TUI AG (TUI)
TUI AG: Annual Financial Report - Part 1
10-Dec-2020 / 07:00 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
10 December 2020
TUI GROUP
Full year results to 30 September 2020
2020 IN REVIEW
· First half of FY20 opened with record bookings in January 2020, strong
outlook and increased capacity planned for Summer 2020
· C-19 global pandemic led to a suspension of operations in March 2020
impacting most of our financial second half
· Significant self-help actions taken to address the impact of the C-19
pandemic, with cash fixed costs reduced by more than 70% during the
immediate lockdown period and substantial reduction in cash capex
· Swift and disciplined liquidity management during the crisis including
three support packages agreed
· Liquidity further enhanced with completion of compensation agreement
with Boeing as well as Hapag-Lloyd Cruises disposal to TUI Cruises in a
challenging market environment
· Global Realignment Programme launched to permanently reduce costs -
target increased from &euro300m to &euro400m p.a.
· TUI was the first tour operator to successfully restart across multiple
markets and destinations as travel restrictions eased worldwide from
mid-June, demonstrating the advantage of our integrated and diversified
business model
FY20 RESULTS
· As a result of C-19 travel restrictions during Summer 2020, FY20 revenue
declined by 58% with a full-year Group underlying EBIT loss of &euro3.0bn1
· Full-year customer volume of 8.1m, down 62% on prior year, as direct
result of imposed travel restrictions (FY19: 21.1m). Since restart of
operations in mid-June, more than 2m customers have enjoyed their holidays
with us
· Dividend suspended as required by terms of German Support Packages
1 At constant currency
LATEST DEVELOPMENTS
· As a result of the increasing travel restrictions caused by the rising
number of infections and the associated later booking behaviour of some
customers, we currently expect to operate an adjusted capacity2 of 20% for
Winter 2020/21 which will be weighted towards our financial Q2. We
continue to expect to operate an adjusted capacity2 of 80% for Summer
2021, which will be flexed as we gain more visibility on future imposed
travel restrictions
· Agreed additional support package for &euro1.8bn with Unifirm Ltd, a
syndicate of underwriting banks, KfW and the German Economic Support Fund
(Wirtschaftsstabilisierungsfonds - WSF), strengthening our position and
providing sufficient liquidity reserves in this volatile market
environment
· As at 30 November 2020, cash and available facilities on a pro forma
basis including additional support package would amount to &euro2.5bn,
post &euro300m anticipated senior notes redemption
· On 15 March 2020, the Executive Board of TUI AG withdrew its guidance
for financial year 2020 in view of the significant uncertainties relating
to future developments and still feels unable to announce specific
guidance in light of the ongoing situation
2 Adjusted capacity refers to capacity % planned to be operated versus 2019
programme
EXECUTIVE SUMMARY
· Transformed TUI will be leaner, less cost, less capital intensive and
more digital, driving return to profitable growth
· Strongly positioned to benefit from market recovery, resuming growth
trajectory
· Optimised investments and accelerated digitalisation will increase
agility and strengthen TUI's competitive position
ANNUAL REPORT AND FY20 RESULTS INVESTOR & ANALYST AUDIO WEBCAST
Our year-end announcement and a full copy of our Annual Report can be found
on our corporate website: http://www.tuigroup.com/en-en/investors [1]. An
audio webcast for investors and analysts will take place today at 08.00 GMT
/ 09.00 CET. Our year-end presentation alongside details of the webcast,
will be made available via our website beforehand.
FY20 KEY FINANCIALS (IAS 17 basis)
Year ended 30 September
&eurom 2020 2019 Change
Adjusted7
Revenue 7,953 18,928 -58.0%
Underlying EBIT3 -3,033 894 n.a
Reported EBIT4 -2,963 769 n.a
(Loss)/Earnings before tax5 -3,129 691 n.a
Group (loss)/profit attributable -3,077 532 n.a
to shareholders of TUI AG
Underlying (loss)/earnings per -&euro5.45 &euro0.89 n.a
share6
Dividend per share &euro0.00 &euro0.54 n.a
Net (debt)/cash -4,557 -910 -3,647
3 Underlying EBIT has been adjusted for gains on disposal of investments,
major gains and losses from the disposal of assets, major restructuring and
integration
expenses. The indicator is also adjusted for all effects from purchase price
allocations, ancillary acquisition costs and conditional purchase price
payments.
4 Reported EBIT comprises earnings before net interest result, income tax
and result from the measurement of interest hedges
5 For reconciliation of loss/earnings before tax to underlying EBIT, please
refer to page 58 of the Annual Report
6 For calculation of underlying loss/earnings per share please refer to page
32 of the Annual Report
7 FY19 figures adjusted as a result of revised classification of certain
expense items to cost of sales and revisions to PPAs, please refer to page
155 of the Annual Report for further details
FY20 RESULTS
· In line with our achieved cost reductions, underlying EBIT for the year
was a loss of -&euro3.0bn at constant currency, down &euro3.9bn on prior
year. The year-on-year movement reflects the significant impact of C-19,
as shown below.
In &eurom (IAS 17 basis)
FY19 Underlying EBIT 893
5M (Oct 19 to Feb 20) Underlying performance incl. +97
one-offs
FY20 Pre-C-19 Underlying EBIT at constant currency 990
C-19 Impact
H2 MAX costs impact YoY (non-repeat of FY19 Q4 impact of +144
&euro144m)
-3,416
C-19 Impact all other
-505
C-19 Impairments
-248
C-19 Hedging Ineffectiveness
FY20 Underlying EBIT at constant currency -3,035
Foreign exchange translation 2
FY20 Underlying EBIT at actual rates -3,033
Underlying FY20 at FY19 Variance at FY20 at Variance at
EBIT in constant constant actual
&eurom currency currency rates
rates1 rates
actual
rates
(IAS 17
basis)
Hotels & -379.7 451.8 -831.5 -399.6 -851.4
Resorts
Cruises -327.0 366.0 -693.0 -322.8 -688.8
TUI Musement -116.6 55.7 -172.3 -114.6 -170.3
Holiday -823.3 873.5 -1,696.8 -837.0 -1,710.5
Experiences
Northern -984.4 58.5 -1,042.9 -975.1 -1,033.6
Region
Central -620.8 101.9 -722.7 -619.8 -721.7
Region
Western -445.7 -28.6 -417.1 -440.8 -412.2
Region
Markets & -2,050.8 131.8 -2,182.6 -2,035.7 -2,167.5
Airlines
All other -160.8 -111.8 -49.0 -160.2 -48.4
segments
Total TUI -3,035.0 893.5 -3,928.3 -3,032.8 -3,926.3
Group
· Hotels & Resorts saw the majority of the portfolio closed during the
height of the pandemic, with around 40% of our 355 group hotels operating
by the end of the financial year.
· Our model of diversified locations has been an advantage during the
pandemic, with differing regional restrictions enabling an earlier
reopening of some of our destinations, such as in Germany, Mexico and
Egypt which were able to host domestic customers.
· Underlying EBIT loss of &euro380m at constant currency reflects lost
contribution attributable to forced closures across our business in the
third quarter, limited capacity operated during the final quarter and
impairment charges amounting to &euro205m, triggered by C-19 related WACC
increases, under IAS 36.
· FY occupancy rate declined by 16% pts to 66% with average rate per bed
improving by 8% to &euro71 as a result of mix.
· For further commentary and brand split for Hotels & Resorts, please see
page 61 of the Annual Report.
· Cruise has been heavily impacted as travel restrictions triggered
worldwide port closures resulting in cancelled itineraries across all
three brands during the third quarter.
· We have been one of the few cruise operators who have been able to
restart partial operations during the fourth quarter, with Germany
permitting sailings within European waters for TUI Cruises and Hapag-Lloyd
Cruises.
· Marella Cruises operations remained suspended as at the end of the
financial year in line with UK government advice.
· Underlying EBIT loss of &euro327m at constant currency, reflects limited
restart of operations during our key second half, and impairment charges
of &euro150m for Marella Cruises, triggered by C-19 related WACC
increases, under IAS 36.
· For further commentary and brand split for Cruise, please see page 62 of
the Annual Report.
· TUI Musement (renamed from Destination Experiences as of 1 October 2020)
saw tours and activities suspended from March, with partial restart from
mid-June, in line with Markets & Airlines.
· Underlying EBIT loss of &euro117m, reflects the pause in operation
during Q3 and partial restart from mid-June.
· 2.6m excursions & activities sold, down 73% versus prior year.
· During the second half, we accelerated our digital transformation plans
- including the prioritisation of our 'Digital First' service model and
developing additional app functionalities as we incorporate C-19 safety
protocols.
· For further commentary on TUI Musement, please see page 63 of the Annual
Report.
· Markets & Airlines opened the year with a record booking position and a
strong outlook prior to C-19 pandemic.
· In line with worldwide government advice from mid-March, our operations
were suspended as we contributed to the global efforts to mitigate the
spread of C-19.
· With the advantage of our diversified model, we were the first tour
operator to successfully restart operations from Germany in mid-June,
followed by the rest of our European markets including the UK in July.
· Since travel bans were lifted, 2.3m customers enjoyed their holidays
with us between June and October.
· Overall full-year volume of 8.1m customers is down by 62% as a result of
our business suspension throughout most of the third quarter and a partial
programme operated in the peak fourth quarter.
· Underlying EBIT loss of &euro2,051m at constant currency is driven by
factors above, compounded by fuel and FX hedging ineffectiveness of
&euro252m and partly offset by non-repeat of MAX costs in the prior year.
· For further commentary on Markets & Airlines, please refer to pages 63
to 65 of the Annual Report.
· All other segments
· The result of All other segments declined by &euro49m at constant
currency versus prior year, reflecting Corsair-related impairments,
partially offset by immediate cost saving measures.
· Reported EBIT loss of &euro2,963m at constant currency firstly reflects
the acute impact of C-19 business suspension as described above.
Adjustments improved by &euro195m versus prior year, predominantly driven
by a &euro476m gain on disposal from the divestment of Hapag-Lloyd Cruises
and a &euro90m gain on disposal from the divestment of our German
specialist businesses Berge & Meer and Boomerang, partially offset by
restructuring charges in line with our announced Global Realignment
Programme and WACC-driven goodwill and property impairments totalling
&euro496m. For further detail on Adjustments, please refer to page 58 &
171 of the Annual Report. In FY21, we expect total Adjustments in the
range of &euro180m to &euro200m to be incurred.
· Underlying loss per share for the year was -&euro5.45 (FY19: EPS of
&euro0.89) reflecting the impact of the C-19 pandemic as described above.
For the calculation of underlying loss per share, please refer to page 32
of the Annual Report.
GLOBAL REALIGNMENT PROGRAMME - TARGET INCREASED TO &euro400M P.A
In response to the C-19 pandemic we initiated a Global Realignment Programme
as one of our self-help measures to address group-wide costs with a target
of permanently saving more than &euro300m, with the first benefits to be
delivered from FY20 and full benefits to be achieved by FY23. Projects
announced and underway across core functions, Markets & Airlines and TUI
Musement (formerly Destination Experiences) are already expected to deliver
close to the &euro300m target savings and we have therefore increased our
target to &euro400m per annum. In addition to restructuring charges of
&euro303m realised in FY20, we expect restructuring costs of &euro120m in
FY21 and &euro40m in FY22.
As a result of these measures, we are confident TUI Group will emerge
stronger, leaner, more digitalised and more agile, in what is likely to be a
much more consolidated market.
NET DEBT
Closing financial position deteriorated from &euro3,850m (IAS 17 basis) as
at 30 June 2020 to &euro4,557m net debt as at 30 September 2020. The
increase in net debt in the final quarter of &euro707m is in line with our
cash outflow expectations.
The year-end net debt position of &euro4,557m (IAS 17 basis) versus the
prior year (FY19: net debt &euro910m) reflects the full draw down of our
original Revolving Credit Facility of &euro1,535m and the first tranche of
state aid amounting to &euro1.8bn as part of our support package agreed
(second and third support package of &euro1.2bn and &euro1.8bn both
finalised post balance sheet date).
In the financial year 2020 we transitioned to IFRS16. All leases are
recognised as right-of-use assets and lease liabilities in our statement of
financial position. According to IFRS16 our year-end net debt position
amounts to &euro6,421m.
CASH OUTFLOW/ LIQUIDITY POSITION
Pro forma cash and available facilities as at 30 November 2020, including
third support package, would amount to &euro2.5bn (post &euro300m senior
notes redemption).
For FY21 Q1, we expect lower working capital from settlement of supplier
payments and as a result of more extensive local restrictions across our key
markets since November, which has forced us to cancel departures and
affected booking momentum. Overall, we now expect monthly cash outflow to be
in the range of &euro400m to &euro450m per month.
ADDITIONAL SUPPORT PACKAGE
On 2 December 2020, we announced an agreement with Unifirm Ltd, a syndicate
of underwriting banks, KfW and the German Economic Support Fund
(Wirtschaftsstabilisierungsfonds - WSF) on a further financing package of
&euro1.8bn.
The package includes in summary -
· a capital increase with subscription rights of approx. &euro500m;
· a silent participation, convertible into shares by the WSF of &euro420m;
· a non-convertible silent participation by the WSF of &euro280m;
· a state guarantee of &euro400m, or, alternatively, a respective increase
of the non-convertible silent participation by the WSF; and
· an additional credit facility by KfW of &euro200m, and a prolongation of
an existing credit facility by KfW until July 2022.
The package is, inter alia, subject to the approval of the European
Commission under state aid rules, the granting of the necessary merger
control approvals (where there is a prohibition on implementation) and the
respective resolutions at our Extraordinary General Meeting envisaged for
January.
The financing package strengthens our position and provides us with
sufficient liquidity reserves in this volatile market environment. It also
balances out the presumed travel restrictions until the beginning of the
2021 summer season. The package became necessary due to the increasing
travel restrictions caused by the rising number of infections and the
associated later booking behaviour of some customers. Further details of the
support package can be found in our Ad-hoc release of 2 December 2020 as
well as on pages 152 to 154 of our Annual Report.
BREXIT
With regard to the UK's exit from the EU as of 31 January 2020, a main
concern remains whether our airlines will continue to have full access to EU
airspace after the transition period. We are continuing to address the
importance of there being a special and comprehensive agreement for aviation
between the EU and the UK post Brexit to protect consumer choice with the
relevant UK and EU decision makers. We follow the political negotiations
closely and continue to develop scenarios and mitigating strategies for
various outcomes, including the potential exit of the UK from the EU on 31
December 2020 without a comprehensive free trade agreement, with a focus on
alleviating potential Brexit impacts on the Group. As at 30th November 2020
our EU level of ownership, excluding the UK, was >50%.
BUSINESS ASSUMPTIONS
There is still considerable uncertainty regarding the likelihood and nature
of further lockdowns and travel restrictions over the next few months, the
distribution of an effective vaccine and the shape of the economic recovery.
As a result the TUI Executive Board refrains from issuing new guidance for
the Financial Year 2021 under the current circumstances.
WINTER 2020/21 - we currently expect to operate an adjusted capacity8 of 20%
for Winter 2020/21, a reduction of 20% since our Pre-Close trading update
which reflects the more extensive local restrictions across our key markets
during the first quarter. We expect our adjusted capacity8 plans to be
weighted towards our financial Q2 as travel restrictions are eased, with a
notable pick up in recent bookings in those markets with softening local
restrictions.
Anecdotally we have observed an immediate uplift in demand when destinations
reopen with long-haul destinations such as Jamaica and St Lucia reporting
load factors of over 90% on reopening. Whilst many of the popular winter
destinations as well as long-haul options may at present not be permitted,
our integrated model means we are well positioned to resume both medium and
long-haul programmes as soon as destinations are reopened again. Our Winter
bookings9 are currently down 82%, in line with adjusted capacity, compared
to normal levels of prior year as well as reflecting an overall later
customer booking pattern in recent months as a result of the short notice
changes in travel advice. ASP for Winter 20/21 is up 4%.
SUMMER 2021 - we currently plan to operate an adjusted capacity8 of 80%, in
line with our last trading update. Bookings are down 10% versus this same
point last year for Summer 2020 and ASP is up 14%9, made up of both new
bookings and re-bookings. Compared to the same stage of the Summer 2019
programme, our current level of bookings would be 3% ahead. UK bookings9 are
up 19% reflecting the typical earlier booking behaviour for the region. The
absolute and relative change in overall bookings position since our
Pre-Close trading update reflects a slowdown in booking momentum during
November as a result of local restrictions across our key markets and
particularly strong comparables in the wake of the Thomas Cook insolvency.
We expect the later booking behaviour to be less pronounced as local travel
restrictions ease, vaccine programmes become available and we return to a
more normalised environment for leisure travel (supported by a pickup in
recent bookings following positive vaccine news). The integrated nature of
our business model means we have a high level of flexibility to adapt our
programme as we gain more visibility. People's continuing passion for
holidays is evident in external research10 which identifies holidays as
being one of the most missed activities during the C-19 pandemic.
8 Adjusted capacity refers to capacity % planned to be operated versus 2019
programme
9 These statistics are up to 29 November 2020, shown on a constant currency
basis and relate to all customers whether risk or non-risk
10 BCG COVID-19 consumer sentiment survey UK, US, Italy and France
https://www.bcg.com/en-gb/publications/2020/covid-consumer-sentiment-survey-
snapshot-5-18-20 [2]
BOEING 737 MAX
With regards to the Boeing 737 MAX, the US FAA issued an Airworthiness
Directive on 18 November 2020 which allows for the resumption of commercial
operations of the B-737MAX after the implementation of the specified means
of compliance. EASA issued a draft Airworthiness Directive relating to the
B-737MAX on the 24 November for consultation. EASA have publicly indicated
its intention to issue final certification within a matter of weeks, subject
to the 28-day consultation process and various other required steps. It is
our view that airlines in the EASA region are likely to be permitted to
return the Boeing 737 MAX to commercial service during the first quarter of
2021. We anticipate further updates as EASA completes their final steps for
recertification.
RETURN TO PROFITABLE GROWTH
We expect FY21 to be a year of transition and for the Group to return to
profitable growth from FY22 onwards. The additional financing package agreed
strengthens our position and provides us with sufficient liquidity reserves
in this volatile market environment, balancing out the presumed travel
restrictions until the beginning of the 2021 Summer season. We are actively
streamlining the business through targeted cost cutting, whilst prioritising
growth spend on digitalisation initiatives. We will be selective in our
investment strategy which will be supported by disposals and we will be
focussed on asset light structures. Our trusted, leading brand with
differentiated products is strongly positioned to benefit from the expected
market consolidation. Our digitalisation transformation, underpinned by cost
control, and balance sheet discipline will drive our return to healthy
financial metrics and profitable growth.
EXTRAORDINARY GENERAL MEETING
TUI Group plans to hold an EGM and seek approval for its new support package
in January 2021.
ANALYST & INVESTOR ENQUIRIES
Mathias Kiep, Group Director Tel: +44 (0) 1293 645 925
Investor Relations and
Corporate Finance
+49 (0) 511 566 1425
Nicola Gehrt, Director, Head Tel: +49 (0) 511 566 1435
of Group Investor Relations
Contacts for Analysts and Investors in UK, Ireland and
Americas
Hazel Chung, Senior Investor Tel: +44 (0) 1293 645 823
Relations Manager
Tel: +49 (0) 170 566 2321
Corvin Martens, Senior
Investor Relations Manager
Contacts for Analysts and Investors in Continental
Europe, Middle East and Asia
Ina Klose, Senior Investor Tel: +49 (0) 511 566 1318
Relations Manager
Jessica Blinne, Junior Tel: +49 (0) 511 566 1442
Investor Relations Manager
ISIN: DE000TUAG000
Category Code: ACS
TIDM: TUI
LEI Code: 529900SL2WSPV293B552
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 89397
EQS News ID: 1154159
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