13th Aug 2008 07:00
13 August 2008
Thomas Cook Group plc
Interim Management Statement for the period since 30 April 2008
Current trading continues to be strong in the Summer 08 season with early indicators for Winter 08/09 and Summer 09 ahead of last year
Steps already taken to increase flexibility for Summer 09 in capacity, accommodation, cost base and fuel hedging
Crude oil 92% hedged for FY 08/09 and hedging to benefit us at lower price levels
Recent acquisitions performing in line with our expectations and integration continuing successfully
Strong e-Commerce development
On track to meet our expectations for the current financial year
Manny Fontenla-Novoa, Group CEO, said:
"Trading in the 08 summer season is strong in all markets and early indicators show that we are currently ahead of last year for Winter 08/09 and Summer 09. While we are encouraged by these early results, we are increasing our flexibility to give us the levers to pull in tougher market conditions, including fuel price hedging and capacity management in all our markets. We have a range of additional optional measures in the UK market, our largest market, which should strengthen our resilience.
"Overall, the progress we are making in realising synergies, the development of our e-Commerce platforms, the integration of our new businesses as well as the strength of our management team and financial position stands us in good stead as we look forward. And in the current year, we remain on track to meet our expectations."
Overall performance and financial position
Thomas Cook continues to execute its strategy of maximising value in the mainstream business, as well as capturing growth from independent travel, financial services and emerging markets. Our Group-wide business model allows us to manage and improve the balance between supply and demand with a focus on capacity planning for future seasons.
The financial performance of the Group in the period since the half year end, 30 April 2008, (which was reported on in our release of 24 June 2008), has been in line with the Board's expectations. The seasonal cash inflows in May, June and July have resulted in a strengthening of our net debt position since the half year end. A pro forma income statement for the nine months to 30 June 2008 compared with the pro forma nine months to 30 June 2007 is included in the appendix to this release.
As set out in our 2007 Annual Report, the accounting reference date for the Group has been changed to 30 September with effect from the current financial period. The current financial period will therefore cover eleven months.
Current trading
Summer 08
Trading for summer 2008 continues to be strong in our main markets despite the current economic conditions. We are benefiting from the flexibility of our business model, our capacity reductions, and the actions taken to ensure we have been able to remain robust in times of economic uncertainty.
|
Sold to date % |
Year on year pro forma variation % |
|||
|
Average selling price |
Bookings |
Capacity |
||
|
UK |
86 |
+6 |
-9 |
-10 |
|
Northern Europe |
86 |
+10 |
+1 |
+2 |
|
Continental Europe |
n/a |
+4 |
flat |
n/a |
|
North America |
78 |
-2 |
flat |
-1 |
Note: Figures above are as at 9/10 August 2008. The figures above for UK, Northern Europe and North America represent Risk bookings only. In Continental Europe, all bookings are included.
UK
The UK continues to perform strongly. Average selling prices are cumulatively 6% ahead and, over the last twelve weeks, have been 14% ahead of the corresponding prior year period. Margins are also significantly ahead of the prior year. In line with our capacity reduction programme, there are 14% fewer holidays to sell than at this time last year, standing us in good stead in the late bookings market and our much lower level of stock left to sell in both short haul and long haul is particularly encouraging.
|
UK haul mix |
Year on year pro forma variation % |
|
|
Left to sell |
Capacity |
|
|
Short haul |
-32 |
-22 |
|
Medium haul |
-3 |
-2 |
|
Long haul |
-46 |
-13 |
|
UK total |
-14 |
-10 |
Northern Europe
In Northern Europe bookings are 1% ahead year on year on capacity increased by 2%. Average selling prices remain 10% ahead and margins are well ahead of last year.
Continental Europe
In Continental Europe bookings are in line with last year with average selling prices 4% higher. Continental Europe comprises:
North America
In North America, where the summer season is the low season for the charter market and capacity is therefore limited, trading remains satisfactory.
Airlines Germany
Capacity overall is 9% lower in Airlines Germany, resulting from the elimination of unprofitable city routes. The booked load factor is in line with last year, at 78%.
Winter 08/09
Selling for Winter 08/09 is well underway in the UK and Northern Europe, but we are at an earlier stage in our other markets. Indicators at this early stage in the booking cycle are encouraging given the economic uncertainty.
|
Sold to date % |
Year on year variation % |
|||
|
Average selling price |
Bookings |
Capacity |
||
|
UK |
25 |
+1 |
+3 |
-8 |
|
Northern Europe |
30 |
+6 |
-3 |
+2 |
Note: Figures above are as at 9/10 August 2008.
UK
In the UK, 25% of capacity has been sold. Bookings are currently 3% ahead of the prior year on 8% less capacity and, over the last six weeks, bookings have been 1% behind but prices 9% ahead of the corresponding prior year period last year.
Northern Europe
In Northern Europe, we have sold 30% of our winter capacity to date with bookings slightly down and average selling prices 6% ahead of last year's record level.
Continental Europe
Selling in Germany began four weeks earlier this year and has been strong, although year on year comparisons are affected by this year's earlier launch. Selling in the other Continental European markets has only just been launched with satisfactory results at this early stage in the cycle.
North America
At this early stage, bookings, capacity and average selling prices are at similar levels to a year ago.
Summer 09
We are as yet only selling for Summer 09 in the UK market. Although, typically for this stage of the year, less than 10% of available capacity has been booked to date, the early trend is encouraging with bookings in line with the prior year and average selling prices 8% ahead.
Increased flexibility
Our Group-wide business model gives us greatest flexibility at the early stage of the booking cycle and consequently we are in a strong position for Summer 09. Less than 10% of our hotel room capacity is committed and our use of third-party flying allows us to accommodate changes in demand until late in the season. Specifically, in the UK, we can reduce capacity up to 15% without an impact on our own fleet.
Whilst our flexibility gives us the capability to manage considerable variation in demand, we have also ensured that our planning for 2009 is prudent. We have therefore implemented a rigorous programme of measures designed to manage costs and limit our exposure to variability in commodity costs and demand throughout 2009. This includes:
Hedging 92% of our crude oil requirements and putting in place hedging instruments to provide some benefits at lower oil price levels;
Hedging 86% of our Dollar and 85% of our Euro requirements for the coming year; and
Implementing a procurement review designed to manage our accommodation costs effectively.
In the UK we have further:
Reduced capacity by 7% with matching cost reductions being targeted throughout the whole of the business; and
Focused on optimising our destination mix, prioritising medium-haul destinations over short and long-haul.
Other developments
E-Commerce
We continue to see rapid growth in our two largest e-commerce businesses with a significant increase in bookings on the web. Northern Europe leads the way, with 48% of total bookings year to date made on the web and 53% in June. In the UK, 26% of bookings for summer 08 have been online and early signs for Winter 08/09 and Summer 09 are encouraging, with total tour operator bookings to date through our main website, www.ThomasCook.com, up year-on-year by 89% and 113% respectively.
Acquisitions
The acquisitions of TriWest Travel Holdings (TTH) in Canada and Jet Tours in France, announced on 9 June 2008, were closed on 1 August and 4 August respectively. Both acquisitions are expected to meet the Group's acquisition criteria in respect of earnings accretion by year two and returns exceeding the cost of capital by year three. Further details of these acquisitions can be found in our results announcement of 24 June 2008.
In March 2008, the Group acquired 54.9% of Thomas Cook India's shares with the possibility of acquiring up to an additional 20% of the shares in the Company from the public shareholders of Thomas Cook India, as tendered in the mandatory tender offer. In this respect, on 2 July, the Reserve Bank of India approved the acquisition of an additional 19.08% of the shares in the Company from the public shareholders of Thomas Cook India. As a result, we now own 74.9% of the shares.
We are seeking formal approvals for a transaction with Iberostar which would increase our stake in Iberoservice, the ground handling agency in Spain, to give us control of the business. This will support our independent travel businesses and in particular Hotels4U. The transaction is expected to close within a month.
The businesses acquired earlier in the year are all performing satisfactorily and we are generating synergies as planned. We have rapidly integrated Hotels4U, folding our Flexible Trips business into the operations; linking it to the Pegasus hotel reservations system; and beginning to roll out the stock beyond the UK. Bookings year to date in Hotels4U have increased year on year by 41%. Our recently acquired business in India has been amongst the first to take advantage of including Hotels4U stock in their European holiday programmes
Condor and share buy-back programme
On 11 July 2008, Thomas Cook Group plc and Air Berlin PLC informed the German Bundeskartellamt (Federal Cartel Office) that they were withdrawing their current application for approval of the proposed merger of Condor Flugdienst GmbH and Air Berlin. The parties also agreed that the existing merger agreement be terminated. The Board continues to view Condor as a strong business with significant potential. Whilst discussions continue with Air Berlin about the feasibility of an alternative transaction, we are also pursuing other available options for Condor.
The Board remains committed to the share buy-back programme amounting to £290 million. However we were required, owing to the regulatory requirements relating to the potential options for Condor to suspend the share buy-back programme from 11 July 2008 until further notice. We intend to reinstate the share buy-back programme as soon as possible.
At the close of business on 10 July 2008, the Group had purchased a total of 72,501,384 shares for cancellation, at a total cost of £183.3m, excluding commission. Of these shares, 30,308,666 were purchased from Arcandor AG, as a result of which, Arcandor now owns 52.8% of the Group.
Credit facility
On 23 May 2008, the Group announced that it had agreed terms for a new £1.4 billion (€1.8 billion) credit facility, of which £155m is a bonding facility. The credit facility, which replaces the Group's existing facilities, incorporates three year revolving credit and term facilities, each at a margin of 175 bps above EURIBOR/LIBOR, and a bonding facility. Up to £250m of the facility will be available only if a disposal of Condor occurs. The remainder of the facility is available for the Group's general corporate purposes, including acquisitions and the existing share buyback programme.
Board appointment
Nigel Northridge joined the Board as a Non-Executive Director with effect from 1 August. He is a member of the Management Development and Remuneration Committee and the Nominations Committee. He brings wide-ranging international experience to the Board, further strengthening and complementing its composition.
Outlook
The Board remains confident that the business will meet its expectations for the current financial year and has taken steps to ensure resilience to changes in demand in the future.
Arcandor reporting
Arcandor, our majority shareholder, is today issuing its quarter three report to the German market in line with German regulatory requirements. This report contains statutory financial information relating to Thomas Cook Group plc for the eight months ended 30 June 2008 and 30 June 2007 drawn up in line with Arcandor's accounting policies and formats and is stated in euros. As a result, it is not directly comparable with the Thomas Cook Group plc pro forma financial information for the nine months to 30 June that is included in the appendix.
In addition, in its press release relating to the quarter three report, Arcandor has provided illustrative results for Thomas Cook Group plc for the nine months ended 30 June 2008 and 30 June 2007. The basis of preparation of these illustrative results is set out in their press release and differs from that used by Thomas Cook Group plc in reporting its pro forma results. As a result, the Board of Thomas Cook Group plc has not approved this illustrative information.
Enquiries
|
Thomas Cook Group plc |
Today |
+44 (0) 20 7404 5959 |
|
|
Thereafter |
+44 (0) 1706 746298 |
||
|
Manny Fontenla-Novoa |
Chief Executive |
||
|
Juergen Bueser |
Chief Financial Officer |
||
|
Steven Olivant |
Investor Relations |
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|
Brunswick |
+44 (0) 20 7404 5959 |
||
|
Sophie Brand |
|||
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Laura Cummings |
|||
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Appendix
Pro forma Group Income Statement
|
Unaudited |
Unaudited |
|
|
9 months to |
9 months to |
|
|
30/06/08 |
30/06/07 |
|
|
£m |
£m |
|
|
Revenue |
5,287.2 |
4,871.3 |
|
Cost of providing tourism services |
(4,122.7) |
(3,886.0) |
|
Gross profit |
1,164.5 |
985.3 |
|
Other operating income |
29.3 |
26.7 |
|
Personnel expenses |
(709.1) |
(665.3) |
|
Depreciation and amortisation |
(100.2) |
(95.7) |
|
Impairment of goodwill |
- |
(9.1) |
|
Other operating expenses |
(544.5) |
(487.1) |
|
Profit on disposal of businesses and property, plant & equipment |
0.8 |
15.4 |
|
Loss from operations |
(159.2) |
(229.8) |
|
Analysed between: |
||
|
Loss from operations before exceptional items |
(87.4) |
(157.5) |
|
Exceptional items |
(71.8) |
(72.3) |
|
(159.2) |
(229.8) |
|
|
Share of results of associates and joint ventures |
(0.2) |
(3.9) |
|
Profit on disposal of associates |
(0.1) |
36.9 |
|
Net investment income |
(1.2) |
0.5 |
|
Net finance costs |
(26.3) |
(2.9) |
|
Exceptional finance costs |
(13.9) |
- |
|
Loss before tax |
(200.9) |
(199.2) |
|
Tax |
53.2 |
55.8 |
|
Loss for the period |
(147.7) |
(143.4) |
All revenue and results arose from continuing operations.
Notes to the Pro forma Interim Financial Information
Basis of preparation
The pro forma information has been prepared using the accounting policies stated in the Company's report and accounts for the year ended 31 October 2007. For comparison purposes, the amortisation of business combination intangibles has been excluded from the pro forma information.
The information in this report relating to the nine months ended 30 June 2008 and the nine months ended 30 June 2007 is pro forma and unaudited and does not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.
A copy of the statutory accounts for the year ended 31 October 2007 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.
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