Annual Report & Accounts 2016
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ANNUAL REPORT & ACCOUNTS 2016 175 years ago, our founder Thomas Cook began this company with a vision to “broaden the mind of others and break down the partition walls of prejudice.” Once describing himself as “the willing and devoted servant of the travelling public”, Thomas Cook was a true pioneer of the travel industry, opening up a world of new destinations and new travel experiences to everyone. By obtaining the best services and prices for his customers, he laid the foundations of the company that still bears his name today. Thomas Cook is now one of the world’s leading leisure travel groups, supported by 22,000 colleagues and operating from 16 countries. Our vision today remains true to the principles of Thomas Cook 175 years ago – to be the best loved holiday company, delighting our customers, our people and our Shareholders. TABLE OF CONTENT Overview 1 Governance 50 Financial Statements 98 The Group at a glance 1 Directors’ Report Independent Auditors’ Report 98 Chairman’s statement 2 Chairman’s Governance Statement 50 Group income statement 104 Our markets today 4 Board of Directors 51 Group statement of Corporate Governance Report 54 comprehensive income 105 Annual Statement by Chair of Group cash flow statement 106 Strategic Report 6 Remuneration Committee 68 Group balance sheet 107 Chief Executive’s review 6 Directors’ Remuneration Policy 73 Group statement of changes in equity 109 Customer at our heart 10 Annual Report on Directors’ Remuneration 82 Notes to the financial statements 110 Progress against strategy 12 Other disclosures 95 Company balance sheet 155 Our business model 20 Company cash flow statement 156 Key performance indicators 22 Company statement of changes in equity 157 Our people 23 Notes to the Company financial statements 158 Sustainability 26 Six year financial summary 166 Financial review 30 Shareholder Information 168 Risk management 46 THE GROUP AT A GLANCE OUR SEGMENTS IN DETAIL KEY FACTS UNITED KINGDOM Retail outlets: 790 Aircraft: 33 2016 2015 Customers Revenue £2,365m £2,457m Gross margin % 29.1% 26.7% 5,809k Underlying EBIT £152m £119m Underlying EBIT % 6.4% 4.8% UNITED KINGDOM KEY FACTS CONTINENTAL EUROPE Retail outlets: 2,163 Aircraft: 5 2016 2015 Customers Revenue £3,435m £3,449m Gross margin % 14.0% 13.5% 6,627k Underlying EBIT £72m £71m Underlying EBIT % 2.1% 2.1% KEY FACTS NORTHERN EUROPE Retail outlets: 4 Aircraft: 11 GULF OF 2016 2015 Customers BISCAY Revenue £1,132m £1,057m Gross margin % 30.4% 27.9% 1,614k Underlying EBIT £124m £96m Underlying EBIT % 11% 9.1% KEY FACTS AIRLINES GERMANY Aircraft: 45 2016 2015 Customers* Revenue £1,253m £1,257m Gross margin % 25.1% 28.4% 7,269k Underlying EBIT £(10)m £56m Underlying EBIT % (0.8)% 4.5% * Includes 2,213k in-house customers. SWEDEN FINLAND NORWAY NORTHERN EUROPE RUSSIA NORTH SEA DENMARK CONTINENTAL EUROPE NETHERLANDS POLAND AIRLINES GERMANY BELGIUM GERMANY CZECH REPUBLIC AUSTRIA HUNGARY FRANCE BLACK SEA MEDITERRANEAN SEA THOMAS COOK GROUP PLC ANNUAL REPORT & ACCOUNTS 2016 1 HIGHLIGHTS Underlying EPS Underlying EBIT Underlying gross margin Profit after tax 8.5p £308m 23.4% £9m OUR BUSINESS Own-brand hotels and resorts Aircraft Employees Customers 190 94 21,940 19m OUR BUSINESS BY SEGMENTS Revenue Underlying EBIT* Employees** £2,365m £152m 8,824 £3,435m £72m 6,381 £1,132m £124m 3,199 £1,253m £(10)m 3,288 United Kingdom Continental Europe Northern Europe Airlines Germany Group revenue of £7,812m includes £(373)m of internal revenue. * The term “underlying” refers to trading results that are ** All full time equivalent (includes 248 corporate employees). adjusted for separately disclosed items that are significant in understanding the ongoing results of the Group. Separately disclosed items are included on the face of the income statement and are detailed in Note 7 to the Group financial statements. * Underlying EBIT of £308m includes £(30)m of internal EBIT. FINANCIAL STATEMENTSFINANCIAL GOVERNANCE REPORT STRATEGIC OVERVIEW 2 OVERVIEW CHAIRMAN’S STATEMENT »Everything I see shows me that the renewed focus on the customer has reinvigorated the organisation.« Thomas Cook ends 2016, its 175th The progress the business has made It is a privilege to be a part of a company anniversary year, a much stronger, was recognised in the new B1 credit with such a rich history. Thomas Cook more resilient business than a year rating assigned by Moody’s in the spring. remains one of the best-known names ago. Management’s focus on executing Combined with the successful conclusion in the travel industry with more years’ the strategy for growth has enabled of a programme to buy back £100 million experience of travel combined than any other it successfully to manage through a of bonds ahead of plan, this represents an organisation and a brand to be proud of. turbulent environment while at the important step in our strategy to reduce Peter Fankhauser and his team are building same time positioning the Group for interest costs and build a more efficient on this legacy with a strategy that will set the future. balance sheet. the business on the path to sustainable growth for many years to come. Against a backdrop of political turmoil and Operationally, performance in the year terrorism, we have made good progress on was mixed. Northern Europe delivered On behalf of the Board, I would like to thank implementing the New Operating Model, our record profits off a strong base, while the every one of the Thomas Cook colleagues plan to deliver sustainable, profitable growth. UK continued its turnaround, achieving an across the business for their hard work However, it is the progress that Management EBIT margin of 6.4 per cent, significantly up and the progress that they have made in has made in changing the culture of the on the prior year. Group EBIT was slightly the past year. I would also like to thank business to embed a mindset of customer behind 2015, as market disruption had a all of our Shareholders for their continued centricity that is making the biggest impact. particular impact on our German Airline support in this 175th anniversary year. and Belgian businesses. Everything I see shows me that the renewed focus on the customer has reinvigorated the Despite this backdrop, our resilient business FRANK MEYSMAN organisation. Colleagues are pulling together model enabled us to deliver a positive net CHAIRMAN to ensure they do all that they can to give profit for the second consecutive year and customers the best experience on the most we have re-started our dividend programme 22 November 2016 important weeks of their year. It is these for the first time since 2011. This reflects the efforts to create lifelong advocates for Board’s confidence in the strategy. the Thomas Cook brand that will generate Moving onto the business of the Board, the greatest value in the future. we were delighted to welcome Lesley Knox as a new Non-Executive Director in March. Bringing a wealth of international and strategic experience from her Board roles at Centrica and SAB Miller, Lesley becomes the fourth woman on our Board of nine. We continue to look for ways to increase female representation in positions of leadership across the organisation. THOMAS COOK GROUP PLC ANNUAL REPORT & ACCOUNTS 2016 3 FINANCIAL STATEMENTSFINANCIAL GOVERNANCE REPORT STRATEGIC OVERVIEW 4 STRATEGIC REPORT OUR MARKETS TODAY ECONOMIC ENVIRONMENT Demand for holidays across North Africa POLITICAL AND REGULATORY According to OECD estimates, world GDP remains subdued; Tunisia remained closed to UK ENVIRONMENT is forecast to grow by 3.2 per cent in 2017. tourist arrivals, as did Sharm el Sheikh airport It is widely recognised that the tourism The travel and tourism sector continues to in Egypt, substantially affecting passenger industry is a highly regulated environment grow ahead of the global economy and is volume to other resorts in the country. within the European Union. expected to grow four per cent on average These geopolitical events have not stopped The UK’s decision in June 2016 to exit the annually over the next ten years, according customers wanting to go on holiday. to industry forecasts. EU brings regulatory changes which may Much of what we see tells us that customers affect our business in different ways. Customers’ appetite for overseas travel is value the security and peace of mind that The negotiation process for Britain’s exit returning to pre-recession levels, underpinned comes with travelling with a trusted package is expected to start in spring 2017, and we by improving household finances and helped tour operator. Despite repeated shocks in are working with governments across our by the lowest oil prices in more than a 2016, countries within Europe saw a three markets and the EU institutions to make sure decade. Over 2015, the UN World Tourism per cent rise in international tourism arrivals travel remains as seamless as possible after Organisation reported that global international in the first six months of the year. the exit is complete. tourist arrivals grew by 4.6 per cent to Within our source markets, the OECD reach 1.2 billion, with arrivals into European Where many of our competitors were more estimates that the Eurozone is forecast to vocal in campaigning during the referendum, countries recording growth at five per cent. grow by 1.4 per cent, with our largest market International tourist arrivals are expected we see it as our role to manage the outcome within it, Germany, just ahead at 1.5 per cent. and make sure all of our customers have the to grow 3.8 per cent per year between 2010 UK GDP is expected to rise by one per cent and 2020.