Annual Report 2004 Moving Assets. Convincing Details
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24-05-0087 Umschlag GB engl 18.3.2005 12:25 Uhr Seite 1 Annual Report 2004 Moving assets. Convincing details. Annual Report 2004 Europe’s largest leisure hotelier. Leading tour operator in 17 countries. Strong distribution network. International team. Comprehensive logistics services. TUI AG 24-05-0087 Umschlag GB engl 18.3.2005 12:26 Uhr Seite 1 Table of Contents Chief Executive’s Statement 5 Management Report I Economic Situation 18 I Business Trend in the Divisions 36 I Research and Development 56 I Risk Management 59 I Prospects 62 Other Information I Human Resources 78 I Environmental Protection 82 Corporate Governance I Report on Corporate Governance 96 I Report of the Supervisory Board 100 I Supervisory Board 106 I Executive Board 109 I TUI Share 111 Financial Statements I Financial Statements of the TUI Group 126 I Notes on the Financial Statements 130 B 24-05-0087 Umschlag GB engl 18.3.2005 12:23 Uhr Seite 2 Group Structure 2004 TUI Gr Tourism TUI Group in Central Europe Source markets: Germany | Switzerland | Austria | Eastern Europe | Turnover Tourism Hapag-Lloyd Flug Logistics Others Northern Europe Group Source markets: United Kingdom | Ireland | Nordic Countries | Earnings by div Britannia Airways UK | Britannia Airways Nordic Tourism Logistics Western Europe Others Source markets: France | Netherlands | Belgium | Group Corsair | TUI Airlines Belgium Earnings before Tourism Destinations Logistics Incoming agencies | Hotel companies Others Group Other Tourism Net profit for t Business travel | IT-Services Earnings per sh Assets Non-current ass Logistics Current assets Total assets Shipping Equity and liab Hapag-Lloyd Container Linie | Hapag-Lloyd Kreuzfahrten Equity Non-current liab Special logistics Current liabilitie VTG AG Total equity an Equity ratio Other Sectors Cash flow from Capital expend Trading US-Steel Service Companies Net debt Divestments Employees Energy | AMC Group Central operations TUI AG | Hapag-Lloyd Express | Thomsonfly | Real estate | Other companies 24-05-0087 Umschlag GB engl 18.3.2005 12:24 Uhr Seite 2 TUI Group in Figures TUI Group in Figures 2004 2003 Var. % Turnover Tourism € mill 13,123 12,671 + 3.6 Logistics € mill 3,472 3,915 - 11.3 Others € mill 1,451 2,629 - 44.8 Group € mill 18,046 19,215 - 6.1 Earnings by divisions (EBTA) Tourism € mill 362 208 + 74.1 Logistics € mill 290 323 - 10.4 Others € mill - 30 382 n. m. Group € mill 622 913 - 31.9 Earnings before interest, tax, depreciation and amortisation (EBITDA) Tourism € mill 673 532 + 26.7 Logistics € mill 495 567 - 12.7 Others € mill 214 623 - 65.7 Group € mill 1,382 1,722 - 19.7 Net profit for the year € mill 532 315 + 69.0 Earnings per share € 2.74 1.54 + 77.9 Assets Non-current assets € mill 9,758 10,271 - 5.0 Current assets € mill 2,561 2,718 - 5.8 Total assets € mill 12,319 12,989 - 5.2 Equity and liabilities Equity € mill 2,991 2,767 + 8.1 Non-current liabilities € mill 4,764 4,204 + 13.3 Current liabilities € mill 4,564 6,018 - 24.2 Total equity and liabilities € mill 12,319 12,989 - 5.2 Equity ratio % 24.3 21.3 + 3.0 Cash flow from operating activities € mill 964 902 + 6.8 Capital expenditure € mill 677 724 - 6.5 Net debt € mill 3,251 3,828 - 15.1 Employees 31 Dec 57,716 64,257 - 10.2 Annual Report 2004 b2004 – A successful year. bUpswing in tourism. bSustained growth in shipping. bExtraordinarily good business in trading. bNet financial debt further reduced. bFinancing long-term structured. bRealignment of the Group completed. 1 Moving assets. Convincing details. TUI’s tour operators organise tours of every With its 104 aircraft, TUI flies more than kind: package or individual tours, ranging 67 billion seat-kilometres annually, thus ope- from low-budget to premium tours, on all rating Europe’s largest charter aircraft fleet. continents, in 17 European countries. Travel Our seven airlines carry our tour operators’ services also include advice for our customers customers and individual travellers to their in 3,200 travel agencies throughout Europe. various destinations: from 57 airports in New direct distribution channels such as call Germany, the UK, France, Belgium and centres, travel TV and above all the internet Scandinavia to 143 destinations in Europe are playing an increasingly important role. and beyond. From Hanover, TUI Airline Hence, a broad variety of offerings can be Management’s international team controls booked via the websites of our travel agencies, the central functions of our flight operations: tour operators, airlines and of course via our fleet management, purchasing and main- hotel portal – an individual, convenient way tenance. of booking, available around-the-clock. 2 With its 51 container vessels, Hapag-Lloyd With more than 163,000 beds in 285 hotels, ships more than 2 million standard contai- TUI is Europe’s largest hotelier in the leisure ners every year. Reaching customers around sector. Holidaymakers can spend their holi- the world, on routes between Europe and days in our hotels in more than 30 countries Asia, on the North Atlantic, Pacific and on in Europe and Africa, the Caribbean and routes to South America. 3,980 employees in Florida. They are free to choose between 90 countries and our sophisticated informa- apartments, clubs or 5-star hotels, self-cate- tion systems ensure that the customers’ ring, full-board or all-inclusive. Our agencies goods reach their destinations quickly and cater for tourists in 37 countries: 5,000 reliably. In the cruise sector, Hapag-Lloyd, representatives cater for their needs day in with its four ships, is the leading German day out. We know that hotel and services provider in the premium segment. Its flag- play a crucial role in our customer's holiday ship, the ‘Europa‘, has been crowned the experience. That is why everything must be world’s best cruiser for the fifth consecutive perfect. time. Moving assets. Convincing details. 3 Dr. Michael Frenzel, Chairman of the Executive Board Chief Executive’s Statement Dear shareholders, 2004 was an eventful year in which we achieved a great deal for the future of TUI. The course set in previous years paid off and measurable progress was achieved in our business in an overall improved environment. Thus, tourism recorded moderate growth in turnover and customer numbers, but significantly increased its profitability. Shipping saw a further increase in demand and turned this into another record result. In addition, we pushed ahead with the realignment of the Group, we continued the scheduled reduction in net debt and we restructured maturities of our financing, thus securing our future and gaining new room for manoeuvre. Certainly, there is still considerable potential that remains to be tapped, but TUI is heading in the right direction. As in the past, we will be guided by our overriding corporate objective: the long-term success of our Com- pany. We are pursuing this objective from our position of uncontested market leadership in the European tourism industry and by means of our second major stronghold in the continuously growing world-wide container shipping business. The tourism division is expanding on the basis of our strong brands and our prominent market positions. Cost-efficient produc- tion and high utilisation of our own capacity in aircraft and hotels will lead to qualitative growth. We see the changes in the market as an opportunity, and we take advantage of new trends and help shape them. In shipping, we will participate above-average in the growing volume of container transport due to our high level of efficiency. By expanding our capacities we build the basis for continuing success. In line with our long-term strategy, we have continued to sharpen TUI’s profile by concentrating our logistics division on shipping. To this end, we already sold most of our special logistics business in 2004. We have also consolidated our tourism business by divesting shareholdings such as the Alpitour Group and the Anfi Group and at the same time increasing our interest in TUI Suisse and the Magic Life Group. As a result, Group turnover dropped on the previous year. However, we do not pursue size for its own sake. It is our operating profit that is crucial to the long-term success of our Company, and here in particular we made significant headway in 2004. Thus, tourism only achieved moderate growth in turnover, but increased its earnings by almost 75%. This success is primarily attributable to the measures initiated in previous years, by means of which we have optimised our production structures and significantly cut cost. Although markets in tourism have been extremely difficult for a number of years, we have implemented measures during that period that 5 Chief Executive’s Statement went far beyond mere cost savings. They initially led to additional costs but also created a basis for our medium- and long-term success, and this is already reflected in our results for 2004. As before, we geared ourselves towards our long-term success in the last financial year: We took advantage of opportunities and tapped new earnings potential. For example, the TUI hotel portal was opened on the web, and a new low-cost airline, Thomsonfly, was launched in the UK. In addition, we used the opportunity to extend our value chain in Belgium and started TUI Airlines Belgium. And last but not least, we initiated a comprehensive restructuring programme for our distribution and tour operator activities in the UK. These measures will enable us to increase the sustainable pro- fitability of our business significantly. For a long time now, we have taken the same approach in shipping. Expenditure on the development and introduction of efficient information technology is now paying off at a time of increasing demand on the scope and speed of information exchange relating to transport services.