DJ TUI AG: Annual Financial Report - Part 2
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TUI AG (TUI)
TUI AG: Annual Financial Report - Part 2
13-Dec-2018 / 08:00 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Financial Highlights
EUR million 2018 2017 Var. % Var. % at
constant
currency
Turnover 19,523.9 18,535.0 + 5.3 + 6.3
Underlying EBITA1
Hotels & Resorts 425.7 356.5 + 19.4 + 38.7
Cruises 324.0 255.6 + 26.8 + 27.0
Destination Experiences 44.7 35.1 + 27.4 + 33.6
Holiday Experiences 794.4 647.2 + 22.7 + 33.8
Northern Region 254.1 345.8 - 26.5 - 27.4
Central Region 89.1 71.5 + 24.6 + 25.0
Western Region 109.3 109.2 + 0.1 + 0.1
Markets & Airlines 452.5 526.5 - 14.1 - 14.6
All other segments - 99.9 - 71.6 - 39.5 - 31.4
TUI Group 1,147.0 1,102.1 + 4.1 + 10.9
Discontinued operations - - 1.2 n. a. -
Total 1,147.0 1,100.9 + 4.2 + 11.0
EBITA2, 4 1,060.2 1,026.5 + 3.3 + 10.4
Underlying EBITDA4 1,563.9 1,541.7 + 1.4
EBITDA4 1,498.5 1,490.9 + 0.5
EBITDAR4 2,219.9 2,240.9 - 0.9
Net profit for the 780.2 910.9 - 14.3
period
Earnings per share4EUR 1.18 1.36 - 13.2
Equity ratio (30 Sept.) 27.8 24.9 + 2.9
3 %
Net capex and 827.0 1,071.9 - 22.8
investments (30 Sept.)
Net cash (30 Sept.)4 123.6 583.0 - 78.8
Employees (30 Sept.) 69,546 66,577 + 4.5
Differences may occur due to rounding
This Annual Report of the TUI Group was prepared for the financial year (FY) from 1 October 2017 to 30 September 2018. The
terms for previous years were renamed accordingly.
In FY 2018 we have adjusted our segmental reporting to reflect the growing strategic importance of the services delivered
in our destinations. Destination Experiences is now reported separately in the segmental structure, and within Holiday
Experiences together with Hotels & Resorts and Cruises. The further businesses of former Other Tourism and All other segments
have been combined into All other segments. There are no changes to the total numbers. The prior year's reference figures
were restated accordingly.
1 In order to explain and evaluate the operating performance by the segments, EBITA adjusted for one-off effects (underlying
EBITA) is presented. Underlying EBITA has been adjusted for gains/losses on disposal of investments, restructuring costs
according to IAS 37, ancillary acquisition costs and conditional purchase price payments under purchase price allocations and
other expenses for and income from one-off items.
2 EBITA comprises earnings before interest, taxes and goodwill impairments. EBITA includes amortisation of other intangible
assets. It does not include the result from the measurement of interest hedges, and in the prior year did not include results
from container shipping operations.
3 Equity divided by balance sheet total in %, variance is given in percentage points.
4 Continuing operations
»We are on track because we have undergone a transformation. This year,
in particular, has shown that the realignment we launched in 2014 to focus on the hotel, cruise and destination business has
now become TUI's special strength. Only five years ago, a similar summer would have left its mark on TUI, too. We have now
become an integrated hotel and cruise group. We develop,
we invest and we operate. And we
are increasingly becoming a digital and platform organisation.«
Friedrich Joussen, CEO of TUI AG
LETTER TO OUR
SHAREHOLDERS
Dear shareholders,
2018 was another growth year for TUI. We delivered on our promises in a challenging market environment. Our operating result
again delivered double-digit growth for the fourth time in a row - it grew by nearly eleven per cent at constant currency in
the completed financial year.
The robust results delivered in 2018 are particularly gratifying given that we were operating under exceptional circumstances
last year. In the UK, the exchange rate and purchasing power of sterling were adversely affected by Brexit. Air traffic in
Europe faced particular challenges. And in our European home markets, we experienced a record summer - with a summer heatwave
lasting right into the autumn. This brought its weight to bear on results in our sector in the course of the financial year.
I would like to extend a special word of thanks to our customers who chose to travel with TUI and its brands, and to you, our
shareholders, for your loyalty to TUI. Let me also thank all the employees who looked after our guests and again created
unforgettable moments during their holidays in 2018. The Executive Board and the Supervisory Board will be proposing another
increase in the dividend to 0.72 euros for the completed year to the Annual General Meeting.
We are on track because we have undergone a transformation. This year, in particular, has shown that the realignment we
launched in 2014 to focus on the hotel, cruise and destination business has now become TUI's special strength. Only five years
ago, a similar summer would have left its mark on TUI, too, as the Group's focus and earnings structure were too one-sided and
above all excessively geared to our classical tour operation business. We have now become an integrated hotel and cruise
group. We develop, we invest and we operate. And we are increasingly becoming a digital and platform organisation.
Today's success is important. However, what do we need to do to stay on track and keep growing? We used 2018 to define our
position. Are we fit for further growth? How are we going to further enhance the quality, efficiency and strength of today's
businesses? And where do our strong global TUI brand and the increasing digitalisation of our businesses create new growth
areas for the Group? Let me comment on some of the decisions we took:
Our classical tour operation business is characterised by strong competition, seasonality and low margins in European source
markets. That is why we must identify synergies and enhance our efficiency. Since the summer, we have clustered the Group's
worldwide tour operators and airlines into Markets & Airlines, managed by an Executive Board member. We have to learn more
from one another, rapidly transfer successful models from one market to another and harmonise non-customer-facing activities.
This transformation has begun and will enhance the efficiency and competitiveness of our classical tour operation business.
Where markets have already achieved the required level of maturity, TUI is already fully digital. TUI Nordic in Scandinavia is
an example of that. We will not ignore the social and cultural particularities of our markets and customers, but we will be at
the forefront of this transformation in other countries, too.
Today, 70 per cent of our operating result is delivered by holiday experiences developed and designed by us: hotels, cruise
ships, excursions and activities in the holiday regions. This is where customers experience the strength of the TUI brand.
These holiday moments make holidays with TUI so special and personal. We are growing and investing in this segment so as to
strengthen it. Despite the large variety of holiday experiences offered by TUI Group, we want them to display a distinctive
signature. This includes our Group's own hotel brands such as TUI Blue, Riu, Robinson, TUI Magic Life, hotel concepts such as
TUI Sensimar, TUISensatori and TUI Family Life, global hotel purchasing with our partners, the cruise lines and destination
activities.
This is where we are seeking further growth. We know our customers very well, we know when they travel where, and what
services they appreciate, be it holiday destinations, hotel rooms, cruise suites, excursions or activities. If we put this
knowledge to smart use, we can create great value added for our customers - and for us, as we will be able to generate
additional turnover and earnings. We have paved the way for that growth through our comprehensive digitalisation strategy and
our investments in IT as well as new technologies, which are increasingly paying off. Here, too, our transformation as a
digital company has progressed and opened up new growth areas.
The destination activities market, in particular, is delivering extremely strong growth, promising highly attractive returns
and still typically features many small, local providers. With more than 27 million customers - thereof around 21 million
guests from our European source markets, a highly professional international team on the ground, a strong digital
infrastructure and networked customer systems, we are well placed to take a leading international position in this market for
tours and excursions and to deliver very profitable growth. Usually, several months pass after a holiday booking before our
customers depart for their trip. That period offers us great potential to submit personalised offerings for activities in the
destination to our customers - from the 'Select your room' option via special excursions through to reservations for
restaurants, sporting programmes and wellness facilities.
Having identified the growth potential in this area, we made investments in the completed year by purchasing two companies. By
acquiring destination management from Hotelbeds Group, we doubled the footprint of Destination Experiences from 23 to 49
countries. We now have a team on the ground in almost every major destination in the world and are able to develop new
products and services for our customers. This summer, we purchased the Milan-based technology start-up Musement. The Italian
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company has developed a platform that already pools a great portfolio of holiday experiences and offers its users customised
excursions. Integrating this approach into our business with 27 million has enormous potential. We expect this acquisition,
the further development of our digital platform and the expansion of our offering to contribute substantially to our future
growth.
Dear shareholders, we are transforming our traditional portfolio, strengthening today's successful and profitable business
lines and investing in digital platforms for our future growth. I hope that the year 2018 and the progress achieved in the
past few years have convinced you that TUI has been and will remain a good investment. TUI is the world's leading integrated
tourism group. Supported by a great team of 69,500 employees around the world, the Executive Board is committed to ensuring
that things stay that way. Tourism is and remains one of the world's biggest and most stably growing industries. There is no
reason and no indication to believe that demand for travel will decline - on the contrary. We have identified potential in
many new markets, in particular in the countries of South East Asia, where we are expanding our hotel portfolio and building
TUI's position.
I would be delighted to be able to welcome you personally to our Annual General Meeting in Hanover. Birgit Conix, the
successor to our long-standing CFO Horst Baier, will take part for the first time. Let me use this opportunity to extend my
sincerest thanks to Horst Baier once again. He was our CFO throughout FY 2018. Horst Baier played a key role in designing and
delivering our successful transformation over the past few years. He has always been a reliable advisor and partner to my
Executive Board colleagues and myself.
We are working to continue our successful performance in 2019. Thank you very much for your support and loyalty.
Best regards,
Friedrich Joussen
CEO of TUI AG
Guidance
Key Guidance Guidance
Figures achievement Guidance
Actual
Outlook FY Actual FY 2018 2018 FY 2019
20181 rebased
Turnover in
EUR bn
in excess of 19.5 + 6.3 %2 19.5 approximately
3 %2, 3 2 + 3 %2, 3
EBITA
(underlying)
in EUR m
At least 1,147 + 10.9 %2 1,187 at least
+ 10 % 2 4 + 10 %2
Adjustments
in EUR m
80 costs 87 costs 125 costs
Net capex
and
investments
in EUR bn
1.2 0.8 1.0 - 1.25
Leverage
ratio
3.00(X) - 2.7(X) 3.00(X) - 2.25(X)
2.25(X)
1 As published on 13 December 2017, unless otherwise stated
2 Variance year-on-year assuming constant foreign exchange rates are applied to the result
in the current and prior period and based on the current group structure
3 Excluding cost inflation relating to currency movements
4 The starting variable for the forecast is the rebased underlying EBITA. This rebased figure was determined by increasing the
underlying EBITA of FY 2018 by the negative effect from the revaluation of euro denominated loans in Turkey amounting to EUR
40 m, translated at actual rates for the FY 2018.
5 Including PDPs, excluding aircraft assets financed by debt or finance leases
REPORT OF THE
SUPERVISORY BOARD
Ladies and Gentlemen,
After we completed the post-merger integration of TUI AG and TUI Travel plc last year, we again demonstrated in the financial
year just completed that we - the Executive Board, the employees and the Supervisory Board - have together created the right
strategic positioning for our organisation. We have established an internationally operating, integrated tourism company with
a successful, sustainable business model.
Despite various challenges we faced at both national and international levels, we increased our underlying EBITA by more than
10 % year-on-year at constant currency. This has also enabled us to clearly stand out from our main competitors, some of whom
had to lower their guidance in the completed financial year. We again successfully mastered a number of special challenges,
such as the insolvencies of Air Berlin and its subsidiary Niki, the prolonged, exceptional good weather in Europe this summer
which limited demand for travel, and also the weakening of the Turkish lira. This confirms that we took the right decision in
transforming TUI into an integrated tourism company with a broad value-chain.
We will not rest on our laurels but consistently pursue our transformation roadmap. After leveraging synergies from the merger
and the transformation of our business model, we will now focus on selective investments mainly in the Hotels and Cruises
segments and efficiency enhancement. We will also make a priority of continued digitalisation, which opens up new
opportunities for TUI at all levels. Especially with our broad customer portfolio, the potential of Artificial Intelligence
offer high chances for optimisation.
At our meetings, we regularly discussed the strategic development of our business model with the Executive Board. To implement
this, following comprehensive review and discussion, the Supervisory Board approved a number of key acquisition projects, in
particular the repurchase of incoming agencies from Hotelbeds Group, enabling us to expand our offering in the Destination
Experiences segment from 23 to 49 countries. This segment was further reshaped with the acquisition of Musement, transforming
the segment from offline to a fully digitalised business. We also approved investments in a new generation of TUI Cruises
ships and the construction of a further expedition liner for the fleet operated by Hapag-Lloyd Cruises.
Looking ahead to future challenges, another major priority of our deliberations in the Supervisory Board was Brexit.
Throughout the year, we paid detailed attention to the various scenarios and the resulting potential impacts on our business
model as well as measures to be derived.
As in this year, Corporate Governance will be another focus area next year. The UK Corporate Governance Code was recently
fundamentally revised. Meanwhile, the commission in charge of the German Code is also planning to carry out a major review
from the middle of next year.
Let me use this opportunity to thank Sir Michael Hodgkinson on behalf of the entire Supervisory Board for his outstanding
efforts and commitment as a member of the TUI AG Supervisory Board. Sir Michael Hodgkinson has rendered lasting services above
all to the merger of the two TUI companies and the subsequent integration management. The same applies to our former CFO Horst
Baier, who stepped down from the Executive Board towards the end of the financial year. He was instrumental in shaping our
organisation's successful course over a long period of time. We would like to thank both of them and wish them all the best
for their future.
After 14 years of active participation, Mrs Carmen Riu Güell will resign her mandate at the end of the Annual General Meeting
on 12 February 2019. She has made a very intensive contribution to the strategy discussion, particularly in the restructuring
of our hotel business, and has set important accents. It will then be proposed to the Annual General Meeting to elect Mr Joan
Trian Riu to replace her as member of the Supervisory Board. Mr Joan Trian Riu has extensive knowledge and experience in the
tourism business and finance.
Cooperation between the Executive Board and the Supervisory Board
In a stock corporation under German law, there is a mandatory strict separation of the Executive Board and the Supervisory
Board. While the management of the company is the exclusive task of the Executive Board, the Supervisory Board is in charge of
advising and overseeing the Executive Board. As the oversight body, the Supervisory Board provided on-going advice and
supervision for the Executive Board in managing the Company in FY 2018, as required by the law, the Articles of Association
and its own Terms of Reference.
Its actions were guided by the principles of good and responsible corporate governance. Our monitoring activities essentially
served to ensure that the management of business operations and the management of the Group were lawful, orderly, fit for
purpose and commercially robust. The individual advisory and oversight tasks of the Supervisory Board are set out in Terms of
Reference. Accordingly, the Supervisory Board is, for instance, closely involved in entrepreneurial planning processes and the
discussion of strategic projects and issues. Moreover, there is a defined list of specific Executive Board decisions requiring
the consent of the Supervisory Board, some of which call for detailed review in advance and require the analysis of complex
facts and circumstances from a supervisory and consultant perspective (own business judgement).
TUI AG falls within the scope of the German Industrial Co-Determination Act (MitbestG). Its Supervisory Board is therefore
composed of an equal number of shareholder representatives and employee representatives. Employee representatives within the
meaning of the Act include a senior manager (section 5 (3) of the German Works Council Constitution Act) and three trade union
representatives. All Supervisory Board members have the same rights and obligations and they all have one vote in voting
processes. In the event of a tie, a second round of voting can take place according to the Terms of Reference for the
Supervisory Board, in which case I as Chairman of the Supervisory Board have the casting vote.
In written and verbal reports, the Executive Board provided us with regular, timely and comprehensive information at our
meetings and outside our meetings. The reports encompassed all relevant facts about strategic development, planning, business
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