TCG plc Pre-close Statement

27 March 2014

ENCOURAGING TRADING

CONTINUED DELIVERY OF STRATEGY

"Delivery of our strategy of sustained profitable growth remains on track and our trading, with increased summer bookings, is encouraging. Winter trading has been satisfactory, despite the significant market disruption caused by continued unrest in Egypt, as our businesses have worked successfully together to offer our customers a wider choice of destinations. Customer bookings for the Summer 2014 season have shown an improving trend since we reported our first quarter results with around 50% of holidays already sold, slightly higher than at this stage last year. Compared with last year, margins are expected to improve more than average selling prices, reflecting enhanced yield management and the benefits of our cost out and profit improvement programme, which is delivering ahead of schedule. Finally, having successfully completed the disposal of our interest in The Airline Group, shareholder in NATS, I am pleased to confirm the delivery of our disposals target eighteen months early.

The continuing transformation of Thomas Cook, including the delivery of our strategic targets, remains our top priority and I look forward to sharing a full update at our half year results announcement on 15 May, together with details of further new product development and the second wave of our profit improvement plans."

Harriet Green, Group Chief Executive Officer

Current trading

Winter 2013/14

Despite significant market disruption, trading has been satisfactory for the Winter season, which is 93% sold and in line with the booking pattern at the same time last year. Compared to last year, Winter bookings have been adversely impacted by continued social unrest in Egypt. However, this was successfully mitigated through the more integrated management processes and improved customer service that we introduced last year. Excluding Egypt, we have achieved higher average selling prices and bookings and gross margin has been positively impacted by improved yield management and cost efficiencies. We continue to expand the range of winter sun destinations on offer consistent with our strategy of broadening our product range.

In the UK, bookings are 2% higher than last year (excluding Egypt). Pricing however, was impacted by a higher proportion of one-week duration holidays and competitive pricing in certain destinations as market capacity was redirected from Egypt. As a result, average selling prices were 3% lower than last year; however, this short term impact of lower average selling prices has been mitigated by the significant cost out initiatives as part of the ongoing transformation of the business, which remains on track.

For Continental Europe, average selling prices improved by 4% due to strong performances in most source markets, including pricing improvements in Germany (+3%) and the reduction of low value, low margin business resulting in improved margins compared to last year. Bookings for Continental Europe have been impacted by strategic reductions in capacity in France and Russia as we make good progress returning these businesses to profitability by focusing on margin improvement and cost reduction.

For Northern Europe, bookings are 5% higher than last year (excluding Egypt). Pricing in Northern Europe reflects a lower share of long haul business compared to last year, particularly to Thailand where capacity was reduced in response to customer demand. Improved capacity management has ensured that, although average prices were 2% lower than last year, the gross margin in Northern Europe has improved year-on-year.

Bookings for Airlines Germany are in line with last year at slightly higher prices as capacity to Egypt was successfully redirected to other destinations. Improved yield management and cost efficiencies have facilitated an improved margin performance compared to last year.

(1) Based on cumulative bookings as at 15 March 2014

(2) Stated in local currency at constant intra-segment exchange rates

Summer 14

The Summer season is already 50% sold, 1% more than this time last year with overall bookings 2% higher than last year. Trading performance across the Group has shown an improving trend since we reported our first quarter results against a strong prior year comparative at this stage in the booking cycle. While average selling prices are below last year in some of our markets, Group underlying margin for the Summer season and the full year are expected to be above last year's levels, consistent with our profitable growth strategy.

Bookings for our UK business are 3% higher than last year with a 1% reduction in capacity commitments and, as a result, Summer capacity is better sold than at this time last year. Average selling prices are 2% lower due mainly to product mix and a higher proportion of shorter duration holidays reflecting customer demand, partially offset by new product and cost out and profit improvement benefits.

Continental Europe continues to trade well with slightly higher average selling prices (+1%) and an improved booking trend, with passenger volumes 1% higher than last year. Within the Continental Europe segment, our German business is trading strongly with volumes well in excess of last year, resulting in Summer capacity being 4% better sold at this stage in the booking cycle.

Bookings in Northern Europe are 2% higher than last year with a similar load factor supported by the successful expansion of our flexible trips product. While average selling prices are 2% lower than last year, due to changes in sales mix, overall margins are expected to be maintained. 

Airlines Germany bookings are 5% higher than last year, in line with increased capacity, mainly to short / medium haul destinations. Average selling prices are 2% lower than last year reflecting a lower proportion of long haul flights and increased market capacity. Margins however, are expected to increase year-on-year due to improved efficiencies.

(1) Based on cumulative bookings as at 15 March 2014

(2) Stated in local currency at constant intra-segment exchange rates

Outlook

Going forward, our focus remains on implementing our strategy for sustainable profitable growth and delivering on our targets. Our new product development is progressing well. Bookings at our higher margin concept hotels are up 49% compared with the same time last year and our hotel development programme remains well on track. We also continue to make significant progress transforming Thomas Cook, further professionalising our business and delivering additional cost out and profit improvement benefits. We look forward to sharing further progress on these at our half year results on 15 May.

Analyst and investor conference call

Management will host a conference call for analysts and investors on Thursday 27 March at 9.30 a.m. (London time).

We recommend participants start dialling in 5-10 minutes prior to the start of the presentation. To telephone link-up to the briefing, dial one of the following numbers from 9.20 a.m. (London time):