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TUI has coped well with a difficult year

TUI AG, has held its own well in 2003, which was a difficult year for the holiday industry…

TUI AG, has held its own well in 2003, which was a difficult year for the holiday industry. `Against this uniquely difficult background, our Group has coped well with the challenges. We stand solid as a rock in a competitive environment`, said Dr Michael Frenzel, CEO of TUI AG, at the annual press conference in Hanover. Thanks to the Group`s successful divestments and positive operating results of the divisions, he was able to present an extraordinarily good result. Earnings were clearly positive, even in the tourism business which was extremely difficult in 2003. Group profit for the year also rose strongly. Net debt was significantly reduced, as planned.

The consolidated financial statements were prepared in accordance with the latest IAS standards (International Accounting Standards) for the first time. TUIis therefore one of the first companies in Germany to apply the new accounting

standards already, which will not be compulsory until 2005. This impacted the reported level of earnings by divisions (EBTA) as well as the recognition of goodwill. In addition, the new detailed classification of the segment report further enhances the transparency of the figures presented.

High Group profit for the year

At 19.2 billion euros, Group turnover dropped by 5.4% year-on-year. This decline was mainly attributable to a reduction in turnover of the trading sector.

Earnings before taxes on income and amortisation of goodwill (EBTA) of the divisions totalled 913 million euros and thus rose by just under 60 per cent year-on-year. Under the previous definition, earnings by divisions would have amounted to 956 million euros. The significant increase is primarily due to the extraordinarily good result of the logistics division and the gains on disposal from the divestment of the energy sector.

Group profit for the year rose to 315 million euros. It is planned to pay a stable dividend of 77 euro cents per share to the shareholders, despite the difficult year.

Group profit for the year rose strongly although goodwill was amortised by 667 million euros with an effect on results. Due to the allocation of goodwill to the segments and the first-time application of the revised IAS standards, goodwill had to be impaired by another 371 million euros with no effect on results. The total reduction of goodwill in the balance sheet therefore amounted to more than 1 billion euros.

TUI has made considerable progress in reducing the Group`s debt. In 2003, net debt was reduced by 1.6 billion euros year-on-year and totalled 3.8 billion euros at the end of the financial year.

Tourism exceeding expectations

Turnover of the tourism division rose by 2.1% to 12.7 billion euros due to the first-time inclusion of the French business for a full year. By industry standards, earnings of the division of 208 million euros were gratifyingly positive in a market ridden by crises, in particular in Germany, but could not match the previous year`s level.

The Central Europe sector was most adversely affected. While turnover only declined by 2 per cent, earnings fell considerably short of the previous year`s level at – 17 million euros.

Northern Europe, in contrast, reported satisfactory earnings of + 79 million euros despite a 9.7 per cent decline in turnover. The decline mainly resulted from the weakness of the pound sterling against the euro. In domestic currency, both turnover and earnings in the UK matched the previous year`s level.

Western Europe reported a 52.1% increase in turnover and posted earnings of + 42 million euros. The significant improvement mainly resulted from the inclusion of the activities in France for a full year. At + 105 million euros, the destinations made the largest profit contribution, mainly due to the good performance of the hotel companies.

Logistics generating record result

The logistics division posted record results, mainly due to the increase in transport volumes and the improvement in freight rates. Earnings rose by 57.3 per cent to 314 million euros. Turnover grew by 3.6% to 3.9 billion euros. The logistics sectors of VTG Lehnkering and Algeco managed to hold their own well in difficult markets.

The shareholding in the AMC Group (Amalgamated Metal Corporation) was divested in the fourth quarter of 2003 in the framework of a management-buy-out. The shareholding was only included in consolidated financial statements for the first ten months of the financial year. At a turnover of 2.1 billion euros and earnings of 12 million euros, performance of the trading sector declined considerably year-on-year.

Persistently high level of demand for holiday tours

The Madrid terrorist attack did not affect the development of business in the tourism division. Over the past few weeks, sales were 17 per cent up on the same period last year. `The persistent increase in the demand for holiday tours throughout Europe thus continues unbroken`, said Dr Frenzel, commenting on the current business trend. Overall, sales for the 2003/2004 tourism year have risen by 4.2 per cent year-on-year in the Group, with customers up 3.7 per cent.

The upward trend also continues on the German market.

In seasonal terms, the winter season, which terminates at the end of April, has shown a 6.2 per cent increase in sales and a 6.3 per cent increase in customers. This trend is continuing into the summer season: following an initially slow start, sales in the Group are currently 2.4 per cent up on last year, with customers up 1.3 per cent.

The logistics division is reporting a seamless continuation of last year`s good performance. Thanks to the persistently strong demand in container shipping, earnings of the division have exceeded last year`s level in the first months of the new financial year.

`Overall, the development of business to date has matched our expectations. I am therefore confident that we will continue to increase our operating results in 2004, in particular in tourism.`, said Dr Frenzel optimistically.

Group turnover by divisions

Theodore Koumelis
Co-Founder & Managing Director - Travel Media Applications | Website

Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.