TUI’s tourism division achieved an increase in turnover in the first quarter of 2007. The division recorded year-on-year growth of 3.1 per cent to 2.6 billion euros (previous year: 2.5 billion euros). Source market Central Europe and the destinations sector, in particular, reported significant turnover growth. Despite an increase in transport volume of 9.9 per cent year-on-year, the shipping division reported a decline of 8.5 per cent to 1.5 billion euros compared to the previous year (1.64 billion euros). The development of the division was impacted by a reduction in freight rates in almost all trade lanes. At 4.1 billion euros, turnover by the Group’s continuing operations (tourism, shipping and central operations) fell slightly short of 2006 levels (4.2 billion euros) in the first quarter of 2007.
In the period under review, underlying earnings by tourism fell to -227 million euros (previous year: -216 million euros). Due to the typical seasonal nature of the tourism business, the first quarter regularly produces negative figures. The Central Europe sector generated underlying earnings at -93 million euros, just under nine per cent higher than the previous year (-102 million euros). The Northern Europe sector was affected by the weaker business in the UK. At -117 million euros, earnings by the sector dropped substantially year-on-year (-92 million euros). The Western Europe sector posted underlying earnings of -32 million euros (previous year: -25 million euros). Despite the decline, the situation in the French travel market improved gradually in the period under review. The destinations sector managed to achieve growth. The substantial increase in earnings by the sector to 15 million euros (previous year: 6 million euros) was driven by the hotel companies.
In the first quarter of 2007, the shipping division saw only minor changes in its environment compared with previous quarters. The development of the division was impacted in particular by reductions in freight rates in almost all trade lanes. Despite an increase in transport volume of 9.9 per cent year-on-year, the development of the division was impacted by a reduction in freight rates in almost all trade lanes.
Underlying earnings by the shipping division totalled -53 million euros (previous year: 22 million euros) in the first quarter of 2007. Including the one-off income of 181 million euros from the divestment of Montreal Gateway Terminals and 15 million euros from the sale of Hapag-Lloyd’s minority shareholding in Germanischer Lloyd AG as well as other integration effects, earnings by the division amounted to 141 million euros, a substantial increase year-on-year (-25 million euros).
Underlying earnings by central operations dropped to 13 million euros (previous year: 23 million euros) in the first quarter of 2007. This decline was attributable to the divestment of Wolf GmbH in 2006 and income from a sale in the real estate segment (Schacht Konrad), creating a corresponding reduction in income. On the other hand, in the first quarter 2007, there were increased profit contributions from the measurement of derivatives.
In the first quarter of 2007, earnings by the continuing operations, tourism and shipping as well as central operations, dropped to -83 million euros (previous year: -70 million euros). Both in the period under review and the 2006 reference period, earnings were affected by a variety of special factors. Adjusted for these effects, earnings by the continuing operations totalled -267 million euros (previous year: -171 million euros).
Prospects
Booking situation
Core business tourism saw an overall positive start to the 2007 financial year. At Group level, bookings for the 2006/2007 winter season, which ended in April, rose by 8.5 per cent in terms of customer numbers and 4.9 per cent in terms of booked turnover. Overall, bookings for the 2007 summer season have started off well. At Group level, customer numbers are currently 6.9 per cent up year-on-year, with booked turnover up 3.6 per cent year-on-year. An even more positive trend is emerging in Germany, where the number of customers is 10.1 per cent up year-on-year while booked turnover for the 2007 summer season is currently 5.6 per cent up year-on-year. The difficult source market France currently shows an initial recovery of business and sound price levels. With a slight increase in customer numbers year-on-year (+1.4 per cent), booked turnover is currently up 4.6 per cent.
Overall, source market Western Europe is showing year-on-year growth both in turnover and in terms of customer volume for the summer of 2007. In the Northern Europe sector, the current bookings situation reflects the difficult market environment in the UK. Customer numbers in the UK have risen year-on-year (+1.9 per cent) but booked turnover is currently 6.8 per cent down year-on-year. The Nordic countries show a positive trend. Customer numbers are 6.5 per cent up year-on-year for the 2007 summer season, with booked turnover up 9.0 per cent year-on-year.
With regards to underlying earnings (EBITA) by the tourism division, an uneven trend is emerging for the 2007 financial year. The tour operator business in source market Central Europe shows a positive trend. However, an opposite effect is caused by start-up costs for the realignment of flight operations under the new brand TUIfly.com. The Northern Europe sector will not be able to fully reproduce the very good performance of 2006, despite a persistently positive trend in the Nordic countries. Earnings by the sector will be impacted by the difficult market environment in the UK. For the Western Europe sector, earnings are expected to grow overall. This will reflect the visible recovery of the French market. Earnings by the destinations sector are expected to rise, with the hotel companies playing a key role in achieving this growth.
The current development and earnings situation in the shipping division is primarily characterised by a year-on-year decline in freight rates in almost all trade lanes. Initial recovery trends are expected for the second quarter of 2007. Positive operating profit contributions are therefore expected again from the second half of 2007 onwards. The overall development of the shipping division will depend not only on the development of freight rates during the important summer period but also on the future development of costs, for example for land-based transportation and shipping bunker costs. The expected recovery of freight rate levels in the course of the year is expected to go hand in hand with a corresponding upswing in turnover.
Earnings by central operations will fall slightly short of 2006 levels due to special effects included in 2006 figures.
Overall, the Group expects slight turnover growth for its continuing operations (tourism, shipping, central operations). However, due to the announced merger of TUI AG’s tourism division - excluding the hotel companies jointly operated under TUI Hotels & Resorts - with the British First Choice Holidays PLC, an assessment of the earnings trend cannot be provided at this point in time.
Detailed development of divisions
Tourism
In the first quarter of 2007, four million customers selected tourism products of the TUI Group, an increase of 7.2 per cent year-on-year (3.73 million). At 2.6 billion euros, turnover by the tourism division was 3.1 per cent up year-on-year (2.5 billion euros). In the 2006 reference quarter, ‘Other tourism’ still comprised turnover of the divested business travel activities on a pro rata basis. Adjusted for ‘Other tourism’, the tourism division posted turnover growth of 5.8 per cent in the first quarter of 2007. Earnings were negative for seasonal reasons. Another factor to be taken into account was the fact that earnings in the first quarter of 2006 comprised one-off income of 144 million euros from the divestment of the business travel activities. Adjusted for the special effects, earnings declined by 5.1 per cent to -227 million euros year-on-year (-216 million euros).
The Central Europe sector (Germany, Austria, Switzerland as well as airline TUIfly.com) reported business growth compared with 2006. Customer numbers rose by 11.7 per cent to 1.91 million (previous year: 1.71 million). Turnover grew by 8.8 per cent to 984 million euros (previous year: 905 million euros). Underlying earnings by the Central Europe sector also rose by 8.8 per cent to -93 million euros (previous year: -102 million euros). The overall positive business trend in source market Germany was slightly curbed by additional expenses for the integration of the two airlines Hapag-Lloyd Flug and Hapag-Lloyd Express into the new brand TUIfly.com. In the first quarter of 2007, the integration resulted in one-off expenses of 5 million euros.
The Northern Europe sector (UK, Ireland, Nordic countries and airlines Thomsonfly [charter and scheduled flights] and TUIfly Nordic) showed an overall difficult trend in the first quarter of 2007. Customer numbers rose by 5.8 per cent to 1.28 million (previous year: 1.21 million); however, this growth was primarily driven by Thomsonfly’s expansion in the seat-only business. Turnover thus did not reflect this trend, rising by 2.4 per cent to 937 million euros (previous year: 915 million euros). At -117 million euros, underlying earnings by the Northern Europe sector dropped considerably year-on-year (-92 million euros). Earnings were impacted by source market UK, which failed to meet the previous year’s earnings level due to a weak market environment. In Ireland, 2006 earnings levels were matched. The Nordic countries, in contrast, managed to continue the positive trend of previous quarters and again increased their profit contribution.
In the Western Europe sector (France, the Netherlands, Belgium, as well as airlines Corsair, TUI Airlines Nederland and TUI Airlines Belgium), the number of customers was 0.81 million, matching 2006 levels (0.81 million). At the same time, turnover grew by 5.2 per cent to 553 million euros (previous year: 526 million euros). Source markets France and Belgium achieved year-on-year growth in turnover. In the Netherlands, turnover dropped below the 2006 reference level due to the divestment of the specialist tour operators in the second quarter of 2006. At -32 million euros, underlying earnings by the Western Europe sector were down year-on-year (-25 million euros).
In the Destinations sector (incoming agencies and hotel companies), the hotel companies played a key role. The RIU Group, in particular, posted a significant increase in earnings year-on-year. Turnover grew by 14.4 per cent to 116 million euros (previous year: 101 million euros). In the first quarter of 2007, earnings by the sector climbed substantially to 15 million euros (previous year: 6 million euros).
The Other tourism sector still comprised the business travel activities of the TQ3 Group and the IT services companies of TUI InfoTec in 2006. In the course of the 2006 financial year, one of these operations was completely divested, with a majority shareholding in the other one sold in 2006.
Shipping
The shipping division (container and cruise business) posted turnover of 1.5 billion euros in the first quarter of 2007, down 8.5 per cent year-on-year (1.64 billion euros). The decline resulted from a reduction in freight rates in almost all trade lanes for container shipping and from a considerable weakening of the US dollar against the euro. At 141 million euros, earnings by the shipping division were significantly up year-on-year (-25 million euros). Adjusted for the one-off effects of divestments in the first quarter of 2007 and one-off expenses for the integration of CP Ships, earnings totalled -53 million euros (previous year: 22 million euros).
At around 1.45 billion euros and minus 8.8 per cent, the container business accounted for the bulk of turnover by the division. Transport volume grew by 9.9 per cent year-on-year to a total of 1,315 million standard containers (TEU), with all trade lanes reporting growth, albeit at different levels. On the other hand, freight rates declined in almost all trade lanes with the exception of the Far East trade lane. Freight rates dropped by 8.2 per cent on average for all trade lanes.
Hapag-Lloyd Kreuzfahrten recorded an overall positive business trend in the first quarter of 2007. The segment achieved turnover of 50 million euros, up 2.9 per cent year-on-year (49 million euros). Earnings declined slightly to 3 million euros (previous year: 4 million euros) due to higher operating costs.
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Turnover by divisions
| € million | Q1 2007 | Q1 2006 | Var. % |
|---|---|---|---|
| Tourism | 2,589.5 | 2,510.6 | + 3.1 |
| Central Europe | 984.1 | 904.9 | + 8.8 |
| Northern Europe | 936.5 | 914.7 | + 2.4 |
| Western Europe | 553.0 | 525.9 | + 5.2 |
| Destinations | 115.9 | 101.3 | + 14.4 |
| Other tourism | – | 63.8 | – |
| Shipping | 1,500.3 | 1,639.6 | - 8.5 |
| Central operations | 4.3 | 50.2 | - 91.4 |
| Continuing operations | 4,094.1 | 4,200.4 | - 2.5 |
| Discontinuing operations | – | 278.0 | – |
| Turnover by divisions | 4,094.1 | 4,478.4 | - 8.6 |
Earnings by divisions (EBITA)
| € million | Q1 2007 | Q1 2006 | Var. % | Q1 2007 Underlying | Q1 2006 Underlying | Var. % |
|---|---|---|---|---|---|---|
| Tourism | - 237 | - 83 | - 185.5 | - 227 | - 216 | - 5.1 |
| Central Europe | - 98 | - 102 | + 3.9 | - 93 | - 102 | + 8.8 |
| Northern Europe | - 119 | - 92 | - 29.3 | - 117 | - 92 | - 27.2 |
| Western Europe | - 35 | - 36 | + 2.8 | - 32 | - 25 | - 28.0 |
| Destinations | 15 | 6 | + 150.0 | 15 | 6 | + 150.0 |
| Other tourism | – | 141 | – | – | - 3 | – |
| Shipping | 141 | - 25 | n. m. | - 53 | 22 | n. m. |
| Central operations | 13 | 38 | - 65.8 | 13 | 23 | - 43.5 |
| Continuing operations | - 83 | - 70 | - 18.6 | - 267 | - 171 | - 56.1 |
| Discontinuing operations | – | 25 | – | - 227 | - 216 | - 5.1 |
| Earnings by divisions (EBITA) | - 83 | - 45 | - 84.4 | - 93 | - 102 | + 8.8 |
Condensed profit and loss statement of the TUI Group for the period from
1 January to 31 March
| € million | Q1 2007 | Q1 2006 |
|---|---|---|
| Turnover | 4,094.1 | 4,200.4 |
| Other income | 326.1 | 308.0 |
| Changes in inventories and other own work capitalised | + 2.4 | + 4.2 |
| Cost of material and purchased services | 3,282.0 | 3,199.2 |
| Personnel costs | 538.7 | 613.4 |
| Depreciation and amortisation | 156.7 | 169.3 |
| Impairment | – | 1.1 |
| Other expenses | 559.7 | 628.7 |
| Financial income | 63.1 | 70.0 |
| Financial expenses | 95.8 | 104.5 |
| Result from companies measured at equity | + 7.1 | + 5.0 |
| Earnings before taxes on income | - 140.1 | - 128.6 |
| Income taxes | - 34.3 | - 20.2 |
| Result from continuing operations | - 105.8 | - 108.4 |
| Result from discontinuing operations | 0.0 | + 17.5 |
| Group profit/loss | - 105.8 | - 90.9 |
| Group profit/loss attributable to shareholders of TUI AG | - 117.2 | - 93.7 |
| Group profit/loss attributable to minority interests | + 11.4 | + 2.8 |
| Group profit/loss | - 105.8 | - 90.9 |
Earnings per share
| € | Q1 2007 | Q1 2006 |
|---|---|---|
| Basic earnings per share | - 0.47 | - 0.38 |
| Diluted earnings per share | - 0.47 | - 0.38 |