Preliminary Results Pro forma 12 months ended 30 September 2008 2 December 2008
Introduction Manny Fontenla-Novoa, CEO Financial review Jürgen Büser, CFO Strategy update, current trading & outlook Manny Fontenla-Novoa, CEO Page 2
Introduction Manny Fontenla-Novoa Page 3
Highlights Strong performance across all segments EBIT up 49.8% to 365.9m EBIT margin up 35.5% to 4.2% Adjusted EPS up 40.9% to 24.1p Integration completed with increased synergy target of 215m by 2010 Significant progress against strategic agenda Final dividend 6.50p per share and total 9.75p Current trading in line with expectations Well positioned for FY 09 Industry leading margins will progress further Continuing to target EBIT of 480m by FY10 Adjusted EBIT is earnings before interest, tax, exceptional items and amortisation of business combination intangibles and our share of the results of associates and joint ventures. We use this definition throughout this presentation when referring to EBIT Page 4
Financial highlights Revenue in m EBIT m EBIT margin % +49.8% +35.5% +11.8% 7,878.5 8,809.8 244.2 365.9 3.1 4.2 12m to 30/9/07 12m to 30/9/08 12m to 30/9/07 12m to 30/9/08 12m to 30/9/07 12m to 30/9/08 Page 5
Group revenue up 11.8% Segmental pro forma revenue m 12m to 30/9/08 Change % UK 3,097.3 (1.1) Continental Europe 3,620.4 18.7 Northern Europe 971.6 20.5 North America 439.8 16.0 Airlines Germany 680.7 33.0 Group 8,809.8 11.8 Page 6
EBIT up 49.8%; EBIT margin up 35.5% Segmental review of pro forma EBIT m 12m to 30/9/08 Change % Margin % UK 143.4 94.8 4.6 Continental Europe 106.3 57.5 2.9 Northern Europe 86.2 17.3 8.9 North America 6.0 22.4 1.4 Airlines Germany 45.4 (1.7) 4.6 Corporate (21.4) 0.5 - Group 365.9 49.8 4.2 Notes: Airlines Germany margin calculated on total revenue. Page 7
Good EBIT margin progression % 12m to 30/9/08 12m to 30/9/07 % Change UK 4.6 2.4 91.7 Continental Europe 2.9 2.2 31.8 Northern Europe 8.9 9.1-2.2 North America 1.4 1.3 7.7 Airlines Germany 4.6 5.4-14.8 Group 4.2 3.1 35.5 Notes: Airlines Germany margins calculated on total revenue. Page 8
Continental Europe strong margin growth EBIT margins in % Continental Europe 12m to 30/9/08 12m to 30/9/07 % change Germany including airlines 3.1 2.9 6.9 France 5.6 2.9 93.1 Belgium 4.8 2.9 65.5 Netherlands 3.3 2.0 65.0 East Europe 4.6 4.1 12.2 Page 9
Progress against November 07 strategy day targets EBIT margins % Fully integrated businesses Highly integrated businesses Partially integrated businesses Emerging markets Northern Europe UK Belgium Netherlands France Canada Eastern Europe 2010 target range 12m to 30/09/08 7 9 8.9 5 8 3 5 4.6 4.8 3.3 5.6 1.4 2 4 4.6 Tour operator Germany 2 3 1.9 Airline Condor 4 6 4.6 Germany combined 3 5 3.1 Margin figures calculated on adjusted EBIT. Airlines Germany margin calculated on total revenue. India included in UK insignificant impact Page 10
Financial Review Jürgen Büser Page 11
Pro forma financial highlights 12m to 30/9/08 Change Revenue 8,809.8m +11.8% EBIT 365.9m +49.8% EBIT margin 4.2% +35.5% Adjusted PBT 309.3m +32.0% Adjusted EPS 24.1p +40.9% Operating cash flow 220.2m +2.3% Page 12
Group pro forma P&L 12 months to September m 12m to 30/9/08 12m to 30/9/07 Change % Revenue 8,809.8 7,878.5 +11.8 Cost of providing tourism services (6,765.4) (6,101.7) Gross profit 2,044.4 1,776.8 Personnel expenses (940.1) (861.9) Depreciation and Amortisation (140.1) (125.4) Net other operating expenses (598.3) (545.3) EBIT pre exceptionals 365.9 244.2 +49.8 Share of associates & JVs and net investment income 1.6 (1.9) Net finance costs (58.2) (7.9) Profit before tax pre exceptionals 309.3 234.4 +32.0 Total exceptional items (232.1) (134.2) Tax (13.4) (28.0) Profit after tax 63.8 72.2-11.6 Adjusted EPS (pence) 24.1 17.1 +40.9 Excluding the impact of currency translation, revenue grew by 3.1% year on year Page 13
Pro forma cost of sales m 12m to 30/9/08 % of costs % of revenue Accommodation 2,913 43 33 Aviation excluding fuel 2,545 37 29 Fuel 724 11 8 Commission 387 6 4 Other costs 196 3 3 Cost of sales 6,765 100 77 Around 90% of accommodation costs are variable Aviation costs are partially variable depending on degree of integration and timing Commissions are 100% variable Page 14
Pro forma exceptional items m 12m to 30/9/08 12m to 30/9/07 Merger integration costs (116.3) (82.1) Other integration & restructuring (47.1) (60.4) Other merger related costs (21.7) (4.7) Disposal of assets (1.1) 15.1 Impairments (7.7) (21.8) Other operating exceptional items (11.4) (17.3) Total exceptional operating items (205.3) (171.2) Profit on disposal of associates - 37.0 Loss on revaluation of trading securities (13.9) - Impact of financial markets volatility (12.9) - Total all exceptional items (232.1) (134.2) Management estimate that the cash effect of exceptional items in the year was approximately 200m. Page 15
Pro forma net finance costs m 12m to 30/9/08 12m to 30/9/07 Interest and similar income 33.1 37.6 Fair value gains on derivatives 2.2 0.6 Interest payable (48.4) (24.3) Finance costs in respect of finance leases (23.7) (16.9) Forward points on future hedging contracts (12.8) - Other finance costs (8.6) (4.9) Net finance costs pre exceptionals (58.2) (7.9) Loss on revaluation of trading securities (13.9) - Impact of financial markets volatility (12.9) - Exceptional finance costs (26.8) - Total all net finance costs (85.0) (7.9) Cash finance costs 30.9m Page 16
Tax assets and tax rate Group effective tax rate 26% Total losses available at 30 September 2008 1.3 billion Deferred tax assets recognised in respect of 0.7 billion Group pro forma income statement effective tax rate for 2008 of 26.1% Group cash tax rate around 20% UK tax losses available Circa 900m Period no expiry under law Usable only against profits in the same trade or company German tax losses available Circa 350m Period no expiry under law Use restricted to 60% of taxable profits per year Effective tax rate calculated excluding the effect of adjustments to tax provisions made in respect of exceptional items Page 17
Dividends Adjusted earnings per share 24.1p Interim dividend 3.25p Final dividend 6.5p Total dividend 9.75p Cover 2.47x Earnings pay out 41% Dividend for pro forma 12 month period Reflects strong performance and confidence in business model In line with policy to pay out 40 50% of earnings To be paid on 27 March 2009 Page 18
Strong balance sheet m As at 30/9/08 As at 30/9/07 Intangible assets & investments 3,504.5 2,965.9 Property, plant & equipment 913.3 798.7 Other non-current assets* 520.9 526.9 Cash & cash equivalents** 761.3 856.0 Trading securities 129.2 197.3 Net current liabilities*** (2,559.2) (2,115.9) Non-current liabilities* (1,260.8) (1,141.7) Net assets 2,009.2 2,087.2 **Includes assets / liabilities held for resale in prior year ***Includes 128.7m 127.1m of restricted cash in 2008. (2007: 104.3m) *** Excludes cash & cash equivalents and trading securities. *** Excludes cash and cash equivalents and trading securities Page 19
Net debt m As at 30/9/08 As at 30/9/07 Cash & cash equivalents* 761.3 856.0 Trading securities 129.2 197.3 Current debt (excl. finance leases) (356.0) (101.2) Non-current debt (excl. finance leases) (416.1) (116.0) Finance leases (410.9) (442.5) Net (debt) / funds (292.5) 393.6 Net debt increase primarily due to: Share buy-back programme (cash out at 30.09.08: 247.8m cost; total cash out following close on 9.10.08: 292.6m) Dividends of 78.2 m paid in the 12 months to 30/09/08 ( 0.1m in the prior year) Acquisitions totaling 379.1m with a cash impact of 296.4m * Includes 127.1m of restricted cash in 2008 (2007: 104.3m) Page 20
New credit facility Facility m Term bps over EURIBOR/ LIBOR Revolving credit facility 780 May 11 175 Term facility 500 May 11 175 Bonding facility 200 May 11 160 Condor related lock-up 320 May 11 175 Total 1,800 Facility for general corporate purposes including acquisitions EBITDAR over adjusted gross debt covenant at 3.75x As at 30 September 2008: EBITDAR / adjusted gross debt at 3.0x Net debt cover of 0.58x (pre exceptional and excluding aircraft operating leases) Facility is ring-fenced with regard to Arcandor Page 21
Net cash outflow in the year m Page 22 12m to 30/9/08 Operating cash flow pre integration and restructuring spend 517.2 Cash effect of integration and restructuring spend* (185.0) Operating cash flow 332.2 Working capital movement (38.3) Tax (73.7) Cash generated by operations 220.2 Capital expenditure (net) (140.9) Interest paid (58.1) Dividends paid (78.2) Acquisitions / disposals (296.4) Share buyback (247.8) Net movement in borrowings and securities 579.5 Finance lease repayments (91.8) Other 0.4 Net decrease in cash (113.1) * Management estimate
Fuel and currency hedging W 08/09 S 09 EUR 96% 96% USD 95% 99% Fuel requirements 100% 95% Fuel hedging High hedge ratios with good cost certainty W08/09 65% hedged in jet fuel with remainder in gas oil, S08/09 primarily in gas oil Closed out option positions and replaced with lower price swaps - now locked in for FY09 Policy to hedge in gas oil collars 12 18 months ahead of departure Page 23
Synergy savings m 12m to 30/9/07 12m to 30/9/08 12m to 30/9/09E 12m to 30/9/10E UK 3 121 160 190 Continental 11 14 14 Corporate 10 11 11 Total synergies 3 142 185 215 Cost to P&L (cumulative) 82 198 265 265 Capex cost 12 22 22 UK Synergies (+ 50m vs. 155m target) 85m in Tour Operations (+ 30m) 35m Airline, (+ 5m) 30m Distribution (+ 7m) 40m Central Costs (+ 8m) Continental Synergies (+ 6m) Corporate Synergies (+ 4m) Page 24
Strategy update Manny Fontenla-Novoa Page 25
Our Group strategy Our Vision Strengthening mainstream Building longevity in our business Maximise value of mainstream Leading Independent travel provider Leading travel-related financial services provider Capture growth and value through acquisitions Product Pioneering our future Technology Results orientated Customer insight People Obsessed with customer service Brands United as one team Financial rigour Driving robust decisions Source: TCG Page 26
Significant progress in maximising value of mainstream Mainstream: 72% of revenue Physical integration completed Synergies of 215m by 2010 Maximise value of mainstream Strong financial performance Successful capacity management Developed our own hotel brand SENTIDO Strong margin improvement Significant progress more to come Source: TCG Page 27
Strengthening position in growing Independent travel Independent: 23% of revenue Hotels4U.com - rollout in various markets Leading independent travel provider Elegant Resorts No. 1 UK luxury travel company Acquired TriWest now leading independent in Canada Dynamic and component product offering expanded Growing share of bookings through the internet across all markets Source: TCG Page 28
Leveraging our brand and network to strengthen financial services Thomas Cook India by far the market leader in foreign exchange with 50% market share Successful launch into Heathrow T5 and Manchester Airport Increased cross selling of travel insurance Excellent customer quality on credit card book Well placed for new UK travel insurance legislation Leading travelrelated financial services provider Source: TCG Page 29
Acquisitions delivering value Mainstream Jet Tours Iberoservice Neckermann Urlaubswelten Independent Hotels4U Elegant Resorts TriWest Emerging markets Thomas Cook India Thomas Cook Egypt/Lebanon Opportunities in Russia and China Acquisitions performing in line with stated strategy and our expectations Capture growth and value through acquisitions Source: TCG Page 30
Current trading Page 31
Current trading in line with expectations Summer 08 ended well with with high prices and margins in Q4 lates market Winter 08/09 and early bookings for Summer 09 in line with expectations Overall performance provides confidence for future outlook Less stock left to sell compared to last year Margins and load factors in line with expectations Page 32
Current trading Winter 08/09 % Sold to date Year on year pro forma variation % Average selling price Bookings Planned capacity UK 53 +4-4 -6 Northern Europe 61 +9-8 -2 Continental Europe 53 +11-6 -6 North America 47-1 -11-11 Note: Figures above are as at 22/23 November 2008. Those for UK, Northern Europe and North America represent Risk bookings and committed capacity only. In Continental Europe, capacity figures relate to risk capacity which is much lower than in other segments, whereas bookings represent all bookings including non-risk. Calculating W08/09 sold to date for Northern Europe to include October, as competitors do, we would report 71% Page 33
UK haul mix Winter 08/09 UK haul mix % Year on year pro forma variation % Average selling price Left to sell Planned capacity Short haul +12-30 -26 Medium haul +8 flat +1 Long haul +3-39 -22 UK Total +4-8 -6 Note: Figures above are as at 22/23 November Page 34
Current trading Summer 09 - UK Haul mix % Sold to date Bookings Year on year pro forma variation % Average selling price Left to sell Planned capacity Short haul - - +5-20 -21 Medium haul - - +7-8 -7 Long haul - - +4-13 -8 Total 24-8 +8-12 -11 Since September update capacity reduced by further 5% points Note: Figures above are as at 22/23 November 2008. Page 35
No signs of trading down Share of sales % W08/09 W07/08 S09 S08 4 to 5 star rating 52 47 41 41 All inclusive 44 40 40 34 14 nights in line with last year Cancellation rates as expected Winter 8.7% XL and Futura Operational changes Summer 5.1% November flown load factor: 99% Note: Figures above are as at 22/23 November 2008. They represent Risk bookings and committed capacity only. Page 36
Outlook Page 37
Well positioned for FY09 Asset light and flexible In-house flying gives flexibility to cut capacity without impact on our fleet Only 10% of accommodation guaranteed Product mix focus on medium haul, 4 and 5 Star and all-inclusive Cost discipline Cost contingency plans developed Hotel costs to remain at most level with last year Fuel hedging providing pricing certainty Benefits during period of high volatility Capacity cuts continue Significant reduction in capacity in major markets Failures have taken further capacity out Most trusted holiday brand Page 38
Thomas Cook - the most trusted brand in travel Ranking Differential to nearest competitor in % points A brand I can trust No 1 +11 Is an authority about travel No 1 +24 Are the travel experts No 1 +22 Leading travel/leisure company Caters for every possible foreign holiday need No 1 +19 No 1 +15 Research shows holidays remain a key priority for consumers Note: Conquest Research. Base: All respondents Feb 2008 Page 39
Outlook Trading in Winter 08/09 and Summer 09 currently in line with expectations Flexibility to underpin FY09 performance Increased synergies Proactive on cost discipline Capacity management Product mix Cost and pricing certainty through hedging fuel and currency Experienced management team Further contingency planning in place We are well positioned and confident for FY09 prospects targeting further growth in margins and EBIT of 480m in FY10 Page 40
Q&A
Appendix Page 42
KPIs - UK 12 months ended 30/9/08 12 months ended 30/9/07 Change % Revenue ( m) 3,097.3 3,131.8-1.1% EBIT ( m) 143.4 73.6 +94.8% Operating profit margin % 4.6% 2.4% +91.7% Mass Market Risk Passengers (000 s) -6.8% Capacity (000 s) -7.5% Average selling price ( ) +4.9% Load factor % +0.6% Brochure mix % +3.8% Controlled distribution % 67.6% 64.8% +4.3% Internet distribution % 26.2% 23.2% +12.9% Page 43
KPIs Continental Europe 12 months ended 30/9/08 12 months ended 30/9/07 Change % Revenue ( m) 3,620.4 3,049.0 +18.7% EBIT ( m) 106.3 67.5 +57.5% Operating profit margin % 2.9% 2.2% +31.8% Mass Market Passengers (000 s) Flight-inclusive (000 s) -0.8% Non-flight inclusive (000 s) -1.7% Average selling price ( ) +3.0% Controlled distribution % 37.7 35.8 +5.3% Internet distribution % 8.5 7.2 +18.1% Page 44
KPIs Northern Europe 12 months ended 30/9/08 12 months ended 30/9/07 Change % Revenue ( m) 971.6 806.6 +20.5% EBIT ( m) 86.2 73.5 +17.3% Operating profit margin % 8.9% 9.1% -2.2% Mass Market Risk Passengers (000 s) +3.2% Capacity (000 s) +3.2% Average selling price (SEK) +8.6% Load factor % -0.1% Brochure mix % +4.6% Controlled distribution % 79.4 77.4 +2.6% Internet distribution % 45.6 38.4 +18.8% Page 45
KPIs North America 12 months ended 30/9/08 12 months ended 30/9/07 Change % Revenue ( m) 439.8 379.1 +16.0% EBIT ( m) 6.0 4.9 +22.4% Operating profit margin % 1.4% 1.3% +7.7% Mass Market Risk Passengers (000 s) -2.3% Capacity -2.4% Average selling price (C$) -2.6% Load factor % +0.1% Brochure mix % +6.6% Controlled distribution % 27.2 21.6 +25.9% Internet distribution % 15.8 12.7 +24.4% Note: Controlled and internet distribution % includes independent travel business Page 46
KPIs Airlines Germany 12 months ended 30/9/08 12 months ended 30/9/07 Change % Revenue external ( m) 680.7 511.7 +33.0 Revenue internal ( m) 297.5 344.1-13.5 Revenue total ( m) 978.2 855.8 +14.3 EBIT ( m) 45.4 46.2-1.7 Operating profit margin % 4.6% 5.4% -14.8 Sold seats (000 s) -9.5 TC tour operators -28.4 3 rd party tour operators +18.5 External seat only -3.5 Sold seats (000 s) Europe (excl. Cities) -10.8 Long haul +1.5 Cities -24.2-9.5 Capacity (ASKm) -4.7 Yield ( ) +9.6 Seat load factor % +2.4 Page 47
Page 48 Investor Relations Jill Sherratt +44 20 7034 7585 +44 7500 227 382 www.thomascookgroup.com