TUI AG posts jump in profits in the 2007 financial year / 47 per cent growth in operating earnings to 616 million euro / Positive outlook: Rise in earnings in tourism and shipping expected for 2008

Hanover, March 18, 2008

TUI AG, the tourism and shipping group, has delivered a positive summary of the 2007 financial year. It achieved a significant increase in turnover, operating earnings, Group earnings and earnings per share. ‘2007 was a good year for us. We were set for growth, and we returned to the profit zone with a leap in earnings”, said Dr Michael Frenzel. TUI’s CEO emphasized that both tourism and shipping had posted a positive performance. Frenzel continued: “And we are also optimistic for the 2008 financial year. We intend to further improve our Group’s profitability.”

Turnover by the Group’s continuing operations rose by around 7 per cent to 21.9 billion euro (previous year: 20.5 billion euro). A jump in profits of 47 per cent fuelled a rise in operating earnings (underlying EBITA) by the continuing operations to 616 million euro (previous year: 419 million euro). The positive business trend was driven by both Group divisions, in particular due to the strong performance in the second half of the year. Following the successful completion of the integration of CP Ships, container shipping benefited from a significant increase in profitability. Below the bottom line, Group earnings totalled 236.3 million euro (previous year: -843.4 million euro). Basic earnings per share amounted to 0.61 euro, following minus 3.65 euro per share in the 2006 reference period. TUI will propose a 25 Euro-Cent dividend payment per share to the annual general meeting for the business year 2007. 

Detailed development of the tourism division
In the 2007 financial year, turnover by the tourism division grew by 11 per cent to 15.6 billion euro (previous year: 14.1 billion euro). Earnings by the tourism division (underlying EBITA) rose by almost 14 per cent year-on-year to 449 million euro (previous year: 395 million euro). The earnings growth was driven both by TUI Travel and TUI Hotels & Resorts.

Due to the first-time consolidation of the turnover by First Choice since September 2007, TUI Travel’s turnover grew by 11.6 per cent to 15.3 billion euro, including an amount of around 1.3 billion euro for the former First Choice activities. Earnings by TUI Travel PLC rose by 17.7 per cent year-on-year to underlying EBITA of 304.4 million euro (previous year: 285.6 million euro). Underlying earnings by TUI Travel PLC comprise earnings of around three million euro by the former First Choice sectors, included in consolidation.

TUI Hotels & Resorts also posted a significant increase in turnover and earnings in the 2007 financial year. Turnover grew by 9.5 per cent to around 379.8 million euro (previous year: 346.7 million euro). Operating earnings by the hotel sector rose even more strongly, up 18.6 per cent year-on-year. Underlying earnings by the hotel operations totalled 146.1 million euro (previous year: 123.2 million euro). The growth in operating earnings was partly driven by RIU hotels, the largest hotel group in the sector. Overall, TUI Hotels & Resorts achieved a 3.1 per cent increase in hotel bed occupancy to 81.2 per cent year-on-year on capacity which was up three per cent. Average revenues per bed grew by 4.2 per cent to 46.25 euro (previous year: 44.37 euro).

Detailed development of the shipping division
In the 2007 financial year, turnover by the shipping division declined slightly by 0.8 per cent to 6.2 billion euro (previous year: 6.3 billion euro) due to changes in exchange rates. Earnings (underlying EBITA) by the division rose by 121 per cent to 197 million euro (previous year: 89 million euro).

In 2007, container shipping focused above all on process optimisation and productivity enhancements, following the successful completion of the integration of CP Ships in 2006. Turnover by container shipping dropped slightly by 1.2 per cent to 6.0 billion euro (previous year: 6.09 billion euro). This decline was primarily attributable to the weakness of the US dollar exchange rate against the euro. Shipping volumes rose by 9.0 per cent to 5.45 million standard containers (TEU). Average freight rates rose substantially in all trade lanes in the second half of the year. However, average freight rates for the year as a whole still fell 1.3 per cent short of 2006 levels. At plus 124.5 per cent, operating earnings (underlying EBITA) more than doubled, totalling 182.5 million euro (previous year: 81.3 million euro).

Hapag-Lloyd Kreuzfahrten again recorded a positive business trend in 2007. At 183.2 million euro, turnover grew by 14.3 per cent year-on-year (previous year: 160.3 million euro). Hapag-Lloyd Kreuzfahrten reported underlying EBITA of 14.2 million euro (previous year: 7.9 million euro), up by 79.7 per cent.

Detailed development in central operations/net debt
Turnover by central operations dropped by 85.5 per cent year-on-year to 25.5 million euro (previous year: 175.5 million euro). This was primarily due to the divestment of the majority interest in Wolf GmbH in October 2006 and the associated turnover effect. Underlying earnings by central operations (underlying EBITA) climbed by 54.9 per cent year-on-year to minus 29.5 million euro (previous year: -65.4 million euro). Besides an initial reduction in personnel costs in the corporate centre area, this improvement was attributable to a positive profit contribution from the measurement of derivative financial hedging instruments. In the 2007 financial year, the TUI Group no longer held any discontinuing operations. In 2006, it had generated earnings of 29.6 million euro from the trading sector in this segment.

At the balance sheet date, the Group’s net debt totalled 3.9 billion euro (previous year: 3.2 billion euro). The increase is due to the first-time consolidation of the First Choice Group.

Outlook for the current financial year
For 2008, TUI expects an increase in Group turnover of around four billion euro to 26 billion euro due to higher turnover expectations in the tourism and shipping divisions.

The tourism division expects to increase its turnover to around 19 billion euro. Due to the capacity adjustments already initiated, this turnover growth is expected to primarily result from the consolidation of the First Choice activities for a full year. The increase in earnings by TUI Travel will result from consolidation of First Choice for a full financial year, expected initial synergy effects, margin improvements in the Mainstream business and growth of the Specialist Holidays, Activity Holidays and Online Destinations Services sectors.

Booking volumes remain strong, both for the current winter season and the 2008 summer season. Turnover by the Northern Europe sector is up 7 per cent for the winter and up 9 per cent for the summer. Central Europe is currently recording an increase in turnover of 4 per cent for the winter and 6 per cent for the summer season. Western Europe is reporting turnover growth of 4 per cent, both for the current winter season and the 2008 summer season (a detailed overview of the booking situation of TUI Travel is available on the internet at www.tui-group.com).

TUI Hotels & Resorts also expects turnover and earnings growth, resulting among others from a further increase in bed nights and an increase in average revenues per bed. Overall, the tourism division expects a substantial increase in earnings despite persistently intense competition as well as commodity price increases.

For its globally operating shipping division, TUI expects growth of 7 per cent, mainly driven by the persistently strong trade activities with China. At the same time, TUI AG expects freight rates to grow in all trade lanes. The TUI Group’s container shipping sector aims to achieve above-average market growth in transport volumes. Against this background, turnover growth from currently 6.2 billion euro to up to 7 billion euro – depending on the development of the US dollar exchange rate against the euro – is considered possible. TUI expects to leverage the full synergy potential of 220 million euro and thus achieve a considerable improvement in earnings by the shipping division, even if volume growth should turn out to be only moderate and freight rates should only recover slightly. In this connection, the effect of the sub-prime crisis on the development of world trade cannot yet be fully assessed and thus entails an element of risk. The development of shipping bunker prices will also play an important role.

Overall, the Group’s profitability is expected to be boosted by the expected increase in earnings in tourism and the expected recovery of freight rates as well as other productivity increases in shipping.

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Contact:

Uwe Kattwinkel, phone +49 (0) 511 566 1417
Robin Zimmermann, phone +49 (0) 511 566 1488

Turnover by divisions

Consolidated Profit and Loss Statement

  ¹⁾ EBITA is equivalent to earnings before interests, income taxes and amortisation of goodwill .

 

Balance Sheet of the TUI Group as at 31 December 2007