The rebalancing of mainstream and independent has transformed our profitability delivering a step-change in EBIT margins in the 2009 financial year.
- Michael Friisdahl
- Chief Executive Officer,
North America
Our North American business, which operates predominantly in Canada, is now the leading wholesaler in that market. This follows its transformation from pure tour operating through the acquisition of TriWest in 2008, with a significant step-up in profitability.
Financial highlights1
Key performance indicators
| Year ended 30 September 2009 |
Pro forma year ended 30 September 2008 |
Change | |
|---|---|---|---|
| Controlled distribution‡‡ | 14.1% | 15.7% | -10.2% |
| Internet distribution‡‡ | 38.1% | 20.6% | +85.0% |
| Change | |
|---|---|
| Passengers† | -20.2% |
| Capacity†† | -20.7% |
| Average selling price# | +1.7% |
| Load factor††† | +0.5% |
| Brochure mix## | +0.9% |
- The outlook is more positive in the independent segment and, while there is still over capacity in the mainstream travel market, consolidation is possible with the proposed Sunwing merger with TUI.
- Pursue flight and accommodation cost savings and strengthen hotel exclusivities.
- Grow independent travel through dynamic packaging technology and improved product line.
- Strengthen controlled distribution, especially online.
- Grow newly launched Financial Services division and expand product range.
- 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
- Our mainstream packages are strongly differentiated and while 70% of our partner hotels are exclusive to us, levels of commitment required are low.
Independent
- Thomas Cook North America is now less exposed to the highly competitive mainstream market in Canada while benefiting from the higher profitability of the independent segment.
- The majority of our passengers are independent travellers and with new dynamic packaging technology, we can reinforce our position in this market.
- The rebalancing of mainstream and independent has transformed our profitability delivering a step-change in EBIT margins in the 2009 financial year.
Financial services
- We have relaunched Thomas Cook Financial Services offering the first multi-currency automatic telling machines in Canada.
Financial performance
The North American segment delivered profit from operations of £17.9m in the year, a significant improvement from the £6.0m in the prior year. Operating margins also improved significantly to 4.8%, from 1.6% in the prior year. Revenue was 3.6% lower than in the prior year, at £370.4m. Excluding the year on year impact of changes in foreign currency translation rates and the acquisition of TriWest, underlying revenue was 23% lower.
The threefold improvement in profitability reflects the transformational effect of the TriWest acquisition. As a result of the successful integration of this business with our existing Independent business, and the realisation of substantial merger synergies, the greatest proportion of profits in the North American segment now come from our Independent sector. This reduces our exposure to the highly competitive mass market sector, which continues to suffer from significant over-capacity. In response to the continuing tough conditions in this sector, management reduced capacity by 21%, but this was not sufficient to prevent margin erosion. Swine flu also adversely impacted the results by £2.6m.
North America has successfully increased its proportion of internet distribution to over 38% which has resulted in significant benefits and cost efficiency, particularly for the Independent business.
Back to top
