Dear Shareholders,
2009 was characterised by the most severe economic crisis worldwide since 1929, threatening the very existence of companies and entire industries. Meanwhile, forecasts assume that the economic downturn has bottomed out and that the world economy will gradually start to grow again next year. It remains to be seen whether the recovery of markets will temporarily be curbed by an increase in unemployment following the crisis with a time lag.
The successful performance of our Tourism activities in the short financial year 2009 has impressively shown that our structural positioning in our core business is appropriate. In the light of the gloomier economic climate, we cut our capacity in good time and managed to generate operating earnings of €696m in Tourism, exceeding the level achieved in 2008.
The sound performance of our Tourism Division in the difficult economic environment proves that we took the right decision in forming TUI Travel. We merged two strong organisations with great determination and consistency, and will deliver sustainable synergies of £200m sterling annually. Thanks especially to consolidation in the UK, one of our key tourism markets, we enhanced earnings in crisis year 2009.
Our Group is excellently positioned today with strong brands and market positions and a unique portfolio of differentiated products. In the short financial year 2009 we pursued a margin-centred capacity policy to prepare for a decline in demand in due time and thus managed to achieve our performance targets. Many of our competitors have meanwhile adopted a similar margin-oriented approach, and so the major European source markets have not seen significant oversupplies of tourism services in spite of subdued demand caused by the difficult economic environment. Following years of very strong growth orientation, Tourism has thus matured into a yield-oriented sector.
In the first quarter of 2009 we completed the sale of Hapag-Lloyd AG to the Hamburg-based consortium and took a 43.33% stake in the purchasing company Albert Ballin. The difficult economic framework impacted operating earnings in Container Shipping as the year progressed. Additional capital and financial measures by all shareholders were therefore required to secure the long-term financial stabilisation of Hapag-Lloyd AG. Hapag-Lloyd also launched its own package of measures to generate substantial cuts in operating costs.
The restructuring contributions agreed on by the shareholders and Hapag-Lloyd AG paved the way for the granting of a state loan guarantee. The final approval of the application for a state loan guarantee for an additional credit facility worth €1.2bn by the federal government was granted on 6 October 2009. From our perspective, an essential step has thus been taken towards securing our financial investment totalling €2.6bn.
Due to the funds currently tied up in Hapag-Lloyd AG, TUI AG’s priority is therefore to manage the existing shareholding portfolio with a view to maximising value, while at the same time securing and strengthening our liquidity position. The focus here is on two measures:
- Management of our indirect investment in Hapag-Lloyd AG with a view to maximising value:
We will support the restructuring programme launched by Hapag-Lloyd in order to cope with the crisis in Container Shipping. However, we will also monitor any options to reduce TUI AG’s financial investment in Hapag-Lloyd AG.
- Streamlining non-core assets not required for operational or strategic purposes:
To create appropriate liquidity reserves for TUI AG and financial scope for the strategic development of the Group in the medium term, we have defined an asset streamlining programme intended to generate cash inflows of around €500m for TUI AG by 2012. The planned measures include, for instance, refinancing assets owned by TUI AG, such as cruise ships, hotels and other buildings, and selling non-core real estate. Asset streamlining will strengthen our liquidity position and create broader leeway to develop TUI AG further while maintaining all entrepreneurial options.
The TUI Group now comprises the majority stake in TUI Travel, an attractive portfolio of more than 240 hotels and a growing cruise business. We intend to further enhance the profitability of the Group’s operative business on this basis. We seek to achieve profitability levels in excess of the cost of capital in the long term, above all thanks to the delivery of further synergies in TUI Travel and active management of invested capital.
With the placement of convertible bonds worth €218m in November 2009, we have strengthened TUI AG’s liquidity. We are aiming to further reduce net debt for TUI AG and our Group, achieve an improvement in our credit rating and create leeway for the strategic development of our Group by implementing our asset streamlining project and continuing our restrictive investment policy.
Taking account of the above-mentioned factors, we aim to enhance the value of TUI shares and pay appropriate dividends to our shareholders again in the medium term.
We cordially invite you to place your confidence in us and follow us on this road.
Dr. Michael Frenzel,
CEO