Final Results

30th Nov 2009 07:00



30 November 2009

Thomas Cook Group plc

Audited results for the twelve months ended 30 September 2009

Highlights 

	Year ended 30/09/09	Pro forma Year ended 30/09/08	Year on year change		Statutory 11 months to 30/09/08
	£m	£m	%		£m
Revenue	9,268.8	8,754.2	+5.9		8,111.5
Profit from operations1	414.9	365.9	+13.4		363.4
Operating profit margin %2	4.5	4.2	+7.1
Adjusted profit before tax3	308.2	309.3	-0.4		303.9
Statutory profit before tax	56.1				48.4
Adjusted Basic EPS (p)4	26.4	24.1	+9.5
Adjusted Diluted EPS (p)	26.2	24.1	+8.7
Statutory Basic EPS (p)	1.9				4.6
Dividend per share (p)	10.75	9.75	+10.3		9.75
Net debt	(675.3)	(292.5)			(292.5)

As a result of the change in the Company's year end reference date (from 31 October to 30 September) last year, the narrative in this report is referenced to the pro forma comparative financial information for the 12 months to 30 September 2008. This has been done to assist readers in understanding the year on year performance of the Group. Statutory comparative financial information for the 11 months to September 2008 has been included in Appendix 2 to this report and is summarised above.

1 Profit from operations / adjusted EBIT is defined as earnings before interest and tax, and has been adjusted to exclude exceptional operating items and amortisation of business combination intangibles. It also excludes our share of the results of associates and joint ventures. 

2 The operating profit margin / adjusted EBIT margin is the profit from operations (as defined above) divided by the external revenue.

3 The adjusted profit before tax is stated before exceptional operating items (2009: £(215.9)m; 2008 pro forma: £(205.3)m; 2008 statutory: £(179.6)m); amortisation of business combination intangibles (2009: £(34.8)m; 2008 pro forma: £(53.5)m; 2008 statutory: £(49.1)m); loss on disposal of associates (2009: £(2.2)m; 2008 pro forma: £nil; 2008 statutory: £nil); and exceptional finance income/(costs) (2009: £0.8m; 2008 pro forma: £(26.8)m; 2008 statutory: £(26.8)m). The statutory income statement is included on page 39. 

4 Adjusted basic earnings per share is calculated as net profit after tax, but before exceptional items and amortisation of business combination intangibles, divided by the weighted average number of shares in issue during the period.

 

Manny Fontenla-Novoa, Chief Executive, Thomas Cook Group plc said:

"We have delivered a strong performance in 2009 achieving full year results ahead of market expectations. This is particularly pleasing as it comes despite the worldwide recession and the financial impact of the Swine Flu outbreak. Profit from operations grew 13%, demonstrating the resilience of the package holiday and the power of our brands. The adjusted EBIT margin rose from 4.2% to 4.5%, driven by our focus on medium haul and higher margin product, careful capacity and cost management and a strong contribution from our acquisitions.

"Looking ahead, the late booking trend is still evident but our winter 09/10 trading position continues to improve and trend towards our planned capacity. Although it is still early in the cycle, bookings for summer 10 are also in line with our expectations. Recent customer research shows that UK consumers remain intent on taking their holidays abroad next summer and we continue to see strong growth in bookings to medium haul destinations such as Turkey and Egypt.

"We remain committed to achieving significant growth and have embarked on a programme of strategic initiatives that will deliver revenue, profit and margin expansion over the medium term. These include centralising accommodation purchasing in order to leverage the scale of our Group buying power in mainstream travel; building on our financial services heritage in key markets; targeted acquisitions in emerging markets; and taking advantage of consolidation opportunities as they arise. In addition, we are restructuring our independent business and targeting significant long term growth in the European online travel agency (OTA) market. 

"The Board is recommending a dividend of 10.75p and remains confident that the Group will perform in line with its expectations for the current year."

  Enquiries

Thomas Cook Group Plc
Manny Fontenla-Novoa, CEO
Ludger Heuberg, Acting CFO
Jill Sherratt, Investor Relations Director	+44 (0) 20 7557 6412	Mobile: +44 (0) 7500 227 382
Kathryn Rhinds, Investor Relations Manager	+44 (0) 20 7557 6414	Mobile: +44 (0) 7974 160 013
Louise North, Investor Relations Manager	+44 (0) 20 7557 6413	Mobile: +44 (0) 7554 458 674
Brunswick	+44 (0)20 7404 5959
Fiona Antcliffe
Sophie Brand

A presentation for analysts and investors will take place today at 0900 GMT at The Lincoln Centre, 18 Lincoln Inn Fields, London, WC2A 3ED.

Dial in details: +44 (0) 1452 541 077 

Conference ID: 39922460

A live web-cast and a copy of the slides will be available on our website at www.thomascookgroup.com.

  CHIEF EXECUTIVE'S REVIEW

Overview of financial results

Thomas Cook has reported a strong set of results despite the worldwide recession and the financial impact of the Swine Flu outbreak. This performance reflects the quality of our product and the experience of our management team in adapting to changes in demand. It also demonstrates the resilience of the package holiday and the strength of our asset-light business model which gives us high levels of operational and cost flexibility to support our profitability. 

Group revenue for the 12 months to 30 September 2009 grew 6% to £9,268.8m (2008: £8,754.2m). Excluding the impact of currency translation, Group revenue was down 1%, reflecting reduced capacity in all our major markets, as we actively managed the business through the global recession, offset by the year on year increase as a result of acquisitions in this year and last.

We delivered a 13% increase in adjusted Group EBIT to £414.9m (2008: £365.9m). The Group operating profit margin rose 7% to 4.5%, from 4.2% last year. This strong result reflected our ability to adapt to changing demand by reducing capacity, improvements in our product and destination mix, increased average selling prices, acquisitions, merger synergies and cost initiatives.

Adjusted profit before tax was flat year on year at £308.2m (2008: £309.3m). Financing costs increased as a result of higher net debt throughout the year and our decision to draw down all available funds to protect ourselves against counterparty risk in the early stages of the banking crisis. Net debt increased as a result of the funding of the share buyback programme and acquisitions in 2008 and 2009, and the higher working capital requirements in 2009 resulting from the capacity cuts and the later booking trend we have experienced. Adjusted basic EPS increased 10% to 26.4p (2008: 24.1p). 

Operating cash flow broadly followed the usual seasonal phasing. However, as a result of the increased cash requirements arising primarily from the impact of the later booking profile and the capacity reductions on working capital, operating cash flow before 

exceptional items5 was £420 million (2008: £471 million) and free cash flow6 before exceptionals was £103m (2008: £208 million).

The Group and segmental performance is reported in detail in the Financial Review. 

 

 

Financial position

Net debt at 30 September 2009 was £675m (30 September 2008: £292m). The increase year on year reflects the completion of the share buyback programme and payments for acquisitions, as well as the cash outflows on working capital noted above and expenditure on integration and restructuring initiatives.

Our financial position remains robust. Our bank facility of €1.8bn does not expire until May 2011 and we plan to refinance this by summer 2010.

Dividend 

The Board is recommending a final dividend of 7.0p per share, which, when combined with the interim dividend of 3.75p per share gives a total dividend for the year of 10.75p. This represents a payout of 41.0% (2008: 40.5%) of adjusted diluted EPS. This is in line with our policy, which remains to increase dividends progressively, paying between 40% and 50% of adjusted earnings. 

Once approved, the final dividend will be payable on 8 April 2010 to holders of relevant shares registered on 19 March 2010.

Outlook 

While the late booking trend is still evident, our winter 09/10 trading position continues to improve and trend towards our planned capacity. It is still early in the summer booking cycle, however we are confident we can manage trading in line with demand.

A range of initiatives within our power underpins our confidence for the current financial year. Our business model allows us to flex capacity and product mix well into the summer 10 booking cycle. 

In addition, capacity rationalisation throughout the industry supports pricing discipline. We have further scope to manage input costs and are negotiating with suppliers to ensure costs, and accommodation costs in particular, are reduced. We also have tight cost discipline throughout the business and are hedging fuel and currency against extreme volatility. As ever, we have contingency plans to cut overhead costs further should tougher market conditions prevail. 

The combination of our management team's long industry experience, a consolidated market place, our own initiatives and our current trading supports our confidence that we can meet the Board's expectations for the current financial year. 

Looking further ahead, we are confident that we can grow revenue, profit and margin in the medium term. This will be achieved through significant growth in our independent and ecommerce businesses; expansion of our financial services heritage in key markets; targeted acquisitions, including expansion into emerging markets and taking advantage of consolidation opportunities as they arise; and continued cost efficiencies and improvements in mainstream distribution.

Operational flexibility, cost base and hedging

The flexibility within our asset-light business model has given us the ability to adapt to market conditions during this past challenging period and we have strengthened our foundations through cost rationalisation to underpin our future performance even if demanding conditions persist. 

In addition, the mainstream travel market has been strengthened by capacity rationalisation throughout the industry. Capacity reductions in the UK market, for example, amount to approximately 30% over the last two years through our actions and those of other market participants. 

The reliance of our partner hotels on the strength and breadth of our distribution, gives us significant buying power to manage accommodation costs, which represent more than 30% of revenue.

The ability to adjust our cost base for potential changes in demand is also important, particularly in the current market conditions. At the beginning of the summer season, less than 10% of our group-wide hotel capacity is committed, giving us considerable scope to make further capacity adjustments as required as the season progresses. We also have flexibility in flying right up until the beginning of the season.

Tight control of all costs is a fundamental part of the Thomas Cook business approach and we have, and will continue to, cut operating costs throughout the Group to ensure we operate as efficiently and as flexibly as possible.

Fuel costs represent approximately 9% of revenue and currency has also been a significant element of our costs during a volatile year. Hedging will continue to be an important tool for managing these costs and ensuring pricing certainty. We use a mixture of swaps, collars and options to ensure flexibility. 

Foreign exchange is hedged 6 to 15 months in advance of the expected expenditure. We have hedged 89% of our dollar and euro requirements for winter 09/10 and 85% of our dollar and 87% of our euro requirements for summer 10.

Our fuel hedging recognises the varying requirements of different markets and we plan to hedge between 80% and 90% of our fuel requirements between 6 and 18 months ahead of consumption. In line with our policy, we have hedged 99% of our fuel requirements for winter 09/10 and 70% for summer 10. 

Merger synergies

The integration of our operations since the merger between Thomas Cook and MyTravel Group in June 2007 has been highly successful.

Synergies have amounted to more than initially identified, with the target raised to £215m from £155m at the end of the last financial year. By accelerating synergy delivery, we have realised total savings of £205 million in 2009 (2008: £142 million), of which £63 million were additional synergies achieved during the period. We expect to deliver a final tranche during the current year, achieving the previously stated cumulative synergies of £215 million.

Strategy 

Our strategy remains focused on strengthening our core mainstream business and investing in areas of future growth, primarily independent travel, travel-related financial services and acquisitions, most notably in emerging markets.

The highlights of the past year:

Maximise value of mainstream 

Our vertically integrated business model maximises our earnings from transport, accommodation and distribution through both retail and online outlets. It also gives us the flexibility to manage capacity and product mix allowing us to adapt for differing market conditions. We therefore have considerable flexibility giving us relative resilience in an economic downturn. 

 

We continue to develop our mainstream business, looking to take greater advantage of the size and scale of the Group; improving our product and services to differentiate us from the competition; and increasing efficiency, including investment in systems such as automated yield management.  

 

Leading independent travel provider 

We continue to develop our independent business and are benefiting from the rapid growth in this area. 

We have continued to invest in our dynamic packaging capabilities and products and we have, in parallel, improved our online capabilities across the Group. As well as ongoing content management, merchandising, programming and technology investment, we have also ensured that customers booking travel online have access to all the same services that are available in-store and receive a seamless customer experience across channels.  

 

Leading travel-related Financial Services provider 

The development of our Financial Services business is underpinned by the strength of the Thomas Cook brand and, by having re-established our world-wide control of the brand, we have considerably enhanced the potential to develop it in other markets. 

Capture growth and value through bolt-on acquisitions and partnerships 

We completed four acquisitions in the financial year. These transactions are summarised below:

Acquisition	Description	Date
Airtrack	Sports travel business in the UK primarily focused on motorsports. Initial consideration £0.5m. Total consideration capped at £1.4m.	October 2008
Med Hotels	Pioneer in the UK bed bank market, bolt-on to Hotels4U acquisition in 2008. Consideration of £3m.	February 2009
Wasteels	Chain of 36 retail shops in France. Cash consideration of £0.5m.	March 2009
Gold Medal	Leading UK independent travel company, with a strong focus on the US, Middle and Far East and Australasia. Initial acquisition of 50.01% economic interest with option to acquire remaining share within two years. Initial consideration £22m. Total consideration capped at £87m and contingent on future performance.	April 2009

The businesses acquired since the merger are performing well and we are generating more synergies than planned.

We continue to review acquisition opportunities, with the focus on emerging markets and independent travel. We will also explore consolidation opportunities in our existing mainstream markets as they arise. 

In emerging markets, tourism is growing at a faster rate than in our traditional markets. We are particularly encouraged by the opportunities in Russia and China, which are expected to become two of the largest travel markets within the next few years. We are looking at limited investment in partnership and joint venture structures in these markets to manage risks, but with an opportunity to take majority or full control over time. In Russia, we seek to establish a strong presence early on and would expect to leverage our destination strengths, particularly in Turkey. However, in China, we believe it is essential to first establish a foothold to gain experience.

  Other developments

Arcandor

On 10 September 2009, 43.9% of Thomas Cook Group plc, which was held by Arcandor and its subsidiaries, was placed in the stock market at 240 pence per share. In early October, a further 8.8% of Thomas Cook Group plc shares held as pledge against an Arcandor exchangeable bond were delivered to bondholders. Following these developments, 100% of the Group's share capital can now be traded freely on the London Stock Exchange.

Board changes

Upon completion of the placing on 10 September 2009, the Relationship Agreement between the Group and Arcandor was terminated and Dr Karl-Gerhard Eick resigned as a Director and Chairman of the Board. Michael Beckett, previously Non-Executive Deputy Chairman and senior Independent Director, was appointed Non-Executive Chairman.

On 18 September 2009, Non-Executive Director Hemjo Klein resigned from the Board for personal reasons.

On 6 November 2009, Sam Weihagen, CEO Northern Europe, was appointed to the Board as Deputy to the Group CEO. In taking this role, he brings his vast tour operating experience to benefit the Group more directly. He has deferred his retirement and will continue as CEO in Northern Europe. 

Paul Hollingworth has been appointed as Group Chief Financial Officer with effect from 1 January 2010. Paul was most recently Chief Financial Officer of Mondi Group, and previously was Group Finance Director of BPB plc, De La Rue plc and Ransomes plc. 

On 29 November 2009, Juergen Bueser stepped down as Group Chief Financial Officer and as an Executive Director, following a period of ill health. We are delighted to confirm, however, that Juergen has recovered well and is returning to the business to take up the role of Group Strategy Director. Ludger Heuberg, who has been Acting Group Chief Financial Officer since March 2009, will continue in this role until 31 December 2009, after which time he will return to his operational role.

Peter Middleton has been appointed as an Independent Non-Executive Director with effect from 30 November 2009. His appointment brings to the Board extensive experience across the global travel and finance industries.

Current trading 

Summer 09

Our flexible capacity model has enabled us to manage our way through a difficult operating environment. Our strong summer 09 performance illustrates the resilience of the package holiday and the robustness of our products. 

The later booking trend characterised the summer trading. Yet, despite this and the impact of Swine Flu, we maintained or improved average selling prices; achieved average departed load factors in line with last year; and successfully predicted demand trends, balancing capacity accordingly. 

Winter 09/10

Since our September trading update, trading has strengthened in our major markets. We continue to take advantage of our flexibility to manage capacity, reducing low-margin product to underpin profitability. This is supported by our experience in accurately predicting summer demand. We are confident that we can manage the continuing trend of late booking and that bookings will trend towards capacity levels as the season progresses. 

W 09/10	Year on year variation %
	Average selling price	Cumulative bookings	Last 4 weeks bookings	Planned capacity
UK	+6	-11	-1	-9
Continental Europe	-7	-12	-8	-10
Northern Europe	+12	-13	+6	-8

Figures above are as at 21/22 November 2009. 

In Continental Europe, bookings represent all bookings including cars/overland. However, capacity represents airline capacity only. 

In Northern Europe, for comparability with peers, we now use October-March to define the winter season. On our previously reported November-April season, figures show asp +11%, cumulative bookings -15%, last 4 weeks bookings +5% and capacity -7%.

  UK 

Average selling prices are up 6%, with bookings down 11%. We are 50% sold for winter 09/10, consistent with this point last year, and in line with our expectations given the later booking profile. Over the last four weeks bookings have improved and are running only 1% behind. We now have 6% fewer seats left to sell than at the same time last year.

We have adjusted mix for the demand patterns. By significantly reducing our short haul capacity, we have cut relatively lower-margin programmes. Demand for medium haul destinations remains strong and plays to our strengths in these destinations and customers' demand for non Euro-zone resorts. Selling prices for medium and long haul are up 7%. Overall, we are confident that the volume left to sell will match demand. 

Continental Europe

Successful accommodation and airline contract renegotiations have allowed us to pass lower input costs on to our customers in Continental Europe while also protecting margins. Therefore, the 7% decline in average selling prices does not flow through to margins. Bookings are down 12% but have improved in recent weeks to  -8%, highlighting the continued later booking trend. We are confident that bookings are levelling towards planned capacity of -10%. We have an encouraging left to sell position, with 14% less left to sell than at the same time last year. 

In Germany, our largest market in Continental Europe, we are seeing similar patterns. Average selling prices are down 8% but margins are being maintained. This reflects a change in mix towards short haul products, as well as the sharing of the benefits of successful hotel accommodation and flying cost negotiations with customers. Bookings are down 10% but this is in line with planned capacity with the last four weeks at -5% showing better trends. This leaves us in a strong position with 13% less left to sell than at the same time last year. 

Northern Europe

Prices are up 12% in Northern Europe, reflecting the strength of our brands, distribution and differentiated product as well as a positive currency translation impact. Bookings in the last four weeks are up 6% year on year demonstrating the later booking pattern as cumulative bookings are currently at -13%. This pattern reflects our experience in the summer and we are confident that bookings will trend towards our planned capacity reduction of 8%. Departed load factors for October, the first month of the Northern European winter season, were 99.6% just ahead of the prior year.

North America

In North America, the winter is our peak season. However, with the overall rebalancing of our business towards independent travel, mainstream passengers now represent less than 40% of our winter volume.

The pricing trend in Canada has improved markedly, with average selling prices in the last four weeks up 4% compared with the cumulative price decline of 8%. This reflects the competitive nature of the Canadian mainstream market but we are retaining some benefit from input cost reductions. Bookings in the last four weeks are up 14%, trending ahead of the prior year, and we are therefore confident that cumulative bookings are trending towards the planned capacity increase of 2%. 

Our independent bookings are slightly behind the prior year but up 25% in the last four weeks. Overall performance is in line with expectations.

Airlines Germany

In our German airline, Condor, bookings are down 6% broadly in line with planned capacity of -4%. Booked load factors at 48% are in line with last year. Selling prices are down 9% in Continental and 7% in Intercontinental reflecting competitive pricing in the German airline market and reduced surcharges following a fall in fuel costs. 

  Summer 10

At this stage in the summer season, we have only just launched our programmes in Germany and Northern Europe, with 12% and 11% sold respectively.

In the UK, we launched our brochures later in response to the later booking pattern. As a result, only 20% of capacity in the UK has been sold to date and trends therefore are difficult to ascertain. Nevertheless, we have seen encouraging signs in the last 4 weeks, with bookings up 14% and average selling prices up 2%, and differentiated and exclusive products selling particularly well. Sales of higher margin, all-inclusive holidays and four and five star products are also proving resilient. 

We have continued to optimise our destination mix, prioritising medium haul destinations. At this point, overall capacity is expected to be flat year on year. However, we will continue to monitor changes in behaviour to ensure we can adapt as we need to and, if necessary, bring to bear the considerable flexibility we have.

 

  FINANCIAL REVIEW

Basis of financial information

The results included within this announcement for the current year reflect audited statutory information for Thomas Cook Group plc. For the comparative period, audited statutory comparative information for the 11 month period to 30 September 2008 has been presented in the Group financial summary table and in Appendix 2.

However, to allow a more meaningful year on year comparison of the development of the business, we have also included unaudited comparative financial information for the 12 months to 30 September 2008 in Appendix 1. As management deems this to be a more meaningful comparison, all narrative in this Financial Review is also referenced to this comparative data.

We expect to publish our Annual Report in January 2010.

Financial results and performance review 

Group

	Year ended 30/09/09	Pro forma Year ended 30/09/08	Year on year change		Statutory 11 months to 30/09/08
	£m	£m	%		£m
Revenue	9,268.8	8,754.2	+5.9		8,111.5
Profit from operations7	414.9	365.9	+13.4		363.4
Operating profit margin %8	4.5	4.2	+7.1
Adjusted profit before tax9	308.2	309.3	-0.4		303.9
Statutory profit before tax	56.1				48.4
Adjusted Basic EPS (p)10	26.4	24.1	+9.5
Adjusted Diluted EPS (p)	26.2	24.1	+8.7
Statutory Basic EPS (p)	1.9				4.6
Dividend per share (p)	10.75	9.75	+10.3		9.75
Net debt	(675.3)	(292.5)			(292.5)

Income Statement highlights

Revenue and profit from operations

Group revenue for the year was £9,268.8m, an increase of 6% on the pro forma prior year. Excluding the impact of translation, Group revenue was down 1%, reflecting reduced capacity in all our major markets, as we actively managed the business through the global recession, offset by the year on year increase as a result of acquisitions in this year and last.

Profit from operations before exceptional items for the year was £414.9m, an increase on the pro forma prior year of £49m, or 13%. As noted above, capacity was reduced in all major markets as we sought to manage the Group through the global recession. Trading was also adversely impacted by the Swine Flu outbreak, increases in fuel prices year on year, and the weakening of sterling against the euro and dollar which served to push up accommodation costs, particularly in our UK business. The adverse impact of the above was more than offset, however, by strong cost control, a year on year foreign currency translation benefit, the realisation of additional merger synergies and contributions from acquisitions made this year and last.

7Profit from operations / adjusted EBIT is defined as earnings before interest and tax, and has been adjusted to exclude exceptional operating items and amortisation of business combination intangibles. It also excludes our share of the results of associates and joint ventures. 

8 The operating profit margin / adjusted EBIT margin is the profit from operations (as defined above) divided by the external revenue.

9 The adjusted profit before tax is stated before exceptional operating items (2009: £(215.9)m; 2008 pro forma: £(205.3)m; 2008 statutory: £(179.6)m); amortisation of business combination intangibles (2009: £(34.8)m; 2008 pro forma: £(53.5)m; 2008 statutory: £(49.1)m); loss on disposal of associates (2009: £(2.2)m; 2008 pro forma: £nil; 2008 statutory: £nil); and exceptional finance income/(costs) (2009: £0.8m; 2008 pro forma: £(26.8)m; 2008 statutory: £(26.8)m). The statutory income statement is included on page 39. 

10 Adjusted basic earnings per share is calculated as net profit after tax, but before exceptional items and amortisation of business combination intangibles, divided by the weighted average number of shares in issue during the period.

More details of the movements in revenue and profit from operations are given later in this report in the segmental performance review section.

Exceptional operating items

Exceptional items are defined as costs or profits that have arisen in the period which management do not believe are a result of normal operating performance and which, if not separately disclosed, would distort the year on year comparison of trading performance.

Exceptional operating items amounted to £215.9m (2008 pro forma: £205.3m). £56.6m of these costs relate to the MyTravel / Thomas Cook merger integration process which is now largely complete. Cumulative merger synergies delivered to the end of September 2009 were £205m with a further £10m of benefits expected to come through in the year to September 2010. Total merger integration costs to be incurred in delivering the annualised savings are expected to be £274m, of which £268m has been incurred to date (including £13m of capital costs).

A further £112.8m of exceptional operating costs have been incurred in the year in relation to the integration of other acquisitions made last year and this, and other restructuring projects that we have undertaken across the Thomas Cook Group. These restructuring projects largely reflect changes made to underlying business processes and systems in the UK, Germany, the Western Europe markets and Canada to improve efficiency and cost leadership across the Group. These measures have served to not only protect profitability in FY09, but will also ensure that the Group is well-placed going forward as we expect them to deliver annualised benefits in excess of £50m. 

Other exceptional operating items amounted to £46.5m and include exceptional costs in relation to fuel, impairment and book losses on the disposal of fixed assets (mainly aircraft related), aborted acquisition costs and losses resulting from other exceptional operating events that are not expected to recur. 

Amortisation of business combination intangibles

During the year we incurred costs of £34.8m in relation to the amortisation of business combination intangibles (2008 pro forma: £53.5m), of which £25.6m relates to the merger of Thomas Cook and MyTravel and represents the amortisation of brand names, customer relationships and computer software. The remaining £9.2m relates to other acquisitions made post-merger. Of this amount, £7.8m relates to the amortisation of brand names, customer relationships and computer software, and £1.4m to the amortisation of the order backlog that existed at the time of the respective acquisitions.

Associates and joint ventures

Our share of the results of associates and joint ventures before exceptional items was a loss of £3.8m (2008 pro forma: profit of £0.2m). The increase in losses year on year largely reflects increased losses from our Barclaycard joint venture arrangement. 

In August 2009, the Group disposed of its 19.99% share in Aqua Sol Hotels Limited, a quoted hotel group based in Cyprus, resulting in an exceptional loss on disposal of £2.2m.

Net investment income

Net investment income, which reflects dividends and interest received from investments, was £1.4m (2008 pro forma: £1.4m).

Net finance costs

Net finance costs (excluding exceptional finance costs) in the year were £104.3m (2008 pro forma: £58.2m). The increase year on year reflects the higher net debt throughout the year which, to a large extent, resulted from the full year effect of funding the share buyback programme (£295m) and acquisitions in 2008 and 2009 (£368m).

The net debt position was further exaggerated in the first quarter of the 2009 financial year as the Group took the prudent decision, in October 2008, to draw down all available funds under the bank facility as a protective response to the uncertainties in the banking market at that time. This action was taken to limit counterparty risk going into the Group's low point but came at a net cost of approximately £8m in additional interest costs.

The Group also incurred the annualised effect of commitment fees and amortisation of set-up fees on the Group's banking facility, which was put in place in May 2008. In addition, non-cash costs increased by £11.7m as a result of movements in the notional interest income and expense on the Group's pension schemes. However, this was broadly offset by income on marking to market the forward points on our foreign currency hedging instruments.

Net exceptional finance income in the year was £0.8m (2008 pro forma: cost of £26.8m). The net cost in 2008 included £12.9m relating to the exceptional element of the phasing effect of marking to market the forward point on our foreign currency hedging, which arose in September 2008 as a result of the global banking crisis. In 2009, £11.4m of this unwound, but was offset by £10.6m of additional revaluation losses on trading securities. The Group has now disposed of all of its trading securities.

Tax

The tax charge in the year was £37.8m (2008 pro forma: £13.1m). Excluding the effect of adjustments to tax provisions made in respect of exceptional items, this represents an effective tax rate of 26.9% on the pre-exceptional profit for the year.

The pre-exceptional effective cash tax rate was 20% and is expected to continue to be considerably lower than the effective income statement rate as a result of being able to utilise the losses available in the UK and Germany. Total losses available for carry forward in the Group at 30 September 2009 are £1.4 billion. Deferred tax assets have been recognised in respect of £0.8 billion of this amount.

Earnings per share and dividends

The basic earnings per share before exceptional items ("adjusted earnings per share") for the year was 26.4 pence, an increase of 10% on the 2008 pro forma figure. The adjusted diluted earnings per share for the year was 26.2 pence (2008 pro forma: 24.1 pence).

The basic and diluted statutory earnings per share was 1.9 pence and 1.8 pence respectively (2008 statutory: basic and diluted of 4.6 pence).

The Board is recommending a final dividend of 7.0 pence per share, for payment after, and subject to shareholder approval at, the Annual General Meeting expected to be held on 25 March 2010. This, together with the interim dividend of 3.75 pence per share, brings the total dividend in respect of the financial year to 10.75 pence. Based on the adjusted diluted earnings per share figure noted above, this equates to a 41.0% payout ratio for the full year compared with a payout ratio of 40.5% in the prior year.

Cash and liquidity

Net debt (cash less borrowings, overdrafts and finance leases) at 30 September 2009 was £675.3m (2008: £292.5m). The balance at 30 September 2009 consisted of £550.2m of cash, £940.0m of borrowings and overdrafts and £285.5m of finance lease liabilities. The increase in net debt year on year is primarily due to the following net cash outflows in the period:

 

 

These have been partly offset by the year on year improvement in the underlying operating profit performance.

Cash and cash equivalents at the balance sheet date were £550.2m (2008: £761.3m). This balance includes restricted cash of £60.2m (2008: £127.1m), which is held in escrow accounts predominantly in the US and Canada, in respect of local regulatory requirements, in addition to amounts held in respect of White Horse Insurance Ireland Limited, the Group's insurance company.

The Board is satisfied with the Group's funding and liquidity position, which remains robust. Fixed charges cover11 and the ratio of gross debt to EBITDAR12, which are the ratios used as the basis for the covenants in our credit facilities, were 3.1x and 2.9x respectively at 30 September 2009.

Our financial position remains robust. Our bank facility of €1.8bn does not expire until May 2011 and we plan to refinance this by summer 2010.

11 Fixed charges cover is defined as EBITDAR divided by net interest plus operating lease rentals.

12 EBITDAR is defined as earnings before interest, tax, depreciation, amortisation, restructuring and integration related exceptional items and operating lease rentals.

 

 

  Segmental performance review

Segmental performance presented here is based on financial performance before exceptional items and amortisation of business combination intangibles. It also compares the 12 months to September 2009 to the pro forma 12 months to September 2008 as the Directors believe that this provides a more meaningful year on year comparison of the development of the business. Statutory segmental information is provided in note 2 of the financial information in Appendix 2 to this document.

	Year ended 30/09/09	Pro forma Year ended 30/09/08	Year on year change		Statutory 11 months to 30/09/08
	£m	£m	%		£m
External revenue
UK	3,098.0	3,097.3	Flat		2,830.3
Continental Europe	4,000.3	3,620.4	+10.5%		3,377.8
Northern Europe	1,059.3	971.6	+9.0%		907.3
North America	370.4	384.2	-3.6%		365.2
Airlines Germany	740.8	680.7	+8.8%		630.9
Corporate	-	-			-
Group	9,268.8	8,754.2	+5.9%		8,111.5
Profit from operations13
UK	162.2	143.4	+13.1%		144.3
Continental Europe	127.0	106.3	+19.5%		103.1
Northern Europe	86.4	86.2	+0.2%		79.8
North America	17.9	6.0	+198.3%		14.7
Airlines Germany	47.4	45.4	+4.4%		40.1
Corporate	(26.0)	(21.4)	-21.5%		(18.6)
Group	414.9	365.9	+13.4%		363.4

13 Profit from operations is defined as earnings before interest and tax, and has been adjusted to exclude exceptional operating items and amortisation of business combination intangibles. It also excludes our share of the results of associates and joint ventures.  UK

	Year ended 30/09/09 £m	Pro forma Year ended 30/09/08 £m	Change %
Financial
Revenue (£m) *	3,098.0	3,097.3	Flat
Profit from operations (£m) **	162.2	143.4	+13.1
Operating profit margin % ***	5.2	4.6	+13.0
Non-financial
Mass Market Risk
Passengers (000's) †			-9.2
Capacity (000's) ††			-9.2
Average selling price (£) #			+7.3
Load factor % †††			Flat
Brochure mix % ##			+2.6
Controlled distribution % ‡‡	68.6	67.4	+1.8
Internet distribution % ‡‡	29.9	25.8	+15.9

See Appendix 3 for key.

The UK business delivered profit from operations of £162.2m, an improvement of 13% year on year, despite the tough economic conditions. The operating profit margin was also improved from 4.6% to 5.2%. Revenue was in line with the prior year at £3,098.0m. However, excluding the year on year impact of acquisitions we made this year and last, underlying revenue fell 3%.

In anticipation of the tough market conditions, we reduced capacity by 9% in our mass market business, largely in the less profitable summer short haul programmes. However, we continued to focus on increasing the proportion of medium haul holidays, which now represent over 70% of our mass market programmes. As a result of the tight capacity control and the shift to more profitable medium haul destinations, we were able to achieve a 7% increase in average selling prices and improved margins. 

Underlying trading was further improved through savings in like-for-like accommodation rates, merger synergies, and other cost initiatives. However, these benefits were more than offset by increased fuel costs and the adverse impact on our accommodation costs of the weak pound. Management also believe Swine Flu adversely impacted the results by £8m.

However, the UK segment benefited year on year from the acquisitions made last year and this. Our Indian business has had a difficult year, with the global recession and the Mumbai terrorist activity hampering progress. Despite this, the business contributed positively year on year to the segment results and, following a number of restructuring measures, is well-placed to take advantage of the expected post-recessionary bounce back in trading in future years.

Our Independent businesses in the UK have seen good growth and the performance of Gold Medal, Hotels4U and MedHotels, in particular, has been strong. Elegant Resorts has also produced a solid performance, despite the difficult market conditions. Synergies from our acquisitions earlier in the year (Gold Medal and MedHotels) are ahead of our expectations.

The business has continued to grow its proportion of controlled distribution which we believe is a key factor for success. Controlled distribution in mass market now represents 69% of total distribution, with internet bookings now running at 30%.

Continental Europe

		Year ended 30/09/09 £m	Pro forma Year ended 30/09/08 £m	Change %
Financial
Revenue (£m) *		4,000.3	3,620.4	+10.5
Profit from operations (£m) **		127.0	106.3	+19.5
Operating profit margin % ***		3.2	2.9	+10.3
Non-financial
Mass Market
Passengers (000's) †
	Flight-inclusive			-4.7
	Non-flight inclusive			-9.9
Average selling price (€) #				+4.6
Controlled distribution % ‡‡		38.3	36.2	+5.8
Internet distribution % ‡‡		10.0	9.0	+11.1

See Appendix 3 for key.

Our Continental Europe businesses delivered a strong improvement in results year on year. Profit from operations was increased by 19.5% to £127.0m and the operating profit margin was also improved from 2.9% to 3.2%. Revenue was also 10.5% higher than the prior year at £4,000.3m. However, this increase was driven by changes in euro to sterling translation rates and the full year impact of acquisitions made last year. Excluding these, underlying revenue fell 9% reflecting fewer passengers travelling as a result of the global recession. 

In Germany, our largest market in this segment, flight-inclusive passengers were 10% lower than in the prior year and average selling prices were 1% higher. Successful renegotiations with hoteliers meant that margin loss from volume was offset by the impact of lower bed rates. In addition, acquisitions made in the prior year performed strongly and we were able to realise significant cost savings from a major restructuring programme that was undertaken in anticipation of the tough trading conditions. These positive developments more than offset the impact of Swine Flu which management believe adversely affected the German results by £3.2m. As a result, we were able to strengthen the operating margin in our German tour operator from 1.9% to 2.3%. The overall operating margin we achieved in Germany (i.e. including Airlines Germany) also improved from 3.1% to 3.3%. 

We experienced a similar development in results in our Western markets (France, Belgium and the Netherlands). Flight-inclusive passengers in Belgium and the Netherlands fell by 5% and 10%, and average selling prices increased by 1% and 3% respectively. In France, flight-inclusive passengers increased by 58% with average selling prices up 10%. However, this development was heavily influenced by the acquisition of Jet Tours, in August of 2008, which has been successfully integrated into the underlying French business and is performing well. Overall, accommodation rates were held flat in our Western markets but Swine Flu adversely affected the results by £4.2m. However, profitability was improved by savings generated from extensive restructuring programmes in all markets. As a result, we were able to improve the operating margin in our Belgian business to over 5%. Margins in France and the Netherlands were maintained around 5% and 3% respectively.

In the smaller Eastern businesses (Poland, Hungary and the Czech Republic) conditions were also difficult, with passenger volumes and average selling prices both falling year on year as a result of the poor economic conditions and the weak currencies in those markets.

Our Independent businesses in Continental Europe have performed well in the year. 

We have also continued to grow our proportion of controlled distribution, further enhancing the multi-channel proposition which we continue to believe plays an important role. Controlled distribution now represents 38% of total distribution, with internet bookings now running at 10%.

Northern Europe

	Year ended 30/09/09 £m	Pro forma Year ended 30/09/08 £m	Change %
Financial
Revenue (£m) *	1,059.3	971.6	+9.0
Profit from operations (£m) **	86.4	86.2	+0.2
Operating profit margin % ***	8.2	8.9	-7.9
Non-financial
Mass Market Risk
Passengers (000's) †			-2.3
Capacity (000's) ††			-2.4
Average selling price (SEK) #			+7.8
Load factor % †††			+0.1
Brochure mix % ##			-7.9
Controlled distribution % ‡‡	82.7	79.4	+4.2
Internet distribution % ‡‡	54.1	45.6	+18.6

See Appendix 3 for key.

The Northern Europe business delivered profit from operations of £86.4m, in line with the previous year. Revenue was 9% higher than in the prior year, at £1,059.3m. However, excluding the year on year impact of changes in foreign currency translation rates, underlying revenue was 2% ahead.

Despite the global economic recession, we were able to maintain industry-leading margins of over 8% for the full year. Capacity was maintained at similar levels to the prior year, down only 2%. However, average selling prices were increased by 8% as we sought to recover increased bed costs, fuel prices and inflationary increases in other operating costs.

Unlike our other European tour operating segments where losses in the winter season are typical for both Thomas Cook and the industry as a whole, our Northern European business generates a significant proportion of its profits in winter. The winter 08/09 performance, in both Mainstream and Independent, was particularly affected by the difficult economic conditions which resulted in a £7m reduction in profit year on year at the Half Year. Trading in the summer season showed a strong recovery, however, despite the continued delayed booking pattern and subsequent reduction in the proportion of brochure bookings. As a result of this and the benefits of cost saving initiatives, we were able to recover the £7m winter shortfall and deliver an operating margin of 11% in the second half of the year, ahead of the prior year. 

Northern Europe now controls over 80% of its distribution, with internet bookings now running at over 50% in all markets. This continues to be a key driver and differentiator in achieving margins of over 8%.

North America

	Year ended 30/09/09 £m	Pro forma Year ended 30/09/08 £m	Change %
Financial
Revenue (£m) *	370.4	384.2	-3.6
Profit from operations (£m) **	17.9	6.0	+198.3
Operating profit margin % ***	4.8	1.6	+200.0
Non-financial
Mass Market Risk
Passengers (000's) †			-20.2
Capacity (000's) ††			-20.7
Average selling price (C$) #			+1.7
Load factor % †††			+0.5
Brochure mix % ##			+0.9
Controlled distribution % ‡‡	14.1	15.7	-10.2
Internet distribution % ‡‡	38.1	20.6	+85.0

See Appendix 3 for key.

Note: Internet distribution % includes independent travel bookings.

The North American segment delivered profit from operations of £17.9m in the year, a significant improvement from the £6.0m in the prior year. Operating margins also improved significantly to 4.8%, from 1.6% in the prior year. Revenue was 3.6% lower than in the prior year, at £370.4m. Excluding the year on year impact of changes in foreign currency translation rates and the acquisition of TriWest, underlying revenue was 23% lower.

The threefold improvement in profitability reflects the transformational effect of the TriWest acquisition. As a result of the successful integration of this business with our existing Independent business, and the realisation of substantial merger synergies, the greatest proportion of profits in the North American segment now come from our Independent sector. This reduces our exposure to the highly competitive Mass Market sector, which continues to suffer from significant over-capacity. In response to the continuing tough conditions in this sector, management reduced capacity by 21%, but this was not sufficient to prevent margin erosion. Swine Flu also adversely impacted the results by £2.6m.

North America has successfully increased its proportion of internet distribution to over 38% which has resulted in significant benefits and cost efficiency, particularly for the Independent business.

Airlines Germany

		Year ended 30/09/09 £m	Pro forma Year ended 30/09/08 £m	Change %
Financial
Revenue - external (£m) *		740.8	680.7	+8.8
Revenue - internal (£m) *		320.4	297.5	+7.7
Total revenue (£m) *		1,061.2	978.2	+8.5
Profit from operations (£m) **		47.4	45.4	+4.4
Operating profit margin % ***		4.5	4.6	-2.2
Non-financial
Sold seats (000's) ‡‡‡
	TC tour operators			-16.0
	3rd party tour operators			-9.5
	External seat only			-17.3
Total sold seats				-14.4
Sold seats (000's) ‡‡‡
	Europe (excl. Cities)			-11.3
	Long haul			-10.4
	Cities			-94.9
Total sold seats				-14.4
Capacity (ASK m) ††				-9.8
Yield (€) ###				+12.2
Seat load factor % †††				-2.3

See Appendix 3 for key.

Our Airlines Germany segment has continued to perform well, increasing profit from operations by £2.0m, to £47.4m, whilst maintaining the overall margin at 4.5%. This result is particularly pleasing as it comes despite the impact of Swine Flu, which management believe adversely impacted the results by £9.2m and in a period when other airlines have suffered significantly from the global recession.

Total revenue increased by 8.5%. However, this increase reflects the impact of movements in euro to sterling translation rates. Excluding this, total revenue fell by 4% reflecting a 14% reduction in passengers carried and a 12% increase in yield. The 12% increase in yield reflects increased income from fuel surcharges to offset the impact of higher fuel costs, together with the full year effect of the elimination of the loss-making city programme. Margin was further protected by a number of initiatives undertaken during the year to create sustainable additional revenue streams and reduce direct costs.

Corporate

	Year ended 30/09/09 £m	Pro forma Year ended 30/09/08 £m	Change %
Revenue (£m) *	-	-	Flat
Loss from operations (£m) **	(26.0)	(21.4)	-21.5

See Appendix 3 for key.

The costs associated with running the corporate headquarters increased in the year to £26.0m. This increase reflects the ongoing re-sizing and re-shaping of the post-merger head office functions to ensure that we are appropriately placed to effectively support the operating segments in delivering the Group's strategy and growth in the future.

 

  Appendix 1 - Audited statutory information with pro forma comparatives

Group Income Statement

					Restated
		Audited			Pro forma
		Year ended			Year ended
		30/09/09			30/09/08
		Pre Adj's	Adj's	Total	Pre Adj's	Adj's	Total
	Note	£m	£m	£m	£m	£m	£m
Revenue	2	9,268.8	-	9,268.8	8,754.2	-	8,754.2
Cost of providing tourism services		(7,017.8)	(58.7)	(7,076.5)	(6,709.8)	(14.5)	(6,724.3)
Gross profit		2,251.0	(58.7)	2,192.3	2,044.4	(14.5)	2,029.9
Personnel expenses		(1,027.1)	(59.7)	(1,086.8)	(940.1)	(59.0)	(999.1)
Depreciation and amortisation		(158.4)	(9.2)	(167.6)	(140.1)	(0.4)	(140.5)
Amortisation of business
combination intangibles		-	(34.8)	(34.8)	-	(53.5)	(53.5)
Net operating expenses		(650.6)	(84.4)	(735.0)	(598.3)	(130.3)	(728.6)
Loss on disposal of
businesses and PPE		-	(3.9)	(3.9)	-	(1.1)	(1.1)
Profit from operations		414.9	(250.7)	164.2	365.9	(258.8)	107.1
Share of results of associates and
joint ventures		(3.8)	-	(3.8)	0.2	-	0.2
Loss on disposal of associates		-	(2.2)	(2.2)	-	-	-
Net investment income		1.4	-	1.4	1.4	-	1.4
Finance income	4	51.2	-	51.2	80.6	-	80.6
Finance costs	4	(155.5)	0.8	(154.7)	(138.8)	(26.8)	(165.6)
Profit before tax		308.2	(252.1)	56.1	309.3	(285.6)	23.7
Tax				(37.8)			(13.1)
Profit for the period				18.3			10.6
Attributable to:
Equity holders of the parent				15.8			10.8
Minority interests				2.5			(0.2)
				18.3			10.6
Adjusted EPS (pence)
Basic				26.4			24.1
Diluted				26.2			24.1

Adjustments relate to exceptional operating items (2009: £(215.9)m; 2008: £(205.3)m); amortisation of business combination intangibles (2009: £(34.8)m; 2008: £(53.5)m); loss on disposal of associate (2009: £(2.2)m; 2008: £nil) and exceptional finance income/(costs) (2009: £0.8m; 2008: £(26.8)m). All revenue and results arose from continuing operations.   Group Statement of Net Assets

				Restated
			Audited	Audited
			As at	As at
			30/09/09	30/09/08
			£m	£m
Non-current assets
Intangible assets			3,775.1	3,438.1
Property, plant & equipment
	- aircraft and aircraft spares		628.3	584.8
	- investment property		18.0	15.7
	- other		347.1	312.3
Investment in associates and joint ventures			36.0	42.7
Other investments			20.3	29.4
Deferred tax assets			431.8	328.0
Tax assets			5.6	9.9
Trade and other receivables			113.8	126.4
Pension assets			-	0.4
Derivative financial instruments			4.9	55.6
			5,380.9	4,943.3
Current assets
Inventories			27.0	24.2
Tax assets			38.6	15.1
Trade and other receivables			931.6	1,016.0
Derivative financial instruments			133.9	261.6
Cash and cash equivalents			550.2	761.3
			1,681.3	2,078.2
Non-current assets held for sale			9.1	-
Total assets			7,071.3	7,021.5
Current liabilities
Retirement benefit obligations			(4.8)	(9.0)
Trade and other payables			(1,904.7)	(1,856.0)
Borrowings			(619.1)	(356.0)
Obligations under finance leases			(237.8)	(182.6)
Tax liabilities			(80.9)	(69.4)
Revenue received in advance			(861.8)	(917.5)
Short-term provisions			(206.1)	(185.0)
Derivative financial instruments			(251.1)	(174.3)
			(4,166.3)	(3,749.8)
Non-current liabilities
Retirement benefit obligations			(366.3)	(181.6)
Trade and other payables			(17.1)	(36.1)
Long-term borrowings			(320.9)	(416.1)
Obligations under finance leases			(47.7)	(228.3)
Revenue received in advance			(1.2)	(0.9)
Deferred tax liabilities			(111.5)	(99.3)
Long-term provisions			(294.3)	(234.1)
Derivative financial instruments			(18.8)	(66.9)
			(1,177.8)	(1,263.3)
Total liabilities			(5,344.1)	(5,013.1)
Net assets			1,727.2	2,008.4

  Group Cash Flow Statement

		Audited	Pro forma
		Year ended	Year ended
		30/09/09	30/09/08
	Note	£m	£m
Cash flows from operating activities	5
Cash generated by operations		204.7	293.9
Income taxes paid		(26.6)	(73.7)
Net cash from operating activities		178.1	220.2
Investing activities
Proceeds on disposal of subsidiaries (net of cash sold)		1.1	-
Proceeds on disposal of associated undertakings		1.5	-
Proceeds on disposal of property, plant and equipment		12.3	18.6
Proceeds on disposal of available for sale
financial assets		9.0	-
Purchase of subsidiaries (net of cash acquired)		(71.2)	(296.4)
Purchase of tangible and financial assets		(131.0)	(90.5)
Purchase of intangible assets		(68.5)	(69.0)
Purchase of non-current financial assets		(4.8)	-
Additional loan investment		(3.7)	-
Disposal of short-term securities		125.3	75.9
Net cash used in investing activities		(130.0)	(361.4)
Financing activities
Interest paid		(102.6)	(58.1)
Dividends paid		(87.4)	(78.2)
Dividends paid to minority shareholders		-	(1.9)
Draw down of borrowings		181.9	732.2
Repayment of borrowings		(128.9)	(228.6)
Repayment of obligations under finance leases		(174.4)	(91.8)
Purchase of own shares		(47.1)	(247.8)
Proceeds from issue of ordinary shares		-	2.3
Net cash used in financing activities		(358.5)	28.1
Net decrease in cash & cash equivalents		(310.4)	(113.1)
Cash & cash equivalents at beginning of period		747.5	813.2
Effect of foreign exchange rate changes		69.9	47.4
Cash & cash equivalents at end of period		507.0	747.5
Liquid assets		550.2	761.3
Bank overdrafts		(43.2)	(13.8)
Cash & cash equivalents at end of period		507.0	747.5

  Notes to the Financial Information

1. General information and basis of preparation

The financial information contained in this appendix does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006. The information has been prepared using the accounting policies set out in the 2008 Annual Report, and the basis of preparation is consistent with that set out on page 43 of this document.

2. Segmental analysis

For management purposes, the Group is currently organised into five geographic operating divisions: UK and Ireland, Continental Europe, Northern Europe, North America and Airlines Germany. These divisions are the basis on which the Group reports its primary segment information. Certain residual businesses and corporate functions are not allocated to these divisions and are shown separately as Corporate.

The primary business of all these operating divisions is the provision of leisure travel services and, accordingly, no separate secondary segmental information is provided.

Segmental information for these activities is presented below.

Year ended 30 September 2009
	UK &	Continental	Northern	North	Airlines
	Ireland	Europe	Europe	America	Germany	Corporate	Total
	£m	£m	£m	£m	£m	£m	£m
Revenue
Segment sales	3,117.2	4,014.6	1,061.6	370.4	1,061.2	-	9,625.0
Inter-segment sales	(19.2)	(14.3)	(2.3)	-	(320.4)	-	(356.2)
Total revenue	3,098.0	4,000.3	1,059.3	370.4	740.8	-	9,268.8
Profit/(loss) from
operations before	162.2	127.0	86.4	17.9	47.4	(26.0)	414.9
exceptional items

Year ended 30 September 2008
	UK &	Continental	Northern	North	Airlines
	Ireland	Europe	Europe	America	Germany	Corporate	Total
	£m	£m	£m	£m	£m	£m	£m
Revenue
Segment sales	3,104.4	3,646.9	974.9	384.2	978.2	-	9,088.6
Inter-segment sales	(7.1)	(26.5)	(3.3)	-	(297.5)	-	(334.4)
Total revenue	3,097.3	3,620.4	971.6	384.2	680.7	-	8,754.2
Profit/(loss) from
operations before	143.4	106.3	86.2	6.0	45.4	(21.4)	365.9
exceptional items

Inter-segment sales are charged at prevailing market prices.

 

3. Exceptional items

	2009	2008
	£m	£m
Property costs, redundancy and other costs incurred in integrating
the Thomas Cook and MyTravel businesses	(56.6)	(116.3)
Property costs, redundancy and other costs incurred in other
business integrations and reorganisations	(112.8)	(47.1)
Disposal of property, plant & equipment	(3.9)	(1.1)
Impairment of assets	-	(7.7)
Other expenses incurred as a result of the merger	-	(21.7)
Fuel-related costs	(20.7)	-
Other exceptional operating items	(21.9)	(11.4)
Exceptional items included within profit from operations	(215.9)	(205.3)
Exceptional items have been included in the income statement
as follows:
Cost of providing tourism services	(58.7)	(14.5)
Personnel expenses	(59.7)	(59.0)
Depreciation and amortisation	(9.2)	(0.4)
Net operating expenses	(84.4)	(130.3)
Loss on disposal of businesses and PPE	(3.9)	(1.1)
	(215.9)	(205.3)
Share of associates' exceptional items
Loss on disposal of associates	(2.2)	-
	(2.2)	-
Exceptional finance income/(costs)
Loss on revaluation of trading securities	(10.6)	(13.9)
Impact of financial markets volatility	11.4	(12.9)
	0.8	(26.8)
Total exceptional items	(217.3)	(232.1)

4. Finance income and costs

	2009	2008
	£m	£m
Finance income
Income from loans included in financial assets	1.0	1.0
Other interest and similar income	11.1	32.1
Expected return on pension plan assets	38.4	45.3
Fair value gains on derivative financial instruments	0.7	2.2
	51.2	80.6
Finance costs
Interest payable	(85.3)	(48.4)
Finance costs in respect of finance leases	(22.5)	(23.7)
Interest cost on pension plan liabilities	(50.1)	(44.9)
Forward points on future hedging contracts	10.0	(12.8)
Other finance costs (including discounting charges)	(7.6)	(9.0)
	(155.5)	(138.8)
Exceptional finance income/(costs)
Loss on revaluation of trading securities	(10.6)	(13.9)
Impact of financial markets volatility	11.4	(12.9)
	0.8	(26.8)
	(154.7)	(165.6)
	(103.5)	(85.0)

5. Notes to the cash flow statement

		2009	2008
		£m	£m
Profit before tax		56.1	23.7
Adjustments for:
	Finance income	(51.2)	(80.6)
	Finance costs	154.7	165.6
	Net investment income	(1.4)	(1.4)
	Share of results of associates and joint ventures	3.8	(0.2)
	Loss on disposal of associate	2.2	-
	Depreciation of property, plant & equipment and intangibles	167.6	140.5
	Amortisation of business combination intangibles	34.8	53.5
	Impairment of assets	18.0	7.7
	Loss on disposal of businesses, PPE and intangible assets	3.9	1.1
	Share based payments	8.3	3.1
	Other non-cash items	(19.6)	(0.8)
	Decrease in provisions	(17.6)	(7.6)
	Income received from other non-current investments	1.4	0.4
	Additional pension contributions	(17.4)	(17.4)
	Interest received	15.5	27.2
Operating cash flows before movements in working capital		359.1	314.8
Movement in working capital		(154.4)	(20.9)
Cash generated by operations		204.7	293.9
Income taxes paid		(26.6)	(73.7)
Net cash from operating activities		178.1	220.2

Cash and cash equivalents, which are presented as a single class of assets on the face of the balance sheet, comprise cash at bank and other short-term highly liquid investments with maturity of three months or less.

6. Net debt

	At		Other		At
	1 Oct	Cash	non-cash	Exchange	30 Sept
	2008	flow	changes	movements	2009
	£m	£m	£m	£m	£m
Liquidity
Cash and cash equivalents	761.3	(284.2)	-	73.1	550.2
Trading securities	129.2	(125.3)	(10.6)	6.7	-
	890.5	(409.5)	(10.6)	79.8	550.2
Current debt
Bank overdrafts	(13.8)	(26.2)	-	(3.2)	(43.2)
Short term borrowings	(198.8)	(37.7)	(129.5)	(35.8)	(401.8)
Current portion of long term
borrowing	(143.4)	17.1	(36.0)	(11.8)	(174.1)
Obligations under finance leases	(182.6)	174.4	(205.0)	(24.6)	(237.8)
	(538.6)	127.6	(370.5)	(75.4)	(856.9)
Non-current debt
Long term borrowings	(416.1)	(32.4)	165.5	(37.9)	(320.9)
Obligations under finance leases	(228.3)	-	205.0	(24.4)	(47.7)
	(644.4)	(32.4)	370.5	(62.3)	(368.6)
Total debt	(1,183.0)	95.2	-	(137.7)	(1,225.5)
Net debt	(292.5)	(314.3)	(10.6)	(57.9)	(675.3)

Appendix 2 - Audited statutory financial information

Group Income Statement 

					Restated
		Audited			Audited
		Year ended			11 months ended
		30/09/09			30/09/08
		Pre Adj's	Adj's	Total	Pre Adj's	Adj's	Total
	Note	£m	£m	£m	£m	£m	£m
Revenue	2	9,268.8	-	9,268.8	8,111.5	-	8,111.5
Cost of providing tourism services		(7,017.8)	(58.7)	(7,076.5)	(6,226.9)	(13.0)	(6,239.9)
Gross profit		2,251.0	(58.7)	2,192.3	1,884.6	(13.0)	1,871.6
Personnel expenses		(1,027.1)	(59.7)	(1,086.8)	(849.3)	(47.0)	(896.3)
Depreciation and amortisation		(158.4)	(9.2)	(167.6)	(127.6)	(0.4)	(128.0)
Amortisation of business
combination intangibles		-	(34.8)	(34.8)	-	(49.1)	(49.1)
Net operating expenses		(650.6)	(84.4)	(735.0)	(544.3)	(117.5)	(661.8)
Loss on disposal of
businesses and PPE		-	(3.9)	(3.9)	-	(1.7)	(1.7)
Profit from operations		414.9	(250.7)	164.2	363.4	(228.7)	134.7
Share of results of associates and
joint ventures		(3.8)	-	(3.8)	(1.6)	-	(1.6)
Loss on disposal of associates		-	(2.2)	(2.2)	-	-	-
Net investment income		1.4	-	1.4	0.5	-	0.5
Finance income	4	51.2	-	51.2	68.4	-	68.4
Finance costs	4	(155.5)	0.8	(154.7)	(126.8)	(26.8)	(153.6)
Profit before tax		308.2	(252.1)	56.1	303.9	(255.5)	48.4
Tax				(37.8)			(4.8)
Profit for the period				18.3			43.6
Attributable to:
Equity holders of the parent				15.8			43.9
Minority interests				2.5			(0.3)
				18.3			43.6
EPS (pence)
Basic				1.9			4.6
Diluted				1.8			4.6

Adjustments relate to exceptional operating items (2009: £(215.9)m; 2008: £(179.6)m); amortisation of business combination intangibles (2009: £(34.8)m; 2008: £(49.1)m); loss on disposal of associate (2009: £(2.2)m; 2008: £nil) and exceptional finance income/(costs) (2009: £0.8m; 2008: £(26.8)m). All revenue and results arose from continuing operations.   Group Statement of Recognised Income and Expense

			Restated
		Audited	Audited
		Year ended	11 months to
		30/09/09	30/09/08
	Note	£m	£m
(Losses)/gains on cash flow hedges		(213.7)	281.4
Losses on available-for-sale investments		(1.1)	(0.9)
Exchange differences on translation of foreign operations		86.4	121.6
Actuarial losses on defined benefit pension schemes		(170.1)	(16.3)
Movement on asset cap on defined benefit pension schemes		0.7	-
Tax on items taken directly to equity	5	113.3	(74.5)
Net (expense)/income recognised directly in equity		(184.5)	311.3
Transfers
Transferred to profit or loss on cash flow hedges		(24.6)	(177.8)
Transfer of translation losses to profit or loss on disposal		4.5	-
Tax on items transferred from equity	5	7.0	53.3
		(13.1)	(124.5)
Profit for the period		18.3	43.6
Total recognised income and expense for the period		(179.3)	230.4
Attributable to:
Equity holders of the parent		(181.8)	230.7
Minority interests		2.5	(0.3)
		(179.3)	230.4

  

Group Balance Sheet

				Restated
			Audited	Audited
			As at	As at
			30/09/09	30/09/08
			£m	£m
Non-current assets
Intangible assets			3,775.1	3,438.1
Property, plant & equipment
	- aircraft and aircraft spares		628.3	584.8
	- investment property		18.0	15.7
	- other		347.1	312.3
Investment in associates and joint ventures			36.0	42.7
Other investments			20.3	29.4
Deferred tax assets			431.8	328.0
Tax assets			5.6	9.9
Trade and other receivables			113.8	126.4
Pension assets			-	0.4
Derivative financial instruments			4.9	55.6
			5,380.9	4,943.3
Current assets
Inventories			27.0	24.2
Tax assets			38.6	15.1
Trade and other receivables			931.6	1,016.0
Derivative financial instruments			133.9	261.6
Cash and cash equivalents			550.2	761.3
			1,681.3	2,078.2
Non-current assets held for sale			9.1	-
Total assets			7,071.3	7,021.5
Current liabilities
Retirement benefit obligations			(4.8)	(9.0)
Trade and other payables			(1,904.7)	(1,856.0)
Borrowings			(619.1)	(356.0)
Obligations under finance leases			(237.8)	(182.6)
Tax liabilities			(80.9)	(69.4)
Revenue received in advance			(861.8)	(917.5)
Short-term provisions			(206.1)	(185.0)
Derivative financial instruments			(251.1)	(174.3)
			(4,166.3)	(3,749.8)
Non-current liabilities
Retirement benefit obligations			(366.3)	(181.6)
Trade and other payables			(17.1)	(36.1)
Long-term borrowings			(320.9)	(416.1)
Obligations under finance leases			(47.7)	(228.3)
Revenue received in advance			(1.2)	(0.9)
Deferred tax liabilities			(111.5)	(99.3)
Long-term provisions			(294.3)	(234.1)
Derivative financial instruments			(18.8)	(66.9)
			(1,177.8)	(1,263.3)
Total liabilities			(5,344.1)	(5,013.1)
Net assets			1,727.2	2,008.4
Equity
Called-up share capital			57.7	59.8
Share premium account			8.9	8.9
Merger reserve			1,984.2	1,984.2
Translation and hedging reserves			136.1	214.8
Capital redemption reserve			8.5	6.4
Retained earnings deficit			(474.0)	(265.4)
Investment in own shares			(13.1)	(13.0)
Equity attributable to equity holders of the parent			1,708.3	1,995.7
Minority interests			18.9	12.7
Total equity			1,727.2	2,008.4

Group Cash Flow Statement

		Audited	Audited
		Year ended	11 months to
		30/09/09	30/09/08
	Note	£m	£m
Cash flows from operating activities
Cash generated by operations		204.7	420.9
Income taxes paid		(26.6)	(63.7)
Net cash from operating activities	10	178.1	357.2
Investing activities
Proceeds on disposal of subsidiaries (net of cash sold)		1.1	-
Proceeds on disposal of associated undertakings		1.5	-
Proceeds on disposal of property, plant & equipment		12.3	13.2
Proceeds on disposal of available for sale
financial assets		9.0	-
Purchase of subsidiaries (net of cash acquired)	8	(71.2)	(296.4)
Purchase of tangible and financial assets		(131.0)	(82.2)
Purchase of intangible assets		(68.5)	(60.2)
Purchase of non-current financial assets		(4.8)	-
Additional loan investment		(3.7)	-
Disposal of short-term securities		125.3	134.1
Net cash from investing activities		(130.0)	(291.5)
Financing activities
Interest paid		(102.6)	(55.2)
Dividends paid		(87.4)	(78.2)
Dividends paid to minority shareholders		-	(1.9)
Draw down of borrowings		181.9	732.3
Repayment of borrowings		(128.9)	(221.7)
Repayment of obligations under finance leases		(174.4)	(91.3)
Purchase of own shares		(47.1)	(247.8)
Proceeds from issue of ordinary shares		-	2.2
Net cash used in financing activities		(358.5)	38.4
Net (decrease) / increase in cash & cash equivalents		(310.4)	104.1
Cash & cash equivalents at beginning of period		747.5	596.0
Effect of foreign exchange rate changes		69.9	47.4
Cash & cash equivalents at end of period		507.0	747.5
Liquid assets		550.2	761.3
Bank overdrafts		(43.2)	(13.8)
Cash & cash equivalents at end of period		507.0	747.5

  Notes to the Financial Information

1. General information and basis of preparation

The financial information contained in this preliminary announcement, which comprises the Group income statement, Group balance sheet, Group cash flow statement, Group statement of recognised income and expense and related notes has been prepared under the historical cost convention using the accounting policies set out in the 2008 Annual Report, and the basis of preparation is consistent with the year ended 30 September 2008.

However, during the year, the prior period was restated for fair value adjustments and revenue accounting adjustments related to the acquisitions of TriWest Travel Holdings and Jet Tours S.A. The revenue accounting adjustments have no impact on profit. The determination of fair values related to these acquisitions has now been concluded.

The financial information contained herein does not constitute the full financial statements of the Group within the meaning of Section 434 of the UK Companies Act 2006. 

The 2009 Annual Report will be posted to shareholders in January 2010. Further copies will be available for members of the public on our website at www.thomascookgroup.com, or on application to the Group Company Secretary, Thomas Cook Group plc, 6th Floor South, Brettenham House, Lancaster Place, London WC2E 7EN.

 

2. Segmental analysis

For management purposes, the Group is currently organised into five geographic operating divisions: UK and Ireland, Continental Europe, Northern Europe, North America and Airlines Germany. These divisions are the basis on which the Group reports its primary segment information. Certain residual businesses and corporate functions are not allocated to these divisions and are shown separately as Corporate.

The primary business of all these operating divisions is the provision of leisure travel services and, accordingly, no separate secondary segmental information is provided.

Segmental information for these activities is presented below.

Year ended 30 September 2009
	UK &	Continental	Northern	North	Airlines
	Ireland	Europe	Europe	America	Germany	Corporate	Total
	£m	£m	£m	£m	£m	£m	£m
Revenue
Segment sales	3,117.2	4,014.6	1,061.6	370.4	1,061.2	-	9,625.0
Inter-segment sales	(19.2)	(14.3)	(2.3)	-	(320.4)	-	(356.2)
Total revenue	3,098.0	4,000.3	1,059.3	370.4	740.8	-	9,268.8
Result
Profit/(loss) from
operations before	162.2	127.0	86.4	17.9	47.4	(26.0)	414.9
exceptional items
Exceptional items	(88.8)	(64.6)	(7.3)	(22.8)	(3.4)	(29.0)	(215.9)
Amortisation of
business	(14.2)	(0.5)	(18.9)	(1.2)	-	-	(34.8)
combination
intangibles
Segmental result	59.2	61.9	60.2	(6.1)	44.0	(55.0)	164.2
Share of results of associates & JV's							(3.8)
Loss on disposal of associate							(2.2)
Net investment income							1.4
Finance income							51.2
Finance costs							(154.7)
Profit before tax							56.1
Tax							(37.8)
Profit for the year							18.3

Inter-segment sales are charged at prevailing market prices.

2. Segmental analysis (continued)

11 months ended 30 September 2008
	UK &	Continental	Northern	North	Airlines
	Ireland	Europe	Europe	America	Germany	Corporate	Total
	£m	£m	£m	£m	£m	£m	£m
Revenue
Segment sales	2,836.6	3,403.4	910.0	365.2	896.1	-	8,411.3
Inter-segment sales	(6.3)	(25.6)	(2.7)	-	(265.2)	-	(299.8)
Total revenue	2,830.3	3,377.8	907.3	365.2	630.9	-	8,111.5
Result
Profit/(loss) from
operations before
exceptional items	144.3	103.1	79.8	14.7	40.1	(18.6)	363.4
Exceptional items	(114.7)	(33.1)	(0.2)	(5.2)	(2.6)	(23.8)	(179.6)
Amortisation of
business
combination
intangibles	(14.2)	(1.2)	(27.8)	(5.9)	-	-	(49.1)
Segmental result	15.4	68.8	51.8	3.6	37.5	(42.4)	134.7
Share of results of associates & JV's							(1.6)
Net investment income							0.5
Finance income							68.4
Finance costs							(153.6)
Profit before tax							48.4
Tax							(4.8)
Profit for the year							43.6

Inter-segment sales are charged at prevailing market prices.

 

3. Exceptional items

	2009	2008
	£m	£m
Property costs, redundancy and other costs incurred in integrating
the Thomas Cook and MyTravel businesses	(56.6)	(106.7)
Property costs, redundancy and other costs incurred in other
business integrations and reorganisations	(112.8)	(46.4)
Disposal of property, plant & equipment	(3.9)	(1.7)
Impairment of assets	-	(2.5)
Other expenses incurred as a result of the merger	-	(14.8)
Fuel-related costs	(20.7)	-
Other exceptional operating items	(21.9)	(7.5)
Exceptional items included within profit from operations	(215.9)	(179.6)
Exceptional items have been included in the income statement
as follows:
Cost of providing tourism services	(58.7)	(13.0)
Personnel expenses	(59.7)	(47.0)
Depreciation and amortisation	(9.2)	(0.4)
Net operating expenses	(84.4)	(117.5)
Loss on disposal of businesses and PPE	(3.9)	(1.7)
	(215.9)	(179.6)
Share of associates' exceptional items
Loss on disposal of associates	(2.2)	-
	(2.2)	-
Exceptional finance income/(costs)
Loss on revaluation of trading securities	(10.6)	(13.9)
Impact of financial markets volatility	11.4	(12.9)
	0.8	(26.8)
Total exceptional items	(217.3)	(206.4)

4. Finance income and costs

	2009	2008
	£m	£m
Finance income
Income from loans included in financial assets	1.0	1.0
Other interest and similar income	11.1	23.3
Expected return on pension plan assets	38.4	41.9
Fair value gains on derivative financial instruments	0.7	2.2
	51.2	68.4
Finance costs
Interest payable	(85.3)	(40.9)
Finance costs in respect of finance leases	(22.5)	(22.2)
Interest cost on pension plan liabilities	(50.1)	(41.9)
Forward points on future hedging contracts	10.0	(12.8)
Other finance costs (including discounting charges)	(7.6)	(9.0)
	(155.5)	(126.8)
Exceptional finance income/(costs)
Loss on revaluation of trading securities	(10.6)	(13.9)
Impact of financial markets volatility	11.4	(12.9)
	0.8	(26.8)
	(154.7)	(153.6)
	(103.5)	(85.2)

5. Tax

Analysis of tax charge		2009	2008
		£m	£m
Current tax
	corporation tax charge for the period	24.8	43.8
	(income)/reimbursements in respect of prior periods	(6.0)	3.3
		18.8	47.1
Deferred tax
	tax charge/(credit) for the period	9.2	(25.9)
	adjustments in respect of prior periods	9.8	(16.4)
		19.0	(42.3)
Total tax charge		37.8	4.8

In addition to the amount charged to the income statement, deferred tax relating to actuarial losses on pension schemes and the fair value of derivative financial instruments of £120.3m has been credited directly in equity (2008: charge of £21.2m).

UK corporation tax is calculated at 28% (2008: 28.9%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

Surplus losses not recognised in deferred tax of £679.9m (2008: £531.0m) are available in the UK and Germany for offset against future profits.

6.  Dividends

	2009	2008
	£m	£m
Interim dividend paid of 3.75 pence per share (2008: 3.25 pence)	31.6	29.4
Proposed final dividend for the period of 7.00 pence per share	60.1	55.8
(2008: 6.5 pence).
	91.7	85.2

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

7. Earnings per share

The calculations for earnings per share, based on the weighted average number of shares, are shown in the table below. The weighted average number of shares shown excludes 5.1m shares held by the employee share ownership trusts (2008: 2.6m).

		Restated
	2009	2008
Basic and diluted earnings per share
	£m	£m
Net profit attributable to equity holders of the parent	15.8	43.9
	millions	millions
Weighted average number of shares for basic
earnings per share	853.7	947.6
Effect of dilutive potential ordinary shares - share options *	5.2	0.5
Weighted average number of shares for diluted
earnings per share	858.9	948.1
	pence	pence
Basic earnings per share	1.9	4.6
Diluted earnings per share	1.8	4.6

* Awards of shares under the Thomas Cook Performance Share Plan and Buy As You Earn Scheme will be satisfied by shares held in trust and therefore are potentially dilutive. The remainder of the share schemes will be satisfied by the purchase of existing shares in the market and will therefore not result in any dilution of earnings. 

 

8. Acquisitions

Gold Medal

On 7 April 2009, the Group acquired a 50.01% economic interest (60% of the ordinary share capital) in Gold Medal International Limited, one of the UK's largest independent travel groups, consisting of an air and hotel consolidator, online booking site and luxury tour operator. For accounting purposes the Group is deemed to have acquired 100% of Gold Medal. The purchase price was £65.6m, of which £22.0m has been paid in cash and an estimated balance of £43.6m has been recognised in relation to the value of the options in place for the Group to purchase the remaining shareholding or for the vendor to sell it to the Group.

Details of the net assets acquired are set out in the table below:

	Carrying value		Amount
	before business	Fair value	recognised at
	combination	adjustments	acquisition date
	£m	£m	£m
Net assets acquired
Intangible assets	0.5	44.2	44.7
Property, plant and equipment	1.8	-	1.8
Trade and other receivables	42.6	-	42.6
Tax asset	1.2	-	1.2
Cash and cash equivalents	24.0	-	24.0
Trade and other payables	(81.9)	-	(81.9)
Deferred tax asset/(liability)	1.1	(12.4)	(11.3)
	(10.7)	31.8	21.1
Goodwill			45.9
Total consideration			67.0
Satisfied by:
Cash and attributable costs			23.4
Contingent consideration			43.6
			67.0

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management's best estimates.

The acquired business contributed revenue of £59.5m and net profit of £4.6m to the Group for the period from acquisition to 30 September 2009.

 

8. Acquisitions (continued)

During the period the Group concluded a number of small acquisitions, namely:

Details of the net assets acquired are set out in the table below.

	Carrying value		Amount
	before business	Fair value	recognised at
	combination	adjustments	acquisition date
	£m	£m	£m
Net assets acquired
Intangible assets	1.0	6.2	7.2
Property, plant and equipment	0.1	-	0.1
Trade and other receivables	19.1	-	19.1
Cash and cash equivalents	0.3	-	0.3
Trade and other payables	(18.5)	-	(18.5)
	2.0	6.2	8.2
Goodwill			1.7
Negative goodwill			(3.0)
Total consideration			6.9
Satisfied by:
Cash and attributable costs			5.0
Contingent consideration			0.6
Recovery of receivable previously written off			1.3
			6.9

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management's best estimates.

The acquired business contributed revenue of £6.4m and net loss of £0.2m to the Group for the period from acquisition to 30 September 2009.

Lufthansa payment

During the period, the Group paid £71.8m for Lufthansa AG's 24.9% holding of Condor. As prior to acquiring Lufthansa AG's share, Condor was 100% consolidated by the Group, this payment is in effect settlement of deferred consideration. 

India

Due to a rights issue by Thomas Cook India in January 2009, the Group's share in the company increased from 74.9% to 77.63%. As a result of this transaction, the Group received cash from minority shareholders amounting to £4.7m.

 

9. Equity attributable to equity holders of the parent

The movements in equity attributable to equity holders of the parent during the period were as follows:

			£m
Balance at 1 November 2007			2,112.3
Total recognised income & expense for the period			230.7
Equity credit in respect of share based payments			3.1
Issue of equity shares net of expenses			2.2
Purchase of own shares			(8.3)
Disposal of own shares			0.2
Share buyback			(266.3)
Dividends			(78.2)
Net change directly in equity			(347.3)
Total movements			(116.6)
Balance at 30 September 2008			1,995.7
Total recognised income & expense for the year			(181.8)
Equity credit in respect of share based payments			8.3
Purchase of own shares			(0.1)
Share buyback			(26.4)
Dividends			(87.4)
Net change directly in equity			(105.6)
Total movements			(287.4)
Balance at 30 September 2009			1,708.3

 

10. Notes to the cash flow statement

		2009	2008
		£m	£m
Profit before tax		56.1	48.4
Adjustments for:
	Finance income	(51.2)	(68.4)
	Finance costs	154.7	153.6
	Net investment income	(1.4)	(0.5)
	Loss on disposal of associate	2.2	-
	Share of results of associates and joint ventures	3.8	1.6
	Depreciation of property, plant & equipment and intangibles	167.6	128.0
	Amortisation of business combination intangibles	34.8	49.1
	Impairment of assets	18.0	6.8
	Disposal of businesses, PPE and intangible assets	(0.4)	1.7
	Disposal of intangible assets	4.3	-
	Share based payments	8.3	3.1
	Other non-cash items	(19.6)	(32.7)
	(Decrease)/increase in provisions	(17.6)	0.5
	Income received from other non-current investments	1.4	0.4
	Additional pension contributions	(17.4)	(17.4)
	Interest received	15.5	27.2
Operating cash flows before movements in working capital		359.1	301.4
Movement in working capital		(154.4)	119.5
Cash generated by operations		204.7	420.9
Income taxes paid		(26.6)	(63.7)
Net cash from operating activities		178.1	357.2

Cash and cash equivalents, which are presented as a single class of assets on the face of the balance sheet, comprise cash at bank and other short-term highly liquid investments with maturity of three months or less.

11. Net debt

	At		Other		At
	1 Oct	Cash	non-cash	Exchange	30 Sept
	2008	flow	changes	movements	2009
	£m	£m	£m	£m	£m
Liquidity
Cash and cash equivalents	761.3	(284.2)	-	73.1	550.2
Trading securities	129.2	(125.3)	(10.6)	6.7	-
	890.5	(409.5)	(10.6)	79.8	550.2
Current debt
Bank overdrafts	(13.8)	(26.2)	-	(3.2)	(43.2)
Short term borrowings	(198.8)	(37.7)	(129.5)	(35.8)	(401.8)
Current portion of long term
borrowing	(143.4)	17.1	(36.0)	(11.8)	(174.1)
Obligations under finance leases	(182.6)	174.4	(205.0)	(24.6)	(237.8)
	(538.6)	127.6	(370.5)	(75.4)	(856.9)
Non-current debt
Long term borrowings	(416.1)	(32.4)	165.5	(37.9)	(320.9)
Obligations under finance leases	(228.3)	-	205.0	(24.4)	(47.7)
	(644.4)	(32.4)	370.5	(62.3)	(368.6)
Total debt	(1,183.0)	95.2	-	(137.7)	(1,225.5)
Net debt	(292.5)	(314.3)	(10.6)	(57.9)	(675.3)

 

Appendix 3 - Key Performance Indicators Definitions

* Revenue for the Group and segmental analysis represents external revenue only, except in the case of the Airlines Germany pro forma segmental key performance analysis where revenue of £320.4m (2008: £297.5m) largely to the Continental Europe division has been included.

** Profit from operations / adjusted EBIT is defined as earnings before interest and tax, and has been adjusted to exclude exceptional operating items and amortisation of business combination intangibles. It also excludes our share of the results of associates and joint ventures.

*** The operating profit margin / adjusted EBIT margin is the profit from operations (as defined above) divided by the external revenue, except in the case of the Airlines Germany segmental key performance analysis where total revenue has been used as the denominator to more accurately reflect the trading performance.

‹ Adjusted earnings per share is calculated as net profit after tax, but before exceptional items and amortisation of business combination intangibles, divided by the weighted average number of shares in issue in the twelve months to September. Profit after tax has been calculated using a notional tax rate of 26.9% for 2009 and 26.1% for 2008.

Adjusted dividend cover is calculated by dividing the adjusted earnings per share (see above) by the full year paid and proposed dividends. 

In the case of pro forma prior year figures, the figures reflect the normalised results for the 12 months to 30 September 2008.

† Passengers in the case of UK, Northern Europe and North America represents the total number of passengers (in thousands) that departed on a Thomas Cook Group plc holiday in the period. It excludes customers who booked third party tour operator products through Thomas Cook retail channels and transfers only. For Continental Europe passengers represents all tour operator passengers departed in the period, excluding those on which only commission is earned.

Mass Market Risk passengers in UK, Northern Europe and North America represent those holidays sold where the business has financial commitment to the product (flights and accommodation) before the customer books. The analysis excludes accommodation only passengers.

†† Capacity for UK, Northern Europe and North America represents the total number of holidays available to sell. This is calculated by reference to committed airline seats (both in-house and third party).

In the case of Airlines Germany, capacity represents the total number of available seat kilometres (ASK). ASK is a measure of an airline's passenger carrying capacity and is calculated as available seats multiplied by distance flown.

††† For UK, Northern Europe and North America, load factor is a measure of how successful the airline was at selling the available capacity. This is calculated by dividing the departed mass market passengers in the period (excluding accommodation only) by the capacity in the period.

For Airlines Germany, seat load factor is a measure of how successful the airline was at selling the available capacity. This is calculated by dividing the revenue passenger kilometres (RPK) by the available seat kilometres (ASK - see capacity definition above) and is the recognised IATA definition of load factor used for airlines. RPK is a measure of the volume of passengers carried by an airline. One RPK is flown when a passenger is carried one kilometre.

# Average selling price for UK, Northern Europe and North America represents the average selling price (after discounts) achieved per mass market passenger departed in the period (excluding accommodation only passengers). For Continental Europe, average selling price represents the average selling price (after discounts) achieved per passenger departed in the period.

## Brochure mix is defined as the number of mass market holidays (excluding accommodation only) sold at brochure prices divided by the total number of holidays sold (excluding seat only) and is a measure of how successful a business was at selling holidays early. Holidays are generally discounted closer to departure.

‡‡ Controlled distribution is defined as the proportion of passengers booking through our in-house retail shops, call centres and websites. Internet distribution is a sub-set of controlled distribution and is defined as the proportion of passengers booking through in-house websites. Both performance indicators are calculated on departed passengers in the period.

‡‡‡ Sold seats in Airlines Germany represents the total number of one-way seats sold on aircraft (in thousands) that departed in the period.

### Yield in Airlines Germany represents the average price per seat departed in the period.

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ENDFR BLBJTMMITTRL

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