Tourism Industry: net EBITA +30 percent, shipping: net EBITA +19 percent, overall corporate result negative due to high integration expenditures at TUI Travel, cost cutting measures at Hapag-Lloyd: economization of about 365 million US Dollars
Despite a noticeably slowing economic environment throughout the year, TUI AG was able to increase its turnover and operational result in the business year 2008. Revenues across the company’s divisions rose by 14 percent to nearly 25 billion euros. At the same time, the operational result (net EBITA) was increased substantially in both, the tourism and shipping segments. Tourism (TUI Travel, TUI Hotels & Resorts, TUI Cruises) achieved an increase of nearly 30 percent on the previous year in the net EBITA for the business year 2008, reaching 602 million euros (previous year: 463 million euros). Container shipping, too, has developed well with an increase in earnings of 19 percent to reach a net EBITA of 211 million euros (previous year: 177 million euros). The sea carrier thus performed particularly well in comparison with the rest of the industry.
The corporate result was negative in the business year 2008 – mainly due to 440 million euros in expenditures for future economization at TUI Travel. It showed a minus of 142 million euros (previous year: 231 million euros). This result includes a depreciation of goodwill amounting to 107 million euros.
The undiluted result per stock was minus 0.57 euros (previous year: 0.60 euros). Increasing uncertainty in the financial and real markets do not allow for accurate projections for the business year 2009 as of yet.
For the core business of tourism, the TUI corporation anticipates a stable development of the operational result with significantly lowered capacities. Margin risks resulting from the presently difficult economic environment can not yet be properly assessed, as TUI clarified.
„Both, tourism and container shipping have held their own in a slowing economic environment in the business year 2008. Our capacity strategy in the mainstream segment has brought about improved margins. Further, we were able to achieve a notable improvement in efficiency in container shipping after the successful integration of CP Ships“, said TUI CEO Dr. Michael Frenzel. He continued: „TUI Travel has made essential progress in integration and restructuring in the business year 2008, thus bracing itself for future challenges. We expect these one-time advance performances to bring about a significant increase in earning power at TUI Travel.“
Development in the tourism segment
The tourism segment encompasses the branches of TUI Travel, TUI Hotels & Resorts and the cruise segment. In the business year 2008, the activities of the First Choice Group were incorporated year-round for the first time. Turnover in the tourism segment was increased by 18 percent in the business year 2008 to reach 18.6 million euros (previous year: 15.8 million euros). The operational result of the tourism segment (net EBITA) rose by nearly 30 percent on the previous year to 602 million euros (previous year: 463 million euros).
TUI Travel increased its turnover by nearly 18 percent due to the first-time incorporation of revenues from First Choice, reaching roughly 18 billion euros (previous year: 15.2 billion euros). The operational result of TUI Travel showed an increase of almost 50 percent on the reference period of the previous year, reaching a net EBITA of 453 million euros (previous year: 304 million euros). The rise in the operational result was brought about in part by cost synergies, as well as an increased utilization of capacities and higher margins in the mainstream segment. At the same time, the first-time incorporation of First Choice had a positive effect, whereas the result was negatively impacted by the British Pound, which had shown a depreciated annual average.
Throughout the year, new potential for increasing profits was identified, causing the synergy targets to be raised by an initial 25 million British pounds to a total of 175 million British pounds per year. These targets were since raised by another 25 million British pounds, now totaling 200 million British pounds per year. Since the integration process was completed earlier than expected, these synergies will sooner generate increased profits. Meanwhile, the burdens from the merging of First Choice and the TUI tourism segment, as well as expenditures for the strategic realignment of TUI Travel flight activities, resulted in a notable deviance of the operational result from the one announced. The result of TUI Travel includes restructuring expenses amounting to 285 million euros (such as the merging of First Choice and TUI’s tourism segment and the strategic realignment of the flight segment), effects from purchase price allocations amounting to 58 million euros and individual issues amounting to 147 million euros (such as integration costs in the British market, hedging activities and exchange losses).
TUI Hotels & Resorts was able to increase its turnover by 9 percent to reach 400 million euros in the business year 2008 (previous year: 380 million euros). The net EBITA of the hotel segment was 142 million euros (previous year: 146 million euros), ranging about 2 percent below that of the previous year. The slight decline was brought about mainly by exchange fluctuations in the US dollar environment. A 3.6 percent growth in capacities resulted in a decrease of the utilization rate of hotel beds to 80.6 percent, 0.7 percentage points below that of the previous year. The average returns per bed rose by 4 percent to reach 48.08 euros (previous year: 46.25 euros).
Turnover in the cruise segment rose to 200 million euros, an increase of 9 percent on the previous year (previous year: 180 million euros). Despite the negative impact of the oil price-related increase in bunker costs, Hapag-Lloyd Cruises was able to top the favorable results of the previous year. The segment’s net EBITA of 6.8 million euros (previous year: 14.2 million euros) includes 7 million euros of input costs for TUI Cruises, which is planned to begin business operations in May 2009.
The corporation’s net debt amounted to 4.1 billion euros on the date of balance (previous year: 4.9 billion euros).
Projections
Due to increasing uncertainty in the finance and real markets, accurate, comprehensive projections can not yet be made. TUI Travel focuses on generating solid product margins and high utilization rates, the foundation for which will be laid by highly restrictive capacity planning in all relevant source markets. TUI Travel is anticipating a slight increase in net results in 2009 due to increasing synergies and solid product margins. Risk factors are a continuingly weak British pound and a possible further downturn in the tourism-related markets. The hotel segment is anticipating a virtually stable level of earnings in 2009. In light of the expected input costs for the joint venture TUI Cruises, the result of the cruise segment is anticipated to range well below the level of the previous year. Taking into consideration the current assessments of results for TUI Travel, TUI Hotels & Resorts and cruises, the TUI corporation is anticipating a stable development of the operational result in its core segment of tourism. Margin risks caused by the presently difficult economic environment can not yet be assessed in their entirety.
