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TUI Travel PLC (TT.)

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Tuesday 07 February, 2012

TUI Travel PLC

1st Quarter Results for the 3 months ended 31Dec11

RNS Number : 9257W
TUI Travel PLC
07 February 2012
 



 

 

7 February 2012

TUI Travel PLC

("TUI Travel")

 

First Quarter Results for the three months ended 31 December 2011 and Interim Management Statement

 

 

Key financials

 

First quarter ended 31 December 

 

Underlying results1

Statutory results

£m

Q1 12

Q1 112

Change%

Q1 12

Q1 112

Revenue

2,845

2,716

+5%

2,845

2,716

Operating loss

(109)

(86)

-27%

(131)

(117)

1Underlying operating loss excludes separately disclosed items, amortisation of business combination intangibles, acquisition related expenses, predecessor accounting for Magic Life and interest 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, and to incorporate the results of Magic Life under predecessor accounting

Highlights

 

·   

Winter 2011/12 and Summer 2012 bookings overall have progressed as anticipated since our last update, with an improvement in the cumulative booked position in all key source markets.

 

 

·   

As expected, underlying operating loss for the quarter increased by £23m, principally driven by lower demand for North African destinations.

 

 

·   

Business improvement programme progressing to plan.

 

 

·   

Improved UK Winter trading with load factors and late sales margins ahead of the prior year.

 

 

·   

Outperformed the UK leisure travel market, as defined by GFK Ascent, during the key booking period in January:

 

 


·     

TUI Summer 2012 bookings flat versus -14% for total market.

 

·   

Our business strategy to grow differentiated product and to be online driven is progressing well:

 

 


·     

Differentiated product currently accounts for 64% of UK bookings for Summer 2012, up seven percentage points on prior year.

 

 


·     

UK Summer 2012 differentiated product volumes up 16% in January versus prior year.

 

 


·     

UK Mainstream websites occupy a number one position in online travel*.

 

 


·     

Thomson website visits up 11% and First Choice up 45% in January versus prior year.

 

 


·     

Online bookings up 19% for Winter and 16% for Summer 2012 in January versus prior year.

 

 


·     

Increase in holidays booked online in the UK during January: 49% booked online for Winter, up ten percentage points versus prior year and 42% for Summer, up six percentage points versus prior year.

 

 


·     

Summer 2012 online accommodation bookings in the Accommodations & Destinations Sector up 21% to date on the prior year.

 

 


* Hitwise

 

 



 

Peter Long, Chief Executive of TUI Travel PLC, commented

 

"We are satisfied with the progress in trading since our last update and are particularly pleased with the performance of differentiated product, which continues to book earlier, demonstrating the resilience of our business model. We are also pleased with the development of bookings and pricing in the UK, where we have outperformed the market during the key booking period in January. We have also had a particularly good performance in online sales. We believe that this outperformance reflects the trust that customers place in our market leading brands.

 

"As anticipated, underlying operating loss for the quarter increased principally due to lower demand for North African destinations.

 

"Our performance remains in line with our expectations and the flexibility of our business model means that we are able to manage capacity to match profitable demand.  In addition, our business improvement programme is progressing according to plan. These self-help measures, coupled with our strategy of increasing differentiated product, controlled distribution and online sales, will help us to deliver in the current challenging macro-economic environment."

 

Investor and Analyst Conference Call

 

A conference call for investors and analysts will take place today at 8.00am (GMT). The dial-in arrangements for the call are as follows:

 

Telephone:

+44 (0)1452 555 566

Participant Code:

48883360

 

A presentation to accompany the conference call will be made available at 7.30am (GMT) via our corporate website:

 

http://www.tuitravelplc.com

 

A recording of the conference call will be available for 30 days on:

 

Telephone:

+44 (0)1452 550 000

Participant Code:

48883360#

 

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 645 774

Michael Sandler / Kate Hough (Hudson Sandler)

Tel: +44 (0)20 7796 4133

 

 



 

CURRENT TRADING

 

Winter 2011/12

 

Trading for Winter has been encouraging since our last update on 5 December 2011. The cumulative booked position has improved in all of our key source markets, reflecting the anticipated later booking profile.

 

YoY customer booking variation %

Cumulative
 bookings at 27 Nov

Bookings since previous
trading statement

Cumulative
bookings at 29 Jan


 
 
 

UK

-12
 
-6
 
-10
 

Nordic region

Flat
 
+17
 
+3
 

Germany

-8
 
+4
 
-4
 

France tour operators

-12
 
-7
 
-10
 

Belgium

+2
 
+16
 
+6
 

Netherlands

+15
 
+27
 
+18
 

 

Current Trading1

Winter 2011/12

 
 
 


 
 
 

YoY variation%

Total ASP2

Total

Sales2

Total

Customers2

 
Risk Only
Capacity3
Left to sell3







MAINSTREAM






UK

+5

-5

-10


-9

Nordic region

Flat

+3

+3


+4

Northern Region

+4

-2

-5









Germany

+4

-1

-4


-13

Austria

Flat

-7

-7



Switzerland

-13

-20

-9



Poland

+13

+49

+32



Central Europe

+3

-1

-4









France tour operators

-1

-11

-10



Belgium

-2

+4

+6



Netherlands

+6

+25

+18



Western Europe

Flat

+3

+3









SPECIALIST & ACTIVITY

N/A

+8

N/A



A&D4

+4

+21

+16










1These statistics are up to 29 January 2012
2These statistics relate to all customers whether risk or non-risk

3These 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, bookings since our last announcement have improved, with volumes continuing to trend towards the capacity reduction of 9% and have less left to sell versus last year. Booked load factor is currently 71%, broadly in line with last year. We are pleased with our price performance, with average selling prices up 5% in light of inflationary cost increases and increased differentiated sales. Demand for differentiated products continues to be strong with volumes up 15%. These products now account for 62% of our sales, up 12 percentage points on prior year. As anticipated, North Africa remains challenging with volumes down 23%. Across our programme strong demand in the lates booking period has resulted in improved load factors for November, December and January.  

 

In Canada, we are continuing to trade strongly, following capacity expansion to Mexico and the Caribbean.

 

In the Nordic region, volumes since our last announcement are up 17% and the Winter programme is now 92% sold, broadly in line with prior year. Demand for Thailand continues to be weak following the flooding in Bangkok. Demand for differentiated products continues to be strong with volumes up 31% on prior year.

In Germany, bookings since our last announcement are up 4% leading to improved load factors year on year for December and January. Demand for North Africa remains weak, with volumes down 37%, however volumes for the Canaries have offset some of this decline, with customer numbers up 16%. Load factors for the remaining months of the Winter season are ahead of prior year. The late selling market has benefited our direct seller L'tur with volumes up 18% since our last announcement.

 

In France, the market continues to be impacted by the weaker demand for North Africa. For the French tour operators volumes to North Africa are down 23%.

 

In Belgium and the Netherlands, bookings have been strong since our last announcement, reflecting an increase in capacity in those source markets.

 

Trading in the Specialist & Activity sector remains positive, with sales up 8%.

 

In the Accommodation & Destinations sector (A&D) bookings are now up 16% driven by the B2B division, where bookings are up 20%. Volumes in B2C have improved since our last update and are now 9% ahead of last year.

 



 

Summer 2012

 

Since our last announcement the markets outside of Northern Region have launched their Summer 2012 brochures. Early trading has been in line with expectations, against what was a strong comparative period.

 

YoY customer booking variation %

Cumulative
 bookings at 27 Nov

Bookings since previous
trading statement

Cumulative
bookings at 29 Jan


 
 
 

UK

-11
 
-1
 
-7
 

Nordic region

-14
 
-6
 
-8
 

 

Current Trading1

Summer 2012

 
 
 


 
 
 

YoY variation%

Total ASP2

Total

Sales2

Total

Customers2

 
Risk Only
Capacity3
Left to sell3







MAINSTREAM






UK

+8

Flat

-7


-9

Nordic region

+2

-6

-8


Flat

Northern Region

+7

-1

-7









Germany

+2

-2

-4


-8

Austria

-2

-6

-4



Switzerland

-5

+1

+6



Poland

Flat

+41

+41



Central Europe

+1

-1

-3









France tour operators

+4

-10

-13



Belgium

-5

-6

-1



Netherlands

+4

-1

-6



Western Europe

Flat

-5

-5









SPECIALIST & ACTIVITY

N/A

+3

N/A



A&D4

+11

+34

+21










1These statistics are up to 29 January 2012

2These statistics relate to all customers whether risk or non-risk
3These 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 have significantly outperformed the market in the month of January where volumes have continued to improve and are now ahead of our 9% capacity reduction, with 35% sold to date, which is in line with prior year. Capacity has been reduced for North Africa and the Eastern Mediterranean, with some of this reduction offset by increased capacity in the Canaries. Turn of year trading has been ahead of expectations and we are particularly pleased with our online performance. We have continued to increase the proportion of holidays sold online with 42% booked online for Summer 2012, up six percentage points versus the prior year. Average selling price is currently up 8% reflecting cost base inflation of approximately 5% and the continued increase in differentiated content.

 

This Summer is the first season that First Choice will be exclusively all inclusive. The attractiveness of all inclusive holidays, particularly in the current economic environment, is demonstrated by all inclusive products making up 55% of bookings to date, up seven percentage points on prior year. As we continue to expand our differentiated offering, which traditionally books earlier, these products have accounted for 64% of bookings to date, up seven percentage points on the prior year.

 

In the Nordic Region, trading has improved since our last update, with volumes now down 8% on last year and average selling price up 2%. To date we have sold 29% of the programme. Despite the reduction in volumes, differentiated content continues to increase within the sales mix, with these products accounting for 81% of bookings to date, up seventeen percentage points on prior year.

 

In Germany, where the programme is 26% sold (broadly in line with prior year), volumes are currently down 4% against a very strong position this time last year, however, we are seeing a weekly improvement in volumes. The reduction in volumes is driven by Greece, due to the change in consumer sentiment towards the destination, with volumes down 27%, and the continued impact of North Africa where volumes were strong at this stage last year. This is reflected in our capacity reduction of 8%.

 

In France, volumes are down 13% to date, due to the difficult trading background we are encountering, particularly in North Africa. We are very early in the booking cycle for France and have sold just over 12% of the programme. The joint capacity management across the French tour operators which we began in Winter 2011/12 will allow us to balance capacity, especially to North Africa.

 

Early trading in the Netherlands and Belgium has been in line with our expectations as we continue to encounter later booking profiles in both markets. With 25% of the programme now sold (broadly in line with prior year), volumes in Belgium are down 1% year on year. Compared to very strong early trading last year, volumes in the Netherlands are 6% behind this stage of Summer 2011, with 27% of the programme sold to date.

 

Sales in Specialist & Activity are up 3% on prior year. The Adventure division continues to be affected by lower demand for North Africa, however, trading in the Sport division has benefited from our role as official tour operator for the 2012 UEFA European Championships.

 

In A&D, bookings are up 21% versus prior year, driven by both the B2B (up 22%) and B2C (up 14%) divisions. The strong trends experienced in the Winter season have continued for Summer 2012.

 

Fuel/Foreign exchange

 

We are largely hedged for the current financial year, which gives us certainty of costs when planning capacity and pricing.

 


Winter 2011/12

Summer 2012

Euro

100%

95%

US Dollars

92%

92%

Jet Fuel

93%

84%

As at 2 February 2012



 

 



 

FIRST QUARTER BUSINESS AND FINANCIAL REVIEW

 

Group Performance

 

First quarter ended 31 December

 

Underlying results1

Statutory results

£m

Q1 12

Q1 112

Change%

Q1 12

Q1 112

Revenue

2,845

2,716

+5%

2,845

2,716

Operating loss

(109)

(86)

-27%

(131)

(117)

1Underlying operating loss excludes separately disclosed items, amortisation of business combination intangibles, acquisition related expenses, predecessor accounting for Magic Life and interest 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, and to incorporate the results of Magic Life under predecessor accounting

Group revenue increased by 5% to £2,845m (Q1 11: £2,716m). Organic revenue growth was 4%, driven by strong pricing across the Group and volume growth in A&D. The annualisation impact of acquisitions in the prior year increased revenues by 1%.

 

The Group's underlying operating loss increased by £23m against the prior year to £109m (Q1 11: loss of £86m). The main drivers of the year on year increase in underlying operating loss were:

 

£m


Q1 11 underlying operating loss

(86)

Magic Life Winter losses

(7)

Q1 11 underlying operating loss (incl Magic Life Winter losses)

(93)

UK pension cost saving

2

French tour operators

(10)

North Africa (excluding France)

(14)

Investment in accommodation Online Travel Agents (OTAs)

(1)

FX translation

1

Trading

6

Q1 12 underlying operating loss

(109)



 

A reconciliation of underlying operating loss to statutory operating loss is as follows:

 

 

Q1 12

£m

Q1 11

£m

Underlying operating loss

(109)

(86)

Separately disclosed items

(5)

(7)

Predecessor accounting for Magic Life

-

(7)

Acquisition related expenses

(17)

(16)

Interest and taxation on results of joint ventures and associates

-

(1)

Statutory operating loss

(131)

(117)

 

 

 

 

Segmental Performance

 

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

 

As previously announced, we reported Jet4You's results as a discontinued operation in the first quarter of the prior year, as we expected to dispose of the business in the near term. As a sale agreement has not been reached, the prior year figures have been re-presented to include Jet4You's results. In addition, the impact of predecessor accounting for Magic Life is included within the revenue figures for the Hotels division.

 



 


Northern Region

Central Europe

Western Europe

Total M'stream

Emerging Markets

Specialist & Activity

A&D

Group

Total Group











Customers ('000)

Q1 12

1,159

1,357

1,183

3,699

-

242

-

-

3,941

Q1 113

1,209

1,350

1,178

3,737

-

259

-

-

3,996

Change %

-4%

+1%

Flat

-1%

-

-7%

-

-

-1%

Revenue (£m)

Q1 12

839

966

596

2,401

-

293

151

-

2,845

Q1 112

826

928

583

2,337

-

249

130

-

2,716

Change %

+2%

+4%

+2%

+3%

-

+18%

+16%

-

+5%

Underlying operating (loss)/profit (£m)1

Q1 12

(36)

(15)

(34)

(85)

(9)

(15)

8

(8)

(109)

Q1 112

(39)

(14)

(19)

(72)

(3)

(9)

(6)

(86)

Change %

+8%

-7%

-79%

-18%

-200%

-67%

+100%

-33%

-27%


1Underlying operating (loss)/profit excludes separately disclosed items, amortisation of business combination intangibles, acquisition related expenses, predecessor accounting for Magic Life and interest 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, and to incorporate the results of Magic Life under predecessor accounting

3Customer figures for Germany and Switzerland have been restated for Q1 2011 to reflect redefined product reporting following the implementation of a new system

Mainstream Sector

 

Northern Region

 

Underlying operating loss in the Northern Region reduced by £3m to £36m (Q1 11: loss of £39m).

 

In the UK, the result improved versus prior year. Adverse trading as a result of the continued impact of unrest in North Africa was offset by airline pension cost savings of £2m. The result also benefited from a four percent increase in controlled distribution compared with the prior year and strong load factors during the period.

 

The Nordic region result was flat year-on-year, with bookings to Thailand adversely impacted by the flooding in Bangkok. This was mitigated by an increase in volumes to alternative destinations, such as the Canaries, and cost actions.

 

The strategic venture with Sunwing in Canada continues to perform well, delivering an improved result in the quarter, mainly due to higher volumes.

 

As anticipated, the Hotels result was down year-on-year due primarily to the inclusion of Winter losses for the Magic Life properties acquired in July 2011, which are included under predecessor accounting for the prior year.

 

Central Europe

 

Underlying operating loss in Central Europe increased by £1m to £15m (Q1 11: loss of £14m). The result in Germany improved, with adverse trading to North African destinations offset by increased sales to other destinations such as the Canaries, and a strong performance by our lates retailer, L'tur. The improvement in Germany was offset by the results for the other Central Europe source markets, where trading conditions have been challenging.

 

Western Europe

 

In Western Europe, underlying operating loss increased by £15m to £34m (Q1 11: loss of £19m). As expected, the French result was adversely impacted by lower demand for Tunisia, Egypt and Morocco, which were unaffected by political unrest in the comparative period. Unfavourable hedging on fuel costs versus prior year led to a deterioration of results at Corsair in the quarter, however, this is expected to improve going forwards.

 

Emerging Markets Sector

 

In the Emerging Markets Sector, our Russian business suffered, particularly in the first quarter, due to the continued impact of unrest in Egypt. Underlying operating losses were £9m (Q1 11: loss of £3m).

 

Specialist & Activity Sector

 

The Specialist & Activity Sector reported an underlying operating loss of £15m, down £6m on prior year (Q1 11: loss of £9m). The adverse variance to prior year was driven primarily by the Specialist Holiday Group, Education and Adventure divisions, partly offset by North American Specialist.

 

The Specialist Holidays Group result was adversely affected by poor snow conditions in key ski resorts in October and November, which have since improved, but with margins adversely affected in December. In Education, trading remains subdued due to the challenging economic climate, in particular on premium products such as School Ski, and a weakness in gap year travel due to a rise in university tuition fees. In addition, the Adventure division continues to experience lower demand for North African and Australian holidays (the latter being due to the strong Australian dollar) which offset the inclusion of the results of the strategic venture with Intrepid Travel, which began in April 2011.

 

The North American Specialist division benefited from increased demand in its Starquest business (private jet tours), with six tours offered in the quarter compared with two tours in the prior year. In addition occupancy rates improved within the Quark polar cruising business.

 

Accommodation & Destinations (A&D) Sector

 

The A&D Sector reported an underlying operating profit of £8m (Q1 11: £4m). In the B2B division volumes increased due to continued growth in the source markets and destinations of the Americas and Asia and demand for the destinations of Spain and Cape Verde which helped to offset the impact of reduced volumes to North Africa. Volumes in the B2C division also improved, driven by increased brand awareness following marketing campaigns in 2011 and investment to improve conversion rates. This was partly offset by a further £1m investment in the accommodation OTA. AsiaRooms performed well during the quarter with bookings and conversion rates ahead of our initial expectations. Intercruises reported a good start to the year with 2,000 port calls achieved in the quarter.

 

Separately disclosed items (SDIs)

 

SDIs in the quarter were a charge of £5m (Q1 11: charge of £7m). These related primarily to the planned merger of the French tour operators.

 

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.

 



 

Consolidated income statement (unaudited)

for the 3 month period ended 31 December 2011

 



3 month

Restated

3 month



period ended

period ended



31 December

31 December



2011

2010



£m

£m

 

Revenue

 

2,845 

2,716 

Cost of sales


(2,715)

(2,589)

Gross profit


130 

127 

 


 

 

Administrative expenses


(258)

(248)

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

 

(3)

Operating loss

 

(131)

(117)

 


 

 

Analysed as:


 

 

Underlying operating loss

 

(109)

(86)

Separately disclosed items

 

(5)

(7)

Predecessor accounting for Magic Life

 

(7)

Acquisition related expenses

 

(17)

(16)

Taxation on (loss) / profit of joint ventures and associates

 

(1)

 


(131)

(117)

 


 

 

Financial income

 

21 

31 

Financial expenses

 

(48)

(57)

Net financial expenses

 

(27)

(26)

 


 

 

Loss before tax


(158)

(143)

Taxation

 

55 

37 

Loss for the period


(103)

(106)

 


 

 

Attributable to:


 

 

Equity holders of the parent


(103)

(106)

Minority interest


Loss for the period


(103)

(106)

 


 

 

 

 



 

Note 1. Basis of preparation (unaudited)

 

The unaudited financial information in this report relates to the 3 month periods ended 31 December 2011 and 31 December 2010.   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 3 month periods ended 31 December 2011 and 31 December 2010 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.

 

Note 2. Restatement of prior period results

 

The unaudited financial information of the Group for the comparative quarter ended 30 December 2010 has been restated in respect of Jet4You and Magic Life.  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 comparative period ended 31 December 2010. The acquisition of six operating companies, referred to as Magic Life, occurred on the 22 June 2011 and for the year ended 30 September 2011 was accounted for in accordance with 'predecessor accounting' rules.  Further information regarding both of these is provided on pages 72-74 of the TUI Travel PLC 2011 Annual Report & Accounts. 

 

The Consolidated income statement for the 3 month period ended 31 December 2010 has not been published since these restatements were announced and as such, the Consolidated income statement has now been restated as shown below.

 

Consolidated income statement


Period ended 31 December  2010 as previously reported

Impact of  the re-  presentation of Jet4You

Impact of predecessor accounting for Magic Life

Restated

Period ended

31 December

2010

 

£m

£m

£m

£m

 




 

Revenue

2,694 

21 

2,716 






Operating loss

(108)

(2)

(7)

(117)






Underlying operating loss

(84)

(2)

- 

(86)






Loss before tax

(134)

(2)

(7)

(143)

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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