Ian Derbyshire
Chief Executive Officer,
Independent Travel UK
Pete Constanti
Chief Executive Officer,
Mainstream Travel UK
1 These are unaudited pro forma figures for the twelve months ended 30 September 2008. For a definition of how these figures have been compiled, please refer to Appendix 1 - Unaudited pro forma financial information. See the Statutory results for the eleven months to 30 September 2008. See Appendix 2 - Key performance indicators definitions.
Operational highlights
- We operate in a more rational market where capacity has been reduced by around 25% in the UK market over the last two years
- The UK business is much stronger following the merger, with the majority of the accelerated synergy savings and margin accretion arising in the UK
- Strategic acquisitions, including Hotels4U.com and Elegant Resorts, strengthened our platform for future growth, particularly in independent travel
- The successful launch of Starfish, a sophisticated e-commerce platform, significantly improves our customers’ experience when searching for and booking holidays online
- We expanded our foreign exchange franchise in airports and are the leading partner in Heathrow Terminal 5 and Manchester Airport
- We have established separate divisions for our Mainstream Travel and Independent Travel businesses
Key facts
6.3m
passengers
807
retail outlets
42
aircraft
The UK businesses performed extremely well in the period under review, delivering a 94.8% improvement in profit from operations despite tough market conditions and the ongoing integration process.
The pro forma revenue for the twelve months to September 2008 was 1.1% lower than in the prior year period at £3,097.3m. However, excluding the impact of acquisitions (India, Egypt, Lebanon, Hotels4U and Elegant Resorts), the pro forma revenue was 3% lower. This reduction reflects lower capacity, partially offset by improved selling prices and increased load factors. Other passengers increased by 99% year on year, reflecting the acquisitions we made in the period which underpin our strategy for growth in the Independent Travel business. Retail customers, being third party tour operator passengers booking predominantly through Thomas Cook shops, fell year on year by 9.5% largely due to the rationalisation of the retail network of the combined Group following the merger, which resulted in the closure of 98 shops.
One of the key success factors in managing a tour operating business is ensuring that supply and demand remain in balance and eliminating loss-making programmes and holidays. To achieve this, management reduced capacity on sale in the UK risk business by 7.5% year on year, with the larger part of this reduction coming in the summer season. In addition, in line with our strategy, we increased the proportion of our holidays to medium haul destinations, while reducing our short haul and long haul programmes. As a result of the above actions, the number of passengers carried fell by 6.8% but the average selling prices and margins achieved on those holidays departing in the period were significantly increased year on year.
In addition to the capacity management measures above, we were also able to realise significant merger synergies during the period, which offset the year on year increase in fuel prices and the adverse impact of changes in foreign currency rates. Acquisitions in the period also contributed to the profit from operations.
As a result, the pro forma profit from operations was increased to £143.4m from £73.6m in the prior year, an increase of almost 100%. The operating profit margin was also improved from 2.4% to 4.6%.
Control of distribution and, in particular, growth of sales through the internet is a key cornerstone of our strategy for future success. The proportion of our mass market departed passengers who booked on the internet was 26.2%, an increase of 12.9% on the prior year period. The proportion of mass market passengers departing in the period who booked through our controlled distribution channels (owned websites, shops and call centres) grew by 4.3% to 67.6%.