Thomas Cook Group An Introduction
Leading Global Travel Group
Who we are A leading global travel group Industry leading margins and focused on cash generation Leading portfolio of travel brands No 1 or 2 in our core markets Flexible asset light business model Strategy to deliver top line and margin growth Experienced management team Page 3
Key facts FY 2009 Revenue EBIT (margin) Source markets Passengers Retail outlets Online bookings Aircraft Shareholder structure Employees 9.3b 415m (4.5%) 21 22m 3,400 21% 94 100% Free float 31,000
Strong portfolio of travel brands Global umbrella brand Major local brands Other local brands Page 5
Our Strategy
Our strategy continues to serve us well Vision Strategic objectives Strengthening our business and investing for growth Growth drivers Maximise value of mainstream Become a leading independent travel provider Become the leading travel-related financial services provider Capture growth and value through M&A and partnerships Enablers Product Technology Customer insight Brands Financial rigour Values P R O U D Pioneering our future Results orientated Obsessed with customer service United as one team Driving robust decisions Page 7
There is top line growth in our model Financial Services Independent travel Mainstream travel Mergers & Acquisitions New high growth and/or high margin markets (e.g. BRIC markets) Bolt-on/ consolidation opportunities Continued growth from completed acquisitions Travel-related financial services New markets and product line extensions Maximising distribution and cross-sell opportunities Independent travel OTA market Online third party largely a new market for TCG Greater wholesale distribution to third party agents Growth of scheduled packages (e.g. Thomas Cook Signature) Mainstream travel ASP increases from better product mix and pricing activities Share gain from smaller operators Channel shift into faster growing online channel Page 8
We also have a large cost base to go after Commission/ Other Fuel Commission & Other Greater control of distribution and commission rate reductions Reduced agent costs in-destination Aviation excl. fuel Aviation and fuel Better buying of aviation services across the Group Best practice sharing between airlines e.g. on fuel efficiency Accommodation Accommodation costs Better buying process and use of Group buying power Co-ordination of activities and best practice sharing Other Opex Personnel Operating expenses Operating leverage; spread fixed costs over higher volumes Adopt a common approach to airline, personnel, IT etc. Cost of providing tourism services Operating expenses Page 9
Medium term margin growth potential Mainstream travel Independent travel Financial services M&A Margin pressure Cost efficiencies European OTA growth Forex growth New acquisitions Market development + + + + + ASP and trading margin growth Scheduled package growth New product launches Disposals of non-core assets Execution risk + + + Distribution gains Wholesale growth Improved crosssell rates = = = = = 110-130 bps 130-150 bps 10-20 bps N/A ~(150) bps Total 100-150 bps Note: Basis points improvement applies to total Group medium term revenue Page 10
Our Marketplace
Our core markets account for ~30% of global travel spend Japan 3.0% World leisure travel market 820bn¹ US 8.4% Rest of World 22.1% BRICs 8.7% Netherlands, UK, Belgium, France, Germany 25.8% Other Europe 24.4% Corporate Leisure Nordics 4.8% Canada 2.8% Thomas Cook core markets² Canada UK Belgium Germany Netherlands France Nordics³ Corporate Corporate Leisure Leisure Thomas Cook core markets Other markets Note: ¹Excludes spend on food, drink, fuel, entertainment, shopping, etc; ² These ten markets account for over 90% of total Group revenues; ³Sweden Norway, Finland, Denmark Source: UNWTO; Euromonitor, Thomas Cook Management analysis and estimates Page 12
Travel intermediary Leisure travel market Asset light Travel intermediaries Intermediaries between capacity suppliers and consumers Mainstream travel Pre-packaged holidays, primarily charter packages Independent travel + Individual components + or dynamically created packages Travel-related Financial Services Travel money Travel assurance Travel finance Asset heavy Direct suppliers Asset owners supplying capacity direct to consumers or intermediaries Thomas Cook Group focus Page 13
Our market place in 2009 Leisure travel market 2009 274b 96b Travel Intermediaries 96b FS 5b Other 9b Fly-drive 7b Cruise 6b City break 7b Accom only 11b Thomas Cook definition Financial Services Independent travel Direct Suppliers 178b Flight only 22b Package holiday 29b Mainstream travel Travel market Travel intermediary market Page 14 Source: Euromonitor
Online growth will be faster than offline Travel intermediary market 96b 4b 24b 110b FS 5b Online 34b CAGR (09-14)¹ 2.8% 1.1% 7.3% TCG market share FY09² ~9% ~6% 68b Offline 72b 1.1% ~11% 2009 2014 Online as a %: 25% 31% Note: ¹ Growth rates are real growth; ²TCG market share figures are management estimates Source: Euromonitor Page 15
Our Business by Segment
Thomas Cook UK Highly integrated and higher margin business Distribution Controlled distribution: ~80% Retail outlets: 796 In-house flying Thomas Cook airline Aircraft: summer winter Accommodation Exclusive & differentiated Destination castles c.92% 33 NB, 11 WB 27 NB, 10 WB c.40% Turkey No.1 50% share Egypt No.2 39% share Tunisia No.1 60% share Drivers of margin performance Strong retail, travel and foreign exchange brand Flexibility in capacity and destination Focus on higher margin products: Medium haul, 4* & 5* and all inclusive Exclusive and differentiated Focus on destination castles Yield management improvements Growing strong independent Travel proposition Strengthening financial services position Product mix focus on higher margin Capacity (%) FY09 FY08 Medium haul 72% 65% 4* and 5* 45% 41% All inclusive 41% 31% Page 17 Note: NB narrow body; WB wide body
Thomas Cook Northern Europe Highly integrated and highest margin business Distribution Controlled distribution: 84% Internet distribution 54% Retail outlets: 11 In-house flying Thomas Cook airline c.85% Aircraft: summer 8 NB, 3 WB winter 8 NB, 4 WB Accommodation Concept hotels 25% Exclusive hotels 90% Destination castles Majorca No.1 50% share Gran Canaria No.1 45% share Tenerife No.1 40% share Rhodes No.1 35% share Antalya No.1 25% share Drivers of margin performance Leading market position and No.1 brands Stable, rational market Volume concentrated to destinations where most Nordic customers travel Unique concept hotels (40% higher margin) Growth of online bookings (FY09: 54%, FY08 46%) Controlled distribution (FY09: 83%, FY08: 79%) On board tax free sales Most cost efficient aircraft Product mix focus on higher margin Capacity (%) FY09 FY08 4* and 5*¹ 49% 48% Of which Concept hotels 27% 26% Note:¹Based on hotel utilisation Page 18
Thomas Cook Central Europe Asset light business Distribution Controlled distribution: 27% Internet distribution: 7% Retail outlets: 1254 (1054 franchise) Transport Condor Car Accommodation Exclusive hotels 24% 43% of flight holidays 33% of holidays Drivers of margin performance Strong brand awareness - Neckermann Improving retail positioning Dynamic packaging Flexibility in capacity and destination Focus on differentiated product: Links to 300 concept hotels Strategic partnerships (Sentido, Iberostar) Consolidation opportunities Outbound destination castles Balearics No.1 32% share (S10) Canaries No.2 24% share (S10) Turkey No.2 13% share (S10) Egypt No.2 14% share (W09/10) Product mix focus on higher margin Total Capacity (%) FY09 FY08 4* and 5* 64% 64% All inclusive 32% 32% Exclusive hotels 24% 25% Page 19
Thomas Cook West/ East Europe Partially integrated, diverse businesses Distribution Controlled distribution: 51% Internet distribution: 13% Retail outlets: 1,102 In-house flying Belgium only Aircraft: Car (528 franchise) 58% of flight holidays 6 NB 42% of holidays Drivers of margin performance Brand strength in all markets Flexibility in capacity and destination Focus on higher margin products: Differentiated hotels Increasing exclusive content Belgium benefit of high vertical integration France transformative acquisition (Jet Tours) Accommodation Differentiated & Exclusive hotels 42% Outbound destination castles Belgium France Netherlands Antalya 29% 14% 15% Djerba 40% 23% 21% Monastir 30% 23% 19% Crete 42% 13% 20% Product mix focus on higher margin Capacity (%) FY09 FY08 4* and 5* 64% 63% All inclusive 36% 34% Page 20
Thomas Cook North America Mainstream - partially integrated Distribution Controlled distribution: 14% Internet distribution: 38% Retail outlets: 52 In-house flying Thomas Cook airline 49% Aircraft: winter 8 WB summer - Accommodation Differentiated and exclusive hotels 70% Mainstream destination trends (% of volume) Mexico - 40% Dominican Republic - 21% Cuba - 25% Drivers of margin performance Year round profitable volume Product differentiation (hotel exclusivity) Group buying power Continual aircraft utilization improvements Service excellence and cost leadership Responsible capacity growth Strong brands, including TC brand (Jan 2011) Independent strength, less reliant on mainstream Independent destination trends (% of volume) USA - 70% Europe - 10% Sun destinations - 13% Note: NB narrow body; WB wide body Page 21
Thomas Cook Airlines Germany Condor business model Strong, profitable stand alone airline Arms length transactions with German TO Balanced seat sales allow optimum yields Low cost base, ongoing efficiency programmes (airline synergies) Concentrated airport hubs (reduced from 22 to 10) No. 1 leisure carrier in Frankfurt Peak airport slots Sales split by Sold sales (%) 35% 59% 33% 21% 20% 32% Operating statistics Sold Seats FY09: 5.9m Aircraft: 25 narrow-body Airport bases: 10 9 wide-body Average load factor FY09: 87.1% Daily block hours/aircraft FY09: 10.8 Summer season weekly flights: >350 S10 destinations: 28 continental 29 intercontinental Most frequented destinations: Palma de Mallorca (80 flights per week) Antalya (60 flights per week) FY04 FY09 Seat only 3P tour operator TC TO Page 22
Financial Overview
Group financials Revenue -( m) EBIT ( m) and margin (%) 7,879 8,754 9,269 +9% CAGR 3.1 244 4.2 366 4.5 415 +30% CAGR EPS*and DPS (p) progressive dividend policy payout 40-50% EPS* 17.1 24.1 26.4 9.75 10.75 FY 07 FY 08 FY 09 FY 07 FY 08 FY 09 FY 07 FY 08 FY 09 * pre-exceptional EPS Operating cash flow** ( m) Net cash/(debt) ( m) 30 Sep 2007 394 274 294 205 30 Sep 2008 (292) 30 Sep 2009 (675) FY 07 FY 08 FY 09 ** Definition: cash generated by operations Page 24
Segment financials Segment Revenue % Revenue EBIT EBIT margin UK and Ireland, India and Middle East 3,098m 2008: 3,097m 33.4% 162m 2008: 143m 5.2% 2008: 4.6% % EBIT ** 36.8% Continental Europe 4,000m 2008: 3,620m 43.2% 127m 2008: 106m 3.2% 2008: 2.9% 28.8% Northern Europe 1,059m 86m 8.2% 2008: 972m 11.4% 2008: 86m 2008: 8.9% 19.6% North America 370m 18m 4.8% 2008: 384m 4.0% 2008: 6m 2008: 1.6% 4.1% Airlines Germany 1,061m 2008: 978m 8.0% * 47m 2008: 45m 4.5% 2008: 4.6% 10.7% * The percentage of Group revenue for Airlines Germany has been calculated using the external revenue figure of 741m. ** The contribution to Group has been based on the profit from operations figure of 441m, which excludes corporate costs of 26m. Page 25