- WKN: TUAG00
- ISIN: DE000TUAG000
- Land: Germany
Nachricht vom 12.08.2021 | 08:00
TUI GROUP INTERIM REPORT 9M FY2021 1 OCTOBER 2020 - 30 JUNE 2021
TUI AG (TUI)
Interim report 9M FY2021
1 October 2020 - 30 June 2021
Interim Management Report
1 Since last updated bookings position 2 May 2021
2 Available liquidity defined as unrestricted cash plus committed lines including financing packages, convertible bonds and proceeds from RIU Hotels S.A disposal
Differences may occur due to rounding.
This Quarterly Report of the TUI Group was prepared for the reporting period 9M FY2021 from 1 October 2020 to 30 June 2021.
1 We define the EBIT in underlying EBIT as earnings before interest, income taxes and result of the measurement of the Group's interest hedges. For further details please see pages 16 and 48.
2 EBITDA is defined as earnings before interest, income taxes, goodwill impairment and amortisation and write-ups of other intangible assets, depreciation and write-ups of property, plant and equipment, investments and current assets.
3 Equity divided by balance sheet total in %, variance is given in percentage points.
Q3 2021 Summary
Operational and financial update
1 Available liquidity defined as unrestricted cash plus committed lines including financing packages, convertible bonds and proceeds from RIU Hotels S.A disposal
€400m placement of convertible bonds plus tap issue of ~€190m
In April 2021, we successfully completed the placement of a senior unsecured convertible bonds for €400m and post balance sheet date, a further tap issue for~ €190m, both of which were oversubscribed. The new tap issue bonds for ~€190m are convertible into new and/or existing no-par value ordinary registered shares of TUI and are fully fungible with the €400m convertible bonds issued on 16 April 2021.
The new bonds are issued on the same terms (save for the issue price) as the existing bonds issued in April and will form a single series (Gesamtemission) with the existing bonds.
The bonds have been offered at a coupon rate of 5% and utilises 10% of conditional capital authorised at our recent AGM, representing ~110m underlying shares.
Unless previously converted, redeemed or repurchased and cancelled, the convertible bonds will be redeemed at their principal amount on 16 April 2028. Investors also have the possibility to convert the bonds into new and/or existing no-par value ordinary registered shares of TUI.
We intend to use the convertible bond proceeds for refinancing, in particular to reduce drawings under the KfW facilities and towards a subsequent repayment of such facilities.
Sale of RIU Hotels S.A. real-estate portfolio
Further to our asset-right strategy, decoupling hotel growth and real estate investment, we agreed the sale of our 49% minority stake in RIU Hotels S.A. real estate joint venture to Saranja S.L, an entity of Riu Group, owned by Carmen and Luis Riu. The transaction for an enterprise value of ~€1.5bn, implies an EV/EBITDA multiple of 11.9x (Riu FY 2019) and equates to a sale price of ~€670m including earn-out. The earn-out element is payable upon RIU Hotels S.A. delivering its FY 2022 and FY 2023 operating budget.
The sale was completed on 31 July 2021 and resulted in a net cash inflow of €541m, which will be used to reduce the Group's debt. Further purchase price payments will be made in FY 2023 and FY 2024 upon achievement of agreed earnings targets by RIU Hotels S.A. The transaction is expected to generate a significant book gain of ~€200m in Q4 FY 2021.
Our subsidiary RIUSA II S.A. is not impacted by the transaction and will continue to manage and distribute all Riu hotels and resorts worldwide - including the 21 properties transferred to the Riu-Group in the course of the transaction. The number of beds under our Group portfolio of hotels therefore remains unchanged, with only the ownership structure of 21 Riu properties changing from owned structure under RIU Hotels S.A. to managed structure under RIUSA II S.A.
Revolving Credit Facility maturity extension to July 2024 and covenant waiver for September 2021 and March 2022 agreed
Post balance sheet date on 27 July 2021, we agreed with 19 international banks and KfW to extend the maturity of our Revolving Credit Facility (RCF) totalling €4.7bn by two years to July 2024. Based on our current rating, the margin after extension for the RCF tranches will be 4.5% per annum.
Our RCF currently stands at €4.8bn. For regulatory reasons due to Brexit, the credit line of a British bank (consisting of ~ €80m euros cash and €25m euros guarantee line) could not be extended beyond summer 2022, thereafter our facility will amount to €4.7bn until 2024.
Our current credit facilities comprise the following
As part of our state support package agreed with the German government, covenant waivers were granted for September 2020 and March 2021. Given the continued disruption and limitation on our operations as a result of travel restrictions imposed, on 9 June 2021 and again on agreement of the maturity extension, our creditor banks agreed to a further covenant testing waiver for September 2021 and March 2022. Covenant testing will resume in September 2022, with higher ratio limits set for testing in September 2022 and March 2023. Normalised limits have been agreed to resume from September 2023.
Available liquidity as of 9 August 2021 improved to €3.1bn1.
With many of our key continental European markets re-opening for travel, and confirmation of quarantine exemption and lesser restrictions for those fully vaccinated, we have seen an increase in customer confidence and subsequently new bookings momentum from Central and Western region markets. Q3 as a result saw our first cash break-even quarter since the start of the pandemic, delivering positive cash flow from operating and investing activities.
1 Available liquidity defined as unrestricted cash plus committed lines including financing packages, convertible bonds and proceeds from
RIU Hotels S.A. disposal.
Net financial position improved to €6,349m versus our net financial position of €6,813m as of 31 March 2021 (Q2). The €464m improvement in net debt in the third quarter reflects particularly cash generation from customer bookings.
The WSF support measures comprise a silent participation convertible into shares in TUI of €420m and a second silent participation of €671m. As of 30 June 2021, both silent participations were fully paid in. In the IFRS consolidated financial statements, the silent participations are shown as equity due to their nature and are therefore not included in the Group's net debt.
With the successful placement of €400m convertible bonds, ~€190m tap issue and RIU Hotels S.A real estate disposal post balance sheet date, we have taken first steps towards refinancing our government facilities. As international leisure travel resumes and global markets begin to recover, it is our priority to rebuild a solid and healthy balance sheet and return to a gross leverage ratio target of less than 3x. The Group continues to explore measures to accelerate de-leveraging and ensure the appropriate capitalisation to support growth over the longer term.
2 Bookings up to 8 August 2021 compared to respective bookings for 2019 programme (undistorted by COVID-19) and relate to all customers whether risk or non-risk
Summer Programme 2022 bookings - bookings2 up 120%.
2 Bookings up to 8 August 2021 compared to respective bookings for 2019 programme (undistorted by COVID-19) and relate to all customers whether risk or non-risk
Global Realignment Programme
As one of our self-help measures, we announced our global realignment programme to deliver targeted savings across the group of ~€400m per annum by FY 2023. Projects are well underway across core functions, Markets & Airlines and TUI Musement (formerly Destination Experiences) and we are on track to achieve ~50% of our targeted savings by end of the current financial year. Of the 8,000 roles potentially impacted as part of the programme, we have to date a reduction of ~7,000 FTEs already completed or agreed.
Sustainability Agenda 2050
TUI is committed to making tourism more sustainable - reducing the environmental impacts of holidays, creating positive change for people and communities and pioneering sustainable tourism.
As a leading tourism group, we want to continue to use our significant influence, collaboratively with our partners, to initiate and drive sustainable change, across the whole leisure travel sector.
We have ranked industry-best in the 2020 S&P Dow Jones Sustainability Index Climate Strategy criteria. We have one of the most carbon efficient airlines in Europe, with a proven track record in aircraft performance and climate efficiency. Our cruise fleet is one of the most modern cruise fleets on the seas and furthering our credentials, our upcoming deliveries for our Mein Schiff fleet in 2024 and 2026 will be equipped with Liquified Natural Gas (LNG) engines.
To drive positive impact in our destinations, we launched the TUI Care Foundation which has been responsible for creating various local and international programmes, working in collaboration with our destination partners as well as local and internationals NGOs since 2016. Today, the foundation is running 25 projects in 20 countries. Our many programmes include more recently, the launch of a Corona relief programme to help overcome the effect of the COVID-19 pandemic in holiday destinations by setting up an extensive relief initiative to support more than 200 local organisation around the world. In addition, the Economic Development Programme supports innovative and socially minded tourism entrepreneurs in travel destinations. The programme drives social innovation, creates local employment opportunities and contributes to local added value in holiday destinations, using tourism as a motor for positive change.
Our goal is to play a pioneering role in sustainability. We want to use tourism's creative power to maximise the benefits of tourism. And at the same time, we will innovate to minimise the ecological footprint of travel as well as encourage our customers to choose more sustainable travel options, and to take action to reduce their negative impacts and maximise their positive impacts in destinations. Together, with all our external and internal stakeholders and partners, we will drive a more sustainable future for the tourism industry.
To this end, with the UN Sustainable Development Goals at its core, we look forward to launching the TUI Group Sustainability Agenda 2050 this coming Autumn and sharing our sustainability strategic initiatives and expected key milestones.
Report on changes in expected development
It remains difficult to forecast the further course of the pandemic and its impact on customer behavior. In view of these considerable uncertainties, the Executive Board continues to believe that it is not in a position to issue a specific forecast for the financial year 2021.
As part of our reporting on H1 2021 the expectations for the financial year 2021 made in the Annual Report 2020 have been adjusted in the following points.
In addition, we are adjusting our statement made in the Annual Report 2020 for the adjustments expected in the financial year 2021 as follows:
Structure and strategy of TUI Group
The present Interim Report 9M FY2021 is based on TUI Group's reporting structure set out in the Annual Report 2020.
TUI Group's strategy set out in the Annual Report 2020 should be continued after the effects of COVID-19 have subsided.
283 hotels were open as at the end of the period (~79% of Group hotel portfolio), increasing from 122 at end of H1 2021, reflecting hotels which were able to reopen across destinations such as the Balearics, Canaries, North Africa, Greek Islands, Mexico, Turkey and Cuba.
Demonstrating the benefit of our diversified markets and destinations, our hotels have hosted customers from the local markets like Mexico as well as from the US in addition to our core European source market customers.
In Q3 2021 we delivered an occupancy rate of 48% and average revenue per bed of €70.
Riu operated 85 hotels (out of 101 hotels) as at the end of quarter. Overall occupancy of 59% and average revenue per bed of €56 reflects the continued demand for our Riu brand.
Robinson operated 19 hotels (out of 26 hotels) as at end of the quarter. Overall Q3 occupancy was 48%. The average revenue per bed of €98 was driven by product mix.
Blue Diamond operated all but one of its 34 hotels as at end of the quarter. Overall occupancy was 57% and average revenue per bed was €104.
Underlying EBIT loss improved to €70m versus prior quarter (Q2 2021 loss: €103m) as a result.
During Q3 2021, TUI Cruises increased its operations from May, from three ships to four, offering itineraries to the Canaries, Spanish coast, Greek Islands and Baltic Sea. Average daily rate of the operated fleet was €125 reflecting shorter average duration of itineraries offered. Occupancy of the operated fleet was 41%.
Our UK cruise brand Marella, resumed sailing with Explorer at the end of June, with a domestic programme from Southampton, its first since the government-imposed suspension of cruise operations in March 2020. Average daily rate and occupancy of the operated fleet was £127 and 48% respectively, with occupancy capped at 50% as required by UK government restrictions.
For Hapag-Lloyd Cruises, in addition to Europa 2 which was already in operation, Expedition Class Hanseatic nature and inspiration resumed sailings with short cruises from Hamburg and to the Baltic Sea. Average daily rate of the operated fleet was €443 reflecting the pricing of shorter and more local itineraries. Occupancy of the operated fleet was 42%.
Underlying EBIT loss declined to €81m versus prior quarter (Q2 2021 loss: €55m) reflecting the ramp up of operations in preparing our fleet and returning our crew onboard ahead of our peak summer period. Prior year includes 100% result of Hapag-Lloyd Cruises (Q3 2020 loss: €17.8m) which is now consolidated at equity within the TUI Cruises Joint Venture.
212k excursions and activities sold in the quarter, reflecting the increased departures and reopening of destinations. Online sales participation was 39%.
Underlying EBIT loss of €35m included ramp up costs as we prepared staff to return to destinations ahead of peak summer period.
We restarted operations in April firstly from our German source market. In Q3 we took 876k customers on their summer holidays, mostly from our central and western markets. Greece, the Balearics and the Canaries were the most popular destinations during the quarter. Travel regulations remains a key limitation on our operations, with customer demand highly correlated to newsflow and positive travel policy advice.
Supported by the acceleration of our digital strategy, online distribution has increased 4% pts to 52% (vs Q3 2019: 48%) overall across our markets.
Underlying loss increased to €483m versus prior quarter (Q2 2021 loss: €404m) reflecting the ramp up costs of operations as we prepared our aircraft fleet, retrained crew, and increased the number of retail staff in stores ahead of peak summer period. The quarterly result also includes €33m benefit from hedging ineffectiveness on both FX and fuel contracts.
50k customers departed in the third quarter, reflecting the limited green list destinations made available by the UK government. Direct distribution remained high at 95% with online distribution increasing by 11% pts to 77% (vs. Q3 2019: 66%).
Underlying loss increased to €290m versus prior quarter (Q2 2021 loss: €194m) as a result of ramp up costs in preparation for peak Q4 and related costs from stop/start nature of permitted destinations under UK travel restrictions.
510k customers departed in the third quarter, reflecting the more consistent travel advice given by our Central region governments, enabling customers to depart with more certainty to destinations such as Majorca, Canaries and Turkey.
Online distribution for the region has increased by 17% pts to 39% (vs. Q3 2019: 22%) with direct distribution increasing 13% pts to 63% (vs. Q3 2019: 50%).
Underlying loss improved to €105m versus prior quarter (Q2 2021 loss: 126m) reflecting the contribution from more substantial departures and operations.
317k customers departed in the period reflecting the reopening of destinations part way through the quarter for the region. Again, supported by our digital acceleration, online distribution improved by 13% pts to 69% (vs. Q3 2019: 56%) with direct distribution increasing 10% pts to 85% (vs. Q3 2019: 75%).
Underlying loss increased to €88m versus prior quarter (Q2 2021 loss: €84m) reflecting ramp up costs of operations ahead of peak summer period.
Underlying EBIT loss improved to €1m versus prior quarter (Q3 2021 loss: €19m) reflecting our ongoing cost-savings measures across head-office and other entities, as part of our global realignment programme.
Financial position and net assets
Cash Flow / Net capex and investments / Net debt
In the period under review the TUI Group's operating cash flow continued to be impacted by the travel restrictions imposed by COVID-19 in March 2020.
At €1,089.4m, the cash outflow from operating activities decreased by €869.6m compared to previous year.
The net debt as of 30 June 2021 increased by €482.5m to €6,348.7m year-on-year.
* Including €15.0m for Q3 2021 (previous year: €3.4m) and €20.5m for 9M 2021 (previous year €12.5m) cash gross capex of the aircraft leasing companies, which are allocated to Markets & Airlines as a whole, but not to the individual segments Northern Region, Central Region and Western Region.
Cash gross capex in 9M 2021 was 46.9% lower year-on-year, reflecting our continuously disciplined capex management. Net capex and investments of €-122.8m declined by €187.2m year-on-year.
The divestments related mainly to the sale and lease back of spare engines and aircraft. Previous year's divestments included the sale of Hapag-Lloyd Kreuzfahrten to our joint venture TUI Cruises and the sale of two German specialist tour operators.
Assets and liabilities
Comments on the consolidated income statement
The development of TUI Group's revenue and earnings in the first nine months 2021 was still materially impacted by the suspension of the vast majority of our tour operation, aviation, hotel and cruise operations as a result of the global travel restrictions in order to contain the spread of COVID-19. TUI Group's results generally also reflect the significant seasonal swing in tourism between the winter and summer travel months, however this period the impact is less evident due to the COVID-19 pandemic.
Consolidated turnover in 9M 2021 declined by 79.6% year-on-year to €1.4bn. This decline reflects the worldwide travel restrictions imposed to stem the spread of COVID-19.
Alternative performance measures
We use underlying EBIT for our management system. We define the EBIT in underlying EBIT as earnings before interest, taxes and result of the measurement of the Group's interest hedges.
One-off items carried here include adjustments for income and expense items that reflect amounts and frequencies of occurrence rendering an evaluation of the operating profitability of the segments and the Group more difficult or causing distortions. These items include gains on disposal of financial investments, significant gains and losses from the sale of assets as well as significant restructuring and integration expenses. Any effects from purchase price allocations, ancillary acquisition costs and conditional purchase price payments are adjusted. Also, any goodwill impairments are adjusted in the reconciliation to underlying EBIT.
The TUI Group's operating loss adjusted for special items increased by €11.7m to €1,978.6m in 9M 2021.
Other segment indicators
Composition of the Boards
The composition of TUI AG's Boards changed as follows in the first nine months in FY 2021:
The terms of office of all ten employee representatives on the Supervisory Board and four of the ten Supervisory Board members to be elected by the Annual General Meeting ended at the close of the Annual General Meeting on 25 March 2021.
The following members were elected or re-elected to the Supervisory Board by this year's the ordinary General Meeting:
Dr. Jutta Dönges, Managing Director of Finanzagentur GmbH; Prof. Dr. Edgar Ernst, President of the German Financial Reporting Enforcement Panel (FREP); Janina Kugel, Supervisory Board member & Senior Advisor and Alexey Mordashov, Chairman of the Board of Directors of PAO Severstal. Peter Long and Angelika Gifford re-signed from the Supervisory Board at the end of their regular term of office.
The ten Supervisory Board members representing the employees were already elected on 8 October 2020. Mark Muratovic and Tanja Viehl were elected to the Supervisory Board as new employee representatives. Dr Dierk Hir-schel and Michael Pönipp stepped down at the end of their regular term of office.
There were the following changes in TUI AG's Executive Board:
Birgit Conix, who had been responsible for Finance on TUI AG's Executive Board since July 2018, left in December 2020. She was succeeded by Executive Board member Sebastian Ebel.
In January 2021, Peter Krueger took over a newly tailored Executive Board department as Chief Strategy Officer, combining the TUI Airlines, hotel and cruise shareholdings as well as his previous areas of responsibility TUI Strate-gy and M&A.
On 11 May 2021, the Supervisory Board of TUI AG decided to appoint Sybille Reiß as Member of the Executive Board responsible for Human Resources and as Labor Director with effect from 1 July 2021. She took over the position from Dr Elke Eller, who did not renew her contract, which was scheduled to expire.
The current, complete composition of the Executive Board and Supervisory Board is published on our website, where it is permanently accessible to the public.
Risk and Opportunity Report
Successful management of existing and emerging risks is critical to the long-term success of our business and to the achievement of our strategic objectives. Full details of our risk governance framework and principal risks can be found in the Annual Report 2020.
Details see Risk Report in our Annual Report 2020, from page 33
Actively Managed: IT Development & Strategy, Integration & Restructuring, Corporate & Social Responsibility, Information Security, Brexit
Monitored: Destination Disruption, Customer Demand, Input Cost Volatility, Cash flow, Legal & Regulatory Compliance, Health & Safety, Supplier Reliance, Talent & Leadership Development, Joint Venture Partnerships
Several principal risks materialised simultaneously as a result of the COVID-19 pandemic, which has led to travel restrictions across the world, both within the markets as well as in destination countries.
With the customer deposits received and expected for the peak season in the summer (July to October 2021), additional funds from the convertible bond placed in Q3 2021, the cash inflow from the sale of RIU Hotels S.A. and the extension of the revolving credit facilities including the further suspension of the review of financial covenants, the Executive Board believes that, despite the existing risks, the TUI Group currently has sufficient funds, and will continue to have sufficient funds in the future, resulting both from borrowing and from operating cash flows, to meet its payment obligations and to continue as a going concern. The Executive Board anticipates that as at 30 June 2021, a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern no longer exists. Therefore, as at 30 June 2021, the Executive Board no longer identifies any material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. The Executive Board no longer considers the remaining risk with regard to a further pandemic-related change in booking behaviour as a threat to the company as a going concern. In its assessment, the Executive Board assumes that the booking figures will gradually recover in the financial year 2022 and that the booking behaviour in the financial year 2023 will largely correspond to the pre-pandemic level. The Executive Board assumes that there will be no further long-term closures and lockdowns that could affect travel behaviour. Nevertheless, customer bookings may deteriorate due to new travel restrictions, insufficient vaccination coverage against the COVID-19 virus in individual countries, and virus variants for which there is insufficient vaccination protection, thereby affecting the Company's performance.
During this period of reduced travel compared to pre-pandemic levels, the Executive Board continues to monitor the key risks, particularly heightened risks such as customer demand and those that impact the financial profile (i.e. cost volatility and cashflow) of the Group.
Unaudited condensed Consolidated Interim Financial Statements