotel operations in Turkey and £4m for restructuring of the Canadian business as a consequence of the strategic venture transaction with Sunwing Travel Group Inc.

 

Aircraft and other assets

 

During the 6-month period ended 31 March 2011, the principal charge is £4m 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 is offset by £5m profit on the sale and leaseback of aircraft and the disposal of aircraft engines previously held for sale.

 

The £44m credit in the 6-month period ended 31 March 2010 relates to a combination of aircraft order cancellation credits and compensation for delays to the delivery of aircraft.

 

Impact of volcanic ash

 

There has been a release of £4m of accruals in the 6-month period ended 31 March 2011 as costs in relation to the disruption in 2010 are in the process of being finalised with third party suppliers.

 

Separately disclosed financial expenses

 

The separately disclosed financial expenses in the 6 months ended 31 March 2011, relate to interest charges on the late settlement of tax liabilities in Spain. (6 months ended 31 March 2010: £2m revaluation of a put option written by the Group in respect of a minority shareholder of L'TUR Tourismus AG).

 

6. Analysis of acquisition related expenses


6-month 

 period ended 

 31 March  2011 

6-month 

 period ended 

 31 March  2010 

Year ended 

30 September  2010 


£m 

£m 

£m 

Acquisition related expenses in operating (loss) / profit




Amortisation of business combination intangibles

28

24

54

Other acquisition related expenses

3

4

7

Remuneration for post-combination services

1

1

2

Total

32

29

63

 

7. Goodwill impairment charge

 

The goodwill impairment charge in the year ended 30 September 2010 of £12m related to the Italian (£7m) and Spanish (£5m) Specialist cash generating units (both now part of the Rest of Western Europe segment) as a result of a deterioration in forecast trading results compared to the prior year.

 

8. Taxation

 

The Group's effective tax rate, being tax for the 6-month period ended 31 March 2011, and the Group's underlying effective tax rate, being tax on underlying loss before tax for the same period are both 27%.

 


6-month 

 period ended 

 31 March  2011 

6-month 

 period ended 

 31 March  2010 

Year ended 

30 September  2010 


£m 

£m 

£m 

Loss before tax reported in the consolidated income statement

(345)

(432)

(54)

Adjustment for share of (profit) / loss of joint ventures and associates

(15)


(360)

(427)

(51)

Total income tax credit / (charge) in income statement

91 

113 

(50)

 

Actual tax rate

 

25.3%

 

26.4%

 

98.0%

 

The actual tax rates shown above differ from the underlying effective tax rate of 27% due to the tax effect of separately disclosed items.

 

9. Dividends

 

The following dividends relating to ordinary shares have been deducted from equity in the period:

 


6-month 

 period ended 

 31 March  2011 

6-month 

period ended 

31 March 

2010 

Year ended 

30 September  2010 


£m 

£m 

£m 

Interim dividend paid for 2010

36 

Final dividend paid for 2010

86 

Interim dividend paid for 2009

33 

33 

Final dividend paid for 2009

85 

85 

Total dividends

122 

118 

118 

 

The interim dividend in respect of the year ended 30 September 2010 of 3.2p per ordinary share, totalling £36m was paid on 1 October 2010 and deducted from equity in the period.

 

At the Company's AGM on 3 February 2011, the shareholders approved the final recommended dividend for 2010 of 7.8p per ordinary share.  The dividend was paid on 1 March 2011 and therefore its value of £86m has been recognised as a deduction from equity in the period.

 

Subsequent to the balance sheet date, the Directors have proposed an interim dividend for the 6-month period ended 31 March 2011 of 3.3p per ordinary share, totalling £37m, payable on 3 October 2011.

 

A dividend reinvestment plan is in operation.  Those shareholders who have not elected to participate in this plan, and who would like to participate with respect to the 2011 interim dividend, may do so by contacting Equiniti on 0871 384 2030.  The last day for election for the proposed interim dividend is 19 September 2011 and any requests should be made in good time ahead of that date.

 

10. Loss per share

 

The basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the applicable weighted average number of shares in issue during the period, excluding those held in the employee share ownership trusts. 

 

The diluted loss per share is calculated by:

 

·     

taking losses attributable to ordinary shareholders adjusted where the effect would be dilutive by the interest expense of the Group's convertible bond net of tax; and

·     

dividing by the adjusted weighted average number of ordinary shares and where the effect would be dilutive, outstanding share awards and the conversion to ordinary shares of the Group's convertible bond. 

 

In the accordance with IAS 33: Earnings per share, the calculations of basic and underlying diluted loss per share has not included anti-dilutive potential ordinary shares.  Therefore there is no difference between the calculation of basic and diluted loss per share in the 6-month periods ended 31 March 2011 and 31 March 2010.

 

Following the reclassification of Jet4You (see Note 1) the loss per share for the period ended 31 March 2010 and the year ended 30 September 2010 have been re-presented.  The basic and diluted loss per share increased by 1.2p for the period ended 31 March 2010 and 1.6p for the year ended 30 September 2010.

 

The additional underlying earnings per share measures have been given to provide the reader of the interim financial statements with a better understanding of the results.

 

Basic and diluted loss per share for the 6-month period ended 31 March 2011

 


Loss 6-month 

period 

 ended 31 March 

2011  

 Weighted  average  number of shares 6-month 

period 

ended 31 March 

2011 

Loss per share 6-month 

period 

ended 31 March 

2011 

Loss 6-month period 

ended 

31 March 2010 

(re-presented) 

Weighted  average  number of  shares 6-month period 

ended 

31 March 2010 

(re-presented)

Loss per  share 6-month period 

ended 

31 March 2010 

(re-presented) 


£m 

Millions 

Pence 

£m 

Millions 

Pence 

Basic and diluted loss per share

(255)

1,107 

(23.0)

(320)

1,108 

(28.9)

Acquisition related items (net of tax)

23 

2.1 

22 

2.0 

Separately disclosed items (net of tax)

(30)

(2.7)

21 

1.9 

Basic and diluted underlying loss per share

(262)

1,107 

(23.6)

(277)

1,108 

(25.0)

 

Basic and diluted loss per share for the year ended 30 September 2010 is as follows:

 


 (Loss) / earnings Year
ended

30 September 2010
(re-presented)

Weighted average

no. of shares Year ended

30 September 2010

(Loss) / earnings

per share Year ended

30 September 2010
(re-presented)


 

£m

Millions

Pence

Basic and diluted loss per share

(104)

1,107 

(9.4)

Acquisition related items (net of tax)

127 

-

11.5 

Separately disclosed items (net of tax)

208 

-

18.8 

Basic underlying earnings per share

231 

1,107 

20.9 

Effect of dilutive options

11 

(0.2)

Effect of convertible bonds

32 

144 

0.1 

Diluted underlying earnings per share

263 

1,262 

20.8 

 

11. Acquisitions and investments

 

(a) Acquisitions in the 6-month period ended 31 March 2011

 

In January 2011, the Accommodation and Destinations Sector of the Group purchased 100% of the voting equity instruments of Lima Tours S.A.C., a Peruvian based tour operator.

 

The fair values of the net assets acquired are set out below:

 


£m 

Intangible fixed assets

Trade and other receivables

Cash and cash equivalents

Trade and other payables

(4)

Total

 

Provisional goodwill arising on acquisitions in the period is calculated as follows:

 

Calculation of goodwill arising




£m

Consideration payable




5

Net assets acquired




2

Provisional goodwill arising




3

 

Contingent consideration for Lima Tours S.A.C. is also payable dependent on the future results of the acquired business and on the service of the vendors up to a maximum of £5m. In accordance with IFRS 3 (2008), this cost will be expensed as remuneration for post-combination services in the income statement over the earn-out period, which ends in December 2013.

 

In addition to the above, in line with our distribution strategy in Central Europe, the Group acquired 27 individually immaterial Central European travel agencies in separate transactions and one cruise handling business for a total of £6m cash consideration, resulting in goodwill and intangibles of £6m. All acquisitions have been accounted for using the purchase method.

 

For current period acquisitions certain fair value adjustments and the value of contingent consideration have necessarily been prepared on a provisional basis due to the recent timing of certain acquisitions and the periods over which contingent consideration may become payable.  Experience may result in revisions to fair values in the subsequent accounting period.

 

Provisional goodwill arising in respect of current year acquisitions represents principally:

 

·     

Increased market knowledge and share of particular geographic areas;

·     

The employee workforce of the acquired businesses; and

·     

The ability to sell acquired product through existing channels and existing product through acquired channels.

 

The total cash outflow in the period from acquisition of subsidiaries and travel agencies (net of cash acquired) was £16 million, which comprised £7 million relating to current period acquisitions and £9 million relating to prior period acquisitions.

 

(b) Income statement

 

The acquired businesses and travel agents contributed revenues of £6m during the 6-month period ended 31 March 2011 with no material impact on profit after tax.

 

If the businesses and travel agencies that were acquired at various times during the period ended 31 March 2011 had been part of the Group since 1 October 2010, Group revenue would have increased further by £5m with no material impact on profit after tax.

 

(c) Acquisitions after the balance sheet date

 

On 4 April 2011, the Group entered into a strategic venture in which it acquired 60% of the equity share capital of the company headed by Intrepid Travel Group Limited ("Intrepid"), based in Melbourne, Australia.  The consideration paid for Intrepid was 40% of the share capital of the Group's existing Adventure businesses.  The result of the transaction is that the Group owns 60% of the newly formed group, called "PEAK", combining its adventure businesses with Intrepid to form a leading position in the adventure and experiential travel market. The Group will consolidate PEAK from the date that control passed on 4 April 2011, with 40% held by non-controlling interest shareholders.

 

The acquisition of the 60% of the Intrepid businesses will be treated as a business combination in accordance with IFRS 3 (revised), and the disposal of 40% of the TUI Adventure businesses will be treated in accordance with IAS 27 (revised), with any difference between the fair value and book value of the assets disposed being presented as a change in equity.

 

A review of the assets and liabilities acquired, including the identification and valuation of intangible assets such as brands, is still ongoing and therefore no fair value table has been presented in this Interim Report.  Consequently the resulting goodwill arising from the transaction has not yet been determined.

 

If Intrepid had been part of the Group from 1 October 2010 then the turnover of the Group would have been £30m higher than that reported.  Until the acquisition accounting has been completed, it is not possible to assess the impact on the Group's loss had Intrepid been part of the Group from 1 October 2010.

 

12. Acquisitions of property, plant and equipment and intangible assets

 

Payments made for additions of property, plant and equipment and intangible assets totalled £129m in the six month period to 31 March 2011. This comprised £10m for land and buildings, £33m for yachts, motor boats and cruise ships, £21m for aircraft and related equipment, £28m for computer hardware and software and £37m of other equipment.

 

13. Trade and other payables

 

6-month 

 period ended 

 31 March  2011 

6-month 

period ended 

31 March 2010 

Year ended 

30 September 2010 


£m 

£m 

£m 

Customer deposits

2,388 

1,972 

1,513 

Other

1,998 

2,054 

2,788 

Trade and other payables

4,386 

4,026 

4,301 

 

14. Movements in cash and net debt

 


Cash 

and cash 

equivalents 

Convertible bonds 

Amounts  due to  related  parties 

 

Bank  loans 

 

 

Loan  notes 

 

Finance  Leases 

Other financial  liabilities

 

 

Total 


£m 

£m 

£m 

£m 

£m 

£m 

£m

£m 










At 1 October 2010

1,304 

(633)

(575)

(36)

(2)

(269)

(38)

(249)

Cash movement

(959)

438 

(461)

39 

(943)

Non-cash movement

10 

(12)

(4)

(5)

Foreign exchange

23 

(4)

(1)

(1)

(1)

(1)

15 

At 31 March 2011

378 

(645)

(141)

(498)

(2)

(235)

(39)

(1,182)

 


 

Cash 

and cash 

equivalents 

Convertible 

bonds 

Amounts  due to  related  parties 

 

 

Bank  loans 

 

 

Loan  notes 

 

 

Finance  Leases 

 

Other financial liabilities

 

 

Total 


£m 

£m 

£m 

£m 

£m 

£m 

£m

£m 










At 1 October 2009

790 

(840)

(51)

(6)

(192)

(39)

(338)

Cash movement

(382)

(350)

(372)

12 

(1,092)

Non-cash movement

55 

(1)

54 

Foreign exchange

(6)

22 

(2)

24 

Arising on acquisition

(1)

(1)

At 31 March 2010

402 

(295)

(818)

(415)

(6)

(183)

(38)

(1,353)

 

15. Capital commitments

 

The following amounts have been contracted but not provided for at the balance sheet date:

 



31 March 

2011 

31 March 

2010 

30 September 

2010 



£m 

£m 

£m 

Capital commitments


 

In addition to the above items, the Group has contracted to purchase forty-three aircraft and related spares. The Group intends to refinance these aircraft and related spares in advance of their delivery dates and therefore does not expect to use its own cash resources for their purchase.

 

16. Contingent liabilities

 

The Group is at any time defending a number of actions against it arising in the normal course of business.  Provision is made for these actions where this is deemed appropriate, which includes a provision of €28m in relation to Spanish tax affairs where we are still in discussion with the Spanish tax authorities as detailed on page 97 of the Group's Annual Report and Accounts for the year ended 30 September 2010.  No actions which are outstanding at 31 March 2011 are expected to have a material effect on these accounts.  The Directors consider that adequate provision has been made for all known liabilities.

 

17. Related party transactions

 

(a) Ultimate controlling party

 

The Group's ultimate controlling party is TUI AG, a company registered in Berlin and Hanover (Federal Republic of Germany).

 

(b) Related party transactions

 

On 29 June 2007 the Company entered into the Shareholder Loan Agreement with TUI AG under the terms of which TUI AG will lend a maximum amount of €2 billion (£1.9 billion) to the Company for general corporate purposes.  At the beginning of the period, the net balance owed to TUI AG under the Agreement was €0.7 billion (£0.6 billion).  The facility has remained in place throughout the 6-month period and the net balance at 31 March 2011 was €0.2 billion (£0.1 billion) including accrued interest of £4 million, following repayment of €0.5 billion of the loan in December 2010.

 

The Group also held receivables of £19 million and payables of £52 million with TUI AG and its subsidiaries, which arose through the normal course of business, including under the Hotel Framework Agreement and Trademark Licence Agreement, details of which are set out in Note 30 of the Group's 2010 consolidated financial statements.   During the current and prior financial periods the Group transacted with its joint ventures and associates in the normal course of business.  These transactions did not have a significant impact on the result for the periods.

 

18. Post balance sheet events

 

(a) Shareholder loan

 

On 30 April 2011, the final €160m of the shareholder loan principal amount was repaid to TUI AG in line with the agreed repayment schedule. 

 

(b) Acquisitions

 

Details of acquisitions since 31 March 2011 are disclosed in Note 11(c).

 

Responsibility statement of the Directors in respect of the half yearly financial statements

 

The Directors confirm that to the best of their knowledge:

·     

the consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

 

·     

the interim management report includes a fair review of the information required by:

 

 

(a)

DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the consolidated set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b)

DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The Directors of TUI Travel PLC are listed on page 48 of the TUI Travel PLC Annual Report for the year ended 30 September 2011, with the exception of the following changes in the period: Paul Bowtell resigned on 31 December 2010; Jeremy Hicks resigned on 31 January 2011; Giles Thorley resigned on 31 January 2011 and Minnow Powell was appointed on 4 April 2011.

 

 

On behalf of the Board of Directors

 

Will Waggott

Chief Financial Officer

9 May 2011

 

 

Independent review report to TUI Travel PLC

 

Introduction

We have been engaged by the Company to review the consolidated set of interim financial statements in the half-yearly financial report for the six months ended 31 March 2011, which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of cash flows, the consolidated statement of changes in equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated set of interim financial statements.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The consolidated set of interim financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the consolidated set of interim financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the consolidated set of interim financial statements in the half-yearly financial report for the six months ended 31 March 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

PricewaterhouseCoopers LLP

Chartered Accountants 

Uxbridge

9 May 2011


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