Financial Statements Profit and Loss Statement
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Notes on the consolidated profit and loss statement
Since container shipping has been classified as a discontinued operation according to IFRS 5 since March 2008, earnings by this sector are now shown under the item ‘Result from discontinued operation’ instead of ‘Continuing operations’. In accordance with IFRS 5, the previous year’s figures were restated accordingly.
The year-on-year development of the consolidated profit and loss statement of the continuing operations was essentially characterised by the consolidation of the First Choice Holidays Group acquired in September 2007.
At turnover of € 2,104.5 million, the First Choice Holidays Group posted seasonally negative underlying EBITA of € - 37.0 million in the first half of 2008.
Overall, the earnings situation of the continuing operations was characterised by one-off expenses for restructuring measures within the TUI Travel Group and the seasonality of the tourism business, as a result of which positive operating earnings are primarily generated in the second and third quarters of any one year and a cumulative operating profit is generated as of the third quarter.
In the first half of the 2008 financial year, turnover by the TUI Travel sector rose substantially overall due to the turnover of € 2,104.5 million posted by the First Choice Holidays Group, acquired in the late summer of 2007. The growth in turnover was driven by the change in the basis of consolidation as well as better prices. This increase was more than offset by a drop in turnover in source market Central Europe due to reductions in flight capacity and the weakness of the pound sterling exchange rate for source market Northern Europe. TUI Hotels & Resorts and Cruises recorded turnover growth of € 18.9 million and € 18.6 million, respectively.
(1) Cost of sales and administrative expenses
Adjusted for the contribution by the First Choice Holidays Group in the current financial year, the cost of sales declined year-on-year. Besides increases in aircraft fuel prices and the opposite effects of cost reduction measures, this development was in particular also due to the weak British pound sterling exchange rate affecting the companies in the UK.
Administrative expenses rose by € 301.8 million overall. This increase was mainly attributable to the inclusion of the First Choice Holidays Group in consolidation and the restructuring and integration costs for the TUI Travel Group, to a large extent carried under this item.
The cost of sales and administrative expenses comprised the following items:
Rental and lease expenses
|
€ million |
Q2 2008 |
Q2 2007 restated |
H1 2008 |
H1 2007 restated |
|---|---|---|---|---|
| Rental and lease expenses | 190.7 | 152.8 | 365.6 | 302.0 |
The increase in rental and lease expenses in the first half of the financial year was attributable to the consolidation of the First Choice Holidays Group. It was mitigated by adjustment measures in TUI UK (in particular aircraft).
Personnel costs
|
€ million |
Q2 2008 |
Q2 2007 restated |
H1 2008 |
H1 2007 restated |
|---|---|---|---|---|
| Personnel costs | 598.1 | 425.4 | 1,147.8 | 867.8 |
The increase in personnel costs caused by the inclusion of the First Choice Holidays Group in consolidation was limited by the effects of the restructuring measures implemented in previous years, above all in TUI UK and TUI AG.
Depreciation/amortisation/impairments
|
€ million |
Q2 2008 |
Q2 2007 restated |
H1 2008 |
H1 2007 restated |
|---|---|---|---|---|
| Depreciation and amortisation | 121.2 | 94.9 | 258.0 | 186.3 |
| Impairments of property, plant and equipment | – | 0.1 | 0.8 | 0.1 |
| Total | 121.2 | 95.0 | 258.8 | 186.4 |
The increase in depreciation due to the integration of the First Choice Holidays Group was partly offset by a decline in depreciation due to restructuring measures in source market Northern Europe.
(2) Other income/ Other expenses
Other income/Other expenses
|
€ million |
Q2 2008 |
Q2 2007 restated |
H1 2008 |
H1 2007 restated |
|---|---|---|---|---|
| Other income | 2.5 | 8.4 | 23.6 | 23.2 |
| Other expenses | 102.2 | 0.0 | 105.7 | 3.3 |
| Total | - 99.7 | 8.4 | - 82.1 | 19.9 |
Other income in the first half of the current financial year primarily resulted from book profits in connection with sale-and-lease-back agreements in the flight operations sector (€ 10.4 million) and gains on disposal in the real estate sector (€ 4.1 million). The income shown in the previous year’s reference period mainly resulted from the divestment of a hotel complex and various plots of land.
Other expenses in the period under review mainly comprised book losses from the conclusion of sale-and-lease-back agreements of € 101.7 million fully incurred in the second quarter of 2008. These sale-and-lease-back agreements were concluded with leasing company AerCap Holdings NV and investment company Deucalion
Aviation Funds for 19 aircraft previously owned by TUI Travel in the framework of the strategic realignment of the airline activities of the TUI Travel Group.
(3) Impairments of goodwill
Impairments of goodwill
| € million | Q2 2008 | Q2 2007 | H1 2008 | H1 2007 |
|---|---|---|---|---|
| ’TUIfly‘ | 72.7 | – | 72.7 | – |
| Tarajal Properties, S.L. | 3.4 | – | 3.4 | – |
| Total | 76.1 | – | 76.1 | – |
The impairments of goodwill shown were required in connection with the classification of ’TUIfly‘ and Tarajal Properties, S.L. as disposal groups according to IFRS 5.
The change in the financial result resulted from an increase in interest expenses due to the inclusion of the financial liabilities of the First Choice Holidays Group in consolidation and a bank loan (€ 450.0 million) taken up on the basis of a exchangeable bond by TUI AG and the year-on-year rise in interest rate levels.
A year-on-year comparison of the tax income resulting from the seasonality of the tourism business for the first half of 2008 is of limited use only since the amount shown for the first half of 2007 included the effects of the corporate reorganisation of the German companies in the context with the formation of TUI Travel PLC and the effects of the issue of a convertible bond.
(4) Other one-off items according to sectors
In addition to the disclosures required according to IFRS, a reconciliation to underlying earnings is provided in the consolidated profit and loss statement. The adjustments show deconsolidation income as gains on disposal, events according to IAS 37 as restructuring measures and all effects resulting from purchase price allocations on Ebita under purchase price allocation. This reconciliation also includes the following individual one-off effects.
Other one-off items according to sectors
|
€ million |
Q2 2008 |
Q2 2007 restated |
H1 2008 |
H1 2007 restated |
|---|---|---|---|---|
| Tourism | 29.9 | 31.0 | 45.6 | 39.3 |
| TUI Travel | 27.6 | 31.0 | 43.3 | 39.3 |
| of which First Choice Holidays | 25.2 | – | 32.7 | – |
| TUI Hotels & Resorts | 2.3 | – | 2.3 | – |
| Cruises | – | – | – | – |
| Central operations | – | – | – | – |
| Total | 29.9 | 31.0 | 45.6 | 39.3 |
Special one-off expenses of € 18.7 million incurred in the tourism division in the second quarter of 2008 mainly resulted from one-off hedging effects and foreign exchange losses in flight operations. For the first half of the year, additional major one-off expenses of € 13.9 million (of which in Q2 2008: € 5.0 million) arose from the merger of the British activities of TUI Travel PLC.
In the TUI Hotels & Resorts sector, a provision for maintenance expenses formed for the Magic Life Group for a leased facility was reversed in the framework of the extension and renegotiation of the lease agreement in the second quarter of 2008.
In the 2007 reference period, special one-off expenses mainly related to the rebranding of the new TUIfly.com brand, one-off costs of changes in the air passenger duty in the UK which could not be passed on to passengers and one-off expenses for the revaluation of maintenance provisions for leased aircraft in the wake of the merger of the First Choice Holidays Group and TUI’s tourism division already prepared at that point in time.
Profit and loss statement of the TUI Group for the period from 1 January to 30 June
|
€ million |
Notes |
Q2 2008 |
Q2 20072)
restated |
H1 2008 |
H1 20072)
restated |
|---|---|---|---|---|---|
| Turnover | 4,740.2 | 3,724.3 | 8,376.7 | 6,394.7 | |
| Cost of sales | (1) | 4,447.5 | 3,517.3 | 8,019.8 | 6,264.8 |
| Gross profit/loss | 292.7 | 207.0 | 356.9 | 129.9 | |
| Administrative expenses | (1) | 322.6 | 236.9 | 699.8 | 398.0 |
| Other income/other expenses | (2) | - 99.7 | + 8.4 | - 82.1 | + 19.9 |
| Impairments of goodwill | (3) | 76.1 | – | 76.1 | – |
| Financial income | 63.9 | 64.0 | 72.4 | 80.0 | |
| Financial expenses | 164.4 | 117.6 | 266.0 | 185.5 | |
| Share of results of joint ventures and associates | + 5.3 | + 10.2 | + 12.9 | + 15.4 | |
| Earnings before taxes on income | - 300.9 | - 64.9 | - 681.8 | - 338.3 | |
| Reconciliation to underlying earnings: | |||||
| Earnings before taxes on income | - 300.9 | - 64.9 | - 681.8 | - 338.3 | |
| Interest result and earnings from the valuation of interest hedges | 93.7 | 54.8 | 176.6 | 106.5 | |
| Impairments of goodwill | 76.1 | – | 76.1 | – | |
| EBITA from continuing operations1) | - 131.1 | - 10.1 | - 429.1 | - 231.8 | |
| Adjustments: | |||||
| Gains on disposals | – | – | – | – | |
| Restructuring | 190.6 | 8.7 | 217.7 | 10.3 | |
| Purchase price allocation | 11.7 | – | 53.2 | – | |
| Other one-off items | (4) | 29.9 | 31.0 | 45.6 | 39.3 |
| Underlying EBITA from continuing operations | 101.1 | 29.6 | - 112.6 | - 182.2 | |
| Earnings before taxes on income | - 300.9 | - 64.9 | - 681.8 | - 338.3 | |
| Taxes on income | - 23.9 | - 139.9 | - 138.2 | - 205.9 | |
| Result from continuing operations | - 277.0 | 75.0 | - 543.6 | - 132.4 | |
| Result from discontinued operation | 151.7 | - 4.5 | 140.2 | 97.9 | |
| Group profit/loss | - 125.3 | 70.5 | - 403.4 | - 34.5 | |
| - Group profit attributable to shareholders of TUI AG | - 55.6 | 58.9 | - 222.4 | - 57.6 | |
| - Group profit attributable to minority interests | - 69.7 | 11.6 | - 181.0 | 23.1 | |
| Group profit | - 125.3 | 70.5 | - 403.4 | - 34.5 | |
1) EBITA is equivalent to earnings before interest, taxes on income and impairments of goodwill.
2) Since the alternative treatment allowed under IAS 23 to capitalise borrowing costs was exercised in the 2007 financial year, interest expenses declined by € 4.3 million in the previous year‘s reference period. At the same time, the cost of sales as well as tax expenses rose by € 0.2 million and by € 0.1 million respectively, while other income decreased by € 4.0 million. Earnings by discontinued operation rose overall by € 3.5 million.
|
€ |
Q2 2008 |
Q2 20072)
restated |
H1 2008 |
H1 20072)
restated |
|---|---|---|---|---|
| Basic earnings per share3) | - 0.24 | + 0.19 | - 0.93 | - 0.28 |
| from continuing operations | - 0.85 | + 0.21 | - 1.49 | - 0.67 |
| from discontinued operation | + 0.61 | - 0.02 | + 0.56 | + 0.39 |
| Diluted earnings per share3) | - 0.24 | + 0.20 | - 0.93 | - 0.28 |
| from continuing operations | - 0.85 | + 0.21 | - 1.49 | - 0.67 |
| from discontinued operation | + 0.61 | - 0.01 | + 0.56 | + 0.39 |
3) In calculating earnings per share in accordance with the rules of IAS 33.12, the after-tax amount of the dividend on the hybrid capital was deducted from Group profit attributable to shareholders of TUI AG since the hybrid capital represents equity but does not represent equity attributable to shareholders of TUI AG.