2016 Full Year Results. 23 November 2016

Transcription

1 2016 Full Year Results 23 November 2016

2 Agenda Highlights - Peter Fankhauser CEO Financial results Strategic progress Summary Page 2

3 Proactively managed through a tough market Reported revenue maintained despite significant market disruption Gross margin up 80 basis points to 23.4% Underlying EBIT 308 million Record margins in UK and Northern Europe; tough year for Condor Recommended dividend of 0.5 pence per share 1 HIGHLIGHTS Page 3

4 Strategic progress is delivering benefits More satisfied customers Net promoter score up 6 points in Summer Better product High quality own-brand and selected partner hotels; improved and refurbished aircraft fleet More digital Share of web sales increased from 40% to 43% Better operational delivery Holidays delivered more efficiently New Operating Model delivered net EBIT benefits of 26 million in year 1 Total target benefits increased 1 HIGHLIGHTS Page 4

5 Agenda Highlights Financial results - Michael Healy Group CFO Strategic progress Summary Page 5

6 Financial overview Like-for-like revenue 5% lower, reflecting impact of Turkey, Egypt and Tunisia Gross Margin increase of 80 basis points due to an improved holiday offering Underlying EBIT lower due to weakness in Condor and Belgium Net Debt lower than prior year on a likefor-like basis reflecting operating cash generation m Change Like-for-like Change Revenue 7,812 7, Gross Margin 23.4% 22.6% +80bp +80bp Underlying EBIT EBIT margin 3.9% 4.0% -10bp -40bp Profit after tax Net Debt (129) (128) FINANCIAL RESULTS Page 6

7 Group revenue bridge Proactive switch of capacity from Turkey and North Africa to Spain and Long Haul (114) 8,183 Like-for-like change - 371m (4.5%) 463 Includes - 95m due to Brussels attack 7,834 (604) +2% 7, % +17% % % (161) -54% (105) % FX Fuel Turkey Egypt Tunisia Spain Long Haul (i) Croatia and Bulgaria Other (i) Long Haul includes the USA, Mexico, Cuba, Dominican Republic and Thailand 2 FINANCIAL RESULTS Page 7

8 Gross margin by business Strong performances by tour operator businesses partly offset by weakness in Condor UK Northern Europe Continental Europe Condor Group 26.6% 27.2% 29.1% 26.8% 27.6% 30.4% 28.8% 29.8% 25.1% 22.4% 22.6% 23.4% 14.2% 13.4% 14.0% +80bp +190bp +280bp +60bp -470bp FY14 FY14 FY14 FY14 FY14 2 FINANCIAL RESULTS Page 8

9 Group EBIT bridge Benefits from New Operating Model have been offset by weaker performance by Condor Like-for-like change - 41m (24) (13) Net New Operating Model Benefits 26m 8 (65) (10) 308 FX Gross New Depreciation Operating Model Benefits Inflation Other Condor EBITDA (i) Belgium (i) Condor EBIT is 76m lower year-on-year. Condor s change in depreciation of 11m is included in the 24m depreciation figure above 2 FINANCIAL RESULTS Page 9

10 New Operating Model benefits Net EBIT benefit 26m in Gross targeted benefits of 180m to 210m by FY18 Offset by cost 80m- 90m FY18 Net Target 100m- 120m FY18 target Gross Benefits: 63m (37) (80) (90) Own-brand hotels & flights Differentiated Holiday offering Complementary Holiday offering Omni-channel CRM & Ancillaries Efficiencies Overhead & Depreciation Cost Inflation Net EBIT benefit 2 FINANCIAL RESULTS Page 10

11 Condor profitability Lower demand to Turkey and significant price competition Like-for-like EBITDA change - 65m Like-for-like EBIT change - 76m 80 (48) (37) (26) (20) (14) (11) (10) FX translation Fuel USD FX impact Winter Yields Summer Turkey Demand Summer Spanish Yields Operating cost increases Depreciation EBIT 2 FINANCIAL RESULTS Page 11

12 Actions to improve Condor s profitability Clear set of actions being implemented to deliver benefits from H2 FY17 Action Description Annualised impact Less short/medium haul capacity due to aircraft swap with UK Reroute capacity 10m Profitable growth to niche destinations More flexible planning Fuel hedging benefit Cost reduction initiatives Better ability to switch aircraft to match demand especially in the low season Expect to retain some fuel savings Set of projects to deliver structurally lower cost base 5m 10m 25m Operating cost increases (15)m Targeting 35m of annualised profit improvement full impact in FY18 2 FINANCIAL RESULTS Page 12

13 EBIT by business EBIT growth in UK and Northern Europe offset by decline in Continental Europe and Condor UK Northern Europe Continental Europe Condor Group EBIT Margin % 3.4% 4.9% 6.4% 7.6% 9.2% 11.0% 3.0% 2.5% 2.1% 4.7% 5.1% (0.8)% 3.9% 4.3% 3.9% - 41m + 33m + 22m - 22m - 76m FY14 FY14 FY14 FY14 (10) FY14 2 FINANCIAL RESULTS Page 13

14 Group cash flow Adjusted free cash flow performance consistent with last year at c. 100 million m Change (131)m EBITDA Working Capital Tax (15) (18) +3 Pensions & Other (25) (20) m (60)m Operating Cashflow Exceptional items (95) (118) +23 (55)m Proceeds on asset disposals Capital Expenditure (206) (201) -5 (16)m 8m Net Interest Paid (129) (125) -4 Free Cash Flow Cash Conversion 33% 95% -62pts Adjusted Free Cash Flow (i) working capital change Year end timing reversal Lower hotel creditors Other working capital change Adjusted Cash Conversion (ii) 70% 60% +10pts (i) Adjusted Free Cash flow, adjusts for the 60m working capital timing impact (: + 60m, : - 60m) (ii) Cash conversion ratio is defined as Free Cash Flow divided by Underlying PBT. Methodology shown on page 48 2 FINANCIAL RESULTS Page 14

15 Net debt Net Debt of 129 million represents a reduction of 56 million on a like-for-like basis Like-for-like reduction 56m (206)m 480m (95)m (128)m (58)m 1m (185)m (129)m 6m (129)m FX Non Cash Operating Cashflow Capex Exceptionals Net Interest Paid Other 2 FINANCIAL RESULTS Page 15

16 Financing Review On track to reduce fixed-term debt by 300m by FY18 Lower interest costs remains a priority for Group; 100m bond redemption made during year Additional 150 million Bank Facility signed in May 2016 Provides greater flexibility to refinance outstanding bonds Moody s assigned Thomas Cook a B1 rating One notch higher than ratings assigned by Standard & Poor s and Fitch Dividend resumed Policy unchanged target payout ratio of 20% to 30% of full year reported net income 2 FINANCIAL RESULTS Page 16

17 Current trading and outlook Winter 2016/17 Summer 2017 Winter trading in line; 61% of programme sold Overall bookings up 2% with pricing down 2% UK performing well with expansion of winter sun programme Northern Europe in line with expectations against tough comparator Germany impacted by low demand to Turkey; focus on margin Condor continues to experience yield weakness in short-haul due to overcapacity and weak demand Encouraging start to Summer 2017 bookings with all source markets ahead of last year, although it remains very early in the cycle Outlook Confident of achieving FY17 operating result in line with current market expectations Based on cumulative bookings to 19 November FINANCIAL RESULTS Page 17

18 Agenda Highlights Financial results Strategic progress - Peter Fankhauser CEO Summary Page 18

19 Strategy for profitable growth 3 STRATEGIC PROGRESS Page 19

20 Customer care: our promises We re proud to put our name to all our holidays We re here to help, all the way from planning your holiday to returning home We wear our customers flip flops We ve got everything covered, so rely on us and enjoy your holiday 3 STRATEGIC PROGRESS Page 20

21 Customer care: Net Promoter Score Own-brand hotels NPS Group overall NPS Group Airline NPS +7 points 1 +6 points 2 +4 points 3 1. Own brand hotel NPS improved from 31 to 38 in Summer Overall Group NPS improved from 37 to 43 in Summer Airlines NPS improved from 24 to 28 in Net Promoter Scores up significantly across all business areas 3 STRATEGIC PROGRESS Page 21

22 Customer contact: growing digital Group share of web sales Growth in web sales during 38% 40% 43% +9% +13% FY14 3 STRATEGIC PROGRESS Page 22

23 Customer contact: digital companion app Develops closer relationships with our customers through technology Enables customers to manage their holiday via their smartphone Live in the UK, Northern Europe and Germany 1.3m downloads since launch Set to roll out more widely across the Group Leveraging technology to enhance the customer experience 3 STRATEGIC PROGRESS Page 23

24 Holidays: Growing our own-brand hotel business We have 190 own-brand hotels Improved quality for Summer 16 NPS up by 5 to 10 points for every brand Widening reach with new Casa Cook: - 90% of Casa Cook customers new to Thomas Cook - Attracted double the target number of customers - Achieved highest NPS of any of our hotels New Ocean Beach Club by Sunwing in Gran Canaria guest satisfaction rating 4.7 out of 5 3 STRATEGIC PROGRESS Page 24

25 Holidays: Pipeline of new own-brand hotels Bulgaria Spain Mallorca Sicily Croatia Kos Turkey Cyprus Cape Verde Tenerife Maldives 3 STRATEGIC PROGRESS Page 25

26 Holidays: Selected partner hotels Differentiated sales growth in 1 Increasing focus with selected partner hotels chosen based on quality and high standards Streamlining portfolio to increase returns +18% +8% Holidays to own-brand hotels Differentiated holidays 2 Sharing capacity more effectively across Group Improving quality standards through our Academy of Excellence Building customer offering with unique care package 1. Excludes sales of holidays to Turkey, Egypt and Tunisia, where volumes fell due to geopolitical disruption 2. Includes sales of holidays to both own-brand hotels and selected partner hotels 3 STRATEGIC PROGRESS Page 26

27 Holidays: Thomas Cook Airlines Share of seats sold to tour operator guests Growth in long haul bookings 80% 95% +21% +8% 33% 60% Summer 2016 Winter 2016/17 Condor UK Belgium Scandinavia 3 STRATEGIC PROGRESS Page 27

28 Services: Ancillaries Increased ancillary revenues by 9% in Ancillary performance Taking best practice approach from Nordics Higher engagement post-booking Leveraging technology to support growth Renewed focus on financial services +9% Revenues Top 5 ancillaries: Seating Insurance Luggage Transfer Flight Meals 3 STRATEGIC PROGRESS Page 28

29 Partnerships: complementary hotels Transferring 3,000 sun & beach hotel contracts to Sunhotels Sunhotels responsible for contracting, content, health & safety and hotel payment services Enables significant process and IT efficiencies by consolidating suppliers Retains customer choice while enabling greater focus on core holiday offering 3 STRATEGIC PROGRESS Page 29

30 Partnerships: Thomas Cook China China outbound market size ( bn)* year CAGR +18% Average spend per customer: 1,000 Launched full service travel company offering inbound and outbound travel Offering personalised holiday packages across 40 destinations available on thomascook.com.cn Tapping into rapidly growing, fragmented market Growing collaboration with other source markets * Source: BCG China MAC Database, Euromonitor, BCG analysis 3 STRATEGIC PROGRESS Page 30

31 Financial targets to 2019 Existing target Comment on status Updated target Revenue growth At least in line with market (i) Progress impacted by geopolitical disruption No change EBIT benefits from New Operating Model 100m to 120m by FY18 In line with plan - 26m achieved in 130m to 150m by FY19 Cash conversion >70% per annum Achieved in on an adjusted basis No change Fixed term debt reduction 300m by FY18 In line with plan - 100m reduction so far No change (i) European leisure travel market, expected to grow at 2% - 3% per annum 3 STRATEGIC PROGRESS Page 31

32 Agenda Highlights Financial results Strategic progress Summary - Peter Fankhauser CEO Page 32

33 Summary Good performance in a year of unprecedented disruption Proactively managed through a tough market Continued underlying strategic progress More satisfied customers; New Operating Model leading to bottom line benefits Well positioned to deliver sustainable profitable growth First dividend in five years reflects confidence in the future 4 SUMMARY Page 33

34 Q&A Page 34

35 Financial calendar Q Results & AGM 9 February 2017 Pre-close Trading Update 28 March 2017 H1 Interim Results 18 May 2017 APPENDIX Page 35

36 Performance by business Group EBIT margin has increased from 2.0% in 2012 to 3.9% in 2016 UK & Ireland Continental Europe Northern Europe Condor Group Customers (m) Revenue ( bn) Gross Margin % 25.0% 29.2% 13.9% 14.0% 27.2% 30.5% 25.9% 25.1% 21.4% 23.4% EBIT % (0.4)% 6.4% 1.8% 2.1% 8.9% 11.0% 3.5% (0.8)% 2.0% 3.9% (i) Total Group customers are net of in-house customers of 2.3m in (:2.2m) and intercompany revenue eliminations of 0.4bn in (: 0.4bn) APPENDIX Page 36

37 Revenue & EBIT by quarter Share of revenue Revenue bn 1.4 Q1 18% 1.4 Q2 16% Q3 24% Q4 42% + 22m - 13m - 153m - 227m Full Year m FY14 FY14 FY14 FY14 FY14 EBIT m m + 2m - 22m - 28m m 308 (64) (55) (49) (130) (116) (114) APPENDIX Page 37

38 Group income statement m FY14 to Change Revenue 7,812 8,183 8, Gross Profit 1,831 1,853 1, Overheads (1,523) (1,504) (1,520) -19 EBIT Separately Disclosed Items (EBIT) (103) (99) (269) -4 Profit/Loss from Operations Associated Undertakings Separately Disclosed Items (Finance Charges) (23) (28) (25) +5 Net Finance costs (140) (141) (143) +1 Profit / (Loss) before Tax (119) -47 Tax (33) (31) (2) -2 Profit / (Loss) after Tax 9 58 (121) -49 APPENDIX Page 38

39 Revenue by business m Headline variance vs. Like-for-like variance UK & Ireland 2,365 2,457 2,408-4% -2% Continental Europe 3,435 3,449 3,763 Flat -9% Northern Europe 1,132 1,057 1,107 +7% +2% Condor 1,253 1,257 1,291 Flat -3% Corporate (373) (386) (386) n/a n/a Group Revenue 7,812 7,834 8,183 Flat -5% APPENDIX Page 39

40 Gross margin by business m Headline variance vs. Like-for-like variance UK & Ireland 29.1% 26.7% 27.2% +240bps +190bps Continental Europe 14.0% 13.5% 13.4% +50bps +60bps Northern Europe 30.4% 27.9% 27.6% +250bps +280bps Condor 25.1% 28.4% 29.8% -330bps -470bps Corporate n/a n/a n/a n/a n/a Group Gross Margin 23.4% 22.6% 22.6% +80bps +80bps APPENDIX Page 40

41 Overheads by business m Headline variance vs. Like-for-like variance UK & Ireland (538) (537) (537) Flat Flat Continental Europe (408) (393) (413) -4% +1% Northern Europe (220) (200) (203) -10% -8% Condor (325) (302) (319) -8% -2% Corporate (32) (32) (32) Flat Flat Group Overheads (1,523) (1,464) (1,505) -4% -1% (i) Corporate head office made 2m of operating gains offset by 32m of overheads in resulting in EBIT of 30m (: nil operating gains and 32m of overheads) APPENDIX Page 41

42 EBIT by business m Headline variance vs. Like-for-like variance UK & Ireland % +28% Continental Europe % -23% Northern Europe % +22% Condor (10) n/a n/a Corporate (30) (32) (32) n/a n/a Group EBIT % -12% APPENDIX Page 42

43 Supplementary information Group Tour Operators ( m) Group Airlines ( m) 6,915 6,740 6, % 3.4% 4.1% 2, % 2,809 2, % 2.9% Revenue EBIT EBIT Margin Corporate costs total 30 million in, 32 million in and 19 million in FY14 APPENDIX Page 43

44 Supplementary information Tour Operators m Headline variance vs. Like-for-like variance Revenue 6,278 6, , Gross Margin 16.9% 15.6% +130bps 15.5% +140bps Underlying EBIT Underlying EBIT margin (%) 4.1% 3.2% +90bps 3.4% +70bps Average Selling Price (ASP) ( ) APPENDIX Page 44

45 Supplementary information - Airlines m Headline variance vs. Like-for-like variance Revenue 2,825 2,806 2, Gross Margin 27.2% 27.7% 28.6% -50bps -140bps Underlying EBIT Underlying EBIT margin (%) 2.9% 5.0% 5.4% -210bps -250bps Average Seat Kilometre (ASK) ( m) 66,776 64,925 64,925 +1,851 +1,851 Seat Load Factor (SLF) (%) 89.3% 91.1% 91.1% -180bps -180bps Long Haul Yields per seat ( ) Short Haul Yields per seat ( ) APPENDIX Page 45

46 Separately disclosed items P&L ( m) New Operating model implementation costs (50) (25) Restructuring costs (20) (27) Onerous contracts and legal disputes (21) (35) Write offs, revaluations and other non-cash (6) 9 Other (6) (21) EBIT related items (103) (99) Profit on disposal of associated undertaking - 7 Finance related charges (23) (28) Total (126) (120) Of which -Cash (i) (95) (69) -Non-Cash (31) (51) Cash ( m) Current year cash related exceptionals (95) (69) Of which will be paid in future years 22 7 Prior year cash exceptionals paid in current year (13) (40) Prior year EU261 (paid in FY) (9) (16) Total (95) (118) (i) Items classified as Cash represent both current year cash flows, and cash effects which are yet to be realised APPENDIX Page 46

47 Cash conversion Cash conversion ( m) FY14 Adj. (i) Adj. (i) EBIT Net interest (143) (141) (141) (140) (140) Underlying PBT Free cash flow Cash conversion 64% 95% 60% 33% 70% (i) free cash flow was supported by a 60 million timing benefit, as disclosed last year, which reversed in Q1. Adjusting for this timing impact between and, free cash flow generation would have been approximately 100 million in both years. FY14 95% 64% 60% 70% 33% Rpt. Rpt. Adj. Rpt. Adj. APPENDIX Page 47

48 Cash exceptionals m 40 Prior year exceptionals paid this year EU261 Other current year exceptionals Restructuring costs New Operating model implementation 42 95m APPENDIX Page 48

49 Capital expenditure Airlines m 99 IT Hotels Store refits Other 206m APPENDIX Page 49

50 Underlying finance costs Assumes all bonds are repaid on maturity Pro Forma m Coupon Interest on bank facilities LIBOR +3.50% Interest on m bond 6.75% Interest on m bond 7.75% Interest on bond 7.75% Interest on m bond 6.75% Bank and bond interest and related charges Commitment fees 7 8 Letters of credit & bonding Other interest costs Interest & finance costs before aircraft financing Interest income (10) (6) Net interest & finance costs before aircraft financing Aircraft financing Fee amortisation and other non-cash Assumed at c. 70m (same level as 2016) Net Interest Expense APPENDIX Page 50

51 Net debt composition m Variance Maturity Profile at September GBP Bond June 2017 (200) (299) Euro Bond June 2020 (451) (388) Euro Bond June 2021 (345) (295) -50 Commercial Paper Various (117) (155) +38 Revolving Credit Facility May Finance Leases Various (183) (183) m Senior Note Bank Facility 525m Senior Note 400m Senior Note Additional Facility Aircraft related borrowings Various (64) (99) +35 Other external debt Various (26) (21) -5 Arrangement fees n/a Total Debt (1,363) (1,414) +51 Cash 1,234 1, Net Debt (129) (128) APPENDIX Page 51

52 Reconciliation of like for like to underlying numbers Underlying refers to trading results after adjusting for separately disclosed items that are significant in understanding the ongoing results. m m Revenue Gross Margin EBIT m Change m % % Change % Underlying 7,812 7, % 22.6% +80bps m m Change m Like for like reflects the comparison in the underlying results after removing identifiable non-recurring items in the prior year. Fuel (114) % -30bps - - Currency impact (0.3)% +30bps Like-for-Like 7,812 8, % 22.6% +80bps APPENDIX Page 52

53 FX and fuel hedging (31 October 2016) Winter 2016/17 Price Summer 2017 Price FY17 Price Winter 2017/18 Price EUR 92% 75% 80% 38% USD 95% 84% 89% 40% Jet Fuel 92% $584 90% $485 91% $535 56% $509 Jet Fuel GBP equivalent (i) 430 (i) Hedged jet fuel costs translated at hedged USD to GBP rate in FY17 equates to 430/tonne (including into plane costs), (: 475/tonne). This represents a projected saving of 35m for FY17 versus Transactional USD exposures against EUR, GBP and SEK have been hedged in line with Fuel hedges. A 1% variance in 2015 would have a 1.5m impact Transactional EUR exposures against GBP and SEK hedged in line with policies. A 1% variance in 2017 would have a 2.1m impact It is our policy not to hedge EUR and SEK profits and so profits will not be hedged. At current rates (ii), the impacts of fluctuations in those currencies can be summarised as: Every 1% move in Euro has a 0.9m impact on EBIT Every 1% SEK movement has a 0.7m impact on EBIT (ii) Spot rates as at 18 November 2016 APPENDIX Page 53