TIDMTCG
RNS Number : 3913W
Thomas Cook Group PLC
09 February 2017
9 February 2017
First Quarter Results for the three months ended 31 December
2016
Solid start to the year
GBPm (unless otherwise stated) 3 months ended Change Like-for-like
change(ii)
----------------------- ------- --------------
31 Dec 31 Dec
2016 2015
-------- ------------- ------- --------------
Revenue 1,618 1,409 +209 +14
Gross Margin 22.1% 22.2% -10bps +10bps
Underlying(i) Loss from Operations
(Underlying EBIT) (49) (49) - +1
EBIT Separately Disclosed
Items (18) (29) +11 +11
Loss from operations (EBIT) (67) (78) +11 +12
Net Debt (1,225) (1,192)(iii) -33 -10 (iv)
------------------------------------ -------- ------------- ------- --------------
Notes (i) 'Underlying' refers to trading results that are adjusted for
separately disclosed items that are significant in understanding
the ongoing results of the Group
(ii) 'Like-for-like' changes adjust for the impact of disposals,
foreign exchange translation and fuel. The detailed like-for-like
adjustments are shown on page 7
(iii) December 2015 net debt has been restated for net derivative
financial instruments used to hedge exposure to interest rate
risks of bank and other borrowings which totalled GBP3m (December
2016: nil)
(iv) 'Like-for-like' net debt adjusts the prior year comparative
for foreign exchange translation, the cost of the new EUR750m
2022 Bond (issued in December 2016), and other non-cash movements,
to give a true, underlying change in Net Debt as set out on
page 8
The comments below are based on like-for-like comparisons unless
otherwise stated, as Management believes this provides a better
explanation of performance
Solid financial performance in Q1
-- Revenue up 1% to GBP1,618 million, with growth in holidays to
Greece, Spain and long-haul destinations
-- Gross margin up 10 basis points to 22.1% reflecting focus on
own-brand and selected partner hotels
-- Seasonal underlying operating loss improved by GBP1 million to GBP49 million
-- Successful EUR750 million bond refinancing extends maturities at reduced interest cost
Focused on delivering our strategy for profitable growth
-- Digital growing strongly: online bookings up more than 20% in the UK and 40% in Germany
-- 24-hour satisfaction promise successfully extended to 250
hotels in long haul destinations for Winter 2016/17
-- Improved customer satisfaction: Net Promoter Score (NPS) up 8 points year-on-year
Current trading on track
-- Winter 2016/17 is 82% sold, in line with expectations
-- Summer 2017 is 31% sold, with bookings 9% ahead of last year
-- Expanded holiday offering to Greece and smaller European
destinations, in line with strong demand
Peter Fankhauser, Chief Executive of Thomas Cook commented:
"We have delivered a solid performance for the first three
months in line with our expectations, against a backdrop of
continued uncertainty.
"Our businesses in the UK and Northern Europe continued last
summer's strong performance into the first quarter, while our tour
operating business in Continental Europe also improved. This helped
to offset the pressures that Condor is experiencing in the German
airline market. We have taken measures to address Condor's
challenges and expect to start to see the benefits come through in
the second half, as we set out in November.
"In preparation for the Summer season, we have expanded our
holiday offering to Greece and a number of smaller destinations
across Europe, and I'm pleased that this early action is paying
off. Bookings to Greece are currently up by over 40%, while demand
for destinations such as Cyprus, Bulgaria, Portugal and Croatia is
also strong. These positive trends are making up for continued weak
demand for Turkey.
"We remain focused on giving customers the very best holiday
experience with Thomas Cook, both through the quality of the hotels
and the customer care we provide. The results can be seen in
further improvement in Net Promoter Score, our measure of customer
satisfaction, which was up 8 points during the first quarter.
"We have a number of exciting new customer initiatives coming
this summer. These include the further roll-out of our successful
24-hour satisfaction promise to cover 80% of our customers, and the
launch of a brand new mobile in-flight entertainment system. We are
also making good progress on our own-brand hotel portfolio, with
ten new hotels set to open for the summer, including our second
Casa Cook in Kos, enabling us to offer more unique holidays and
further strengthening our growing hotels business
"We remain cautious about the rest of the year, given the
uncertain political and economic outlook. It's still relatively
early in the selling cycle for summer holidays, but based on
current trading, and supported by further financial benefits from
implementing our strategy, we expect our full year operating
results to be in line with current market expectations."
Presentation to equity analysts
A conference call and webcast for investors and analysts will be
held today at 08.30 (GMT). The access details are as follows:
United Kingdom 020 3059 8125
All other locations + 44 20 3059 8125
http://webcasts.thomascookgroup.com/thomascook015/default.asp
Forthcoming announcement dates
The Group intends to issue a pre-close update on 28 March 2017,
and announce its results for the six months ended 31 March 2017 on
18 May 2017.
Enquiries
James Sandford, Thomas Cook
Analysts & Investors Group +44 (0) 20 7557 6433
Tej Randhawa, Thomas Cook
Group +44 (0) 20 7557 6487
Robin Tozer, Thomas Cook
Group
Matthew Magee, Thomas Cook +44 (0) 20 7294 7031
Media Group +44 (0) 20 7294 7059
CURRENT TRADING AND OUTLOOK
Winter 2016/17
Winter trading remains in line with our expectations, with the
programme now 82% sold, level with the same period last year. Total
bookings for the Group are 1% higher than last year, with average
selling prices down 1% due mainly to the competitive environment in
the airline sector. Bookings have been supported by further growth
in demand for Spain and certain long-haul destinations such as the
Dominican Republic, offsetting the continued shift away from
Turkey. Bookings for the Group excluding Turkey are up by 5%.
UK bookings have increased by 5% compared to last year,
reflecting strong growth in both charter risk package sales (up 9%)
and seat-only sales (up 9%), partly offset by a reduction in lower
margin non-risk packages. This growth is increasingly coming
through our website, with online bookings up by more than 20% so
far this financial year. A focus on improving our holiday offering
has led to charter risk pricing increasing by 4%.
Northern Europe is trading behind last year's exceptionally
strong levels, with bookings down 1% and average selling prices
down 3%. Demand has remained solid for the Canaries but has
weakened further for Turkey. Overall the performance of Northern
Europe is in line with our expectations.
In Continental Europe, bookings are 3% lower due to continued
weak demand in Germany and Belgium, particularly for Turkey. This
has been partly offset by a strong performance from our Russian and
French businesses. However, a focus on sales of differentiated
holidays has helped increase average selling prices by 2%. In
Germany, where we are focusing on growing our controlled
distribution, online bookings have grown by more than 40% following
the launch of a new web platform last year.
Condor bookings are 1% lower, ahead of capacity reductions of
5%, due primarily to the shift away from Turkey. As expected,
yields to both short and long haul destinations remain weak, with
average selling prices down by 1% overall, reflecting general soft
consumer demand and overcapacity, particularly to the Canaries.
Winter 2016/17 Year-on-Year Variation %
---------------------------
Bookings(i) ASP(i) % Sold(ii)
UK +5% -1%(iii) 80%
Continental Europe -3% +2% 82%
Northern Europe -1% -3% 96%
Airlines Germany
(Condor) -1% -1% 80%
Total +1% -1% 82%(iv)
Based on cumulative bookings to 4 February 2017
Notes: (i) Risk and non-risk customers
(ii) Risk customers only
(iii) UK average selling price is up by 4% for charter risk and down 5% for seat only, resulting in an overall ASP down 1% on a blended basis
(iv) For the tour operator only, the Winter 2016/17 season is 89% sold, 1% below last year
Summer 2017
Although it is still early in the booking cycle, Summer 2017
trading is positive, with overall bookings for the Group up 9%, and
pricing broadly in line with last year. Our Summer programme is now
31% sold, 2% higher than this time last year.
Continued reductions in bookings to Turkey have been more than
offset by strong demand for Greece. We have also grown bookings
significantly to a number of smaller European destinations
including Cyprus, Bulgaria, Croatia and Portugal, and we have seen
a strengthening of demand for Egypt and Morocco. Following strong
growth in 2016, demand for the Spanish Islands, including the
Balearics and the Canaries, has now levelled off.
For both Northern Europe and Continental Europe, Summer trading
is significantly stronger than at this point last year. In
Continental Europe, bookings are well ahead of last year in most
markets, with prices holding firm at last year's levels. Northern
Europe has enjoyed a record start to Summer trading, with double
digit bookings growth and positive pricing.
In our UK business, bookings are up 1% overall, with Greece,
Cyprus and other smaller European destinations performing
particularly well. Average selling prices are up 2%. However, a
combination of hotel price inflation and increased air capacity has
intensified competition for the Spanish islands. In this context,
and consistent with our strategy, we have taken a deliberate
decision to focus on higher margin, quality holidays, rather than
chase volume growth. As a result, overall UK charter risk bookings
are slightly behind last year's levels, while pricing is up 9%.
Condor is performing in line with our expectations for Summer.
The German airlines market continues to be impacted by weak demand
for Turkey and overcapacity to the Canaries. However strong demand
for Greece, together with capacity reductions on certain routes, is
helping to mitigate the impact. Our plan of action to improve
Condor's profitability, which we announced in November, is on track
and is expected to deliver positive benefits from the second half
of the year.
Outlook
We have made a solid start to the year, with Winter trading
broadly in line with last year. For the key Summer period, Northern
Europe and Continental Europe are trading well ahead of last year,
while UK bookings are broadly in line with last year as we manage
through a more competitive market for holidays to the Spanish
islands.
We remain cautious for the rest of the year given the uncertain
political and economic outlook. It is still relatively early in the
selling cycle for Summer, but based on the Group's current trading
performance, and supported by further financial benefits from the
New Operating Model, we continue to expect our operating result in
FY17 to be in line with current market expectations.
As previously disclosed, we expect the profit improvement
measures at Condor to positively impact Condor's performance in the
second half, following continued weakness in the first half.
Therefore we expect the Group's positive performance to be weighted
more towards the second half than usual.
OPERATING AND FINANCIAL REVIEW
GBPm 3 months 3 months Change Like-for-like
ended 31 ended 31 Change(ii)
Dec 2016 Dec 2015
Revenue 1,618 1,409 +209 +14
Gross profit 357 313 +44 +4
Gross Margin (%) 22.1% 22.2% -10bps +10bps
Operating expenses (406) (362) -44 -3
Underlying(i) profit from
operations (Underlying EBIT) (49) (49) - +1
EBIT Separately Disclosed
Items (18) (29) +11 +11
-------------------------------------- ------------------- -------------------- --------------- --------------
Loss from operations (EBIT) (67) (78) +11 +12
Net finance charges (underlying) (39) (34) -5 -5
Separately disclosed finance
charges (29) (4) -25 -25
-------------------------------------- ------------------- -------------------- --------------- --------------
Loss before tax (135) (116) -19 -18
-------------------------------------- ------------------- -------------------- --------------- --------------
Notes (i) 'Underlying' refers to trading results that are adjusted
for separately disclosed items that are significant in
understanding the ongoing results of the Group
(ii) 'Like-for-like' change adjusts for the impact of foreign
exchange translation and fuel. The detailed like-for-like
adjustments are shown on page 7
The comments below are based on like-for-like comparisons unless
otherwise stated, as Management believes this provides a better
explanation of performance
Group Performance
Group revenue increased by GBP14 million (or 1%) to GBP1,618
million, due to growth in sales of holidays to Spain, Greece and
long haul destinations, together with new seat-only routes,
mitigating the impact of reduced sales to Turkey and Egypt.
Gross profit of GBP357 million was GBP4 million higher than last
year, while gross margin of 22.1% represents an improvement of 10
basis points over the same period last year, reflecting an
increased focus on own-brand and selected partner hotels.
The Group's underlying operating loss during the first quarter
improved by GBP1 million to GBP49 million, a year-on-year
improvement of 2%.
EBIT separately disclosed items of GBP18 million were GBP11
million lower than last year, and comprise costs associated with
the implementation of our New Operating Model and other
restructuring costs.
Group loss from operations for the first quarter was GBP67
million, an improvement of GBP12 million compared to last year.
However, due to higher separately disclosed finance charges of
GBP29 million, relating mainly to the issuance of our new EUR750
million bond during December 2016, the Group's loss before tax
increased by GBP18 million to GBP135 million.
Segmental EBIT Performance
Underlying EBIT by segment Continental Northern Airlines
(GBPm) UK Europe Europe Germany Corporate Group
---------------------------- ----- ------------ --------- --------- ------------ --------
3 months ended 31 Dec
2015 LfL (48) (24) 25 6 (9) (50)
---------------------------- ----- ------------ --------- --------- ------------ --------
3 months ended 31 Dec
2016 (43) (19) 27 (7) (7) (49)
---------------------------- ----- ------------ --------- --------- ------------ --------
3 months LFL change
(GBPm) +5 +5 +2 -13 +2 +1
---------------------------- ----- ------------ --------- --------- ------------ --------
Our UK business improved underlying EBIT by GBP5 million (or
10%) to a seasonal loss of GBP43 million, mainly due to higher
sales of differentiated holidays and our ability to maintain strong
margins during the end of the Summer season and early Winter
months.
Continental Europe improved underlying EBIT by GBP5 million to a
seasonal loss of GBP19 million, reflecting planned cost reduction
initiatives through our New Operating Model, which helped to
mitigate challenging market pressures in Germany. Russia saw growth
during the period, buoyed by Turkey opening as a potential
destination once again, while France achieved better margins as a
result of a greater proportion of differentiated holidays in the
sales mix.
Northern Europe improved its underlying EBIT by GBP2 million to
GBP27 million, due to higher sales of holidays to own-brand hotels,
including the new Ocean Beach Club resort in Gran Canaria which
opened in December 2016.
Underlying EBIT in Condor (Airlines Germany) declined by GBP13
million to a loss of GBP7 million, as profitability was impacted by
overcapacity in the short-haul market and weak demand.
Net debt
Net debt at 31 December 2016 was GBP1,225 million, an increase
of GBP33 million since the end of December last year. On a
like-for-like basis, excluding the impact of refinancing
activities, exchange rate movements, and other non-cash
adjustments, net debt increased by GBP10 million. The components of
the movement in net debt over the 12 months to 31 December 2016 are
shown in the Appendix on page 8.
Refinancing
In December 2016, Thomas Cook issued a new EUR750 million bond,
bearing a coupon of 6.25% and maturing on 15 June 2022. The
proceeds of the bond enabled us to redeem in full both the
outstanding GBP200 million principal of our GBP300 million bond
maturing in June 2017, and our entire EUR525 million bond maturing
in June 2020. The new bond was issued at a coupon 150 basis points
lower than the two bonds it replaced, helping to enhance our
financial and operational flexibility, and supporting the progress
we are making towards our financial targets.
Hedging of Fuel and Foreign Exchange
The proportion of our forthcoming requirements for Euros, US
Dollars and Jet Fuel that have been hedged are shown in the table
below.
Winter 16/17 Summer 17 Winter 17/18
----------- ------------- ---------- -------------
Euro 96% 87% 72%
US Dollar 94% 89% 71%
Jet Fuel 95% 90% 79%
----------- ------------- ---------- -------------
As at 31 January 2017
As Jet Fuel is priced in US Dollars, we buy forward the
requisite amount of US Dollars from a mix of base currencies. For
FY17, we estimate that our net fuel costs will fall by around GBP30
million compared to FY16.
The Group's policy is not to hedge the translation impact of
profits generated outside the UK. If Q1 period end rates for Euro
and Swedish Krona were maintained throughout the remainder of FY17,
there would be a negative year-on-year translation impact of
approximately GBP7 million.
The average and period end exchange rates relevant to the Group
for the quarter were as follows:
Average Rate Period End Rate
Q1'17 Q1'16 Q1'17 Q1'16
GBP/Euro 1.15 1.39 1.17 1.36
GBP/US Dollar 1.24 1.52 1.23 1.47
GBP/SEK 11.24 12.89 11.17 12.44
--------------- ------- ------ -------- --------
APPENDIX
Like-for-like analysis
'Like-for-like' (LFL) changes adjust for the impact of
disposals, foreign exchange translation, fuel and other.
To assist in understanding the impact of these factors and their
influence on year-on-year progression, we consider 'like-for-like'
adjusted changes from the 3 month period to 31 December 2015 to the
3 month period to 31 December 2016 in our analysis below:
Group (GBPm) Revenue Gross margin Operating Underlying
expenses EBIT
------------------------------ -------- ------------- ---------- -----------
GBPm % GBPm GBPm
------------------------------ -------- ------------- ---------- -----------
3 months ended 31 December
2015 1,409 22.2% (362) (49)
------------------------------ -------- ------------- ---------- -----------
Accounting(i) - -0.1% +2 -
------------------------------ -------- ------------- ---------- -----------
Fuel -18 +0.3% - -
------------------------------ -------- ------------- ---------- -----------
Impact of Currency Movements +213 -0.4% -43 -1
------------------------------ -------- ------------- ---------- -----------
3 months ended 31 December
2015 LfL 1,604 22.0% (403) (50)
------------------------------ -------- ------------- ---------- -----------
3 months ended 31 December
2016 1,618 22.1% (406) (49)
------------------------------ -------- ------------- ---------- -----------
3 month LfL change (GBPm) +14 +10bps -3 +1
------------------------------ -------- ------------- ---------- -----------
Continental Northern Airlines
Underlying Revenue by UK Europe Europe Germany Corporate Group
segment (GBPm)
------------------------------ ----- ------------ --------- --------- ------------ --------
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----- ------------ --------- --------- ------------ --------
3 months ended 31 December
2015 402 557 249 287 (86) 1,409
------------------------------ ----- ------------ --------- --------- ------------ --------
Accounting(i) -2 +2 - - - -
------------------------------ ----- ------------ --------- --------- ------------ --------
Fuel -8 - -7 -3 - -18
------------------------------ ----- ------------ --------- --------- ------------ --------
Impact of Currency Movements +1 +115 +40 +57 - +213
------------------------------ ----- ------------ --------- --------- ------------ --------
3 months ended 31 December
2015 LfL 393 674 282 341 (86) 1,604
------------------------------ ----- ------------ --------- --------- ------------ --------
3 months ended 31 December
2016 407 660 300 334 (83) 1,618
------------------------------ ----- ------------ --------- --------- ------------ --------
3 month LfL change (GBPm) +14 -14 +18 -7 +3 +14
------------------------------ ----- ------------ --------- --------- ------------ --------
Continental Northern Airlines
Underlying EBIT by segment UK Europe Europe Germany Corporate Group
------------------------------ ----- ------------ --------- --------- ------------ --------
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----- ------------ --------- --------- ------------ --------
3 months ended 31 December
2015 (49) (19) 23 5 (9) (49)
------------------------------ ----- ------------ --------- --------- ------------ --------
Accounting(i) +1 -1 - - - -
------------------------------ ----- ------------ --------- --------- ------------ --------
Impact of Currency Movements - -4 +2 +1 - -1
------------------------------ ----- ------------ --------- --------- ------------ --------
3 months ended 31 December
2015 LfL (48) (24) 25 6 (9) (50)
------------------------------ ----- ------------ --------- --------- ------------ --------
3 months ended 31 December
2016 (43) (19) 27 (7) (7) (49)
------------------------------ ----- ------------ --------- --------- ------------ --------
3 month LfL change (GBPm) +5 +5 +2 -13 +2 +1
------------------------------ ----- ------------ --------- --------- ------------ --------
Note (i) The trade and assets of our accommodation business,
Hotels4U, was transferred from our UK to our Continental Europe
business in August 2016; a like-for-like adjustment has been made
to show comparable performance of these two segments
Net debt
The components of the movement in Net Debt over the last 12
months are as follows:
GBPm
31 December 2015 closing net
debt position (1,192)(i)
Exchange rate movements (8)
Bond refinancing cash costs (10)
Bond refinancing non-cash costs (15)
Non-cash movements 10
-----------
Like-for-like 31 December 2015
closing net debt position (1,215)
Operating cashflow 439
Exceptionals (95)
Capex (208)
Net Interest paid (142)
JV Dividend and Other (4)
31 December 2016 closing net
debt position (1,225)
---------------------------------- -----------
Note (i) December 2015 net debt has been restated for net derivative
financial instruments used to hedge exposure to interest rate
risks of bank and other borrowings which totalled GBP3m (December
2016: nil)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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