TUI AG has continued the positive performance in its core business sectors in the third quarter…
TUI AG has continued the positive performance in its core business sectors in the third quarter. Turnover and earnings were improved compared to the previous year in both tourism and shipping. Turnover in the tourism sector for the first 9 months of 2005 rose by 6.0 percent to 11.3 billion euros, while shipping turnover rose by 17.0 percent to 2.3 billion euros. Tourism earnings for that same period improved by 8.1 percent. Shipping earnings for the first three quarters of 2005 were 3.1 percent up on the previous year.
Successful takeover bid for CP Ships
In order to enhance the competitive position and expand the regional presence of Hapag-Lloyd Container Linie, TUI has decided to take over the Canadian shipping company CP Ships. A corresponding offer to the shareholders of CP Ships was successful. 83,972,849 validly deposited shares, representing about 89.0 percent of the outstanding shares, were taken up on 20 October, 2005 and paid for on 25 October, 2005. TUI intends to take over the remaining shares of CP Ships by means of an amalgamation. To this end, a meeting of CP Ships shareholders will convene on 14 December, 2005 in order to effect a corresponding decision pursuant to applicable Canadian law. The amalgamation will be completed in 2005.
Capital increase successfully completed
In order to partly refinance the takeover of CP Ships, a capital increase through subscription rights was effected in September. TUI AG received gross issuing proceeds of around 1 billion euros. Following the capital increase, TUI AG`s capital stock amounts to 639,777,370.74 euros split into 250,259,155 nopar value shares.
Credit rating received
After the completion of the third quarter of 2005, the rating agencies Standard & Poor`s and Moody`s, commissioned by TUI, published their ratings for TUI AG and the bonds issued by TUI in 2004. TUI`s longterm credit rating by Standard & Poor`s is BB+/Positive, with Moody`s rating Ba2/Stable. TUI`s bonds have been rated BB by Standard & Poor`s and Ba2 by Moody`s Due to the rating, an increase in the interest rate of the 2004 bonds was avoided.
Earnings performance in Q3
The application of several new IFRS accounting standards has been mandatory since 1 January, 2005. As a result, the interim financial statement for 1 January, 2005 until 30 September, 2005 contains changes in the disclosure and valuation of several items in the profit and loss statement and the balance sheet. For comparative figures for the previous year appropriate adjustments have been made.
Adjusted earnings by divisions in Q3 up 6.3 percent year-on-year
In the third quarter of 2005, earnings by divisions (EBTA), adjusted for the effects of the IFRS changes as well as unusual expenses and income, rose 6.3 percent year-on-year to 659 million euros (previous year 620 million euros). The figure for the first three quarters of 2005 totalled 591 million euros, which was up 17.0 percent year-on-year (505 million euros).
Earnings of continuing operations confirms positive trend
As in the first two quarters, earnings of continuing operations tourism and shipping as well as central operations again reported an improvement. Earnings in the third quarter of 2005 rose by 5.1 percent to 658 million euros (previous year 626 million euros). Cumulative earnings for the first 9 months of the year reached a figure of 529 million euros (previous year 424 million euros), a 24.8 percent improvement year-on-year. This was attributable to tourism, where earnings were up 8.1 percent, as well as shipping, where earnings were up 3.1 percent. Central operations reported a 27.7 percent improvement year-on-year.
Earnings of discontinuing operations trading and special logistics (before taxes on income and amortisation of goodwill) dropped to 56 million euros in the third quarter of 2005 (previous year including divestments 169 million euros). Cumulative earnings in the first three quarters of 2005 amounted to 139 million euros, which corresponds to a decrease of 51.1 percent year-on-year (previous year including divestments 284 million euros).
This was due primarily to the lower earnings figure for the trading sector, which reported still a good business trend, but was unable to reproduce last year`s high earnings level which had benefited from the effects of exceptional market trends. Moreover, the first three quarters of 2004 included high proceeds from divestments in the special logistics sector.
In the third quarter of 2005 total earnings by divisions (before taxes on income and amortisation of goodwill) for the TUI Group decreased by 10.2 percent to 714 million euros (previous year 795 million euros). The previous year figure comprised high exceptional income from divestments in the special logistics sector. For the same reason, earnings by divisions reported for the first three quarters of 2005 were down 5.6 percent at 668 million euros (previous year 708 million euros).
Turnover of continuing operations above previous year
Turnover generated by continuing operations (tourism, shipping, central operations) in the third quarter of 2005 amounted to 6.22 billion euros, which is up 8.1 percent year-on-year (5.75 billion euros). Turnover of continuing operations in the first three quarters of 2005 amounted to 13.79 billion euros, corresponding to an increase of 7.4 percent year-on-year (12.84 billion euros). Tourism accounted for an increase of 6.0 percent whereas shipping contributed with an increase of 17 percent.
The discontinuing operations of trading and special logistics reported turnover of 361 million euros for the third quarter, which was 18.5 percent down year-on-year (previous year 443 million euros). Cumulative turnover in the first three quarters of 2005 amounted to 1.07 billion euros, and is thus 24.1 percent down year-on-year (previous year 1.41 billion euros).
Tourism improves turnover and earnings
The tourism division continued its positive performance and reported better results in the third quarter of 2005 than in the previous year. 7.79 million (previous year 7.26 million) customers purchased tourism products of the TUI group in the third quarter. Turnover for the same period rose 7.0 percent to 5.29 billion euros and earnings reached 590 million euros, which is 3.0 percent higher than in the previous year (573 million euros).In the first three quarters of 2005, total customer figures thus increased by 8.8 percent to 17.34 million, with turnover up 6.0 percent to 11.29 billion euros and earnings improving by 8.1 percent to 492 million euros.
The Central Europe sector increased turnover in the third quarter of 2005 by 10.1 percent to 2.16 billion euros (previous year 1.96 billion euros). Cumulative turnover for the first three quarters of 2005 increased by 7.8 percent to 4.51 billion euros (previous year 4.18 billion euros). This was attributable primarily to the tour operator business in the three source markets Germany, Switzerland and Austria. At 171 million euros, earnings for this sector in the third quarter of 2005 were up 5.6 percent on the previous year (162 million euros). Apart from the tour operator business this positive development was due primarily to the improved earnings at Hapag-Lloyd Express. In the first three quarters of 2005 earnings of the sector totalled 116 million euros, which was up 19.6 percent on the previous year (97 million euros). Customer numbers in the third quarter of 2005 climbed by 7.0 percent to 3.67 million, the cumulative figure for the first three quarters of 2005 was up 10.0 percent to 8.07 million.
In the Northern Europe sector, the number of customers rose by 3.5 percent to 2.49 million in the third quarter of 2005. Hence, in the first three quarters of 2005, a total of 5.63 million passengers travelled with tour operators in this sector, which is an increase of 4.6 percent. Turnover for this sector increased from 1.79 billion euros in the previous year to 1.82 billion euros in the third quarter. Turnover in the first three quarters of 2005 rose by 2.3 percent to 3.95 billion euros (previous year 3.86 billion euros). Given a largely stable development in the tour operator business, this growth resulted mainly from higher turnover generated by the flight operations in the UK.
At 226 million euros, earnings for the third quarter of 2005 were up by 19.6 percent year-on-year (previous year 189 million euros). The cumulative earnings for the first three quarters of 2005 reached a figure of 153 million euros (previous year 123 million euros). The 24.4 percent year-on-year increase was primarily attributable to the good performance of the Nordic countries, the British tour operating business as well as the positive effects of the restructuring measures initiated in 2004.
In the third quarter of 2005, the Western Europe sector enjoyed a 14.7 percent increase in the number of customers up to 1.63 million. In the first three quarters of 2005 a total of 3.64 million passengers travelled with tour operators in this sector, which is an 13.1 percent increase year-on-year. Turnover in the third quarter of 2005 rose by 13.0 percent to 1.05 billion euros (previous year 0.93 billion euros). In the first three quarters of 2005, turnover reached a figure of 2.25 billion euros and was thus up 10.8 percent year-on-year (previous year 2.03 billion euros). All three source markets contributed to this increase whilst the relative growth in the Netherlands was the most distinctive.
At 80 million euros, earnings by the sector fell below last year`s level (97 million euros) in the third quarter of 2005. Cumulative earnings for the first three quarters of 2005 were 52 million euros (previous year 78 million euros). While Belgium and the Netherlands performed positively, earnings in this sector were affected primarily by the airline sector. One-off expenses were sustained in particular in connection with the renovation of the Corsair Boeing 747 fleet in France. Furthermore, the commencement of operations by TUI Airlines Nederland in April 2005 led to start-up costs.
In the third quarter of 2005, the destinations sector (incoming agencies and hotel companies) generated a turnover of 197 million euros (previous year 207 million euros). The decrease by 4.8 percent resulted mainly from less business with third parties compared to the previous year. In the first three quarters of 2005, turnover totalled 407 million euros, an increase of 3.8 percent year-on-year (previous year 392 million euros). The reduction in sales following divestment of the Anfi Group in June 2004 was more than compensated for by the full-year inclusion of the Toufag Group (three Spanish Robinson Clubs) for the first time.
At 116 million euros earnings for this sector in the third quarter of 2005 matched last year`s level. A slight decline in earnings in the hotel sector was offset by an equivalent increase in earnings by incoming agencies. Cumulative turnover for the first three quarters of 2005 totalled 177 million euros, which means an increase by 24.6 percent year-on-year (previous year 142 million euros). The improvement was primarily attributable to the earnings by hotel companies.
Shipping continues growth
The shipping division (Hapag-Lloyd Container Linie and Hapag-Lloyd Kreuzfahrten) benefited from b demand for container transport and therefore continued its positive business performance despite increases in costs. Transport volume in the third quarter 2005 rose by 11 percent to 695 thousand standard containers (TEU), turnover increased by 20.4 percent to 873 million euros. Earnings at 89 million euros were up 2.3 percent year-on-year.
The cumulative turnover for this sector for the first three quarters of 2005 reached a figure of 2.31 billion euros (previous year 1.97 billion euros), an increase of 17.0 percent. Transport volume in the first three quarters of 2005 totalled 1.967 million TEU, a 9.0 percent increase in the number of standard containers year-on-year (previous year 1.799 million TEU). Earnings for the same period rose by 3.1 percent to 199 million euros (previous year 193 million euros). These improvements resulted primarily from the good course of business in the container shipping segment. Like in the previous quarters the growth in turnover was curbed by an increase in costs, above all in bunker oil costs and charter rates for shortterm contracts.
Central operations improve earnings
Central operations (corporate centre functions, real estate companies, remaining industrial activities) reported turnover of 64 million euros for the third quarter of 2005 (previous year 91 million euros) and turnover of 192 million euros for the first three quarters of 2005 (previous year 215 million euros). Central operations earnings for the third quarter of 2005 amounted to –21 million euros (previous year –34 million euros), with total earnings for the first three quarters of 2005 improving to –162 million euros (previous year –224 million euros).
In the trading sector, the steel service companies of Preussag North America, Inc. (PNA) operating in the USA performed all in all satisfactorily in the third quarter of 2005. Compared to last year`s boom turnover fell by 9.7 percent to 252 million euros (previous year 279 million euros), while in the first three quarters of 2005 turnover reached 748 million euros, a 2.4 percent increase year-on-year (previous year 730 million euros). Following the extraordinary market performance in the previous year purchase prices have risen substantially again.
As a result earnings of the trading sector totalled 9 million euros (previous year 30 million euros) in the third quarter of 2005. At 34 million euros earnings for the first three quarters of 2005 fell short of last year`s record level (94 million euros).
Prospects for 2005 financial year remain positive – Booked turnover for the summer season up by 6.5 percent
In the first three quarters of 2005, the TUI Group has benefited from positive industry trends in its core businesses, tourism and shipping, and increased the operating results in both divisions.
In tourism, last year`s upswing has continued through the 2005 summer season which ended in October. At Group level, the year-on-year increase in bookings accounted for 13.4 percent in customer numbers and 6.5 percent in booked turnover at the end of October.
Bookings for the 2005/2006 winter season, which commenced on 1 November, 2005, started off well. Towards the end of summer, however, the markets lost some of their initial momentum, with regional variations. At Group level, bookings were up by 4.7 percent in customer numbers at the beginning of the season, with booked turnover matching last year`s level.
The tourism division has improved earnings (EBTA) in the first three quarters of 2005, thus a lower doubledigit percentage growth is still expected for the financial year 2005.
The shipping division (excluding CP Ships) has improved its earnings (EBTA) in the first three quarters of 2005. The forecasts for the further trend in container shipping in the 2005 financial year continue to be favourable. This is primarily true for the development of volumes but also for freight rates which are expected to remain at a high level. Should these expectations be met and should costs and currency relations between the euro and the US dollar develop favourably, earnings (EBTA) by the shipping division (excluding CP Ships) for the 2005 financial year are expected to continue on last year`s high level.
CP Ships, which will be included in the group financial statements in the course of the fourth quarter, is expected to continue its good operational performance in the last quarter of the financial year.
As TUI`s CEO Michael Frenzel points out: The two cornerstones of our Group, tourism and shipping, have proven to be stable and profitable. Despite some unexpected influences which affected the earnings performance in the first nine months, we are optimistic that we will achieve our earnings objectives in both divisions.
Turnover by divisions
| € million | Q3 2005 | Q3 2004 | 9M 2005 | 9M 2004 | Var. % |
| Tourism | 5,285.8 | 4,938.3 | 11,294.3 | 10,650.7 | + 6.0 |
| Central Europe | 2,155.8 | 1,958.6 | 4,510.2 | 4,184.0 | + 7.8 |
| Northern Europe | 1,820.9 | 1,788.1 | 3,945.6 | 3,856.7 | + 2.3 |
| Western Europe | 1,048.1 | 927.9 | 2,245.3 | 2,025.7 | + 10.8 |
| Destinations | 196.5 | 206.5 | 406.8 | 392.0 | + 3.8 |
| Other tourism | 64.5 | 57.2 | 186.4 | 192.3 | – 3.1 |
| Shipping | 873.3 | 725.1 | 2,307.3 | 1,972.1 | + 17.0 |
| Central operations | 63.6 | 91.0 | 191.5 | 215.2 | – 11.0 |
| Continuing operations | 6,222.7 | 5,754.4 | 13,793.1 | 12,838.0 | + 7.4 |
| Trading | 252.1 | 279.1 | 747.6 | 730.0 | + 2.4 |
| Special logistics | 109.2 | 164.1 | 325.3 | 682.9 | – 52.4 |
| Disc/ing operations | 361.3 | 443.2 | 1,072.9 | 1,412.9 | – 24.1 |
| Turnover by divisions | 6,584.0 | 6,197.6 | 14,866.0 | 14,250.9 | + 4.3 |
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
