The results of the 100 day review following the completion of the merger between First Choice Holidays PLC and the tourism division of TUI AG in September 2007 were announced by TUI Travel PLC. Peter Long, Chief Executive Officer of TUI Travel commented "The 100 day review has confirmed my initial view that TUI Travel will deliver superior returns for our shareholders. The integration of the two businesses is progressing very well and accordingly, we have upgraded our synergy target by 50% to an annualised £150 million.
"We have now developed a clear vision and strategy for growth that goes beyond the delivery of the cost synergies. We will leverage our unique portfolio of market leading brands, grow our level of differentiated content and controlled distribution and optimise our business model to deliver organic growth. In our portfolio of specialist businesses we are aiming to continue to deliver a mix of strong underlying organic growth and value enhancing acquisitions.
"Current trading is encouraging, with consumer demand for holidays strong across our source markets, including the UK. Our market research clearly indicates that weakening economic performance is not a driver of consumer spending on holidays and this is being confirmed by our current trading results."
Highlights
Clear opportunities identified to deliver sustainable growth leading to superior returns for TUI's shareholders through combination of:
- Focusing on capacity management and optimising business model flexibility
- Growing portfolio of differentiated and exclusive product
- Increasing share of controlled distribution
- Growing specialist portfolio through organic investment and acquisition
Integration/Synergies
- Synergies upgraded by 50% to £150 million per annum by the year ended 30 September 2010, adding an incremental 120bps on pro forma operating margin of 2.2%
- Acceleration of synergy delivery in the current financial year
- Excellent progress achieved on integration in UK Mainstream
- Memorandum of Understanding signed with Lufthansa regarding potential merger of Germanwings and TUIfly
Growth Opportunities
- Mainstream Sector: strategic focus on margin improvements provides an estimated 130bps opportunity on pro forma operating margin of 2.2%
- Specialist Sectors: strong underlying organic growth combined with value-enhancing acquisition strategy
- The Group aims to double its Return on Invested Capital (ROIC) from the current 5.5% via a strong focus on capital allocation
Current Trading
- Current trading remains encouraging with strong consumer demand across all source markets
- Mainstream trading has been particularly strong in the period following the Christmas
- holiday, with sales significantly ahead of prior year
- UK Mainstream sales up 3% for Winter 2007/08, with 16% less product left to sell versus prior year, and sales up 8% for Summer 2008, with 18% less left to sell