As a result of the tight capacity control and the shift to more profitable medium haul destinations, we were able to achieve a 7% increase in average selling prices and improved margins.
- Ian Derbyshire
- Chief Executive Officer,
UK & Ireland
Operating under the iconic Thomas Cook brand, we improved
product mix focusing on medium haul destinations and grew in
independent travel.
Financial highlights1
Key performance indicators
| Year ended 30 September 2009 |
Pro forma year ended 30 September 2008 |
Change | |
|---|---|---|---|
| Controlled distribution‡‡ | 68.6% | 67.4% | 1.8% |
| Internet distribution‡‡ | 29.9% | 25.8% | 15.9% |
| Change | |
|---|---|
| Passengers† | -9.2% |
| Capacity†† | -9.2% |
| Average selling price# | +7.3% |
| Load factor††† | Flat |
| Brochure mix## | +2.6% |
- While the outlook remains challenging there are signs of recovery in consumer confidence. However, the weakness of sterling versus the euro and US dollar is expected to increase input costs and to continue to affect consumer sentiment.
- Target further mainstream margin improvement through product and haul mix.
- Develop our e-commerce strategy and move into the online travel agency market.
- Continue to grow travel-related financial services, notably foreign exchange.
- Build on our strong performance in key medium haul destinations outside the Eurozone.
- 1The Group statutory results for the financial year ended 30 September 2009 are set out in the Financial Statements section. Current year figures have been compared to the unaudited pro forma figures for the 12 months ended 30 September 2008 (Read Appendix 1 for more detail). See Appendix 2 for key.
Progress against strategy
Mainstream
- Holidays to medium haul destinations, where we can achieve a significantly higher margin, increased by 10% and now comprise 70% of our UK mainstream programme.
- Within our medium haul holiday programme, we built leading market positions in the key destinations of Turkey, Egypt and Cuba.
- Capitalising on consumer preferences for value and cost certainty, we increased sales of all inclusive holidays to 50% of the summer programme and four and five star holidays to 43%.
Independent
- Through our acquisition of Gold Medal we are now one of the UK’s leading flight consolidators. Our acquisition of Med Hotels, combined with our Hotels4U business, makes us the UK’s largest bed bank.
- We announced our London 2012 Olympic sponsorship deal, giving us exclusive rights to sell event tickets and travel packages in the UK.
- We grew online sales and took steps to drive forward our online travel agency ambitions.
Financial services
- In UK financial services, we regained market share in currency exchange, increased sales of pre-paid currency cards and took steps to build our travel insurance business.
Financial performance
The UK business delivered profit from operations of £162.2m, an improvement of 13% year on year, despite the tough economic conditions. The operating profit margin was also improved from 4.6% to 5.2%. Revenue was in line with the prior year at £3,098.0m. However, excluding the year on year impact of acquisitions we made this year and last, underlying revenue fell 3%.
In anticipation of the tough market conditions, we reduced capacity by 9% in our mass market business, largely in the less profitable summer short haul programmes. However, we continued to focus on increasing the proportion of medium haul holidays, which now represent over 70% of our mass market programmes. As a result of the tight capacity control and the shift to more profitable medium haul destinations, we were able to achieve a 7% increase in average selling prices and improved margins.
Underlying trading was further improved through savings in like-for-like accommodation rates, merger synergies, and other cost initiatives. However, these benefits were more than offset by increased fuel costs and the adverse impact on our accommodation costs of the weak pound. Management also believe swine flu adversely impacted the results by £8m.
However, the UK segment benefited year on year from the acquisitions made last year and this. Our Indian business has had a difficult year, with the global recession and the Mumbai terrorist activity hampering progress. Despite this, the business contributed positively year on year to the segment results and, following a number of restructuring measures, is well-placed to take advantage of the expected post-recessionary bounce back in trading in future years.
Our Independent businesses in the UK have seen good growth and the performance of Gold Medal, Hotels4U and Med Hotels, in particular, has been strong. Elegant Resorts has also produced a solid performance, despite the difficult market conditions. Synergies from our acquisitions earlier in the year (Gold Medal and Med Hotels) are ahead of our expectations.
The business has continued to grow its proportion of controlled distribution which we believe is a key factor for success. Controlled distribution in mass market now represents 69% of total distribution, with internet bookings running at 30%.
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