Despite the economic recession in the Northern European region, we were able to maintain industry-leading margins of over 8% for the full year.
- Sam Weihagen
- Chief Executive Officer,
Northern Europe &
Deputy to the Group Chief Executive Officer
We operate in Sweden, Denmark, Norway and Finland. In a disciplined market, our highly vertically integrated model enables us to capture profit at each part of the value chain delivering the highest segment margin across the Group.
Financial highlights1
Key performance indicators
| Year ended 30 September 2009 |
Pro forma year ended 30 September 2008 |
Change | |
|---|---|---|---|
| Controlled distribution‡‡ | 82.7% | 79.4% | +4.2% |
| Internet distribution‡‡ | 54.1% | 45.6% | +18.6% |
| Change | |
|---|---|
| Passengers† | -2.3% |
| Capacity†† | -2.4% |
| Average selling price# | +7.8% |
| Load factor††† | +0.1% |
| Brochure mix## | -7.9% |
- 2010 is likely to be challenging as the weakness of the Swedish krona puts significant pressure on margins, and in particular, long haul holidays.
- Further expand internet sales.
- Increase the proportion of customers who book our exclusive, concept hotels.
- Continue to build on the success of our world class, in-flight sales.
- Consolidate our position in the major Nordic outbound destinations of Spain, Greece, Cyprus, Turkey and Thailand.
- 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
- Supply was managed carefully in relation to demand to ensure that prices improved despite a marked tendency to later booking.
- By building a leading market position in a concentrated number of key destinations, Northern Europe has been able to leverage its buying power with hoteliers and specify the product tightly.
- Sales to our unique concept hotels including SunGarden, Sunwing and Sunprime increased to 27% of our programme, delivering 40% higher margins.
- Our world class, in-flight sales programme which captures customer orders prior to departure, delivered good rewards.
- We launched a new web platform and increased online holiday bookings to 54%, making Northern Europe one of the biggest online tour operators worldwide.
- Customer satisfaction rates of 96% result in approximately 57% of customers re-booking through one of our Northern European tour operators within two years.
Financial performance
The Northern Europe business delivered profit from operations of £86.4m, in line with the previous year. Revenue was 9% higher than in the prior year, at £1,059.3m. However, excluding the year on year impact of changes in foreign currency translation rates, underlying revenue was 2% ahead.
Despite the economic recession in the Northern European region, we were able to maintain industry-leading margins of over 8% for the full year. Capacity was maintained at similar levels to the prior year, down only 2%. However, average selling prices were increased by 8% as we sought to recover increased bed costs, fuel prices and inflationary increases in other operating costs.
Unlike our other European tour operating segments where losses in the winter season are typical for both Thomas Cook and the industry as a whole, our Northern European business generates a significant proportion of its profits in winter. The winter 2008/09 performance, in both Mainstream and Independent, was particularly affected by the difficult economic conditions which resulted in a £7m reduction in profit year on year at the Half Year. Trading in the summer season showed a strong recovery, however, despite the continued delayed booking pattern and subsequent reduction in the proportion of brochure bookings. As a result of this, and the benefits of cost saving initiatives, we were able to recover the £7m winter shortfall and deliver an operating margin of 11% in the second half of the year, ahead of the prior year.
Northern Europe now controls over 80% of its distribution, with internet bookings running at over 50% in all markets. This continues to be a key driver and differentiator in achieving margins of over 8%.
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