TUI Aktiengesellschaft
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Speech of Rainer Feuerhake, CFO TUI AG Annual results press briefing on 22 March 2006 in Hanover

Speech of Rainer Feuerhake, CFO TUI AG Annual results press briefing on 22 March 2006 in Hanover

– Check against delivery –

Ladies and Gentlemen,

Dr Frenzel has already presented the earnings situation of the individual sectors and our Group. I will now provide you with more detailed explanations on a number of key items and aspects of the present consolidated financial statements for 2005. Let me start with some introductory comments on the IASB accounting standards newly applicable to our financial statements for 2005.

New IASB accounting standards
Several binding revised or newly adopted standards were applicable to the consolidated financial statements for 2005. In addition, we already applied several standards which will only be binding as of 2006.

The first-time application of IFRS 5 had comprehensive effects on our consolidated financial statements. Accordingly, earnings by sectors classified as discontinuing operations under this standard have to be summarised in a corresponding P&L item. By analogy, the assets and liabilities of the discontinuing operations also have to be pooled in a separate balance sheet item. Moreover, the revised IAS 16 requires an annual examination of residual values, depreciation methods and useful lives. In this context, we adjusted the useful lives of Hapag-Lloyd’s container ships to the internationally customary useful life of 25 years, which is also applied by CP Ships.

In the framework of the recognition of pension obligations, we already applied IAS 19 in 2005 in order to offset shortages of cover in pension provisions against equity with no effect on results. Accordingly, the interest portion from the measurement of pension obligations is no longer carried under personnel costs, but is now shown under financial result. In order to enhance the comparability of data, 2004 figures were adjusted to the standards just mentioned in accordance with IAS 8, providing specific explanations and reconciliation statements.

So much on the newly applicable accounting standards. Let me now add a few remarks to Dr Frenzel's comments on our annual financial statements.

Profit and loss statement
Turnover rose by 1.9 billion euros or 12 per cent to 18.2 billion euros. The cost of materials and personnel costs as well as depreciation/amortisation rose in line with turnover growth. The balance, virtually the operating result, remained virtually unchanged year-on-year at 584 million euros.

As already mentioned, earnings by our operative divisions rose slightly in tourism and declined slightly in central operations. Earnings in shipping matched 2004 levels, due to the first-time inclusion of CP Ships in consolidation, the positive operating result of CP Ships in November and December did not contribute to Group profits.

As every year, earnings by tourism included a number of one-off factors in 2005 such as restructuring costs or gains on disposal. In 2005, our performance was particularly strongly affected by the balance of these one-off factors.

At –237 million euros, our financial result declined by –28 million euros. On the one hand, this was attributable to an increase in average interest rates due to the conversion of short- and medium-term floating-interest financial liabilities to long-term fixed-interest bonds in the 2004 financial year. On the other hand, additional expenses arose from the financing of the acquisition of CP Ships.

The impact on our financial result just mentioned resulted in a corresponding decline in earnings before income taxes of 35 million euros or 8 per cent to a reported amount of 386 million euros.

Despite the drop in earnings, tax expenditure rose to 87 million euros, up by 32 million euros year-on-year. This is attributable to an increase in tax payments of our hotel companies as well as an increase in deferred taxes in source market France.

While earnings from discontinuing operations hardly changed, consolidated earnings dropped by 77 million euros to 495 million euros. As I have just outlined to you, this decline is attributable to similar extents to a deterioration in the financial result and an increase in income tax expenses. Earnings per share declined by 61 cents to 2.16 euros per share. Following these explanations on the profit and loss statement, let me now turn to the key balance sheet items.

Balance sheet / debt
The balance sheet total rose by some 3 billion euros or 24 per cent to 15.3 billion euros. This increase mainly resulted from the inclusion of the CP Ships Group in consolidation since 25 October 2005.

At the same time equity rose by some 1.7 billion euros. This increase, more than 50 per cent of the growth of the balance sheet total, results from the capital increase, the hybrid capital taken up and the net transfer to revenue reserves, after netting against the shortage of cover in the Group’s pension provisions. Accordingly, the proportion of equity in relation to the balance sheet total rose by one third from 21.5 per cent to 28.5 per cent. At the same time, the percentage of other liabilities as a proportion of the balance sheet total declined both for liabilities, financial liabilities and provisions.

One of the results of the development of equity is the fact that equity exceeded goodwill by 600 million euros for the first time since 2000. The ratio between equity and goodwill rose substantially from 71 to 116 percentage points year-on-year. The Group's net financial position rose by around 0.5 billion euros to 3.8 billion euros.

This increase is primarily attributable to the acquisition of CP Ships. On the other hand, the capital increase and the issuance of hybrid capital had a positive effect. As far as investments are concerned, we decided at the end of last year to carry out the required additions, in particular in shipping, as internal investments rather than on a leasing basis since this approach offered advantages both in terms of rating and financing aspects. This impacted our on-balance sheet net debt while simultaneously improving our off-balance sheet liabilities. The divestments due to be made, business travel activities and Preussag North America (PNA), will already reduce our debt to a level below the level at the end of 2004 over the next few weeks.

Let me add one further structural aspect to the issue of Group debt. Our financial debt has been part and parcel of a complete long-term financial package due to the successful issue of the two bonds in December 2005, maturing in 2008 and 2013, respectively. From today’s perspective we therefore do not see any compelling reason to refinance the Preussag bond maturing in October 2006.

So much for our consolidated financial statements. I would like to thank you for your attention. Dr. Frenzel will now comment on our prospects for the 2006 financial year.