In accordance with IAS 34 ‘Interim Financial Reporting’, the Group’s interim financial statements as at 30 June 2009 were published in a condensed form compared with the consolidated annual financial statements. They were based on the historical cost principle, the only exception being the accounting method applied in measuring financial instruments.
The following standards and interpretations revised or newly published by the IASB were mandatory as of the beginning of financial year 2009:
- IFRS 8: ‘Operating Segments’
- Amendments to IAS 1: ‘Presentation of Financial Statements’
- Amendments to IAS 23: ‘Borrowing Costs’ concerning removal of the option of capitalising borrowing costs
- IFRIC 13: ‘Customer Loyalty Programmes’
- Amendments to IFRS 2: ‘Share-based Payment’ concerning the definition of vesting conditions and cancellations
- Amendments to IAS 32: ‘Financial instruments: Presentation’ and follow-up amendment to IAS 1: ‘Presentation of Financial Statements’ concerning puttable financial instruments and obligations arising on liquidation
- Amendments to IFRS 1: ‘First-time Adoption of International Financial Reporting Standards’ and IAS 27: ‘Consolidated and Separate Financial Statements’ concerning the determination of the cost of an investment in a subsidiary, a jointly controlled entity or an associate
- Annual improvements project
IFRS 8 replaces the previous provisions of IAS 14 on segment reporting. The main amendment is that the structure of segment reporting follows the reporting structure internally used by the chief operating decision makers (management approach). In addition, disclosures on geographical regions and major customers are exclusively required for the preparation of annual financial statements.
The present interim financial statements also reflect the amendments to IAS 1 concerning the presentation of the financial position and financial performance for IFRS-based financial statements. Accordingly, a consolidated statement of comprehensive income is now presented, and the statement of changes in equity is shown as a separate element of the financial statements. The statement of comprehensive income comprises the consolidated profit and loss and the other income, which corresponds to income and expenses directly recognised in equity. On top of the previous presentation, the statement of financial position comprises an additional column showing the values as at the beginning of the comparative period in the event of retrospective restatements.
The amendments to IAS 23 now requiring capitalisation of borrowing costs do not impact the financial position and financial performance since the TUI Group already exercised the previous option of capitalising borrowing costs.
Accounting for customer loyalty programmes (e.g. air miles) was adjusted to the requirements of IFRIC 13. The amount of proceeds allocated to the award credits is therefore now measured at its fair value, and the fair value is deferred from turnover until the credits are redeemed. Application of this interpretation does not have a material effect on the TUI Group’s earnings. The effects on the consolidated statement of financial position are presented below:
Effects of IFRIC 13 on the consolidated statement of financial position
| € million | 30 Jun 2009 | 31 Dec 2008 | 1 Jan 2008 |
|---|---|---|---|
| Deferred tax asset | + 0.4 | + 0.4 | + 0.4 |
| Equity | - 1.0 | - 0.8 | - 0.8 |
| Provisions | - 4.1 | - 4.0 | - 3.2 |
| Other liabilities (including deferred revenue) | + 5.5 | + 5.2 | + 4.4 |
The mandatory application of all other amendments to or improvements of standards and interpretations listed above did not give rise to any major effects on the TUI Group’s financial position and financial performance.
In addition, the TUI Group already applies the provisions of the revised IFRS 3 ‘Business Combinations’, put into EU law in June 2009, and the amendments to IAS 27 ‘Consolidated and Separate Financial Statements’ for financial year 2009. The accounting and measurement methods were changed in accordance with the transitional provisions of the standards.
The amendments to IFRS 3 mainly consist of provisions concerning purchase price components and ancillary acquisition costs, business combinations achieved in stages, goodwill, non-controlling interest and remeasurement of agreements assumed. IAS 27 stipulates that disposals and acquisitions of shares in subsidiaries with a change of control lead to measurement at fair value, through profit and loss, of the stake already held by the Group or the residual holding of the Group. In contrast, transactions without a change of control will be recognised directly in equity.
Effects of the early application of IFRS 3 and IAS 27 on the Group financial statement
| € million/€ | H1 2009 |
|---|---|
| Other expenses | + 0.5 |
| Result from discontinued operation/Gain on disposal | + 191.5 |
| Group profit | + 191.0 |
| Goodwill | - 0.5 |
| Equity | + 188.9 |
| Basic earnings per share (in €) | + 0.61 |
| from continuing operations | 0.00 |
| from discontinued operation | + 0.61 |
| Diluted earnings per share (in €) | + 0.61 |
| from continuing operations | 0.00 |
| from discontinued operation | + 0.61 |
EBITA, the variable presented in the income statement, represents the TUI Group’s operating earnings. Following the sale of the majority stake in container shipping, proportionate earnings resulting from this stake are therefore no longer to be included in operating earnings by continuing operations.
Apart from these changes, the interim financial statements as at 30 June 2009 were prepared in accordance with the same accounting, measurement and presentation methods as those applied in the preceding consolidated financial statements as at 31 December 2008.
Basis of consolidation
The consolidated financial statements included all major subsidiaries in which TUI AG was able to directly or indirectly control the financial or operating policies such that the Group obtained benefits from the activities of these companies.
The interim financial statements as at 30 June 2009 included a total of 44 domestic and 683 foreign subsidiaries, besides TUI AG.
Since 1 January 2009, 12 tourism companies and one container shipping company have been newly included in consolidation. The additions in tourism consisted of 2 newly established and 10 acquired companies. In the same period, two tourism companies were deconsolidated due to a merger and a reduction in business operations, respectively. While one container shipping company was included in consolidation due to an expansion of its business operations as against the end of 2008, a total of 47 companies were removed from consolidation due to the sale of container shipping completed in the first quarter of 2009.
Acquisitions – divestments
In the first half of 2009, 10 tourism companies were acquired at acquisition costs totalling the equivalent of €34.9m. All companies were acquired in the second quarter of 2009.
Summary presentation of acquisitions
| Name and headquarters of the acquired company | Business activity | Acquirer | Date of acquisition | Acquired share | Acquisition costs € million |
|---|---|---|---|---|---|
| Adventure Tours Australia group, Australia (3 companies) | Special tour operator | TUI Travel Holdings Ltd. | 2 Apr 09 | each 100.0% | 6.4 |
| Williment World Travel group, New Zealand (4 companies) | Special tour operator | TUI Travel Holdings New Zealand Ltd. | 1 May 09 | each 100.0% | 11.0 |
| Aragon Tours Ltd., UK | Provider of services for cruise companies | TUI Travel Holdings Ltd. | 8 May 09 | 100.0% | 2.6 |
| Zeghram Expeditions group, US (2 companies) | Tour operator for expeditions | First Choice Holdings, Inc. | 30 Jun 09 | each 100.0% | 14.9 |
| Total | 34.9 |
Acquisition costs in foreign currencies were translated into Euro. In accordance with the provisions of the revised IFRS 3, ancillary costs totalling €0.5m were taken to the income statement through profit or loss.
Fair values of considerations transferred
| € million | |
|---|---|
| Purchase price paid | 17.1 |
| Deferred and contingent consideration | 17.8 |
| Total | 34.9 |
In some cases, the acquisition costs comprise the fair values of contingent considerations, i.e. considerations depending on future events, apart from the purchase prices already paid.
Summary presentation of balance sheets as at the date of first-time consolidation
€ million, translated | Carrying amounts at date of acquisition | Revaluation of assets and liabilities | Revalued carrying amounts at date of first-time consolidation |
|---|---|---|---|
| Other intangible assets | 1.9 | 1.9 | 3.8 |
| Property, plant and equipment | 4.1 | - 0.2 | 3.9 |
| Investments | 0.7 | - 0.6 | 0.1 |
| Fixed assets | 6.7 | 1.1 | 7.8 |
| Inventories | 0.1 | – | 0.1 |
| Other receivables and other assets including prepaid expenses | 4.6 | - 0.2 | 4.4 |
| Cash and cash equivalents | 12.4 | – | 12.4 |
| Deferred tax provisions | 0.1 | 0.8 | 0.9 |
| Other provisions | 0.5 | 0.1 | 0.6 |
| Financial liabilities | 2.8 | – | 2.8 |
| Liabilities and deferred income | 13.3 | – | 13.3 |
| Equity | 7.1 | 0.0 | 7.1 |
Total goodwill of €29.6m (including currency translation) arising between the acquisition costs and the acquired revalued net assets as at the acquisition date was temporarily carried as goodwill. This goodwill largely represented part of the expected synergy potential.
Due to the short period of time between the acquisition of the companies and the preparation of the present interim financial statement of the TUI Group, the purchase price allocation to the individual assets and liabilities was only prepared on a temporary basis and it was not possible to make any further disclosures on IFRS 3.
In the present interim financial statements, the purchase price allocations of the following companies and groups acquired in the first half of 2008 were finalised in accordance with the provisions of IFRS 3 within the required period of twelve months.
- Active Safari Group, Australia
- Destination Florida Group, US
- Gullivers Group, UK
- Your Sporting Challenge, UK
- Real Travel Group, UK
- World Challenge Group, UK
- Sportsworld Group, UK
- Travelmood Ltd., UK
Comparative information for reporting periods prior to the completion of the first-time accounting for an acquisition transaction retrospectively has to be presented as if the purchase price allocation had already been finalised as at the acquisition date. The table below provides an overview of the combined final purchase price allocations:
Summary presentation of the final first-time consolidation balance sheets of acquisitions made during the first six months of 2008
€ million | Carrying amounts at date of acquisition | Revaluation of assets and liabilities | Revalued carrying amounts at date of first-time consolidation |
|---|---|---|---|
| Other intangible assets | 7.0 | 42.9 | 49.9 |
| Property, plant and equipment | 4.1 | - 0.6 | 3.5 |
| Fixed assets | 11.1 | 42.3 | 53.4 |
| Inventories | 0.3 | - 0.3 | 0.0 |
| Receivables and other assets including deferred tax receivables | 25.8 | - 0.4 | 25.4 |
| Cash and cash equivalents | 19.8 | – | 19.8 |
| Deferred tax provisions | - 1.3 | 14.0 | 12.7 |
| Financial liabilities | 8.2 | – | 8.2 |
| Liabilities and deferred income | 58.3 | 6.5 | 64.8 |
| Equity | - 8.2 | 21.1 | 12.9 |
Due to the changes in the purchase price allocation, the goodwill arising in the consolidated statement of financial position on eliminating the acquisition cost against the prorated revalued equity rose by 3.5m GBP (€3.6m) to 57.8m GBP (€60.2m, including currency translation) as against 31 December 2008. The capitalised goodwill essentially represents a part of the expected synergy potential. These purchase price allocations did not significantly affect the consolidated income statement.
On 23 March 2009, TUI AG sold its entire container shipping operations. All shares in Hapag-Lloyd AG were sold to ‘Albert Ballin’ Holding GmbH & Co. KG, an indirect subsidiary of the ‘Albert Ballin’ GmbH & Co. KG consortium. By the end of March of the current financial year, container shipping had generated turnover of €1,118.9m and earnings after tax of €-197.9m. The 47 subsidiaries were sold for an enterprise value (excluding real estate) of €4.3bn. Taking account of the early application of IAS 27, the sale now results in adjusted after-tax profit of €1,134.9m (Q1 2009: €989.5m) after deduction of the cost to sell and the final purchase price determination.
Deconsolidation balance sheet of container shipping
| € million | March 2009 | 31 Dec 2008 |
|---|---|---|
| Non-current assets | 3,494.9 | 3,262.6 |
| Current assets | 1,186.3 | 699.4 |
| Assets | 4,681.2 | 3,962.0 |
| Non-current provisions and liabilities | 1,669.6 | 1,233.6 |
| Current provisions and liabilities | 1,401.3 | 1,241.3 |
| Liabilities | 3,070.9 | 2,474.9 |
| Equity | 1,610.3 | 1,487.1 |
| Equity attributable to shareholders of TUI AG | 1,609.9 | 1,486.8 |
| Minority interests | 0.4 | 0.3 |
The assets and liabilities of container shipping carried as at 31 December 2008 were carried in separate items in the previous year’s statement of financial position.
TUI AG indirectly acquired an entrepreneurial stake of 43.33% in ‘Albert Ballin’ Joint Venture GmbH & Co. KG, the sole shareholder of ‘Albert Ballin’ Holding GmbH & Co. KG.