Interim Management Statement

12th Feb 2009 07:00

12 February 

Thomas Cook Group plc

Interim Management Statement since 1 October 2008 

 

Strong Q1 results with seasonal loss from operations before exceptional items in the 3 months to 31 December 2008 improved by 52% to £27.4m (2007: loss of £57.3m) 

Current trading for Winter 08/09 is robust. Average selling prices are up year on year and load factors on departed flights are strong across all markets

While it is too early to read the Summer season in many markets, trading in the UK is encouraging with 10% less left to sell than at the same time last year 

Our continued flexibility and our ability to actively manage capacity, accommodation costs, product mix and the cost base supports our confidence of achieving the Board's expectations for the year 

Manny Fontenla-Novoa, Group CEO, said: 

"We are pleased with our results in the first quarter, which establish a solid foundation for the rest of the year. 

"Trading for the Winter 08/09 season continues to be robust. In all markets prices are ahead and load factors on departed flights are at least in line with last year's level. In addition, bookings are broadly tracking our capacity reductions, except in Northern Europe where the impact of a later Easter has been more marked but where we anticipate to continue to achieve high load factors on departed flights. In Canada the peak winter charter market remains extremely competitive but we are benefiting from our market-leading presence in independent travel, following the acquisition of TriWest, which reduces our dependence on the charter market.

"For the Summer 09 season in the UK we have sold 43% of available capacity. In our other major markets it is early days and clear trends have not yet emerged although we have seen a strengthening of bookings over recent weeks.

"We remain well placed to manage our business through challenging trading conditions. We have an asset-light and flexible business model which continues to enable us to adapt our plans, particularly capacity and destination mix, for changing demand."

Financial performance 

The financial performance for the Group in the three months to 31 December 2008 was strong, with the loss from operations (before exceptional items) reduced by 52% to £27.4 million (2007 pro forma: loss of £57.3 million). An income statement for the three months ended 31 December 2008 compared with the pro forma three months ended 31 December 2007 is included in the appendix to this release.

Our balance sheet and financial position remain robust. The €1.8 billion three-year revolving credit facility we put in place last year matures in May 2011.

Operational flexibility, cost base and hedging

Commitment to our asset-light business model provides significant flexibility and ongoing opportunities to actively manage capacity in line with changes in demand. Less than 10% of our hotel room capacity is committed prior to booking and the use of third-party flying allows us to accommodate changes in demand until late in the season. A notable benefit of this flexibility has been the continued switch to medium haul destinations, which will account for 69% of our charter programme (63% in 2008) for the UK this summer. 

Hedging for the remainder of the current financial year is now complete and we continue to hedge for future seasons in line with our hedging policy.

The Group's euro exposure is 99% hedged for Winter 08/09, 98% for Summer 09 and 69% hedged for Winter 09/10. Similarly, the Group's dollar exposure is 97% hedged for Winter 08/09, 91% for Summer 09 and 47% hedged for Winter 09/10.

Fuel is 100% hedged for Winter 08/09 and 96% hedged for Summer 09. 

Outlook

The Board remains confident that the business will meet its expectations for the current financial year.

Current trading

Winter 08/09 

We remain confident about our winter trading position. We have seen a shift towards later booking in all key markets. However, departed load factors have been at last year's levels or above. 

	Year on year pro forma variation %
	Average selling price	Cumulative bookings	Last 4 weeks bookings	Planned capacity
UK	+7	-7	-5	-6
Continental Europe	+5	-11	+10	-10
Northern Europe	+1	-6	+17	-2
North America	Flat	-12	-12	-13

Note: Figures as at 7/8 February 2009. In Continental Europe, bookings represent all bookings including cars/overland. However, capacity represents airlines seat capacity only. All figures for Continental Europe exlclude JetTours.

UK

The UK is performing strongly. Bookings for the winter season are down broadly in line with capacity and, whilst we have seen a later booking trend, departed load factors are ahead of the prior year. Average selling prices are 7% ahead cumulatively and 10% ahead in the last four weeks. Our strategy to focus on medium haul destinations has ensured that we are well placed to take advantage of the strong demand we continue to see in those markets, particularly Egypt, where we have a leading position.

UK haul mix W 08/09	Year on year pro forma variation %
	Left to sell	Planned capacity
Short haul	-35	-28
Medium haul	+17	+1
Long haul	-41	-21
UK total	+3	-6

Note: Figures above are as 7/8 February 2009.

  Continental Europe 

We are pleased with current winter trading in our Continental Europe markets with bookings tracking planned capacity cuts of 10% year on year. Average selling prices are 5% higher year on year.

In Germany, our largest market in Continental Europe, we continue to take out risk capacity to adapt for changes in demand. Cumulative bookings are down 12%, broadly in line with capacity cuts. Average selling prices are up 4%. Over the last three weeks bookings for flight inclusive holidays were up 5%, demonstrating the resilience of demand within a later booking trend.

Northern Europe

In Northern Europe demand for our products remains robust. Load factors on departed flights for the winter season to date have been at last year's levels of around 99%. We have achieved this despite the uncertain economic climate and increased market capacity on Thailand routes at a time of political disruption in that market. We are seeing a clear trend towards later booking and there is some distortion to the year on year bookings position caused by Easter falling later in the season this year. Reflecting this, cumulative bookings are currently 6% behind the prior year on capacity down 2%. Average selling prices are 1% higher year on year, partly reflecting a change in mix as we moved capacity from Thailand into the Canaries. Bookings over the last four weeks have been strong and are up 17% year on year.

North America

Following the acquisition of TriWest, our market-leading independent business, which significantly reduces our dependence on the charter market, is performing in line with our expectations. Due to this strategic change in the business, we expect to deliver a strong performance.

The winter season is the peak season for the North American charter market which continues to suffer from significant over-capacity. Bookings are currently down 12%, in line with our capacity reductions. Despite the competitive nature of this market, average selling prices are flat.

  Airlines Germany

In Airlines Germany, we have reduced our tour operator flying capacity by 10% year on year and are focusing on the more profitable holiday routes. In addition, we have reduced our domestic feeder flying and exited the unprofitable city routes. These measures have resulted in increased efficiency and significantly higher yields. The booked load factor is currently 3% behind the prior year reflecting a move to later bookings and Easter falling later in the year.

Summer 09

Selling for Summer 09 is well underway in the UK and the current position is good. In the other markets it is still early in the booking cycle. The later booking trend we have seen in the winter appears to be continuing and at this early stage cumulative bookings are behind the prior year. However, bookings have strengthened over the last four weeks and we remain confident that they will trend towards our planned capacity. Average selling prices are ahead in all markets.

	Year on year variation %
	Average selling price	Cumulative bookings	Last 4 weeks bookings	Planned capacity
UK	+9	-11	-6	-11
Continental Europe	+3	-20	-14*	-10
Northern Europe	+5	-24	-18	-5

Note: Figures as at 7/8 February 2009. In Continental Europe, bookings represent all bookings including cars/overland. However, capacity represents airlines seat capacity only. All figures for Continental Europe exlclude JetTours. 

* In Continental Europe Summer 09 bookings are limited to the last 3 weeks as 4 week data is not available for all Continental Europe markets.

  UK

Trading to date in the UK has been robust. Cumulative bookings are tracking in line with capacity reductions of 11%. However bookings have been stronger over the last four weeks and are down only 6%. We have now sold 43% of our capacity, in line with the prior year, and have 10% less left to sell than last year overall and up to 15% less left to sell in the off peak months. Average selling prices are up 9%.

Our ongoing strategy of increasing our medium haul focus is proving successful. Demand for medium haul, which now represents 69% of our total summer charter programme, is strong, particularly to Turkey where we are the market leader.

UK haul mix	Year on year pro forma variation %
	Left to sell	Planned capacity
Short haul	-30	-30
Medium haul	-3	-2
Long haul	-13	-8
UK total	-10	-11

Note: Figures above are as 7/8 February 2009.

Continental Europe

It is still early in the booking cycle for our Continental Europe markets and the trend towards later booking that we have seen to date in winter appears to be continuing. In Germany, our largest market in Continental Europe, average selling prices are 3% ahead. Cumulative bookings are currently down 20%. However bookings over the last three weeks have strengthened significantly, down 9% on the prior year, and ahead of the planned capacity cuts of 12%. 

Overall in Continental Europe, average selling prices are currently 3% ahead of the prior year. Cumulative bookings are down 20% year on year, but are down 14% over the last three weeks. We are currently planning for capacity to be 10% lower than the prior year but we retain significant flexibility with less than 50% of this capacity fixed.

Northern Europe

The performance in the Northern European market is mixed. It is early in the booking cycle and the trend towards later booking that we have seen to date in winter appears to be continuing. Consequently cumulative bookings are currently 24% down year on year but we have only 5% more left to sell than in the prior year. Bookings over the last four weeks have been stronger at 18% down. Average selling prices are 5% ahead and we have plans in place to protect margins.

Airlines Germany

While still early in the booking cycle for Airlines Germany, we continue to benefit from the reduction in domestic feeder flying and the exiting from city routes. Capacity on tour operator flying is currently expected to be 3% below the prior year but we retain flexibility to amend this further. The booked load factor is currently 5% below the prior year reflecting the trend to later booking.

Acquisitions 

During the period Thomas Cook announced two acquisitions which will significantly enhance our independent travel platform.

We agreed to acquire a majority stake in Gold Medal International Limited, a leading UK long haul tour operator and flight consolidator. It offers more than 1,500 worldwide destinations, with a strong focus on the US, Australasia, the Far East and the Middle East. The acquisition is subject to European Commission approval and is expected to be completed in March. We have also entered into option arrangements which will enable us to acquire the remainder of Gold Medal from 31 March 2010. 

We also acquired the business of Med Hotels from Lastminute.com. We intend to combine the Med Hotels business with Hotels4U which we acquired in February 2008. Med Hotels pioneered the bed bank business model in the UK and created one of the leading brands in this sector.

As announced on 9 February 2009, we intend to acquire Lufthansa AG's 24.9 per cent stake in Condor through the exercise of the options granted in 2007. The price agreed under the options at that time, is €77.2 million which will be payable in cash at completion.

Arcandor reporting

Arcandor, our majority shareholder, is today issuing its quarter one 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 three months ended 31 December 2008 and the two months ended 31 December 2007, drawn up in line with Arcandor's accounting policies and formats and stated in euros. As a result, it is not directly comparable with the Thomas Cook Group plc financial information that is included in the appendix to this release. 

Enquiries

Thomas Cook Group plc			+44 (0)20 7557 6435
Juergen Bueser	Chief Financial Officer
Jill Sherratt	Investor Relations Director		+44 (0)7500 227 382
Brunswick			+44 (0)20 7404 5959
Nina Coad

Conference call for investors and analysts

A conference call will take place today at 9.00am (UK time)

Dial in number 0845 140 3010

Password Thomas Cook Group 

Replay until 19 February (after that, it will be available on our website)

International dial in +44(0)1452 550 000  UK free call dial in 0800 953 1533  Access Number 85383848# 

  APPENDIX

Group Income Statement 

	Unaudited	Pro forma Unaudited
	3 months to	3 months to
	31/12/08	31/12/07
	£m	£m
Revenue	1,798.2	1,540.4
Cost of providing tourism services	(1,418.8)	(1,180.2)
Gross profit	379.4	360.2
Other operating income	11.4	11.8
Personnel expenses	(238.6)	(249.1)
Depreciation and amortisation	(34.8)	(32.8)
Amortisation of business combination intangibles	(9.0)	(18.3)
Other operating expenses	(181.1)	(180.8)
Profit on disposal of businesses and property, plant &
equipment	-	0.6
Loss from operations	(72.7)	(108.4)
Analysed between:
Loss from operations before exceptional items	(27.4)	(57.3)
Exceptional items	(45.3)	(51.1)
	(72.7)	(108.4)
Share of results of associates and joint ventures	(2.1)	0.7
Net investment income	0.7	1.1
Net finance costs	(27.3)	(7.9)
Exceptional finance costs	(10.6)	-
Loss before tax	(112.0)	(114.5)
Tax	30.5	30.3
Loss for the period	(81.5)	(84.2)

All revenue and results arose from continuing operations.

Notes to financial information

1. Basis of preparation

The information has been prepared using the accounting policies stated in the Company's report and accounts for the period ended 30 September 2008.

A copy of the statutory accounts for the period ended 30 September 2008 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.

ENDIMSBFLLFKLBZBBL

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