Thomas Cook Group. Interim Results 6 months ended 31 March May 2010

Transcription

1 Thomas Cook Group Interim Results 6 months ended 31 March May 2010

2 Welcome and Introduction

3 Agenda 1 Key Highlights Manny Fontenla-Novoa 2 Financial Review Paul Hollingworth 3 Current Trading and Outlook Manny Fontenla-Novoa 4 Update on Strategic Initiatives Manny Fontenla-Novoa 5 Summary & Wrap-up Manny Fontenla-Novoa 6 Q&A Page 3

4 Key Highlights Manny Fontenla-Novoa, CEO

5 Key highlights Solid operating results: planned capacity cuts but losses contained Strong cash performance: 168m operating cash flow improvement Refinancing complete: lengthened maturity, diversified funding and increased facilities Impressive response to travel disruption caused by volcanic ash Set out medium term strategic goals on 10 March Page 5

6 Financial Review Paul Hollingworth, CFO

7 Financial highlights change % Revenue 3.3b -5% Adjusted LBIT 1 (130)m -15% Loss before tax (252)m +18% Loss per share (24.8)p +6% Dividend per share 3.75p Unchanged Operating cash flow (123)m +58% Net debt 952m +5% Reported profit, cash flow and debt significantly improved Note: LBIT excluding exceptional operating items, IAS 39 fair value re-measurement and BCI amortisation Page 7

8 Reporting changes IAS 38 Brochure costs Immediate recognition IAS 39 Time value options Immediate recognition Forward points on forex Separate disclosure IFRS 8 Segmental reporting Split out Central 1 and West/East 2 Europe Acquisition revisions Prior year adjustment 1. Central Europe comprises Germany, Switzerland and Austria 2. West/East Europe comprises France, Belgium, the Netherlands, Poland, Hungary and the Czech Republic Page 8

9 Group underlying LBIT 1 bridge H1 09 Volume / price / mix 2 Fuel & accom savings FX on fuel & accom Cost savings Inflation / depreciation Acquisition Other H1 10 Capacity cuts and FX largely offset by cost performance 1 Note: LBIT excluding exceptional operating items, IAS fair value 39 re-measurement and BCI amortisation 2 Note: excl. separately disclosed fuel & accommodation rates and FX impact Page 9

10 Segmental breakdown External Revenue m Change m EBIT m Change m UK 1, (116) (7) Central Europe 701 (68) (7) 6 West / East Europe 526 (82) (27) (3) Northern Europe 523 (6) 30 2 North America 238 (25) 11 (3) Germany Airline 321 (21) (8) (5) Corporate - - (13) (7) Total 3,309 (175) (130) (17) Central and Northern Europe improve results Page 10

11 Cost control H1 10 cost breakdown % cost base Managed costs down given capacity cuts 10m increase in depreciation mainly as a result of aircraft spend 35m cost savings achieved Accommodation costs fall from 32.9% to 32.4% of sales Page 11

12 Decrease in interest charge m H1 10 H1 09 Average bank debt (1,065) (801) Debt interest cost (21) (34) Implied interest rate 3.9% 8.6% Average cash Cash interest received 3 9 Implied interest rate 1.0% 2.1% Other charges 1 (37) (41) Underlying net finance costs (55) (66) Benefited from lower interest rates 1 Note: See appendix slide 45 Page 12

13 Exceptional items lower m H1 10 H1 09 Hi Hotels impairment in UK (26) - Skyservice closure in Canada (9) - Continuation of 2009 restructuring and integration programmes (12) (24) Continuation of 2009 fuel-related exceptionals (13) (1) TC / MyTravel merger integration - (41) Other operating exceptional items - (10) Exceptional operating costs (60) (76) Exceptional finance costs - (5) Time value component of option contracts (IAS 39) 3 (26) Forward points on FX cash flow hedging contracts (IAS 39) 4 (4) Total exceptional items & IAS 39 fair value re-measurement (53) (111) Impact from volcanic ash cloud seen in second half Page 13

14 Financial impact of volcanic ash cloud m Lost contribution Welfare costs (accommodation mainly) Repatriation costs inc empty legs Additional costs (grounded aircraft, staff overtime) Estimated financial impact of disruption c. 70 As per original announcement c. 7m / day x c. 10 days of disruption c. 70 Page 14

15 Group cash flow statement m H1 10 H1 09 EBITDA (47) (40) Exceptional costs (60) (86) Working capital movement (10) (147) Provision movement (18) 28 Tax (17) (13) Interest received 2 15 Other (including non-cash items) 27 (48) Net operating cash flow (123) (291) Capital expenditure (net) (99) (79) Interest paid (31) (70) Free cash flow (253) (440) Share buy-back - (47) Dividends - (56) Net acquisitions / disposals (1) (71) Other (1) 1 Movement in cash net of debt (255) (613) Operating cash flow significantly improved Page 15

16 Net debt movement m H1 10 H1 09 FY 09 Opening net debt (675) (292) (292) Movement in cash net of debt (255) (613) (314) Closing net debt before non-cash items (930) (905) (606) Non cash movement in net debt (incl. FX) (22) (99) (69) Closing net debt (952) (1,004) (675) m Cash Debt (1,122) (935) (940) Finance leases (258) (454) (285) Net debt (952) (1,004) (675) Net debt lower despite winter capacity cuts Page 16

17 Refinancing complete Refinancing delivered Simpler framework, increased facilities, longer and varied maturities 3 year facility, extendable for up to 2 years 200m term loan and 850m revolving credit facility Bank facility Borrowings at LIBOR plus 2.75% Covenants: Adjusted net debt 1 leverage EBITDAR 2 Fixed charge EBITDAR 3 2.0x fixed charges Separate 200m bonding facility Bond Issue 650m (Sterling equivalent) raised 400m, 6.75% 5 year Euro bond maturing June m, 7.75% 7 year Sterling bond maturing June 2017 Page 17 Strengthened financial position 2. Leverage EBITDAR is defined as earnings before interest, tax, depreciation, amortisation, exceptional items and IAS 39 re-measurements, as adjusted to add back aircraft rentals 1. Adjusted net debt is defined as net debt plus aircraft rentals capitalised at 6 times 3. Fixed charge EBITDAR is defined as leverage EBITDAR, as adjusted to add back retail rentals

18 H1 summary Contained impact of capacity reductions and FX through tight cost control Interest and exceptional charges significantly lower Improved cash management: substantial reduction in seasonal cash outflow Strengthened financial position following successful refinancing Page 18

19 Current Trading & Outlook Manny Fontenla-Novoa, CEO

20 W09/10 finished strongly (pre volcano) % change Average selling price Cumulative bookings Capacity UK Central Europe West / East Europe Northern Europe Bookings trended towards capacity, as expected Strong ASPs in UK and Northern Europe Price reductions in Central and West/East Europe supported by reducing input costs Load factors ahead of prior year Northern Europe 99%; UK 96% Note: All figures as at 10/11 April 2010 (pre volcano). In Central and West/East Europe, bookings represent all bookings inc. cars/overland; however capacity represents airline capacity only. Northern Europe season is October Mar. Page 20

21 Volcano disruption Excellent operational response to customers stranded in-resort Full holiday programme operating within 36 hours of ban being lifted Alternative holidays offered to customers, with cancellation rate contained Working with relevant bodies to minimise risk of unnecessary future blanket ban Seeking compensation for costs incurred Estimated second half financial impact of around 70m Page 21

22 Impact on operations Passengers stranded in-resort Passengers unable to depart Flights cancelled UK 75,300 95, round trips Central Europe 14,000 14,100 n/a West / East Europe 47,000 40, round trips Northern Europe 15,500 12, round trips German Airlines 25,300 26, round trips Total 177, , round trips Significant operational challenge Page 22

23 Excellent customer feedback The reason for this is to congratulate Thomas Cook for their professionalism throughout the entire ordeal. Thank you Thomas Cook. We will be booking with you in future. Absolutely first class in dealing with the volcanic ash. nothing but praise for Thomas Cook. Thomas Cook stood out from the rest. Well done to all your staff in sorting out what must have been a total headache. I wanted to say well done to Thomas Cook. As a usually independent traveller, Thomas Cook will be my first port of call in the future. Thomas Cook you were excellent! Page 23

24 S10 shows good progress despite volcanic ash cloud % change Average selling price Last 4 weeks bookings Cumulative bookings Planned capacity UK Central Europe West / East Europe Northern Europe Cumulative bookings build steadily in UK and Central Europe UK well sold and less left to sell Price trends positive ahead of prior year in UK and Northern Europe ahead of W 09/10 in Central and West/East Europe Confident Northern Europe will trend to capacity Note: All figures as at 8/9 May In Central and West/East Europe, booking represent all bookings inc cars/overland; however capacity represents airline capacity only. Northern Europe season is April September. Page 24

25 UK significantly less left to sell than last summer % change Average selling price Cumulative bookings Planned capacity Left to sell Short haul Medium haul Long haul Total UK Continued focus on selling shoulder season 13% less left to sell in June and 8% less left to sell in October Load factor ahead of prior year at 65%. +2% pts Last 4 weeks ASP +11% Note: All figures as at 8/9 May Page 25

26 Central Europe % change Last 4 weeks bookings Load Factor Last 4 week s ASP Central % +2 Cumulative bookings ahead of prior year and trending to planned capacity Last four weeks trading very strong Cumulative pricing reflects the decision to pass through lower accommodation and flight costs Destination trends: Majorca coming back Greece weak given political and economic situation Note: All figures as at 8/9 May Page 26

27 West/East Europe % change Last 4 weeks bookings Load Factor Last 4 week s ASP West/East Europe +5 57% +1 Bookings continue to trend towards capacity France +7% Netherlands +5% Belgium is weak due to economic environment Retain considerable capacity flexibility Destination trends: Greece is strong due to the quality of our product All inclusive remains popular Note: All figures as at 8/9 May Page 27

28 Northern Europe focus on profitability not market share % change Last 4 weeks bookings Load Factor Last 4 week s ASP Northern Europe -29% 58% +21 Capacity remains stable over prior year Pricing strong Denmark challenging Confident that bookings will trend to planned capacity Include the impact of the volcanic ash cloud as April is summer season Bookings to Turkey +29% Note: All figures as at 8/9 May Northern Europe season is April September. Page 28

29 FY10 outlook Build on first half cost control and cash discipline Summer bookings continue to improve and trend towards capacity Increasing economic uncertainty Excluding impact of volcanic ash confident of meeting Board expectations Page 29

30 Update on strategic initiatives Manny Fontenla-Novoa, CEO

31 Progress report Mainstream Destination management team now in situ Airline synergy project on track ( 17m incremental by end FY10) UK continue to improve product mix with 73% medium haul (S09 69%) Independent Independent sales held up well and represents 27% of Group sales OTA CEO appointed and organisational structure agreed Group-wide bookings over Internet 8% to 24% Financial Services Financial services sales up Added 12 foreign currency ATMs in UK and 6 in Canada Acquisition of Essential Travel providing scalable online platform for travel insurance sales Page 31

32 In Summary Manny Fontenla-Novoa, CEO

33 In summary Solid operating results Strong cash performance Major refinancing concluded Making progress on our strategy Impressive operational response to volcanic ash cloud Summer bookings on track Page 33

34 Questions

35 Appendix

36 Group income statement Change H1 10 H1 09 Change % m exc FX % Revenue 3,309 3, Cost of providing tourism services (2,559) (2,713) Gross profit Net operating costs (880) (884) Adjusted LBIT 1 (130) (113) Share of assocs. & JVs & net invest. income 1 (1) Net finance costs (55) (66) Adjusted loss before tax 1 (184) (180) -2 Total exceptional items (60) (81) IAS 39 7 (30) Amortisation of BCI (15) (18) Loss before tax (252) (309) +18 Loss per share (p) (24.8) (26.5) +6 Note: LBIT and LBT excluding exceptional items, IAS 39 fair value re-measurements and BCI amortisation Page 36

37 Impact of reporting changes H1 09 m As previously stated Brochure costs Time value of options Forward points Acquisition accounting As restated Revenue 3, ,484.3 Cost of providing tourism services (2,713.7) (2,713.7) Gross profit Net operating expenses (881.5) (2.2) (883.7) Adjusted LBIT (110.9) (2.2) (113.1) Share of associates & JVs & net inv. income (1.1) (1.1) Net finance costs (69.6) 4.4 (0.7) (65.9) Adjusted loss before tax (181.6) (2.2) 4.4 (0.7) (180.1) Total exceptional items (80.9) (80.9) IAS 39 - (25.7) (4.4) (30.1) Amortisation of BCI (17.9) (17.9) Loss before tax (280.4) (2.2) (25.7) - (0.7) (309.0) Reported basic LPS (p) (24.2) (26.5) Underlying basic LPS (p) (15.1) (15.4) Page 37

38 Impact of reporting changes FY 09 m As previously stated Brochure costs Time value of options Forward points Acquisition accounting As restated Revenue 9, ,268.8 Cost of providing tourism services (7,017.8) (7,017.8) Gross profit 2, ,251.0 Net operating expenses (1,836.1) 0.2 (1,835.9) Adjusted EBIT Share of associates & JVs & net inv. income (2.4) (2.4) Net finance costs (104.3) (10.0) (3.5) (117.8) Adjusted profit before tax (10.0) (3.5) Total exceptional items (217.3) (217.3) IAS 39 - (8.1) Amortisation of BCI (34.8) 0.4 (34.4) Profit before tax (8.1) - (3.1) 45.1 Reported basic EPS (p) Underlying basic EPS (p) Page 38

39 UK mitigates challenging macro environment H1 10 Revenue 1,000m +3% H1 10 EBIT (116)m 7% H1 10 Trading performance Mass Market Mass market distribution ASP % change Passengers % change Capacity % change Controlled % Internet % H % capacity cuts implemented in Mainstream in anticipation of challenging trading environment Sterling weakness adversely impacted accommodation and flying costs by est. 44m Impact on result partially mitigated by mainstream ASP gains and hotelier negotiations Acquisitions in Independent contributed 7m to results Note: KPI data for H1 period (October to March). Not on a Winter season (November to April) Page 39

40 Central Europe operating result ahead H1 10 Revenue 700m -9% H1 10 EBIT (7)m +46% H1 10 Trading performance Mass Market Total Business distribution ASP % change Passengers flight inc % change Capacity % change Controlled % H n/a 24 7 Capacity and price reductions introduced in anticipation of challenging trading conditions Successful renegotiation with hoteliers and airlines protect gross profit margin 6m savings achieved through internal cost reduction programmes Independent, dynamic packaging business performing well Operating results improved year on year Internet % Note: KPI data for H1 period (October to March). Not on a Winter season (November to April) Page 40

41 West / East Europe delivers cost savings H1 10 Revenue 526m -13% H1 10 EBIT (27)m -10% H1 10 Trading performance Mass Market Total Business distribution ASP % change Passengers flight inc % change Capacity % change Controlled % Internet % H n/a Capacity reduction in France concentrated in long haul impacting price movement Margins on holidays sold protected through lower hotel and flight costs 11m year on year cost savings delivered Note: KPI data for H1 period (October to March). Not on a Winter season (November to April) Page 41

42 Northern Europe lifts operating margin H1 10 Revenue 523m -1% H1 10 EBIT 30m +7% H1 10 Trading performance Mass Market Total Business distribution ASP SEK % change Passengers % change Capacity % change Controlled % Internet % H Selling prices, fuel and accommodation gains offset lower mainstream volumes Operating profit up 7% against 3% fall in currency adjusted revenue Operating margin up 0.5% to 5.8% 54% of departing customers purchase online Note: KPI data for H1 period (October to March). This is the same as the Northern Europe Winter season. Page 42

43 North America performing well in a difficult market H1 10 Revenue 238m -10% H1 10 EBIT 11m -22% H1 10 Trading performance Mass Market Independent Total Business distribution ASP C$ % change Passengers % change Capacity % change Passengers % change Controlled % Internet % H Overcapacity continues to be a significant issue in the Canadian mainstream market Replacement summer flying and agreement with Jazz for winter flying on better terms Strong operational response to financial distress of Skyservice our largest aircraft seat provider 4m savings achieved from restructuring and integration programmes initiated last year Independent business less impacted by trading conditions validating decision to rebalance the Canadian business Note: KPI data for H1 period (October to March). Not on a Winter season (November to April) Page 43

44 Airlines Germany impacted by price pressure H1 10 Revenue 321m -6% H1 10 EBIT (8)m -136% H1 10 Trading performance Yield % change Sold Seats % change Capacity % change Load Factor % change H Capacity reduction in anticipation of tough winter Proportionately higher cuts in long haul adversely impacts yield Further price pressure as competitors benefit more from fuel price reductions Airline synergies and other cost saving initiatives deliver 8m savings Note: KPI data for H1 period (October to March). Not on a Winter season (November to April) Page 44

45 Interest m H1 10 H1 09 Average bank debt (1,065) (801) Debt interest cost (21) (34) Implied interest rate 3.9% 8.6% Average cash Cash interest received 3 9 Implied interest rate 1.0% 2.1% Interest on other borrowings (5) (5) Commitment fees (1) (2) Finance leases (8) (12) Net finance cost of pension schemes (8) (6) Fair value of derivatives 1 (3) Amortisation of set up fees (8) (5) Other (inc unwinds of discount factor on provisions & deferred consideration) (8) (8) Underlying net finance costs (55) (66) Page 45

46 Group balance sheet m H1 10 H1 09 FY 09 Goodwill & intangible assets 3,821 3,675 3,770 Property, plant & equipment 969 1, Investments Net debt (952) (1,004) (675) Net current liabilities (2,071) (1,988) (2,196) Net non-current liabilities (183) (95) (228) Net assets 1,642 1,684 1,720 Page 46

47 Fuel and currency hedging S10 W10/11 EUR 96% 88% USD 92% 71% Jet fuel 92% 69% Page 47

48 FX rates Income Statement H1 10 H1 09 Euro SEK C$ INR Balance Sheet H1 10 H1 09 Euro SEK C$ INR Note: As profits and losses in our Euro-denominated segments build up differently over the period, the average income statement translation rates may vary Page 48