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TUI AG / Annual Financial Report
TUI AG: Annual Financial Report - Part 2
08-Dec-2016 / 08:01 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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financial highlights
EUR million 2013 / 14 5 2014 / 15 2015 / 16 Var. %
restated restated
Turnover 18,536.8 17,515.5 17,184.6 - 1.9
Underlying EBITA1
Northern Region 404.9 538.4 460.9 - 14.4
Central Region 162.8 103.5 88.5 - 14.5
Western Region 83.3 68.7 86.1 + 25.3
Hotels & Resorts 202.9 234.6 287.3 + 22.5
Cruises 9.7 80.5 129.6 + 61.0
Other Tourism 29.0 8.4 4.6 - 45.2
Tourism 892.6 1,034.1 1,057.0 + 2.2
All other segments - 114.1 - 80.8 - 56.5 + 30.1
TUI Group 778.5 953.3 1,000.5 + 5.0
Discontinued operations 88.7 107.2 92.9 - 13.3
Total 867.2 1,060.5 1,093.4 + 3.1
EBITA2 778.54 794.6 898.1 + 13.0
Underlying EBITDA 1,068.64 1,344.1 1,379.6 + 2.6
EBITDA 1,095.34 1,214.7 1,305.1 + 7.4
Net profit for the period 332.04 407.6 464.9 + 14.1
(continuing operations)
Earnings per share 0.484 0.66 0.61 - 7.6
(continuing operations)EUR
Equity ratio% 18.1 17.2 22.5 + 5.33
Net capex and investments 637.1 659.0 691.0 + 4.9
Net financial position - 292.4 4 213.7 - 31.8 n. a.
Employees 77,028 76,036 66,779 - 12.2
Differences may occur due to rounding.
1 In order to explain and evaluate the operating performance by the
segments, EBITA adjusted for one-off effects (underlying EBITA) is
presented. Underlying EBITA has been adjusted for gains / losses on
disposal
of investments, restructuring costs according to IAS 37, ancillary
acquisition costs and conditional purchase price payments under purchase
price allocations and other expenses for and income from one-off items.
2 EBITA comprises earnings before net interest result, income tax and
impairment of goodwill excluding losses on container shipping and excluding
the result from the measurement of interest hedges.
3 Equity divided by balance sheet total in %, variance is given in
percentage points.
4 Excl. LateRooms, Hotelbeds Group and Specialist Group
5 Pro forma data, unaudited: Hotelbeds Group and Specialist Group were
treated as discontinued operations since 2013 / 14.
Dear Shareholders,
We are delighted to report that TUI Group recorded an excellent development
in the completed financial year 2015 / 16. Despite continued major
geopolitical challenges, we managed to increase our operating result again
by 14.5 per cent. Our positive performance underpins the great resilience
of
our strategic positioning as a vertically integrated tourism group. Thanks
to our access to all elements of the value chain, we are very flexible in
responding to changes in our customers' travel preferences. Your Company is
therefore in an excellent state of health. Let me thank you all for your
interest and support in the completed year.
And yet we will not rest on our laurels but will press ahead with our
growth
roadmap. In the cruise business, we have expanded our fleet to 14 ships
with
the launch of Mein Schiff 5 in the German market and TUI Discovery in the
UK. We are aiming to become one of Europe's leading cruise liners. That is
why we will continue to invest in new ships in the next few years, at both
TUI Cruises and Thomson Cruises and in our luxury cruise subsidiary
Hapag-Lloyd Cruises.
We are also pursuing an ambitious growth roadmap in Hotels & Resorts. In
early summer, we opened the first two hotels of our new hotel brand TUI
Blue. Overall, our hotel portfolio for our core brands Riu, Robinson, TUI
Blue and TUI Magic Life and our hotel concepts Sensatori, Sensimar and
Family Life grew by nine hotels in the completed financial year. In
expanding our portfolio of Group-owned hotels, we find year-round
destinations offering 365 days of sunshine particularly attractive. Our
investments focus on the Caribbean, a destination for customers from both
Europe and the United States.
The consistent expansion of the cruise and hotel segment will gradually
change the structure of your Company. We are steadily transforming from a
group with a strong trading business to a content provider with strong
market positions in the cruise and hotel sector, which already contribute
around half of our profits today. Our transformation will take us from a
tour operator to a hotel and cruise group, further reducing the strong
seasonality of our business, which currently still impacts the valuation by
rating agencies.
To build TUI Group further, we are relying on a mix of centrally managed
areas and our strong local companies
in the individual markets. This will enable us to benefit from economies of
scale on a global level without losing customer centricity and our focus on
their individual needs and expectations. We have identified six areas in
which we can benefit from the strength of a global player: brand, IT,
aviation, hotels and product purchasing, cruises, and destination services.
We have exited or are planning to sell business operations that will not
deliver synergies under the umbrella of TUI. In the completed financial
year, we sold Hotelbeds Group, world market leader for bedbanks, to the
British investor Cinven Capital Management and the Canada Pension Plan
Investment Board for 1.2 billion euros. This very successful transaction is
good for the future of Hotelbeds and good for you, TUI Group's
shareholders.
The proceeds from the sale will be used to promote our growth roadmap in
hotels and cruises and strengthen our balance sheet.
Following the successful sale of Hotelbeds Group, we initiated the
divestment of Travelopia, a collection of specialist tour operation brands
that had already been managed as an independent entity since the merger
between TUI AG and TUI Travel PLC at the end of December 2014. Travelopia
combines more than 50 great brands and successful companies. However, there
is limited linkage to our core tourism business and limited ability to
achieve any economies of scale. Due to the potential impact on our
profitability and the large number of brands, this business will not
continue under our master brand TUI. I am therefore convinced that the best
way to maximise the value of this business for you, our shareholders, is to
dispose the specialists as a whole.
The portfolio of specialists will be disposed in one transaction in
financial year 2016 / 17, with the exception of the two tour operation
brands Crystal Ski and Thomson Lakes & Mountains, which we have transferred
into TUI UK & Ireland. These two vertically integrated brands deliver
strong
synergies with our core tourism business. Both Crystal Ski and Thomson
Lakes
& Mountains play a major role in securing the load factor for our aircraft
fleet in the UK, in particular in winter, and therefore generate the
synergy
potential the other specialist providers lack.
In the completed financial year, we have taken major steps to move towards
the structure and strategic positioning our Group is aiming to achieve. Our
integrated business model has proven robust and future-proof, so that we
are
in a very good position to tackle the next few years.
In the framework of the merger with TUI Travel at the end of 2014, we
promised you, our shareholders, that we will deliver EBITA CAGR of at least
10 per cent over the three years to 2017 / 18. We maintain that guidance,
and we are delivering the results we had promised you.
TUI Group's positive economic performance is also reflected in the
attractive dividend we will again be distributing. We have submitted a
proposal to the Annual General Meeting to increase the dividend for
financial year 2015 / 16 to 63 cents per share, up by around 13 per cent on
the prior year.
TUI Group has demonstrated its strength once more in year two. As the
world's leading tourism group, we are pursuing a clear strategic roadmap in
order to create maximum value for you, our shareholders.
Let me thank you for your confidence, support and loyalty to TUI.
Sincerely yours,
Friedrich Joussen
CEO of TUI AG
key figures Target 2015 target achievement outlook Target
/ 16 1 Actual 2015 / 16 2016 / 17
Turnover in EUR bn
at least 3 % 2 17.2 + 1.4 % 2 approximately + 3
% 2
EBITA (underlying) in
EUR m
at least 10 % 2 1,001 + 14.5 % 2 at least + 10 % 2
Adjustments in EUR m
1362, 3 costs 103 costs 80 costs
Net capex and
investments in EUR bn
0.8 0.7 1.04
Net debt in EUR bn
broadly neutral 2, 3 broadly neutral approximately 0.8
net debt
1 As published on 10 December 2015, the outlook was updated during the year
2 Variance year-on-year assuming constant foreign exchange rates are
applied
to the result in the current and prior period and based on the current
group
structure; guidance relates to continuing operations and excludes any
disposal proceeds for Travelopia and Hapag-Lloyd AG.
3 Target adjusted treating Hotelbeds Group and Specialist Group as
discontinued operations
4 Excluding aircraft orderbook finance
Report of the
Supervisory Board
Ladies and Gentlemen,
We have successfully completed financial year 2015 / 16. Our employees,
Executive Board and Supervisory Board
have jointly achieved many objectives and exceeded some targets. Key
projects for the future of the Company have been completed or are well on
track. In the Report of the Supervisory Board presented below, I would
like,
on behalf of the entire Supervisory Board, to tell you about the key
activities of our various committees in financial year 2015 / 16.
Two years after the merger between TUI AG and TUI Travel PLC, the
integration of the two companies is almost complete. The synergies we had
promised were delivered. The merger and the integration have created the
conditions for the future growth of the Company that had been sought by the
Executive Board and Supervisory Board. Apart from close monitoring of the
synergies, the focus of the work by the Supervisory Board and Integration
Committee in the financial year under review was on cultural integration.
Our declared goal is and remains not to be a German or British but an
international company. The Supervisory Board itself is a good example: only
three of the ten shareholder representatives elected by you have a German
passport. The successful work performed by the Executive Board in the
integration process is also demonstrated by the results of our TUIgether
employee survey, performed for the second time in the past financial year.
Due to the clear corporate strategy defined by the Executive Board and
supported by the Supervisory Board, but also the expansion of career and
development opportunities, the identification and satisfaction of the
employees of your Company have improved substantially.
Overall, the completed financial year was characterised by the continued
volatility of the external framework. With the attack on Brussels Airport
in
March 2016, terrorism reached a key source market. Our employees and
management have delivered an impressive performance in the interests of our
customers: they have given a face to customers' trust in the TUI Smile. We
were also challenged by changes in customer demand for travel to Turkey and
North Africa: our debates focused on shifting capacity to alternative
destinations, initiated and successfully implemented by the Executive
Board,
and the organisation of Group-wide crisis management. We likewise addressed
the decision taken in the UK in June 2016 to be the first country to leave
the European Union since its inception. Long before and directly after the
Brexit vote, the Executive Board and Supervisory Board discussed potential
consequences and an action plan, and this remains a matter of attention.
Thanks to its flexible business model, TUI AG managed to increase its
earnings year-on-year in financial year 2015 / 16, despite the challenging
geopolitical framework. That is a remarkable achievement, as numerous
competitors and peers had to correct their earnings guidance downward, in
some cases quite substantially.
The Supervisory Board and its Committees discussed many technical issues
and
business transactions requiring its approval. Apart from monitoring
compliance with the German Corporate Governance Code (DCGK) and regularly
discussing questions related to the UK Corporate Governance Code (UK CGC),
our work focused on reviewing and
debating the financial statements of TUI AG and the Group. We also closely
monitored the focussing of the business model and the associated
divestments. Both the completed divestment of Hotelbeds Group and the
planned sale of Specialist Group are prerequisites for investments in
growth
during the next few years. The Strategy Committee formed after the 2016
Annual General Meeting provides a key platform for engaging in an even more
intensive exchange with the Executive Board about strategically relevant
decisions and preparing the debates of the Supervisory Board.
Although the forthcoming financial year 2016 / 17 entails uncertainty
regarding the geopolitical situation and the further Brexit process, we
have
every reason to look ahead with confidence. TUI AG is on a growth path. Our
business model continues to progress consistently and systematically from
distribution towards production with integrated control of value creation.
Our clear strategic direction makes TUI AG an attractive and promising
investment.
On behalf of the entire Supervisory Board, let me express warm gratitude to
our employees and the Executive Board for an excellent job done in
financial
year 2015 / 16.
Cooperation between the Executive Board and the Supervisory Board
In a stock corporation under German law, there is a mandatory strict
separation of management of a company and oversight over management. While
the management of the company is the exclusive task of the executive board,
the supervisory board is in charge of advising and overseeing the executive
board. As the oversight body, the Supervisory Board provided ongoing advice
and supervision for the Executive Board in managing the Company in
financial
year 2015 / 16, as required by the law, the articles of association and our
own terms of reference. Its actions were guided by the principles of good
and responsible corporate governance. Our monitoring activities essentially
served to ensure that the management of business operations and the
management of the Group were lawful, orderly, fit for purpose and
commercially robust. The individual advisory and oversight tasks of the
Supervisory Board are set out in terms of
reference. Accordingly, the Supervisory Board is, for instance, closely
involved in entrepreneurial planning processes and the discussion of
strategic issues. Moreover, there is a defined list of specific Executive
Board decisions requiring the consent of the Supervisory Board, some of
which call for detailed review in advance and require the analysis of
complex facts and circumstances from a supervisory and consultant
perspective.
TUI AG falls within the scope of the German Industrial Co-Determination Act
(MitbestG). Its Supervisory Board is therefore composed of an equal number
of shareholder representatives and employee representatives. Employee
representatives within the meaning of the Act include a senior manager
(section 5 (3) of the German Works Council Constitution Act) and three
trade
union representatives. All Supervisory Board members have the same rights
and obligations and they all have one vote in voting processes. In the
event
of a tie, a second round of voting can take place according to the terms of
reference for the Supervisory Board, in which case the Chairman of the
Supervisory Board has the casting vote.
In written and verbal reports, the Executive Board provided us with
regular,
timely and comprehensive information at our meetings and outside our
meetings. The reports encompassed all relevant facts about strategic
development, planning, business performance and the position of the Group
in
the course of the year, the risk situation, risk management and compliance,
but also reports from the capital markets (e. g. from analysts). The
Executive Board discussed with us all key transactions of relevance to the
Company and the further development of the Group. Any deviations in
business
performance from the approved plans were explained in detail. The
Supervisory Board was involved in all decisions of fundamental relevance to
the Company in good time. We fully discussed and adopted all resolutions in
accordance with the law, the Articles of Association and our terms of
reference. We were comprehensively and speedily informed about specific and
particularly urgent plans and projects, including those arising between the
regular meetings. As Chairman of the Supervisory Board, I was regularly
informed about current business developments and key transactions in the
Company between Supervisory Board meetings.
Deliberations in the Supervisory Board and its Committees
Prior to Supervisory Board meetings, the shareholder representatives on the
Supervisory Board and the employees' representatives met in separate
meetings, which were regularly also attended by Executive Board members.
In financial year 2015 / 16, we again recorded a gratifyingly high meeting
attendance, as we have done for several years. Average attendance was 96.6
%
(previous year 95.1 %) at plenary meetings and 90.7 % (previous year 96.9
%)
at Committee meetings. No Supervisory Board member attended fewer than half
of the Supervisory Board meetings in financial year 2015 / 16. Members
unable to attend a meeting usually participated in the voting through
proxies. Preparation of all Supervisory Board members was greatly
facilitated by the practice of distributing documents in advance in the
run-up to the meetings and largely dispensing with handouts at meetings.
Attendance at
meetings of the
Supervisory Board
2015/16
Name Super- Presi- Audit Nomina- Integra- Galaxy
visory ding Com- tion tion Commit-
Board Commit- mit- Commit- Commit- tee
tee tee tee tee
Prof. Dr Klaus 8 (8) 7 (7) 1 6 (6) 3 (3) 1 3 (3) 1 2 (2)
Mangold (Chairman) 1 1
Frank Jakobi (Deputy 8 (8) 6 (7) 2 3 (3) 2 (2)
Chairman) 2 2
Sir Michael 8 (8) 7 (7) 2 3 (3) 3 (3) 2
Hodgkinson (Deputy 2
Chairman) 2
Andreas Barczewski 8 (8) 4 (4) 6 (6)
Peter Bremme 8 (8) 3 (3)
Prof. Dr Edgar Ernst 8 (8) 6 (6) 3 (3)
1
Wolfgang Flintermann 2 (2)
(since 13 June 2016)
Angelika Gifford 4 (5) 1 (2)
(since 9 February
2016)
Valerie Gooding 7 (8) 1 (2) 1 (2)
Dr Dierk Hirschel 8 (8) 3 (3)
Janis Kong 8 (8) 2 (3)
Peter Long (since 9 4 (5) 2 (2)
February 2016) 1
Coline McConville 8 (8) 3 (3) 2 (2)
Alexey Mordashov 4 (5) 2 (3) 0 (0) 2 (2)
(since 9 February
2016)
Michael Pönipp 8 (8) 6 (6)
Timothy Powell 3 (3) 3 (3) 1 (1)
(until 9 February
2016)
Wilfried Rau 4 (4)
(deceased on 30
March 2016)
Carmen Riu Güell 7 (8) 5 (7) 3 (3)
Carola Schwirn 8 (8)
Maxim Shemetov 3 (3) 4 (4) 3 (3)
(until 9 February
2016)
Anette Strempel 8 (8) 7 (7)
Prof. Christian 3 (3) 3 (3) 0 (1)
Strenger (until 9
February 2016)
Ortwin Strubelt 8 (8) 3 (3) 6 (6)
Stefan Weinhofer 5 (5)
(since 9 February
2016)
Marcel Witt (until 9 3 (3)
February 2016)
1 Chairman of Committee
2 Deputy Chairman of Committee
(In brackets: number of meetings held)
Key topics discussed by the Supervisory Board
1. At our meeting on 21 October 2015, we discussed the replacement of
variable pay for the Supervisory Board members. In line with the
recommendations of the Corporate Governance Codes in Germany and the UK, a
proposal for a resolution to be submitted to the Annual General Meeting
2016
was adopted setting out a transformation to purely fixed compensation. We
also defined the personal performance factors for the annual performance
bonuses for members of the Executive Board in financial year 2014 / 15 and
the relevant reference indicators for financial year 2015 / 16. Following
due deliberation, we established the appropriateness of the remuneration
and
pensions for Executive Board members. The Supervisory Board also approved
the budget for financial year 2015 / 16 and took note of the planning for
the two subsequent years. We resolved the annual capital increase in
conjunction with the issue of employee shares in 2015 and obtained
information about the status of the IPO of Hapag-Lloyd AG.
2. At its meeting on 9 December 2015, the Supervisory Board discussed in
detail the annual financial statements of TUI Group and TUI AG, each having
received an unqualified audit opinion from the auditors, the combined
management report for TUI Group and TUI AG and the Report by the
Supervisory
Board, the Corporate Governance Report and the Remuneration Report. The
discussions were also attended by representatives of the auditors.
Following
comprehensive debate of these reports and its own review carried out on the
previous day by the Audit Committee, the Supervisory Board endorsed the
findings of the auditors and approved the financial statements prepared by
the Executive Board and the combined management report for TUI AG and the
Group. The annual financial statements for 2014 / 15 were thereby adopted.
Moreover, the Supervisory Board approved the Report by the Supervisory
Board, the Corporate Governance Report and the Remuneration Report. It also
adopted the invitation to the ordinary AGM 2016 and the proposals for
resolutions to be submitted to the AGM.
We also decided to adjust our targets for the composition of the
Supervisory
Board (see Corporate Governance Report) and considered the HR and Social
Reports, our TUIgether employee survey, the implementation of the female
and
gender quotas in Germany, the IT strategy and safety. We took a careful
look
at the results of the efficiency review of the Supervisory Board conducted
at the end of financial year 2014 / 15 and decided on the next steps. We
also resolved the 2015 declaration of compliance with the German Corporate
Governance Code and the Corporate Governance Declaration required by UK
CGC.
After intensive deliberations, we also approved the launch of the
divestment
process for Hotelbeds Group.
3. On 8 February, the Supervisory Board mainly discussed TUI AG's interim
statement and report for the quarter ended 31 December 2015 and prepared
the
2016 Annual General Meeting. Our deliberations also focused on
the disposal process for Hotelbeds Group and the turnaround in Germany. The
Supervisory Board approved the construction of two expedition newbuilds for
Hapag-Lloyd Cruises. We also agreed measures resulting from the Supervisory
Board's efficiency review, developed in the framework of a workshop on 21
January 2016.
4. On 9 February 2016, the Supervisory Board met for its first meeting in
its new composition directly after the 2016 AGM. Following the election of
the Supervisory Board chairman and two deputy chairmen, we elected the
members of the Presiding Committee, Audit Committee, Nomination Committee,
Integration Committee, Strategy Committee and Mediation Committee.
5. At its extraordinary meeting on 27 April 2016, convened at short notice
due to its urgency, the Supervisory Board approved the sale of Hotelbeds
Group following comprehensive information from the Executive Board and
external advisors and intensive reviews carried out by the Supervisory
Board
itself. Our deliberations focused on the appropriateness of the sale price,
the key terms and conditions of the transaction, transaction security,
financing and safeguarding of employee interests.
6. On 10 May 2016, we debated TUI AG's interim report for the second
quarter
ended on 31 March 2016 and the half-year financial report. The Supervisory
Board also discussed the organisational Health & Safety structure, the
measures launched by the Executive Board as a result of the TUIgether
employee survey, the OneShare employee share programme and the impact of a
potential Brexit. The Supervisory Board also approved a large number of
transactions (e. g. acquisition of all shares in atraveo GmbH, acquisition
of the cruise ship Legend of the Seas and Transat France SA, launch of a
divestment process for Specialist Group). The Supervisory Board furthermore
had to again adopt a resolution regarding the newbuild of two expedition
ships for Hapag-Lloyd Cruises, as the shipyard envisaged at the meeting in
February was no longer available due to a change in ownership. We also
approved the issue of employee shares in financial year 2015 / 16.
7. By written circulation on 30 June 2016, the termination agreement with
Mr
William Waggott was adopted with effect from 30 June 2016.
8. At an extraordinary meeting on 4 July 2016, convened at short notice due
to its urgency (conference call), the Supervisory Board intensively
discussed the outcome of the Brexit referendum and its potential impacts on
TUI AG.
9. By written circulation on 17 August 2016, we approved the increase in
TUI
AG's capital stock for the issue of employee shares in 2016. Following the
completion of a tender process for a change in auditors and based on the
recommendation of its Audit Committee, the Supervisory Board also resolved
to propose the appointment of Deloitte GmbH Wirtschaftsprüfungsgesellschaft
as auditors for TUI AG's consolidated and individual financial statements
and all relevant interim reports for financial year 2016 / 17.
10. Supplementing the resolution adopted on 30 June 2016, we resolved by
written circulation on 19 August 2016 the cash settlement of entitlements
still held by Mr Waggott from the Share Awards taken over from TUI Travel
PLC as at 31 August 2016. (for further details: see Remuneration Report
page
127).
11. During a strategy offsite meeting on 14 and 15 September 2016, we
intensively debated various key topics: apart from IT-supported customer
relationship management, TUI's business model, and growth strategies for
Hotels & Resorts and Cruises, we addressed challenges in source market
Germany and approaches for solutions. Further topics included the sale of
Specialist Group, potential business in China, the airline platform
OneAviation and the impact of Brexit. On the second day, we comprehensively
debated the five-year plan submitted by the Executive Board. We also
discussed crisis management, the Security, Health & Safety structure, and
were given a report on the potential impact of the revision of the European
Package Tour Directive. The Supervisory Board then approved the acquisition
of three Boeing 787-9s for Northern Region and the refinancing of the
existing 2014 / 19 high-yield bond worth EUR 300.0 m. The Supervisory Board
moreover debated Executive Board matters and D&O insurance.
In addition to the Supervisory Board meetings, a further workshop with
internal and external experts on 6 November 2015 was devoted to selected
issues of German and British corporate governance.
Meetings of the Presiding Committee
The Presiding Committee is in charge of various Executive Board issues
(including succession planning, new appointments, terms and conditions of
service contracts, proposals regarding the remuneration system). It also
prepares the meetings of the Supervisory Board.
Members of the Presiding Committee:
Until 9 February 2016:
* Prof. Klaus Mangold (Chairman)
* Andreas Barczewski
* Carmen Riu Güell
* Sir Michael Hodgkinson
* Frank Jakobi
* Maxim Shemetov
* Anette Strempel
From 9 February 2016:
* Prof. Klaus Mangold (Chairman)
* Peter Bremme
* Carmen Riu Güell
* Sir Michael Hodgkinson
* Frank Jakobi
* Alexey Mordashov
* Anette Strempel
* Ortwin Strubelt
1. At a joint meeting of the Presiding Committee and Nomination Committee
on
20 October 2015, we discussed the determination of the personal performance
factors for the annual performance bonus for financial year 2014 / 15 and
the reference indicators for the Executive Board's annual performance bonus
for financial year 2015 / 16. The Presiding Committee also discussed the
appropriateness of Executive Board remuneration and pensions. The Committee
furthermore prepared the Supervisory Board's proposal to the AGM for a new
system of Supervisory Board remuneration.
2. At a meeting on 27 October 2015, convened at short notice due to the
urgency of the issue (conference call), the Presiding Committee intensively
debated the status of preparations and the latest developments regarding
the
IPO of Hapag-Lloyd AG in the light of the current situation in container
shipping.
3. At its meeting on 9 December 2015, the Presiding Committee discussed
target achievement for the Executive Board's annual performance bonus for
financial year 2014 / 15 and the appropriateness of Executive Board
remuneration and pensions. It also debated adjustment of the targets for
the
composition of the Supervisory Board.
4. At its meeting on 8 February 2016, the Presiding Committee discussed in
particular Executive Board matters, the activities of the Supervisory Board
and its committees after the 2016 AGM and the status proceedings Erzberger
versus TUI AG on EU conformity of the German Industrial Co-Determination
Act.
5. At its meetings on 9 May 2016, the Presiding Committee debated business
allocation for the Executive Board following the sale of Hotelbeds Group
and
the potential early redemption of the share awards rolled over from TUI
Travel PLC to TUI AG.
6. At an extraordinary meeting on 29 June 2016, convened at short notice
due
to the urgency of the issue, the Presiding Committee discussed the impact
of
the Brexit vote of 23 June 2016. It also prepared the extraordinary
Supervisory Board meeting on 4 July 2016, dealing with the same issue, and
discussed Executive Board matters.
7. On 16 August 2016, using the written circulation process and based on
relevant documents, the Presiding Committee adopted a recommendation for a
resolution to be adopted by the Supervisory Board about the early cash
settlement of Mr Waggott's entitlements from the share awards rolled over
from TUI Travel PLC as at 31 August 2016.
8. On 14 September 2016, we prepared, inter alia, the resolution to be
adopted by the Supervisory Board on the cash settlement of the entitlements
still held by Mr Long and Mr Burling from the share awards rolled over from
TUI Travel PLC as at 30 September 2016.
Audit Committee
Members of the Audit Committee:
Until 9 February 2016:
* Prof. Edgar Ernst (Chairman)
* Andreas Barczewski
* Prof. Klaus Mangold
* Michael Pönipp
* Minnow Powell
* Prof. Christian Strenger
* Ortwin Strubelt
From 9 February 2016:
* Prof. Edgar Ernst (Chairman)
* Andreas Barczewski
* Dr Dierk Hirschel
* Janis Kong
* Prof. Klaus Mangold
* Coline McConville
* Michael Pönipp
* Ortwin Strubelt
The Audit Committee held six ordinary meetings in the financial year under
review. It elected Prof. Edgar Ernst as Chairman of the Audit Committee on
19 February 2016 using the written circulation procedure. For the tasks and
the advisory and resolution-related issues discussed by the Audit
Committee,
we refer to the comprehensive report on page 20.
Nomination Committee
The Nomination Committee proposes suitable shareholder candidates to the
Supervisory Board for its election proposals to the Annual General Meeting
or appointment by the district court.
Members of the Nomination Committee:
Until 9 February 2016:
* Prof. Klaus Mangold (Chairman)
* Carmen Riu Güell
* Sir Michael Hodgkinson
* Maxim Shemetov
From 9 February 2016:
* Prof. Klaus Mangold (Chairman)
* Carmen Riu Güell
* Sir Michael Hodgkinson
* Alexey Mordashov
1. Regarding the joint meeting of the Nomination Committee and Presiding
Committee on 20 October 2015, we refer to the above notes in the section on
the Presiding Committee.
2. At its meeting on 8 December 2015, the Nomination Committee discussed
the
future composition of the Supervisory Board and the composition of the
shareholder side.
3. At its meeting on 8 February 2016, the Nomination Committee reflected on
the work of the Supervisory Board and its committees after the AGM 2016.
Strategy Committee
The Strategy Committee was established on 9 February 2016 by resolution of
the Supervisory Board. Its task is to advise the Executive Board in
developing and implementing the corporate strategy. Apart from the
Committee
members, the meetings of the Strategy Committee are regularly attended by
Sir Michael Hodgkinson, and by Ms Riu Güell on hotel issues.
The members of the Strategy Committee are:
* Peter Long (Chairman)
* Angelika Gifford
* Valerie Gooding
* Frank Jakobi
* Prof. Klaus Mangold
* Alexey Mordashov
1. At its first meeting on 6 May 2016, the Strategy Committee planned its
mode of operation and defined the scope and topics for further meetings. It
also discussed potential focus areas for the Supervisory Board's strategy
offsite meeting in September. Detailed consideration included a strategy
for
customer growth and options for Specialist Group.
2. At its meeting on 30 June 2016, the Strategy Committee devoted full
attention to the possible repercussions of the Brexit vote and its
potential
impacts on TUI AG and its competitors. In a joint discussion with the
Executive Board, the Strategy Committee furthermore discussed the proposed
topics for the Supervisory Board's strategy offsite meeting in September
2016 and opportunities to re-invest the proceeds from the sale of Hotelbeds
Group. Apart from the strategic measures relating to the turnarounds in
Germany and France, the debate also focused on TUI AG's customer
relationship management.
Integration Committee
The Integration Committee was established by the Supervisory Board for a
period of two years after the completion of the merger (until December
2016). Its task is to advise and oversee the Executive Board during the
integration process required after the merger. In this regard, the
Supervisory Board had resolved to additionally seek external advice, above
all in monitoring the synergies, from Deloitte auditors whose experts also
regularly attended the meetings of the Integration Committee.
Members of the Integration Committee:
Until 9 February 2016:
* Prof. Klaus Mangold (Chairman)
* Sir Michael Hodgkinson (Deputy Chairman)
* Prof. Edgar Ernst
* Frank Jakobi
* Minnow Powell
* Prof. Christian Strenger
From 9 February 2016:
* Prof. Klaus Mangold (Chairman)
* Sir Michael Hodgkinson (Deputy Chairman)
* Prof. Edgar Ernst
* Valerie Gooding
* Frank Jakobi
* Coline McConville
1. At its meeting on 8 December 2015, the Integration Committee initially
discussed a sharpening of its focus on aspects of cultural integration. It
also reviewed the status of synergy effects and the progress of
implementation of the global brand strategy oneBrand towards unified
branding. The debate also focused on the results of the TUIgether employee
survey and measures to be derived from the survey.
2. On 10 May 2016, the Integration Committee discussed a report on
integration progress and the status of
the synergy effects. It also intensively debated a presentation by Deloitte
on best practices in following up on merger synergies. Following a
continuation of the debate about ways to culturally embed the measures
derived from the TUIgether employee survey, the Committee's deliberations
focused on the remuneration structure
for the Group's top management level. The Committee also obtained
information about the successful brand migration in the Netherlands.
3. At its meeting on 13 September 2016, the Integration Committee discussed
the report on integration progress and the status of synergy effects as
well
as TUI Group's new unified HR strategy. It also received reports about the
status of numerous HR activities that had been initiated or planned.
Corporate Governance
Due to the primary quotation of the TUI AG share on the London Stock
Exchange and the constitution of the Company as a German stock corporation,
the Supervisory Board naturally also regularly and comprehensively deals
with German and British corporate governance. Apart from the mandatory
observance of the rules of the German Stock Corporation Act (AktG),
MitbestG, the Listing Rules and the Disclosure and Transparency Rules, TUI
AG had announced in the framework of the merger that the Company was going
to make every practicable effort to observe both the German Corporate
Governance Code (DCGK) and - as far as practicable - the UK GCG.
For the DCGK - conceptually founded, inter alia, on the German Stock
Corporation Act - we issued an unqualified declaration of compliance for
2016 pursuant to section 161 of the German Stock Corporation Act, together
with the Executive Board. By contrast, there are some deviations from the
UK
CGC due for the most part to the different concepts underlying a one-tier
management system for a public listed company in the UK (one-tier board)
and
the two-tier management system comprised of Executive Board and Supervisory
Board in a stock corporation based on German law.
More detailed information on corporate governance, the declaration of
compliance for 2016 pursuant to section 161 of the German Stock Corporation
Act and the declaration on deviations from the UK CGC is provided in the
Corporate Governance Report in the present Annual Report, prepared by the
Executive Board and the Supervisory Board (page 117), as well as on TUI
AG's
website.
Audit of the annual and consolidated financial statements of TUI AG and the
Group
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,
Hanover, audited the annual financial statements of TUI AG prepared in
accordance with the provisions of the German Commercial Code (HGB), as well
as the joint management report of TUI AG and TUIGroup, and the consolidated
financial statements for the 2015 / 16 financial year prepared in
accordance
with the provisions of the International Financial Reporting Standards
(IFRS), and issued their unqualified audit certificate. The above
documents,
the Executive Board's proposal for the use of the net profit available for
distribution and the audit reports by the auditors had been submitted in
good time to all members of the Supervisory Board. They were discussed in
detail at the Audit Committee meeting of 6 December 2016 and the
Supervisory
Board meeting of 7 December 2016, convened to discuss the annual financial
statements, where the Executive Board provided comprehensive explanations
of
these statements. At those meetings, the Chairman of the Audit Committee
and
the auditors reported on the audit findings, having determined the key
audit
areas for the financial year under review beforehand with the Audit
Committee. Neither the auditors nor the Audit Committee identified any
weaknesses in the early risk detection and internal control system. On the
basis of our own review of the annual financial statements of TUI AG and
TUI
Group and the joint management report, we did not have any grounds for
objections and therefore concur with the Executive Board's evaluation of
the
situation of TUI AG and TUI Group. Upon the recommendation of the Audit
Committee, we approve the annual financial statements for financial year
2015 / 16; the annual financial statements of TUI AG are thereby adopted.
We
comprehensively discussed the proposal for the appropriation of profits
with
the Executive Board and approved the proposal in the light of the current
and expected future financial position of the Group.
Executive Board, Supervisory Board and committee membership
The composition of the Executive Board and Supervisory Board as at 30
September 2016 is presented in the tables on pages 114 for the Supervisory
Board and 116 for the Executive Board.
In financial year 2015 / 16, the composition of the boards changed as
follows:
Supervisory Board
Upon the close of the 2016 Annual General Meeting, Prof. Christian
Strenger,
Maxim Shemetov and Minnow Powell stepped down from the Supervisory Board.
At
the same Annual General Meeting, Angelika Gifford, Peter Long and Alexey
Mordashov were elected for a term of five years. Members re-elected for a
term of five years were Carmen Riu Güell, Prof. Edgar Ernst, Sir Michael
Hodgkinson and Prof. Klaus Mangold.
The term of all employee representatives on the Supervisory Board also
ended
at the close of the 2016 Annual General Meeting. Rüdiger Witt stepped down
from the Supervisory Board at that date. Apart from Mag. Stephan Weinhofer,
replacing Rüdiger Witt on the Supervisory Board in his first term of
office,
all previous employee representatives were re-elected for a five-year term
on 10 February 2016.
We were shocked and saddened by the sudden passing of Wilfried Rau on 30
March 2016. Wilfried Rau had been an employee representative on our
Supervisory Board, representing senior managers, since December 2014. With
Mr Rau, we have lost a highly esteemed, circumspect colleague who knew the
Company in many different facets. Mr Rau had earned great merit in many
different managerial positions at TUI AG and in the Group. We miss his
experience, his advice and his sense of humour even in turbulent times. The
Supervisory Board, the Executive Board and the employees of TUI AG will
honour his memory.
With effect from 13 June 2016, Wolfgang Flintermann was appointed as a
member of the Supervisory Board by the court of registration to represent
employees in senior management.
Presiding Committee
Mr Shemetov stepped down from the Supervisory Board and therefore also the
Presiding Committee at the close of the Annual General Meeting 2016. In
addition to re-electing the remaining previous shareholder representatives,
the Supervisory Board elected Mr Mordashov as the fourth shareholder
representative on the Presiding Committee. The new employee representatives
on the Presiding Committee are Mr Strubelt and Mr Bremme, alongside the
re-elected employee representatives Ms Strempel and Mr Jakobi. Mr
Barczewski
has no longer been a member of the Presiding Committee since it was newly
formed on 9 February 2016.
Audit Committee
At the close of the Annual General Meeting 2016, Prof. Strenger and Mr
Powell also stepped down from the Audit Committee. Apart from re-electing
the previous Audit Committee members, the Supervisory Board elected Ms
McConville, Ms Kong and Dr Hirschel as new members after the close of the
AGM 2016.
Integration Committee
After the close of the 2016 AGM, the Supervisory Board re-elected the
existing Integration Committee members and elected Ms Gooding and Ms
McConville to replace Prof. Strenger and Mr Powell, who stepped down from
the Integration Committee at the close of the 2016 AGM.
Nomination Committee
Apart from re-electing the previous members of the Nomination Committee,
the
shareholder representatives on the Supervisory Board elected Mr Mordashov
as
a new Nomination Committee member after the close of the 2016 AGM.
Executive Board
With effect from 15 October 2015, Dr Elke Eller was appointed as a member
of
the Executive Board and Labour Director. The term of office of Peter Long,
Joint-CEO on the Executive Board, ended at the close of the 2016 AGM. Since
that date, Friedrich Joussen has been sole Chairman of the Executive Board.
With effect from 30 June 2016, William Waggott also stepped down from the
Executive Board.
The Supervisory Board thanks all Executive Board and Supervisory Board
members who left in financial year 2015 / 16 for their cooperation in a
spirit of constructive confidence.
Hanover, 7 December 2016
On behalf of the Supervisory Board:
Prof. Klaus Mangold
Chairman of the Supervisory Board
Audit Committee Report
Dear Shareholders,
as the Audit Committee, it is our job to assist the Supervisory Board in
carrying out its monitoring function during the financial year,
particularly
in relation to accounting and financial reporting for the TUI Group, as
required by legal provisions, the German Corporate Governance Code and the
Supervisory Board Terms of Reference.
In addition to these core functions, we are responsible in particular for
monitoring the effectiveness and proper functioning of internal controls,
the risk management system, the Group Auditing department and the legal
compliance system.
The Audit Committee's sphere of responsibility was extended substantially
following the introduction of the Audit Reform Act (AReG) in Germany. Among
other things, this means that the Audit Committee is now responsible for
selecting external auditors within the framework of a public invitation to
tender. The selected auditors are then required to be put forward by the
Supervisory Board to the Annual General Meeting for appointment. Following
the appointment by the Annual General Meeting, the Supervisory Board
formally commissions the external auditors with the task of auditing the
annual financial statements and consolidated financial statements and
reviewing the quarterly interim reports.
The Audit Committee is elected by the Supervisory Board directly after the
annual general meeting and consists currently of the following eight
Supervisory Board members:
* Prof. Edgar Ernst (Chairman)
* Andreas Barczewski
* Dr Dierk Hirschl
* Janis Kong
* Prof. Klaus Mangold
* Coline McConville
* Michael Pönipp
* Ortwin Strubelt
There are no personnel changes to report in the composition of this
committee since the last election.
Both the Chairman of the Audit Committee and the remaining members of the
Audit Committee are seen by the Supervisory Board as meeting the criterion
of being independent. In addition to the Chairman of the Audit Committee,
at
least one other member has expertise in the field of accounting and
experience in the use of accounting principles and internal control
systems.
The Audit Committee has six regular meetings a year; additional meetings
can
also be held on specific topics. No extraordinary meetings were held during
the period under review. The meeting dates and agendas are based both on
the
Group's reporting cycle and on the Supervisory Board agendas.
The Chairman of the Audit Committee reports on the work of the Audit
Committee and the proposals it has to make in the Supervisory Board meeting
that follows each Audit Committee meeting.
Apart from the Audit Committee members, the meetings have been attended by
the Chairman of the Executive Board, the CFO and the following management
members, based on the topics covered:
* Director of Group Financial Accounting
* Director of Group Audit
* Director of Group Compliance & Risk
* Director of Corporate Finance
Auditors PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft (PwC)
have also been invited to meetings on relevant topics. Wherever required,
additional members of TUI Group senior management and operational
management
have been asked to attend Audit Committee meetings, as have external
consultants.
Where it was deemed necessary to go into further detail on specific topics
or cases, the Chairman of the Audit Committee held - in addition to Audit
Committee meetings - individual meetings with the relevant Executive Board,
senior management or auditor representatives. The Chairman of the Audit
Committee reported on the key findings and conclusions from these meetings
in the next Audit Committee meeting.
The members took part in the Audit Committee meetings as shown in the table
on page 11. One Audit Committee resolution was taken by circular decision.
Selection of a new auditor for TUI AG and the TUI Group
In order to implement the regulations of the AReG governing the rotation of
auditors, a public invitation to tender was conducted in the period under
review in order to select a new auditor for TUI AG and the TUI Group.
Determining the key process steps and the key decisions was the
responsibility of the Audit Committee Chairman. In its planned meetings,
the
entire Audit Committee received regular reports on the progress of the
process by its Chairman and discussed the further steps to be taken.
Assistance in implementing the process at an operational level was provided
by the company.
In keeping with EU regulations on public invitations to tender, the entire
process was fair, transparent and non-discriminatory.
By announcing the planned invitation to tender in the Federal Gazette,
German and international auditing firms were initially requested to
communicate their interest in participating in the selection process. From
these initial applicants, a number of minimum criteria were then used to
reduce the remaining applicants to a shortlist of five.
In the following stage, these remaining five applicants were provided with
extensive documentation to enable them to submit a comprehensive written
offer. In addition, all competitors were given the opportunity to clarify
any remaining questions in a joint questions and answers session with
various Group representatives. Of the five applicants, four ultimately
submitted written offers which were made available to the Audit Committee.
All written offers were then analysed and evaluated by the Audit Committee
Chairman and by representatives of the main business areas and Group
functions in order to ensure maximum objectivity during the selection
process. Based on this analysis, the fourth-ranked applicant was
eliminated.
On the basis of the written offer, the evaluation found the remaining three
applicants to be virtually of equal merit, so that all three applicants
were
invited by the Audit Committee to present their offer and the key team
members in person. In addition to the Audit Committee Chairman, these
presentations were attended by the aforementioned representatives of the
main business areas and Group functions, and by the CFO as a guest. The
evaluation of the presentations established a clear ranking of the
applicants, leading the third-ranked candidate to be eliminated.
Up to this point, the quality of the service offered took clear precedence
over any cost aspects. With the final two applicants, the cost-related
aspects of the offer were then discussed. In their final form, the offers
did not vary significantly as regards cost.
Accordingly, at the end of the procedure, the Audit Committee recommended
to
the Supervisory Board that it put forward Deloitte GmbH
Wirtschaftsprüfungsgesellschaft to the Annual General Meeting as the new
Group auditors. As well as this preference, the second-placed applicant was
presented to the Supervisory Board as an alternative. The Supervisory Board
subsequently resolved to accept this recommendation.
Reliability of financial reporting and monitoring of accounting process
The Executive Board of a German stock corporation (Aktiengesellschaft) is
solely responsible for preparing its Annual Report & Accounts (ARA).
Section
243(2) of the German Commercial Code (HGB) requires the ARA to be clearly
structured and to give a realistic overview of the company's financial
situation. This is equivalent to the requirement of the UK Code for the ARA
to be fair, balanced and understandable. Even though the evaluation of this
requirement has not been transferred to the Audit Committee, the Executive
Board is comfortable that the submitted ARA satisfies the requirements of
both legal systems.
In order to be sure ourselves of the reliability of both the annual
financial statements and interim (quarterly) reporting, we have requested
that the Executive Board inform us in detail about the Group's business
performance and its financial situation. This was done in the four Audit
Committee meetings that took place directly before the financial statements
in question were published. In these meetings, the relevant reports were
discussed and the auditors also reported in detail on key aspects of the
financial statements and on the findings of their audit or review.
In order to monitor accounting, we examined individual aspects in great
detail. In addition, the accounting treatment of key balance sheet items
were reviewed, in particular goodwill, advance payments for tourism
services, pension provisions and other provisions.
In consultation with the auditors, we made certain that the assumptions and
estimates underlying the balance sheet were appropriate. In addition, any
material legal disputes and key accounting issues arising from the
operating
businesses were assessed by the Audit Committee.
In the period under review, we concerned ourselves above all with the
following individual subjects:
Owing to the existing geopolitical risks, we stipulated that each of the
quarterly financial statements be accompanied by a report on the effects on
earnings, the risks from guarantee and advance payment mechanisms related
to
Group and third-party hotels in Turkey and North Africa and about the
countermeasures being undertaken.
The status of the introduction of a new ERP system in the UK was also
assessed in detail during our meetings. In this connection, we received
regular reports on the progress of the implementation and asked pointed
questions about any delays and, in particular, risks with regards to Group
reporting.
Another aspect of our work was OneAviation, a project for optimising the
operational efficiency and cost-base of the Group-owned airlines. Given the
strategic importance of the airline in the tourism value chain, we received
an explanation of the key factors driving cost advantages for certain
competitors compared with TUI airlines and about the intended measures for
optimising these. In a further meeting, we also had the management
representatives in question inform us about the legal and operational
organisational structure Technology.
In addition to the operational flight business, however, we also examined
TUI's investing activity in the following areas: Airlines, Hotels &
Resorts,
Cruises and IT. We were given an explanation of how the investments were
prioritised, including how they were distributed throughout the Group
areas.
One particular point in connection with the investment analysis was the
disposal of the Hotelbeds Group in September 2016.
The valuation logic with regard to the Hapag-Lloyd AG shares was also
discussed in detail on numerous occasions in the course of the financial
year. Here, particular attention was given to the impairment booked in the
financial year owing to the price performance of Hapag-Lloyd shares.
The Audit Committee also discussed the going concern and viability
statement
analysis prepared by the company to support the statements made in the
half-year report and the ARA.
In addition, the consistency of the reconciliation from profit before tax
to
the key figure 'underlying earnings' and the material adjustments were
discussed for all quarterly reports and for the annual financial
statements.
Our evaluation of all discussed aspects of accounting and financial
reporting has been in line with that of both management and the Group
auditors.
Effectiveness of internal controls and the risk management system
The Audit Committee recognises that a robust and effective system of
internal control is critical to achieving reliable and consistent business
performance.
To fulfil its legal obligation to examine the effectiveness of internal
controls and the risk management system, the Audit Committee is informed
regularly about their current status and also about the further development
of them.
The Group has continued to evolve its internal control framework which is
underpinned by the COSO concept. In recent years the larger businesses in
the Group have completed documentation of their main financial processes
and
regular testing by management of the key financial controls as a matter of
routine is the next area of development. Some initial testing was conducted
in 2016 and management intend to increase the volume of testing in 2017.
Within the Group, the compliance function is further broken down into three
areas: Finance, Legal and IT. These teams play a crucial role in improving
controls across the Group and identifying areas where more focus is
required. The Group auditors also report to us on any weaknesses they find
in the internal control system of individual Group companies, and
management
tracks these items to ensure that they are addressed on a timely basis.
As stated on page 49 of the risk report, the Audit Committee receives
regular reports on the performance and effectiveness of the risk management
system. The Risk Oversight Committee is an important management committee
within the Group and we are satisfied that there is appropriate, active
management of risk throughout the Group.
The Group Auditing department ensures the independent monitoring of
implemented processes and systems and reports directly to the Audit
Committee in each regular meeting. In the period under review, the Audit
Committee was not provided with any audit findings indicating material
weaknesses in internal controls or the risk management system. As well as
this, talks are held regularly between the Chairman of the Audit Committee
and the Director of Group Audit for the purposes of closer consultation.
The main aspects of the audits planned by the Group Auditing department for
the following year were presented to the Audit Committee in detail,
discussed and approved. The Audit Committee feels that the effectiveness of
the Group Audit department is ensured through this regular consultation.
For added comfort, the effectiveness of the Group Audit department was
examined by third-party experts during the current financial year. This
review concluded that the Group Audit department has already reached
leading-edge maturity.
The legal compliance system was also examined by third-party experts which
confirmed the suitability of the compliance approach. The Groupwide,
uniformly implemented system was presented to us and we received a report
about the conducted risk analysis and the measures derived from it. In
addition to the core elements of the internal control and risk management
system, the Group's hedging policy and transactions and certain areas of
insurance management were part of the reporting to us during the year.
Whistleblower systems for employees in the event of compliance breaches
Whistleblower systems have been set up across the Group to enable employees
to draw attention to potential breaches of compliance guidelines.
Reporting on the legal compliance system included information about the
groupwide standardisation of these whistleblower systems and we were also
shown the main findings during the current financial year from this system.
Examination of auditor independence and objectivity
In December 2015, the Audit Committee recommended to the Supervisory Board
that it propose the existing auditors PwC to the Annual General Meeting as
auditors for financial year 2015 / 16 as well.
Following the commissioning of PwC as auditors by the Annual General
Meeting
in February 2016, the Supervisory Board appointed PwC with the task of
auditing the 2015 / 16 annual financial statements and reviewing the
interim
financial statements.
The Chairman of the Audit Committee discussed with PwC in advance the audit
plan for the annual financial statements as at 30 September 2016, including
the key areas of focus for the audit and the main companies to be audited
from the Group's perspective. Based on this, the Audit Committee firmly
believes that the audit has taken into account the main financial risks to
an appropriate degree and is satisfied that the auditors are independent
and
objective in how they conduct their work. The audit fees were discussed and
we are confident that the amount in question is justified.
Based on the regular reporting by the auditors, we have every confidence in
the effectiveness of the external audit. This outlook is confirmed by an
internal efficiency review, conducted during the period under review, of
the
collaboration with PwC. In addition to the positive outcome of this review,
all participants declared that, were it not for the obligation to rotate
auditors, they would have been able to envisage continuing to work with PwC
without any restrictions.
Owing to the rotation requirement, PwC will no longer serve as auditors.
PwC
has been the external auditor for the TUI Group for over 20 years and the
Audit Committee has always held their work to be of high quality. We would
like to take this opportunity to thank PwC for their many years of trusted
service.
In order to ensure the independence of the auditors, any non-audit services
to be performed by the auditors must be submitted to the Audit Committee
for
approval before commissioning. Depending on the amount involved, the Audit
Committee makes use of the option of delegating the approval to the
company.
The Audit Committee Chairman is only involved in the decision once a
specified cost limit has been reached. Insofar as the auditor has performed
services that do not fall under the Group audit, the nature and extent of
these have been explained to the Audit Committee. This process complies
with
the guideline regarding the approval of non-audit services which came into
effect at the beginning of financial year 2015 / 16, and it also takes into
account the requirements from the AReG regulations on prohibited non-audit
services and on limitations of the scope of non-audit services.
In financial year 2015 / 16, these non-audit services accounted for 37 % of
the auditor's overall fee of EUR 19.5 million. These non-audit services
primarily include services in connection with the preparation of the
Hotelbeds Group disposal, the Travelopia Group disposal and the issue of a
bond.
I would like to take this opportunity to thank the Audit Committee members,
the auditors and the management for their hard work over the past financial
year.
Hanover, 6 December 2016
Prof. Edgar Ernst
Chairman of the Audit Committee
Goals and strategy
Our Strategy
As the world's leading integrated tourism group, we operate in all stages
of
our customers' holiday experience, from marketing and sales to aviation,
destination services and accommodation.
The core of our offering will be our own hotel and cruise brands.
Growth in our hotel and cruise brands is enabled and de-risked by our
strength in direct distribution and our direct customer relationships,
creating a virtuous circle for sustainable growth.
We have a resilient model, prepared for current and future changes.
The strength of our integrated model is the monitoring and selective
control
of all stages in the value chain. This allows us to mitigate capacity
risks,
respond quickly and flexibly to market changes and actively shape overall
situations and markets.
We take advantage of global economies of scale resulting from our size and
international scope to deliver competitive advantages and have defined six
scaling platforms as a framework: TUI Brand, Aviation, Hotels, Cruises,
Destination Services, IT.
We use our local strength at crucial points in the competitive arena, to be
close to customers and their individual needs.
We believe a clear focus on sustainability differentiates us from the
competition and generates value.
We have a common vision and values to achieve our goals.
Marketing & Sales
* Scale - over 20 million* customers per annum, over 13 million customers
flying on Group airlines
* Strength in direct distribution and direct customer relationships -
over
70 % of holidays distributed directly to the customer through our
websites, shops and call centres
* Flexibility - approx. 75 % of our source market accommodation
requirement sourced from third parties
Destination Services
* Scale - over 11 million customers per annum with operations in over 100
destinations
* Unique destination services bring the TUI brand alive and bring us even
closer to our customers
* Including Canada and Russia joint ventures
How we do it - our Business Model
We have a leading position as an
integrated tourism company.
Aviation
* Scale - approx. 150 aircraft, transporting our customers to their
destination
* Flexibility - approx. 95 % of aircraft are leased, current average
remaining lease life of approx. 4 years, with additional capacity from
third party airlines
* Efficiency - OneAviation programme to develop
one virtual airline, short haul fleet renewal commences 2018
Accommodation
* Scale - growing portfolio of Group hotels and cruise ships (currently
over 7 million customers per annum) with a further 10 million customers
staying in third party hotels, which are mostly exclusive to our source
markets
* Wide distribution funnel - over 50 % of our hotel customers purchase
via
our source markets, with significant incremental volumes from other
markets
* Flexibility - balanced ownership model, with around half of our hotels
being managed or franchised, utilisation of joint venture partnerships
to reduce investment risk, and a balanced destination portfolio
Customer perspective
* Easy & convenient
* Seamless customer experience
* Unique & exclusive products
* TUI as most trusted travel partner
* Mobile service and inspiration
Integration benefits our customers
and our performance, and gives us a
strong competitive advantage.
Growth in our hotel and cruise brands is enabled
by our strength in direct distribution and
by our direct customer relationships, creating
a virtuous circle for sustainable growth.
TUI performance perspective
* Growth in differentiated hotels and cruises enabled and de-risked by
direct customer relationship
* Superior occupancy rates, yield management & risk mitigation
* Local freedom to actively shape markets
* Flexibility to respond to changing environment
We have a flexible model with a balanced
portfolio of businesses, which further enhances
our resilience.
We combine local relevance
with global scale.
* Ability to remix flight and hotel capacity and adapt cruise itineraries
* Balanced source market & destination portfolio
* Strong long-term supplier relationships
* Risk assessed ownership / management model,
including joint venture partners
We believe a clear focus on
sustainability differentiates us from the
competition and generates value.
The ambitious 2020 sustainability strategy 'Better Holidays, Better World'
is built around three core pillars to help shape the future of sustainable
tourism.
We have a common vision and values
to achieve our goals.
Our vision, values and customer proposition form the basis of our action
and
our attitude - both inside and outside.
Discovering the world's diversity, exploring new horizons, experiencing
foreign countries and cultures: travel broadens people's minds. At TUI we
create unforgettable moments for customers across the world and make their
dreams come true. We are mindful of the importance of travel and tourism
for
many countries in the world and people living there. We partner with these
countries and help shape their future - in a committed and sustainable
manner.
What we want to achieve -
roadmap for growth
1. GROWTH IN HOTEL AND CRUISE BRANDS
Accommodation (hotels and cruise ships) is the key differentiator in the
customer holiday experience and the key driver of satisfaction and
retention
rates. We will therefore deliver growth through scaling up our unique hotel
and cruise brands.
Growth will be focused on our core, unique brands - these brands have been
selected due to their strong resonance with their respective customer
segments (and therefore competitive advantage) and their ability to be
further scaled.
Following the merger with TUI Travel PLC in December 2014 we targeted circa
60 additional hotels by 2018 / 19. Having delivered 18 openings and two
repositioned hotels to date (30 September 2016), we expect approximately 40
to 45 further openings by the end of 2018 / 19 plus further repositioned
hotels. Taking into account the different ownership models and our current
portfolio, we expect each new hotel on average to deliver an additional EUR
2 m underlying EBITA.
Riu
3 to 5 star hotels at the best beach destinations in the world, offering
holidays from family all inclusive fun to romance and luxury
Current Portfolio (2015/16)
* 94 hotels delivering EUR 318 m underlying EBITA
* Occupancy 90 %
* ROIC 26 % (excl. goodwill)
Openings/Launches
* 2014 / 15: Aruba, Mauritius, Bulgaria, Berlin
* 2015 / 16: Dominican Republic, Sri Lanka, New York, Dublin
* Winter 2016 / 17: Jamaica
* 2017 / 18: Mexico (Costa Mujeres)
Robinson
Premium clubs in excellent beach or mountain locations
Current Portfolio (2015/16)
* 24 clubs delivering EUR 39 m underlying EBITA
* ROIC 13 %
Openings/Launches
* 2014 / 15: Tunisia
* 2015 / 16: Greece, Turkey
* Summer 2017: South East Asia
TUI SENSATORI
Modern luxury holidays designed to fuel the senses
Current Portfolio (2015/16)
* 10 resorts with 5 in Group hotels
Openings/Launches in group hotels
* 2014 / 15: Cyprus, Turkey
* 2015 / 16: Dominican Republic
* Summer 2017: Rhodes
TUI Blue
Premium hotels in first class locations with strong regional influences
Current Portfolio (2015/16)
* TUI Blue launched with two repositioned
hotels this year
Openings/Launches
* 2015 / 16: Turkey (repositioned)
* Winter 2016 / 17: Tenerife (new),
Germany and Austria (repositioned)
* Summer 2017: Croatia (new), Italy (new), (repositioned), Germany
(repositioned)
TUI MAGIC LIFE
All inclusive club holidays in top beachside locations
Current Portfolio (2015/16)
* 13 clubs
Openings/Launches
* 2014 / 15: Ibiza, Rhodes
TUI SENSIMAR
Stylish 4 to 5 star hotels designed for adults with space and relaxation in
mind
Current Portfolio (2015/16)
* 48 resorts with 20 in Group hotels
Openings/Launches
* In Group hotels - 2014 / 15: Portugal, Croatia
* In third party hotels - Winter 2016 / 17:
Lanzarote, Cape Verde, Mauritius
* In third party hotels - Summer 2017:
Sardinia, Greece, Tunisia
TUI FAMILY LIFE
The ultimate environment for a family holiday to remember
Current Portfolio (2015/16)
* 29 resorts with 17 in Group hotels
Openings/Launches In
third party hotels
* Winter 2016 / 17: Thailand, Spain
* Summer 2017: Sardinia, Croatia, Spain, Bulgaria
thomson CRUISES
UK leader in all inclusive fly cruise
Current Portfolio (2015/16)
* Five ships
* Underlying EBITA EUR 61 m
Openings/Launches
* Summer 2016: TUI Discovery
* Summer 2017: TUI Discovery 2
* Summer 2018: additional ship from
TUI Cruises (Mein Schiff 1)
* Summer 2019: additional ship from
TUI Cruises (Mein Schiff 2)
Cruise growth will continue to focus on the underpenetrated European cruise
market, with capacity expansion in TUI Cruises and modernisation of our UK
and luxury / expedition cruise brands.
* The European cruise market remains underpenetrated relative to the US,
but has the right demographics - age, wealth, leisure time available -
for future growth
* TUI Cruises successfully launched Mein Schiff 5 in July 2016 and will
add three further newbuilds over the next three years, delivering
around
EUR 25 m to EUR 30 m share of earnings after tax for each new ship.
* Thomson Cruises is continuing its path of modernisation, with the
launch
of TUI Discovery in Summer 2016 and the delivery of TUI Discovery 2 in
Summer 2017. In addition, Mein Schiff 1 and Mein Schiff 2 will move to
the UK from the TUI Cruises fleet in 2018 and 2019. We expect each new
ship to deliver around EUR 25 m of underlying EBITA per annum, at
constant currency rates.
* Following the successful turnaround of Hapag-Lloyd Cruises to
profitability this year, we have announced the modernisation and
expansion of the expedition cruise fleet, with two newbuilds arriving
in
2019, delivering around EUR 15 m additional EBITA per annum per ship.
Growth will focus on destinations with strong margin and ROIC
characteristics, and where we deliver a competitive advantage.
* Year round destinations deliver higher occupancy, less seasonality in
earnings and therefore higher returns.
* Year round destinations also add the opportunity to sell to other
source
markets outside TUI Group - for example, a significant proportion of
Riu's revenues in the Caribbean come from the US.
* We can leverage off our existing strong presence in long haul and other
year round destinations - on a hotel basis, over 50 % of our current
Hotels & Resorts portfolio is in year round destinations, and around 40
% of our source market customers travel to year round destinations
(defined as Canaries, Cape Verde, North Africa and long haul).
* Our 787 fleet enables us to take more customers, more efficiently to
long haul destinations. In our source markets in 2015 / 16, around 15 %
of our accommodated customers stayed in long haul destinations. We
expect our long haul package holiday customers to grow by over 500,000
over the next three years.
We will continue to build on our direct relationship with the customer in
resort.
Our unique Destination Services bring the TUI brand alive, operating in
more
than 100 destinations with access to over 11 million customers, managing
airport transfers, excursions and resort services. In 2015 / 16 we
completed
the separation of our Destination Services business from Hotelbeds Group
(which has subsequently been sold) and have so far delivered synergies
worth
EUR 10 m as a result of service integration and cost efficiency measures.
Growth in Destination Services will be driven by an increase in the
proportion of differentiated excursions (currently around 20 %) and in
sales
of excursions through online and mobile channels. In addition, we are
continuing to expand our network, with the launch of a destination
management company in the USA in November 2016, and exploring the potential
for launches in other countries.
Balanced ownership model for new and existing hotels and cruise ships, with
clear investment hurdle rates.
* We have a balanced ownership model for hotels, with just under 50 % of
our hotels under management or franchise.
* Investments will be made in differentiating products where there are
pockets of growth and scarcity of supply.
* Our strong joint venture relationships bring significant operational
benefits for our hotels and cruises, as well as reducing levels of
invested capital on a consolidated basis.
* We target ROIC (based on our Group definition) of at least 15 % on
average for our new investments (compared with our Group weighted
average cost of capital of 7.5 %).
* Our Hotels & Resorts and Cruises segments deliver ROIC significantly in
excess of their cost of capital. In 2015 / 16 our Hotels & Resorts
segment delivered ROIC of 12.3 % (versus segment weighted average cost
of capital of 6.5 %) whilst Cruises delivered ROIC of 21.3 % (versus
segment weighted average cost of capital of 7.5 %).
2. DIRECT CUSTOMER RELATIONSHIPS
Growth in our hotel and cruise brands is enabled and de-risked through the
strength of our direct distribution and customer relationships, creating a
virtuous circle for sustainable growth. This also gives us a competitive
advantage compared with other hotel and cruise companies with lower levels
of direct distribution.
Capitalising on the strength of the TUI brand on a global scale - One
global
distribution brand offers significant opportunities in terms of growth
potential, consistency of customer experience, digital presence,
operational
efficiency and competitive strength. In the long run, it is our objective
that there will be one distribution brand wherever it is reasonable, but we
will still ensure that we maintain our local roots. We launched our brand
migration successfully in the Netherlands in October 2015, achieving strong
unaided awareness within weeks of the TUI brand in this source market. The
TUI brand roll-out has also taken place in France, with Belgium and Nordics
following in Autumn 2016 and the UK to follow in late 2017. Brand migration
will be funded from ongoing operational efficiency and additional revenues.
More direct, more online sales - Having a direct relationship with the
customer enables delivery of a more personalised experience and gives us a
strong competitive advantage. In 2015 / 16, 72 % of our source market
customers booked through our direct channels (up two percentage points on
prior year), with 43 % booking online (up two percentage points on prior
year). In Northern Region (UK and Nordics) we now sell over 60 % of our
holidays online. Further progress has also been made in Central Region (47
%
controlled, 15 % online) and Western Region (70 % controlled, 52 % online).
Leveraging our direct relationship with the customer using our global IT
platforms - IT is at the heart of TUI, providing the technology solutions
required to deliver the TUI Group strategy and help our customers create
unforgettable moments. Internet and mobile use among our customers has
increased rapidly, so at TUI we're using technology to create ever-more
innovative and engaging ways to showcase our great destinations and inspire
people's holiday choices, with best in class, more personal digital
experiences.
* Customer App - The 'MyTUI App' is at the heart of our mobile vision.
Through this inspirational, effortless technology, we will drive
customer behaviour change that will lead to the creation of our biggest
digital sales channel of holidays, flights and ancillaries. It will be
key to customer acquisition and retention, winning new customers and
bringing back old customers time after time. In three years, we have
moved from a standing start to multiple awards for our TUI App, which
has been rolled out to ten European countries and has had over 3.5
million downloads. The App provides a rich, immersive experience and
not
only helps customers find and pay for the holiday they want, but allows
them to explore their destination, discover places to visit and book
unforgettable trips and excursions. We have built the App in such a way
that it needs only minimal development to amend it to suit each new
country as it is rolled out. This also makes it easier to enhance and
update functionality as customers' expectations develop. The roadmap is
always evolving due to fast paced technology driving product innovation
and business requirements. Currently in development we have
inspirational video content, hotel check in, live travel information,
social feed, transfer times, native ancillary sales, interactive maps,
restaurant booking, and virtual reality, to mention just a few.
* Group Marketing Platform - We are investing in transformational
capabilities that improve how we interact with our customers, by using
what we know about them to provide more timely and personalised
customer
service and marketing. This is aimed at delivering a better customer
experience, driving higher levels of engagement and conversion, and
creating business value from every customer interaction by encouraging
up-selling, cross-selling and rebooking. We have made significant
progress to date, and have rolled out a common marketing platform and
programmes to a number of key source markets, aimed at supporting
customers through their holiday search and their post-booking holiday
countdown. In addition we are trialling other innovations such as a
Concierge Service in the UK, providing an enhanced level of service for
selected customer segments.
* Yield Management - We have developed our own bespoke yield solution to
automate the management and pricing of holidays in response to changes
in demand and costs throughout the day, seven days a week. This
solution
contains forecasting algorithms and business logic tailored for the
dynamics of the tour operating industry, where flights and hotels are
sold simultaneously. It also includes a sophisticated user interface
which provides high levels of transparency and control to support the
yield process. Following success in the UK, where the first phase went
live in 2013 with full rollout in 2014, the solution was rolled out to
France in 2015 and to the Nordic market in 2016. We are now targeting a
rollout in further markets including Germany over the next 24 months.
Driving operational efficiency improvements - We will continue to drive
efficiency improvements across our source markets, including the following:
* In Germany, we remain focused on further increasing market share
through
a wider holiday offering, further increasing controlled and online
distribution, and delivering operational efficiency improvements.
* In France we have completed the acquisition of Transat's French tour
operations for an enterprise value of EUR 55 m. The acquisition will
enhance our existing turnaround plans for this source market, through
market consolidation and significant margin potential. It is expected
to
bring underlying EBITA margin in France to around 2.5 %.
* In addition, we are continuing to deliver our efficiencies through our
OneAviation programme, through the central control of configuration,
purchasing, finance, maintenance and ground handling.
Enhancing top line growth by adding further flexibility for our customers -
We utilise technology to deliver additional top line growth with minimal
capacity commitment, such as third party flying and dynamic packaging.
Market leading positions which we will continue to grow - Based on the
growth levers outlined above, we target profitable top line growth ahead of
the market, or around 3 % CAGR Group turnover growth, at constant currency
rates. In 2015 / 16 we delivered brand turnover growth (including turnover
from our Canadian and TUI Cruises joint ventures) of 2.4 % and turnover
growth of 1.4 % at constant currency rates, with underlying growth offset
partly by the impact of the lower demand for Turkey within some of our
source markets. Customer volumes from our source markets (excluding Canada
and Russia) were broadly flat in the year at 19.2 million, with strong
growth in the UK and Netherlands offset by volume declines in Germany and
the Nordics, mainly as a result of lower demand for Turkey not being fully
offset by increased demand to other destinations.
3. BALANCE SHEET STRENGTH & FLEXIBILITY
We have a strong and flexible balance sheet, which enables and supports
further growth. We will maintain our rigorous focus on financial
discipline,
to deliver optimal allocation of capital.
Strong operating cash flow provides finance for investments and dividend -
We generate a significant level of operating cash flow. Together with the
proceeds from the Hotelbeds Group disposal, the high level of operating
cash
generation will help to finance future investments in growth as well as
continuing to generate an attractive dividend yield.
Focus on meaningful investments aligned with our strategy - Our capital
expenditure reflects the reinvestment of proceeds in transformational
growth
following the disposal of Hotelbeds Group. Our priorities for capital
allocation are investments in unique hotel and cruise brands. We also
continue to allocate capital to strengthen the core of our business - for
example, through synergetic acquisitions such as Transat - as well as
maintaining a strong and flexible balance sheet to support further growth.
We have clear ROIC hurdle rates for new investments, as outlined above, and
material investments are approved at Board level.
Deliver merger synergies - At the time of the merger with TUI Travel PLC we
outlined EUR 100 m of merger synergies to be delivered by the end of 2016 /
17 from corporate streamlining (EUR 50 m), occupancy improvement in Group
hotels (EUR 30 m) and the integration of Destination Services with our
Tourism businesses (EUR 20 m). By the end of 2015 / 16 we delivered EUR 80
m
of these synergies, and we are on track to deliver the remaining EUR 20 m
to
be delivered by the end of 2016 / 17. In addition, we targeted a reduction
in our underlying effective tax rate as a result of the more efficient tax
grouping in Germany. This was achieved immediately after the merger, with
the Group's underlying effective rate now at 25 %.
Deliver against financial targets with a view to achieving re-rating - Our
focus on rating will allow us to obtain advantageous financing conditions
and continue to ensure access to debt capital markets. This has already
delivered benefits. Moody's upgraded TUI to Ba2 in April 2016, and Standard
& Poor's revised its outlook on TUI from Stable to Positive in February
2016. We have delivered against our financial targets for 2015 / 16 with a
leverage ratio of 3.3 times (target 3.5 to 2.75 times), and an interest
coverage ratio of 4.8 times (target 4.5 to 5.5 times interest). For 2016 /
17 our financial targets have been tightened - leverage ratio target is
3.25
to 2.5 times, and interest cover target is 4.75 to 5.75 times.
Committed to paying an attractive dividend - We are committed to delivering
superior returns for our shareholders. Our growth strategy will enable
this.
We will propose a dividend to our shareholders of 63 cents in respect of
2015 / 16, reflecting 14.5 % growth in the base dividend (in line with
underlying EBITA growth at constant currency) plus the additional 10 %
outlined at the time of the merger in 2014. For 2016 / 17 we expect to pay
a
dividend based on growth in underlying EBITA at constant currency
(calculated off the base dividend of 58 cents in 2015 / 16).
Continue to maximise value of non-core businesses - We successfully
completed the disposal of Hotelbeds Group for a total cash consideration of
EUR 1.2 bn in September 2016, realising significant value for this non-core
business. We are in the process of disposing Travelopia and continue to
hold
our investment in Hapag-Lloyd AG for sale.
TUI CRUISES
German speaking, premium all inclusive cruises
Current Portfolio (2015/16)
* Five ships
* Share of underlying EAT EUR 100 m
* ROIC 9 % / ROE 36 %
Openings/Launches
* Summer 2016: Mein Schiff 5
* Three newbuild ships launched in each of
the next three years (2017 to 2019)
Hapag LLoyd
Luxury and expedition cruises
Current Portfolio (2015/16)
* Four ships
* Underlying EBITA EUR 30 m
Openings/Launches
* Two new expedition ships launch in Spring and Autumn 2019
Principles underlying TUI Group
Structure and business model
tourism All
other
segment-
s*
Source markets * Hotels & Cruises * Other Tourism *
Northern Region * Resorts * Riu TUI Cruises * Central
Corpora-
Central Region * * Robinson * * tourism te
Western Region Other Hotels Hapag-Lloyd functions *
Center *
Cruises Corsair
Real
Estate
* As at 30 September 2016 and the financial stake in Hapag-Lloyd AG
(Container shipping) are held for sale
TUI Group is the world's leading tourism business, consisting of a large
portfolio of strong tour operators, 1,600 travel agencies and leading
online
portals, five tour operator airlines with around 150 aircraft, more than
300
hotels with around 214,000 beds, 14 cruise liners and incoming agencies in
all major holiday destinations around the globe. This integrated offering
enables us to provide our 20 million customers with an unparalleled holiday
experience.
TUI AG parent company
TUI AG is TUI Group's parent company with registered offices in Hanover and
Berlin. It holds directly, via its affiliates, indirect interests in the
principal Group companies conducting the Group's operating business in
individual countries. Overall, TUI AG's group of consolidated companies
comprised 417 direct and indirect subsidiaries at the balance sheet date. A
further 13 affiliated companies and 27 joint ventures were included in TUI
AG's consolidated financial statements on the basis of at equity
measurement.
Organisation and management
TUI AG is a stock corporation under German law, whose basic principle is
dual management by two boards, the Executive Board and the Supervisory
Board. The Executive and Supervisory Boards cooperate closely in governing
and monitoring the Company. The Executive Board is responsible for the
overall management of the Company.
The appointment and removal of Board members is based on sections 84 et
seq.
of the German Stock Corporation Act in combination with section 31 of the
German Co-Determination Act. Amendments to the Articles of Association are
effected on the basis of the provisions of sections 179 et seq. of the
German Stock Corporation Act in combination with section 24 of TUI AG's
Articles of Association.
Executive Board and Group Executive Committee
As at the balance sheet date, the Executive Board of TUI AG consisted of
the
CEO and four other Board members.
A Group Executive Committee was set up in order to manage TUI Group
strategically and operationally. As at 30 September 2016, the Committee
consisted of eleven members who meet under the chairmanship of CEO
Friedrich
Joussen.
TUI Group structure
TUI Group's tour operating business is clustered into three regions, each
with a source market alignment. The three regions make up the Tourism
Division together with Hotels & Resorts, Cruises and Other Tourism.
Northern Region
The Northern Region segment comprises the tour operators, airlines and
cruise business in the UK, Ireland and the Nordics. In addition, the
Canadian strategic venture Sunwing and the joint venture TUI Russia have
been included within this segment. In preparation for the disposal of a
large part of Specialist Group, Ski has been reclassified from the segment
to Northern Region. The prior year's numbers have been restated
accordingly.
Central Region
The Central Region segment comprises the tour operators and airlines in
Germany and the tour operator activities in Austria, Switzerland and
Poland.
Western Region
The tour operators and airlines in Belgium and the Netherlands and the tour
operators in France are included within the segment Western Region.
Hotels & Resorts
The Hotels & Resorts segment comprises all Group-owned hotels and hotel
companies in TUI Group. The hotel activities of the former TUI Travel
Sector
have also been allocated to Hotels & Resorts. The segment comprises
majority
participations in hotels, joint ventures with local partners, stakes in
companies giving TUI a significant influence, and hotels operated under
management contracts.
In financial year 2015 / 16, Hotels & Resorts comprised a total of 303
hotels with 213,503 beds. 279 hotels, i.e. the majority, are in the four-
or
five-star category. 44 % were operated under management contracts, 38 %
were
owned by one of the hotel companies, 15 % were leased and 3 % of the hotels
were managed under franchise agreements.
Categories of
Hotels &
Resorts
Hotel brand 3 4 5 Total Beds Main sites
sta- sta- sta- ho-
rs rs rs tels
Riu 4 48 42 94 86,184 Spain, Mexico,
Caribbean, Cape Verdes,
Portugal, Morocco
Robinson - 20 4 24 15,342 Spain, Greece, Turkey,
Switzerland, Austria
Other hotel 20 114 51 185 111,977 Spain, Greece, Turkey,
companies Egypt
Total 24 182 97 303 213,503
As at 30 September 2016
Riu
Riu is the largest hotel company in the portfolio of Hotels & Resorts. The
Majorca-based enterprise has a high proportion of repeat customers and
stands for professionalism and excellent service. Most of the hotels are in
the premium and comfort segments and they are predominantly located in
Spain, Mexico and the Caribbean.
Robinson
Robinson, the leading provider in the premium club holiday segment, is
characterised by its professional sport, entertainment and event portfolio.
Moreover, the clubs offer high-quality hotel amenities, excellent service
and spacious architecture. Most of the hotels are located in Spain, Greece
and Turkey. The facilities also meet ambitious standards in terms of
promoting sustainable development and meeting specific environmental
standards.
Other hotel companies
Other hotel companies include TUI Blue Hotels as well as the brands
Grupotel, Iberotel, Magic Life and the other hotels previously managed in
the former TUI Travel sector. Many of the hotels are operated as tour
operator concepts, e. g. Sensatori, Sensimar and Family Life.
Cruises
The Cruises segment consists of Hapag-Lloyd Cruises and the joint venture
TUI Cruises.
Hapag-Lloyd Cruises
Hamburg-based Hapag-Lloyd Cruises holds a leading position in the
German-speaking market with a fleet of four ships in the luxury and
expedition cruise segments.
Its flagships are the five-star-plus vessels Europa and Europa 2. They were
awarded this category by the Berlitz Cruise Guide and are the world's only
ships to be recognised in this way, in the case of Europa for the
seventeenth time in succession, and in the case of Europa 2 for the fourth
consecutive time. Europa primarily cruises on world tours, while her sister
ship Europa 2 takes shorter but combinable routes. The Hanseatic is used,
among other destinations, for expedition cruises to the Arctic and
Antarctic. It is the world's only five-star passenger vessel in the highest
Polar class. The Bremen, a four-star vessel − also awarded the highest
Polar
class - is another expedition ship travelling to similar destinations.
Three
of the ships are owned and one is chartered.
TUI Cruises
Hamburg-based TUI Cruises is a joint venture formed in 2008 between TUI AG
and the US shipping company Royal Caribbean Cruises Ltd., in which each
partner holds a 50 % stake. With five ships so far, TUI Cruises is
top-ranked in the German-speaking premium market for cruises. The Berlitz
Cruise Guide rated Mein Schiff 3, Mein Schiff 4 and Mein Schiff 5 among the
world's five best liners in the category 'Large Ships'.
Other Tourism
Other Tourism comprises central functions such as destination services, IT,
aviation control and the French airline Corsair.
All Other Segments
Apart from the segments described above, the accounts include the category
All other segments. This includes, in particular, the corporate centre
functions of TUI AG and the interim holdings, as well as the Group's real
estate companies.
The financial stake in Hapag-Lloyd Container Shipping has been carried
since
December 2014 under financial assets available for sale as defined by IFRS
5. The IPO of Hapag-Lloyd AG took place in November 2015. As TUI did not
take part in the associated cash capital increase and Hapag-Lloyd shares
were sold in the framework of the IPO, TUI's stake in Hapag-Lloyd AG
declined from 13.9 % to 12.3 % as at 30 September 2016.
Discontinued operations
Following the divestments made in financial year 2015 / 16 - the sale of
LateRooms Group in October 2015 and Hotelbeds Group in September 2016 - TUI
Group also intends to sell Specialist Group. The Specialist Group was
reclassified as discontinued operation. The sector pools the activities of
specialist tour operators and had been managed as a separate entity since
the merger between TUI AG and TUI Travel PLC at the end of December 2014.
The portfolio of Specialist Group is to be sold in one transaction from the
autumn of 2016 with the exception of two tour operator brands. Crystal Ski
and Thomson Lakes & Mountains will not be included in the sale as they have
strong synergies and are closely associated with core business Tourism.
They
have been integrated into TUI UK's business.
Research and development
As a tourism service provider, the TUI Group does not engage in research
and
development activities comparable with manufacturing companies. This
sub-report is therefore not prepared.
Value-oriented Group management
Management system and Key Performance Indicators
As the world's number one tourism group with one global brand, an
attractive
hotel portfolio, a growing cruise business, a modern and efficient aircraft
fleet and direct access to more than 20 million customers, we aim to secure
our vertically integrated business model by means ofprofitable growth and
achieve a sustainable increase in the value of the TUI Group.
A standardised management system has been created to implement value-driven
management across the Group as a whole and in its individual business
segments. The value-oriented management system is an integral part of
consistent Group-wide planning and controlling processes.
Key management variables used for regular value analysis are Return On
Invested Capital (ROIC) and absolute value added. ROIC is compared with the
segment-specific cost of capital. ROIC is calculated as the ratio of
underlying earnings before interest, taxes and amortisation of goodwill
(underlying EBITA) to average invested interest-bearing invested capital
(invested capital) for the segment.
Our definition of EBITA is earnings before net interest result, income tax
and impairment of goodwill excluding losses on container shipping and
excluding the result from the measurement of interest hedges. While EBITA
includes amortisation of intangible assets, it does not carry the result of
our investment in container shipping as our stake in Hapag-Lloyd AG is a
pure equity investment without an operating character.
In order to explain and measure TUI Group's operating performance, we use
underlying EBITA adjusted for gains on disposal of investments,
restructuring expenses, primarily scheduled amortisation of intangible
assets from purchase price allocations and other expenses for and income
from one-off effects.
In the framework of our growth strategy, we aim to achieve an underlying
EBITA CAGR of at least 10 % over the years to financial year 2018 / 19 (on
a
constant currency basis).
In order to follow the development of the business performance of our
segments in the course of the year, we monitor the financial indicators
turnover and EBITA, but also key non-financial performance indicators, such
as customer numbers in our tour operators, and capacity or passenger days,
occupancy and average prices in TUI Hotels & Resorts and Cruises. In the
framework of our sustainability reporting, we have also defined a target
indicator for specific CO2 emissions per passenger kilometre for our
airlines. We measure achievement of that indicator on an annual basis.
Cost of capital
Cost of capital (WACC)
Tour Hotels Cruises TUI
operator Group
% 2015 / 16 2015 / 2015 / 2015 /
16 16 16
Risk-free interest rate 0.50 0.50 0.50 0.50
Risk adjustment 9.40 6.03 6.35 8.42
Market risk premium 6.00 6.00 6.00 6.00
Beta factor1 1.5659 1.0042 1.0591 1.4025
Cost of equity after taxes 9.90 6.53 6.85 8.92
Cost of debt capital before 4.18 2.20 2.72 3.63
taxes
Tax shield 1.00 0.55 0.85 0.89
Cost of debt capital after 3.18 1.65 1.87 2.74
taxes
Share of equity 2 42.65 70.11 68.54 50.70
Share of debt capital 2 57.35 29.89 31.46 49.30
WACC after taxes3 6.00 5.00 5.25 5.75
Tax rate 24.00 25.00 31.00 24.62
Cost of equity before taxes 12.55 8.46 9.61 11.50
Cost of debt capital before 4.18 2.20 2.72 3.63
taxes
Share of equity 2 42.65 70.11 68.54 50.70
Share of debt capital 2 57.35 29.89 31.46 49.30
WACC before taxes3 7.75 6.50 7.50 7.50
1 Segment beta based on peer group, group beta based on weighted segment
betas
2 Segment share based on peer group, group share based on weighted segment
shares
3 Rounded to 1/4 percentage points
The cost of capital is calculated as the weighted average cost of equity
and
debt capital (WACC). While the cost of equity reflects the return expected
by investors from TUI shares, the cost of debt capital is based on the
average borrowing costs of the TUI Group. The cost of capital always shows
pre-tax costs, i.e. costs before corporate and investor taxes. The expected
return determined in this way corresponds to the same tax level as the
underlying earnings included in ROIC.
ROIC and economic value added
ROIC is calculated as the ratio of underlying earnings before interest,
taxes and amortisation of goodwill (underlying EBITA) to the average for
invested interest-bearing capital (invested capital) for the relevant
segment or sector. Given its definition, this performance indicator is not
influenced by any tax or financial factors and has been adjusted for
one-off
effects. From a Group perspective, invested capital under the financing
approach is derived from liabilities, comprising equity (including
non-controlling interests) and the balance of interest-bearing liabilities
and interest-bearing assets. The cumulative amortisations of purchase price
allocations are then factored in to invested capital.
Apart from ROIC as a relative performance indicator, economic value added
is
used as an absolute value-oriented performance indicator. Economic value
added is calculated as the product of ROIC less associated capital costs
multiplied by interest-bearing invested capital.
ROIC and Value added TUI Group
EUR million 2015 / 2014 / 15
16 restated
Equity 3,248.2 2,417.4
plus interest bearing financial 3,769.1 3,500.0
liability items
less financial assets 3,137.2 2,522.3
plus purchase price allocation 300.5 572.9
Invested Capital 4,180.6 3,968.1
Invested Capital Prior year 3,968.1 3,544.7
Seasonal adjustment1 500.0 500.0
Ø Invested capital 2 4,574.4 4,256.4
Underlying EBITA 1,000.5 953.3
ROIC% 21.87 22.40
Weighted average cost of capital (WACC)% 7.50 10.00
Value added 657.4 527.7
1 Adjustment to net debt to reflect a seasonal average cash balance
2 Average value based on balance at beginning and year-end
For TUI Group, ROIC was down by 0.5 percentage points on the previous year
at 21.9 %. With the cost of capital at 7.5 %, this meant positive economic
value added of EUR 657.4 m (previous year EUR 527.7 m).
Risk Report
Successful management of existing and emerging risks is critical to the
long-term success of our business and to the achievement of our strategic
objectives. In order to seize market opportunities and leverage the
potential for success, risk must be accepted to a reasonable degree. Risk
management is therefore an integral component of the Group's Corporate
Governance.
The current financial year has seen the risk management framework which
evolved last year after the merger become further embedded in the
organisation and within the business planning cycle. The major enhancement
in the current financial year was the upgrade of the risk and control
software and unification of the two previous legacy systems into a single
application, which has made reporting processes more efficient as a result.
Our risk governance framework is set out below.
Risk governance framework
Strategic direction and risk appetite
The Executive Board, with oversight by the Supervisory Board, determines
the
strategic direction of the TUI Group and agrees the nature and extent of
the
risks it is willing to take to achieve its strategic objectives.
To ensure that the strategic direction chosen by the business represents
the
best of the strategic options open to it, the Executive Board is supported
by the Group Strategy function. This function exists to facilitate and
inform the Executive Board's assessment of the risk landscape and
development of potential strategies by which it can drive long-term
shareholder value. On an annual basis the Group Strategy function develops
an in-depth fact base in a consistent format which outlines the market
attractiveness, competitive position and financial performance by division
and source market. These are then used to facilitate debate as to the level
and type of risk that the Executive Board finds appropriate in the pursuit
of its strategic objectives. The strategy, once fully defined, considered
and approved by the Executive Board, is then incorporated into the Group's
three-year roadmap and helps to communicate the risk appetite and
expectations of the organisation both internally and externally.
Ultimate responsibility for the Group's risk management rests with the
Executive Board. Having determined and communicated the appropriate level
of
risk for the business, the Executive Board has established and maintains a
risk management system to identify, assess, manage and monitor risks which
could threaten the existence of the company or have a significant impact on
the achievement of its strategic objectives: these are referred to as the
principal risks of the Group. This risk management system includes an
internally-published risk management policy which helps to reinforce the
tone set from the top on risk, by instilling an appropriate risk culture in
the organisation whereby employees are expected to be risk aware, control
minded and 'do the right thing'. The policy provides a formal structure for
risk management to embed it in the fabric of the business. Each principal
risk has assigned to it a member of the Executive Committee as overall risk
sponsor to ensure that there is clarity of responsibility and to ensure
that
each of the principal risks are understood fully and managed effectively.
The Executive Board regularly reports to the Audit Committee of the
Supervisory Board on the overall risk position of the Group, on the
individual principal risks and their management, and on the performance and
effectiveness of the risk management system as a whole.
The Risk Oversight Committee (ROC) ensures on behalf of the Executive Board
that business risks are identified, assessed, managed and monitored across
the businesses and functions of the Group. Meeting on at least a quarterly
basis, the ROC's responsibilities include considering the principal risks
to
the Group's strategy and the risk appetite for each of those risks,
assessing the operational effectiveness of the controls in place to manage
those risks and any action plans to further improve controls, and reviewing
the bottom-up risk reporting from the businesses themselves to assess
whether there are any heightened areas of concern. The ROC helps to ensure
that risk management is embedded into the planning cycle of the Group and
has oversight of the stress-testing of cash flow forecasts.
Senior executives from the Group's major businesses are required to attend
the ROC on a rotational basis and present on the risk and control framework
in their business, so that the members of the ROC can ask questions on the
processes in place, the risks present in each business and any new or
evolving risks which may be on their horizon, and also to seek confirmation
that the appropriate risk culture continues to be in place in each of the
major businesses.
Chaired by the Chief Financial Officer, other members of the Committee
include the Group Director Controlling and Finance Director Tourism, the
directors of Compliance & Risk, Financial Accounting, Treasury & Insurance,
Group Reporting & Analysis, Assurance, M&A, Investor Relations and
representatives from the IT and Legal Compliance functions. The director of
Group Audit attends without having voting rights to maintain the
independence of their function. The ROC reports quarterly to the Executive
Board to ensure that it is kept abreast of changes in the risk landscape
and
developments in the management of principal risks, and to facilitate
regular
quality discussions on risks and risk management at the Executive Board.
The Executive Board has also established a Group Risk team to ensure that
the risk management system functions effectively and that the risk
management policy is implemented appropriately across the Group. The Group
Risk team supports the risk management process by providing guidance,
support and challenge to management whilst acting as the central point for
co-ordinating, monitoring and reporting on risk across the Group. The Group
Risk team is responsible for the administration and operation of the risk
and control software which underpins the Group's risk reporting and risk
management process.
Each division and source market within the Group is required to adopt the
Group Risk Management policy. In order to do this, each either has their
own
Risk Committee or includes risk as a regular agenda item at their Board
meetings to ensure that it receives the appropriate senior management
attention within their business. In addition, the divisions and source
markets each appoint a Risk Champion, who promotes the risk management
policy within their business and ensures its effective application. The
Risk
Champions are necessarily in close contact with the Group Risk team and
they
are critical both in ensuring that the risk management system functions
effectively and in implementing a culture of continuous improvement in risk
management and reporting.
Risk management process
The Group Risk team applies a consistent risk methodology across all key
areas of the business. This is underpinned by risk and control software
which reinforces clarity of language, visibility of risks, controls and
actions and accountability of ownership. Although the process of risk
identification, assessment and response is continuous and embedded within
the day-to-day operations of the divisions and source markets, it is
consolidated, reported and reviewed at varying levels throughout the Group
on at least a quarterly basis.
Risk identification: On a quarterly basis, line management closest to the
risks identify the risks relevant to the pursuit of the strategy within
their business area in the context of four types of risk:
* longer-term strategic and emerging threats;
* medium-term challenges associated with business change programmes;
* short-term risks triggered by changes in the external and regulatory
environment; and
* short-term risks in relation to internal operations and control.
A risk owner is assigned to each risk, who has the accountability and
authority for ensuring that the risk is appropriately managed.
Risk descriptions: The nature of the risk is articulated, stating the
underlying concern the risk gives arise to, identifying the possible causal
factors that may result in the risk materialising and outlining the
potential consequences should the risk crystallise. This allows the
divisions /
source markets and the Group to assess the interaction of risks and
potential triggering events and / or aggregated impacts before developing
appropriate mitigation strategies to target causes and / or consequences.
Risk assessment: The methodology used is to initially assess the gross
risk.
The gross risk is essentially the worst case scenario, being the product of
the impact together with the likelihood of the risk materialising if there
were no controls in place to manage, mitigate or monitor the risk. The key
benefit of assessing the gross risk is that it highlights the potential
risk
exposure if controls were to fail completely or not be in place at all.
Both
impact and likelihood are scored on a rating of 1 to 5 using the criteria
outlined below.
The next step in the process is to assess the controls which are currently
in place and which help to reduce the likelihood of the risk materialising
and / or its impact if it does. The details of the controls including the
control owners are documented. Consideration of the controls in place then
enables the current or net risk score to be assessed, which is essentially
the reasonably foreseeable scenario. This measures the impact and
likelihood
of the risk with the current controls identified in operation. The key
benefit of assessing the current risk score is that it provides an
understanding of the current level of risk faced today and the reliance
placed on the controls currently in operation.
im-
pa-
ct
as-
se-
ss-
me-
nt
insignifi- minor moderate major
catastrophic
cant
qu- = 15 %
an- (=
ti- - < EUR 50 < EUR 105 m) - < EUR 160
EUR 160 m)
ta- m) m)
ti-
ve
Qu- Minimal Limited Short term Medium term
Detrimental
al- impact on impact on impact on impact on
impact on
it-
at-
iv-
e
* Global * Global * Global * Global *
Global
reputation * reputation * reputation * reputation *
reputation *
Programme Programme Programme Programme
Programme
delivery * delivery * delivery * delivery *
delivery *
Technology Technology Technology Technology
Technology
reliability reliability reliability reliability
reliability
* Health & * Health & * Health & * Health & *
Health &
Safety Safety Safety Safety
Safety
standards standards standards standards
standards
* Budgeted underlying EBITA for the financial year ended 30 September 2016
Like-
lihood
Assess-
ment
rare < unlikely 10 possible 30 likely 60 - almost
10 % - = 80
Chance Chance Chance Chance %
Chance
Risk response: If management are comfortable with the current risk score,
then the risk is accepted and therefore no further action is required. The
controls in place continue to be operated and management monitor the risk,
the controls and the risk landscape to ensure that the risk score stays
stable and in line with management's tolerance of the risk.
If, however, management assesses that the current risk score is too high,
then an action plan will be drawn up with the objective of introducing new
or stronger controls which will reduce the impact and / or likelihood of
the
risk to an acceptable, tolerable and justifiable level. This is known as
the
target risk score and is the parameter by which management can ensure the
risk is being managed in line with the Group's overall risk appetite. The
risk owner will normally be the individual tasked with ensuring that this
action plan is implemented within an agreed timetable.
Each division / source market will continue to review their risk register
on
an ongoing basis through the mechanism appropriate for their business e. g.
local Risk Committee. The risk owner will be held to account if action
plans
are not implemented within the agreed delivery timescales.
This bottom-up risk reporting is considered by the ROC alongside the
Group's
principal risks. New risks are added to the Group's principal risk register
if deemed to be of a significant nature so that the ongoing status and the
progression of key action plans can be managed in line with the Group's
targets and expectations.
Ad hoc risk reporting
Whilst there is a formal process in place aligned to reporting on risks and
risk management on a quarterly basis, the process of risk identification,
assessment and response is continuous and therefore if required risks can
be
reported to the Executive Board outside of the quarterly process if events
dictate that this is necessary and appropriate. Ideally such ad hoc
reporting is performed by the business or function which is closest to the
risk, but it can be performed by the Group Risk team if necessary. The best
example of ad hoc risk reporting in the year was an early assessment ahead
of the UK referendum of the possible risks posed by a vote in favour of the
UK leaving the EU ('Brexit'). A Brexit Steering Committee has now been
created to monitor developments in this area.
Risk maturity & culture
During the current financial year, the Risk Champions and the Group Risk
team have continued to work together on risk management actions plans for
the businesses as part of the culture of continuous improvement.
Periodically we ask the businesses to formally assess the risk maturity and
culture of their business, primarily through the Risk Champions completing
self-assessment questionnaires, validating this with their local boards and
then discussing their responses with the Group Risk team.
Entity scoping
A robust exercise is conducted each year to determine the specific entities
in the Group which need to be included within the risk and control software
and therefore be subject to the full rigour of the risk management process.
The scoping exercise starts with the entities included within the Group's
consolidation system, and applies materiality thresholds to a combination
of
revenue, profit and asset benchmarks. From the entities this identifies,
the
common business management level at which those entities are managed is
identified to dictate the entities which need to be set in the risk and
control software itself to facilitate completeness of bottom-up risk
reporting across the Group. This ensures that the risks and controls are
able to be captured appropriately at the level at which the risks are being
managed.
Effectiveness of risk management system
The Executive Board regularly reports to the Audit Committee of the
Supervisory Board on the performance and effectiveness of the risk
management system, supported by the ROC and the Group Risk team.
Additionally, the Audit Committee receives assurance from Internal Audit
through its programme of audits over a selection of principal risks and
business transformation initiatives most critical to the Group's continued
success. Finally, the Group's auditor assess the risk management system in
accordance with section 317 (4) of the German Commercial Code.
The conclusion from all of the above assurance work is that the risk
management system has functioned effectively throughout the year and there
have been no significant failings or weaknesses identified. Of course there
is always room for improvement and as noted earlier, the Risk Champions and
the Group Risk team have continued to work together on risk management
actions plans for the businesses. Broadly this concerns ensuring
consistency
of approach in assessing risk scores, clearer identification of controls
currently in place as well as any action plans to introduce further
controls, and ensuring that risk identification has considered the four
risk
categories.
Principal risks
There are some principal risks which are inherent to the tourism sector and
necessarily face all businesses in the sector. For these inherent risks we
have controls, processes and procedures in place as a matter of course
which
serve to mitigate each risk to either minimise the likelihood of the event
occurring and / or minimise the impact if it does occur. These risks are on
our risk radar and we regularly monitor the risk, the controls and the risk
landscape to ensure that the risk score stays stable and in line with our
risk appetite in each case.
Furthermore, the tourism industry is fast-paced and competitive, with the
emergence of new market participants operating new business models,
combined
with consumer tastes and preferences evolving all the time. As a result as
a
business we always have to adapt to the changing environment, and it is
this
process of constant change which generally gives rise to a number of
principal risks which we have to actively manage in order to bring the risk
into line with our overall risk appetite. We have action plans in place to
increase controls around each of these risks and reduce the current net
risk
score to the target level indicated in the heat map overleaf.
In the heat map the assessment criteria used are shown on page 52 below.
Note that the quantitative impact assessment is based on the budgeted
underlying EBITA for the financial year ended 30 September 2016.
If the risk detail in the subsequent tables does not suggest otherwise, the
risks shown below relate to all segments of the Group. The risks listed are
the principal risks to which we are exposed and are not exhaustive. They
will necessarily evolve over time due to the dynamic nature of our
business.
Risks with no impact on underlying EBITA
Impairment risk related to the investment in container shipping
(Hapag-Lloyd
AG).
TUI Group continues to hold a substantial investment in the container
shipping company, Hapag-Lloyd AG. Significant deterioration in the market
value of the investment will require an impairment to be booked in the
income statement of the TUI Group - as has occurred in the financial year
ended 30th September 2016. Whilst this risk has been reduced by the
impairment already taken in the current and prior years, the value of the
investment on our balance sheet is still material and therefore the risk
continues to exist. We are committed to our plan to fully exit this
investment in the medium term.
German trade tax risk.
As noted in prior years, the German tax authorities have issued guidance on
how certain items of expenditure should be treated for the purposes of
German trade tax. The Group continues to disagree with the German tax
authorities' interpretation of this matter and it is possible that the
issue
will have to be litigated through the German tax courts which could take a
considerable amount of time to bring it to a resolution. However due to a
judgement from the fiscal court Munster on 4 February 2016, a reassessment
of the trade tax risk for the purchase of hotel accommodation was
undertaken
in the current financial year, resulting in a separately recognised tax
expense of EUR 37 m in the income statement.
Overall risk assessment
Destination disruption is an inherent risk to which all providers of
holiday
and travel services are exposed. This disruption can take place in many
forms such as natural catastrophes, outbreaks of diseases, social unrest,
terrorist attacks and the implications of war in countries close to our
source markets and destinations. Whilst thankfully we did not directly
experience a tragic event like the Tunisia incident of June 2015, incidents
in various destinations (e. g. Sharm el-Sheikh in October 2015) continue to
keep the risk of disruption in some North African destinations at a high
level. Furthermore, general customer concerns over safety and security in
eastern Mediterranean destinations (particularly Turkey) has led to a
general decline in demand across all our source markets for these
destinations. Due to our geographic reach, we have been able to respond to
this shift in demand by remixing capacity away from North Africa and the
eastern Mediterranean towards destinations customers are currently
favouring
such as Spain, Canary Islands, Cape Verde etc. Despite this current shift
in
demand, Turkey remains an important destination for our Group. Our general
policy in respect of destinations remains to follow foreign office advice
in
each of our source markets relating to non-essential travel to specific
destinations. It is noted that in January 2017 there will be an inquest in
the UK into the Tunisia incident of June 2015 and we await any industry
recommendations that may arise as a result.
One of the biggest events in 2015 / 16 which has the potential to
significantly alter the risk landscape of the Group is the UK referendum at
the end of June which resulted in a vote for the UK to leave the EU
('Brexit'). The exchange rate volatility seen earlier in the year has
continued as a result, which has an immediate impact on the translation of
the sterling results from our UK business into euros, the reporting
currency
of the Group. The depreciation of sterling against the euro means that each
£ of profit translates into a smaller euro value. The outcome of the
referendum has led to a greater degree of uncertainty over the future
economic performance of the UK economy. Whilst we have not seen any
apparent
slow-down in bookings in our UK business to date, there is a greater
potential for this to occur in the medium term. Therefore for both of these
reasons we see our macroeconomic risk as having increased compared to this
time last year, although the strength and differentiation of our customer
offering means that we are well positioned to deal with the changing
macroeconomic environment. The depreciation of sterling also has a cost
impact through making foreign denominated input costs in the UK business
more expensive in sterling terms. Whilst the standard hedging policy we
follow means that for the 2015 / 16 financial year the UK business was
largely immune to these cost pressures, the risk crystallises to a greater
extent in 2016 / 17, as S17 was partially hedged (c. 40 %) at the time of
the referendum, if sterling stays at current levels. Normal business
practice is to increase holiday prices to offset these higher input costs
and protect margins, however competitive pressures may prevent prices from
rising to the full extent required. The other immediate impact of the
Brexit
vote has been the reduction in UK interest rates and therefore discount
factors applied to UK pension liabilities, which has resulted in a
significant increase in the pension liability at the year-end. Whilst this
does not of itself present a risk at the moment, it may do so when the next
actuarial valuation is performed on the UK pension scheme if it then leads
to a requirement to make higher cash pension contributions over a sustained
period of time. Please see note Pension provisions and similar obligations
of the financial statements for further details on the pension deficit.
The Group has created a Brexit Steering Committee to monitor developments
as
the political negotiations take place concerning the specifics of the terms
of the UK exit from and future trading relationship with the EU and how
this
may affect the TUI Group's business model. At this stage it is too early to
assess whether there will be any impact on areas such as flying rights,
customer visa requirements or employee contracts and therefore we view
Brexit as being an emerging risk around which more clarity will be gained
in
the future once Article 50 is triggered by the UK government and exit
negotiations begin.
The completion in December 2014 of the merger between TUI AG and TUI Travel
PLC has had an impact on our risk landscape by opening up new business
opportunities but also introducing new risks in the pursuit of those
opportunities (e. g. brand change) and in the context of the delivery of
specific merger synergies. We are pleased that the post-merger integration
of the Group has progressed well and at a faster pace than originally
anticipated. We are on track to deliver our specific merger synergy
targets,
integration-related restructuring programmes are ongoing as expected, and
we
have successfully navigated our way through the initial period of
post-merger concern with regards to retaining key talent. We therefore
perceive these risks to be at a lower level than they were 12 months ago.
In the course of the restructuring of our tourism activities, we have
completed the disposal in September 2016 of Hotelbeds Group and commenced
the marketing of Travelopia (formerly part of Specialist Group). Such large
disposal transactions have inherent risks associated with them due to the
amount of management time they require to bring them to a successful
conclusion, combined with continuing obligations and customary
representation and warranties.
Finally, the risk of a deterioration in the valuation of our container
shipping investment crystallised again during the year and a further
impairment has been taken. Whilst this has therefore reduced the risk for
future periods, the value of the investment on our balance sheet is still
material and therefore the risk continues to exist.
Other than the items noted above, the Executive Board is of the opinion
that
there has been no other significant change to the risk landscape of the
Group.
Viability statement
In accordance with provision C2.2 of the 2014 revision of the UK Corporate
Governance Code, the Executive Board has assessed the prospect of the
Company over a longer period than the 12 months required by the 'Going
Concern' provision. The Executive Board considers annually and on a
rolling-basis a three year strategic plan for the business as outlined
earlier in the 'Strategic direction and risk appetite' section. The latest
three year plan was approved in October 2016 and covers the period to 30th
September 2019. A three year horizon is considered appropriate for a
fast-moving competitive environment such as tourism, and it is noted that
the Group's current EUR 1,535.0 m revolving credit facility, which is used
to manage the seasonality of the Group's cash flows and liquidity, matures
in December 2020 which is beyond the timeframe of the three year horizon.
The three year plan considers cash flows as well as the financial covenants
which the credit facility requires compliance with. A key assumption
underpinning the three year plan and the associated cash flow forecast is
that aircraft and cruise ship finance will continue to be readily
available.
The Executive Board has conducted a robust assessment of the principal
risks
facing the company, including those that would threaten its business model,
future performance, solvency or liquidity. Sensitivity analysis is applied
to the cash flow to model the potential effects should certain principal
risks actually occur, individually or in unison. This includes modelling
the
effects on the cash flow of significant disruption to a major destination
in
the summer season.
Taking account of the company's current position, principal risks and the
aforementioned sensitivity analysis, the Executive Board has a reasonable
expectation that the company will be able to continue in operation and meet
its liabilities as they fall due over the three year period of the
assessment.
Key features of the internal control and risk management system in relation
to the Group accounting process (sections 289 (5) and 315 (2) no 5 of the
German Commercial Code HGB)
1. Definition and elements of the internal control and risk management
system in the TUI Group
The TUI Group's internal control system comprises all the principles,
processes and measures that are applied to secure effective, efficient and
accurate accounting which is compliant with the necessary legal
requirements.
In the completed financial year, the TUI Group's existing internal control
system was further developed, drawing on the internationally recognised
framework of COSO (Committee of Sponsoring Organizations of the Treadway
Commission), which forms the conceptual basis for the internal control
system.
The TUI Group's internal control system consists of internal controls and
the internal monitoring system. The Executive Board of TUI AG, in
exercising
its function of managing business operations, has entrusted responsibility
for the internal control system in the TUI Group to specific Group
functions.
The elements of the internal monitoring system in the TUI Group comprise
both measures integrated into processes and measures performed
independently. Besides manual process controls, e. g. the 'four-eyes
principle', another key element of the process-related measures are
automated IT process controls. Process-related monitoring is also secured
by
bodies such as the Risk Oversight Committee of TUI AG and by specific Group
functions.
The Supervisory Board of TUI AG, in particular its Audit Committee, as well
as the Group Auditing department at TUI AG and the decentralized audit
departments within Group companies, are incorporated into the TUI Group's
internal monitoring system through their audit activities performed
independently from business processes. On the basis of section 107 (3) of
the German Stock Corporation Act, the Audit Committee of TUI AG deals
primarily with the auditing of the annual financial statements, monitoring
the accounting process and the effectiveness of the internal control and
risk management system.
The Group's auditors have oversight of the TUI Group's control environment
through their non-process-related activities. The audit of the consolidated
financial statements by the Group auditor and the audit of the individual
financial statements of Group companies included in the consolidated
financial statements, in particular, constitute a key non-process-related
monitoring measure with regard to Group accounting.
In relation to Group accounting, the risk management system, introduced as
an Enterprise Risk Management System (ERM System) as a component of the
internal control system, also addresses the risk of misstatements in Group
bookkeeping and external reporting. Apart from operational risk management,
which includes the transfer of risks to insurance companies by creating
cover for damage and liability risks and also hedging transactions to limit
foreign currency and fuel price risks, the TUI Group's risk management
system embraces the systematic early detection, management and monitoring
of
risks across the Group. A more detailed explanation of the risk management
system is provided in the section on the Risk Governance Framework in the
Risk Report.
2. Use of IT systems
Bookkeeping transactions are captured in the individual financial
statements
of the subsidiaries of TUI AG, through local accounting systems such as SAP
or Oracle. As part of the process of preparing their individual financial
statements, subsidiaries complete standardized reporting packages in the
Group's Oracle Hyperion Financial Management 11.1.2.3 (HFM) reporting
system. HFM is used as the uniform reporting and consolidation system
throughout the Group so that no additional interfaces exist for the
preparation of the consolidated financial statements.
All consolidation processes used to prepare the consolidated financial
statements of TUI AG, e. g. capital consolidation, assets and liabilities
consolidation and expenses and income elimination including at equity
measurement, are generated and fully documented in HFM. All elements of TUI
AG's consolidated financial statements, including the disclosures in the
Notes, are developed from the HFM consolidation system. HFM also provides
various modules for evaluation purposes in order to prepare complementary
information to explain TUI AG's consolidated financial statements.
The HFM reporting and consolidation system has an in-built workflow process
whereby when businesses promote their data within the system, to signal
that
their reporting package is complete, they are then locked out from making
any further changes to that data. This ensures data integrity within the
system and also facilitates a strong audit trail enabling changes to a
reporting package to be identified. This feature of the HFM system has been
checked and validated by the TUI AG Group Audit department on several
occasions since the system was introduced.
At their own discretion, TUI AG's Group auditors select certain individual
financial statements from the financial statements entered in the HFM
reporting and consolidation system by the Group companies, which are then
reviewed for the purposes of auditing the consolidated financial
statements.
3. Specific risks related to Group accounting
Specific risks related to Group accounting may arise, for example, from
unusual or complex business transactions, in particular at critical times
towards the end of the financial year. Business transactions not routinely
processed also entail special risks. The discretion necessarily granted to
employees for the recognition and measurement of assets and liabilities may
result in further Group accounting-related risks. The outsourcing and
transfer of accounting-specific tasks to service companies may also give
rise to specific risks. Accounting-related risks from derivative financial
instruments are outlined in the Notes to the consolidated financial
statements.
4. Key regulation and control activities to ensure proper and reliable
Group
accounting
The internal control measures aimed at securing proper and reliable Group
accounting ensure that business transactions are fully recorded in a timely
manner in accordance with legal requirements and the Articles of
Association. This also ensures that assets and liabilities are
properlyrecognised, measured and presented in the consolidated financial
statements. The control operations also ensure that bookkeeping records
provide reliable and comprehensive information.
Controls implemented to secure proper and reliable accounting include, for
instance, analysis of facts and developments on the basis of specific
indicators. Separation of administrative, execution, settlement and
authorisation functions and the implementation of these functions by
different persons reduces the potential for fraudulent operations.
Organisational measures also aim to capture any corporate or Group-wide
restructuring or changes in sector business operations rapidly and
appropriately in Group accounting. They also ensure, for instance, that
bookkeeping transactions are correctly recognised in the period in which
they occur in the event of changes in the IT systems used by the accounting
departments of Group companies. The internal control system likewise
ensures
that changes in the TUI Group's economic or legal environment are mapped
and
that new or amended accounting standards are correctly applied.
The TUI Group's accounting policies together with the International
Financial Reporting Standards (IFRS) in compliance with EU legislation,
govern the uniform accounting and measurement principles for the German and
foreign companies included in TUI's consolidated financial statements. They
include general accounting principles and methods, policies concerning the
statement of financial position, income statement, notes, management
report,
cash flow statement and segment reporting.
The TUI Group's accounting policies also govern specific formal
requirements
for the consolidated financial statements. Besides defining the group of
consolidated companies, they include detailed guidance on the reporting of
financial information by those companies via the group reporting system HFM
on a monthly, quarterly and year end basis. TUI's accounting policies also
include, for instance, specific instructions on the initiating,
reconciling,
accounting for and settlement of transactions between group companies or
determination of the fair value of certain assets, especially goodwill.
At Group level, specific controls to ensure proper and reliable Group
accounting include the analysis and, where necessary, correction of the
individual financial statements submitted by the Group companies, taking
account of the reports prepared by the auditors and meetings to discuss the
financial statements which involve both the auditors and local management.
Any further content that requires adjusting can be isolated and processed
downstream.
The control mechanisms already established in the HFM consolidation system
minimize the risk of processing erroneous financial statements. Certain
parameters are determined at Group level and have to be applied by group
companies. This includes parameters applicable to the measurement of
pension
provisions or other provisions and the interest rates to be applied when
cash flow models are used to calculate the fair value of certain assets.
The
central implementation of impairment tests for goodwill recognized in the
financial statements secures the application of uniform and standardized
evaluation criteria.
5. Disclaimer
With the organisational, control and monitoring structures established by
the TUI Group, the internal control and risk management system enables
company-specific facts to be captured, processed and recognised in full and
properly presented in the Group's accounts.
However, it lies in the very nature of the matter that discretionary
decision-making, faulty checks, criminal acts and other circumstances, in
particular, cannot be ruled out and will restrict the efficiency and
reliability of the internal control and risk management systems, so that
even Group-wide application of the systems cannot guarantee with absolute
certainty the accurate, complete and timely recording of facts in the
Group's accounts.
Any statements made relate exclusively to subsidiaries according to IFRS 10
included in TUI AG's consolidated financial statements.
Overall assessment by the Executive Board and Report on expected
development
Comparison of actual business performance 2015 / 16 with the forecast
In the second post-merger financial year, TUI Group's performance again
exceeded our original forecast, despite a challenging geopolitical
framework. TUI Group's underlying EBITA rose by 5.0 % to EUR 1,000.5 m in
financial year 2015 / 16. Excluding the negative foreign exchange effects
included in these earnings due to the decline of sterling against the euro
in the period under review, this corresponds to an improvement of 14.5 %.
We
have thus outperformed our guidance of achieving an increase in our
operating result of at least 10 % on a constant currencybasis.
Due to the sound operating performance and lower net one-off charges, the
Group also achieved an increase in its reported EBITA, which grew by 13.0 %
to EUR 898.1 m.
Brand turnover and TUI Group turnover grew less than expected, but
delivered
growth of 2.3 % and 1.4 % respectively on the prior year on a constant
currency basis.
At EUR 691.0 m, the Group's net capital expenditure on property, plant and
equipment and financial investments fell slightly short of the target of
EUR
750.0 m. These amounts include the investments and capital expenditure of
Hotelbeds Group and Specialist Group, which were sold in the period under
review. The net debt of EUR 31.8 m carried at the end of financial year
2015
/ 16 also reflected the broadly neutral net finance position for TUI Group
we had expected after the agreement to sell Hotelbeds Group.
Expected changes in the economic framework
Expected development of gross domestic product
Var. % 2017 2016
World + 3.4 + 3.1
Eurozone + 1.5 + 1.7
Germany + 1.4 + 1.7
France + 1.3 + 1.3
UK + 1.1 + 1.8
US + 2.2 + 1.6
Russia + 1.1 - 0.8
Japan + 0.6 + 0.5
China + 6.2 + 6.6
India + 7.6 + 7.6
Source: International Monetary Fund (IMF), World Economic Outlook, October
2016
Macroeconomic situation
The International Monetary Fund (IMF, World Economic Outlook, October 2016)
expects gross domestic product to grow 3.1 % in calendar year 2016, as
economic momentum has declined in the developed economies following the UK
vote to exit the European Union and growth inthe United States has been
weaker than expected. For 2017, the IMF expects the global economy to grow
by 3.4 %. The experts believe the economy will gain some momentum again due
to several factors, including an increase in investments and a better
outlook for the emerging markets.
Market trend in tourism
UNWTO expects international tourism to continue growing globally in this
decade. For the next few years, average weighted growth of around 3 % per
annum has been forecast (source: UNWTO, Tourism Highlights, 2016 edition).
In the first six months of 2016, international arrivals grew by 4.0 %.
UNWTO
expects growth of 3.5 % to 4.5 % for calendar year 2016 (source: UNWTO,
World Tourism Barometer, September 2016).
Effects on TUI Group
As a leading provider of tourism services, TUI Group depends on the
development of consumer demand in the large source markets in which we
operate with our tour operator and hotel brands. Our budget is based on the
assumptions used as a basis by the IMF to predict the future development of
the global economy.
Apart from the development of consumer sentiment, political stability in
the
destinations is a further crucial factor affecting demand for holiday
products. In our view, our business model is sufficiently flexible to
compensate for the currently identifiable challenges.
The expected turnover growth assumed for our tour operators in our budget
for financial year 2016 / 17 is in line with UNWTO's long-term forecast.
Our
strategic focus is to create unified branding in our source markets,
broaden
our portfolio of Group-owned hotels and expand our cruise business.
Expected development of Group turnover and earnings
TUI Group
The translation of the income statements of foreign subsidiaries in our
consolidated financial statements is based on average monthly exchange
rates. TUI Group generates a considerable proportion of consolidated
turnover and large earnings and cash flow contributions in non-euro
currencies, in particular GBP, USD and SEK. Taking account of the
seasonality in tourism, the development of these currencies against the
euro
in the course of the year therefore strongly impacts the financial
indicators carried in TUI Group's consolidated financial statements.
Thecomments on the expected development of our Group in financial year 2016
/ 17 provided below are based on the assumption of constant currencies for
the completed financial year 2015 / 16.
Expected development of Group
turnover, underlying EBITA and
adjustments
Expected
Development
vs. PY
EUR million 2015 / 16 2016 / 17*
Turnover 17,185 around 3 %
growth
Underlying EBITA 1,001 at least 10
% growth
Adjustments 103 approx. EUR
80 m cost
* Variance year-on-year assuming constant foreign exchange rates are
applied
to the result in the current and prior period and based on the current
group
structure;
guidance relates to continuing operations and excludes any disposal
proceeds
for Travelopia and Hapag-Lloyd AG.
Turnover
We expect turnover to grow by around 3 % in financial year 2016 / 17 on a
constant currency basis, primarily due to an expected increase in customer
numbers and higher average prices for our large tour operators, driven by
the delivery of our growth roadmap.
Underlying EBITA
TUI Group's underlying EBITA in financial year 2016 / 17 is expected to
grow
by at least 10 % at constant currency as we deliver our growth roadmap.
Risks relate to the development of customer numbers against the backdrop of
continued volatility in the economic environment in our key source markets,
demand for Group-owned hotels and cruise ships and the delivery of all
merger synergies.
Adjustments
For financial year 2016 / 17, we expect purchase price allocations and net
one-off costs of around EUR 80 m, to be carried as adjustments.
ROIC and Economic Value Added
Due to the enhanced operating result, we expect ROIC to improve slightly in
financial year 2016 / 17; depending on the development of TUI Group's
capital costs, this is also expected to result in an increase in economic
value added.
Development in the segments
The expected development outlined below is based on current trading, our
growth roadmap and the relative performance of our segments during
financial
year 2015 / 16. Future development depends on demand in our source markets
and customer segments and on input cost curves. In our view, the benefit of
our diversified business model is that developments in individual segments
can be offset by opposite trends in other segments.
Source markets
Based on current trading and assuming constant currency exchange rates, we
would expect the source markets to deliver at least 10 % underlying
earnings
growth at constant currency. Besides a continuous good development in UK
and
a further improvement in Nordics we expect and increase of our tour
operating result in France which should also benefit from the recent
Transat
acquisition. In addition, Germany should benefit from efficiency measures.
Hotels & Resorts
We expect that the result improvement following the delivery of our growth
strategy should more than offset the non-recurring gain on disposal of a
Riu
hotel in the past financial year. Taking into account the non-recurring
gain
on disposal of a Riu hotel in financial year 2015 / 16 we expect growth in
Hotels & Resorts above our Group underlying EBITA guidance of at least 10
%.
Cruises
Due to first-time full-year operation of Mein Schiff 5 and the planned
launch of Mein Schiff 6 in financial year 2016 / 17, we expect growth in
underlying EBITA in Cruises to considerably exceed our Group guidance of at
least 10 %.
Expected development of financial position
Expected development of Group
financial position
Expected development
vs. PY in %
EUR million 2015 / 16 2016 / 17
Net cash capex and investments* 642.3 around EUR
1.0 bn
Net financial position - 31.8 around EUR
0.8 bn
* Excl. aircraft orderbook financing
Net capex and investments
In the light of investment decisions already taken and projects in the
pipeline, we expect TUI Group's net funding requirements to be around EUR
1.0 bn for financial year 2016 / 17 excluding aircraft orderbook finance.
Capex mainly relates to the launch of new production and booking systems
for
our tour operators, maintenance and expansion of our hotel portfolio and
the
acquisition of the cruise ship Legend of the Seas. Planned investments
mainly include the acquisition of the French Transat tour operation
business.
Net financial position
At the balance sheet date, the Group's net financial position amounted to
EUR 31.8 m net cash. Due to the planned increase in net cash capex and
investments, we expect TUI Group's net debt to increase to around EUR 0.8
bn
in financial year 2016 / 17.
Sustainable development
Climate protection and emissions
Greenhouse gas emissions and the impact of these emissions on climate
change
pose one of the major global challenges for the tourism sector. The goals
we
set ourselves in our sustainability strategy 'Better Holidays, Better
World', launched in September 2015, include operating Europe's most
carbon-efficient airlines by 2020 and defending this top position. Specific
carbon emissions (g CO2 / PKM) are to be reduced by 10 % by 2020. We also
aim to reduce the carbon intensity of our global operations by 10 % by 2020
(against the baseline of 2013 / 14).
Overall Executive Board assessment of TUI Group's current situation and
expected development
At the date of preparation of the Management Report (6 December 2016), we
uphold our positive assessment of TUI Group's economic situation and
outlook
for financial year 2016 / 17. With its finance profile, strong brand and
services portfolio, TUI Group is well positioned in the market. In the
first
few weeks of the new financial year 2016 / 17, the overall business
performance has matched expectations.
As against the prior year reference period, we expect TUI Group's
underlying
operating result to grow by at least 10 % year-on-year on a constant
currency basis, driven by improved operating performance in the segments.
In the light of our growth strategy, we have updated our medium-term
guidance, aiming to deliver at least 10 % underlying EBITA CAGR in the
three
years to 2018 / 19. Our long-term target for TUI Group's gross capex
(excluding aircraft orderbook finance) is at 3.5 % of consolidated
turnover.
Opportunity Report
TUI Group's opportunity management follows the Group strategy for core
business Tourism. Responsibility for systematically identifying and taking
up opportunities rests with the operational management of the source
markets
and the TUI Hotels & Resorts and Cruises segments. Market scenarios and
critical success factors for the individual sectors are analysed and
assessed in the framework of the Group-wide planning and control process.
The core task of the Group's Executive Board is to secure profitable growth
for the TUI Group by optimising the shareholding portfolio and developing
the Group structure over the long term.
Overall, TUI Group is well positioned to benefit from opportunities
resulting from the main trends in its markets.
Opportunities from the development of the overall framework
Should the economy perform better than expected, the TUI Group and its
sectors would benefit from the resulting increase in demand in the travel
market. Moreover, changes in the competitive environment could create
opportunities for the TUI Group in individual markets.
Corporate strategy
We see opportunities for further organic growth in particular by expanding
our hotel portfolio and cruise business. As market leader, we also intend
to
benefit in the long term from demographic change and the resulting expected
increase in demand for high-quality travel at an attractive price /
performance ratio.
Operational opportunities
We intend to improve our competitive position further by offering unique
product and further expanding controlled distribution in the source
markets,
in particular online distribution. We also see operational opportunities
arising from stronger integration of our content and touroperation
business.
Other opportunities
We also regard a potential sale of Specialist Group and our remaining stake
in container shipping as an opportunity to further improve TUI Group's key
financial ratios.
Principal risks - Inherent to the sector
Nature of Risk
DESTINATION DISRUPTION RISK
Providers of holiday and travel services are exposed to the inherent risk
of
incidents affecting some countries or destinations within their operations.
This can include natural catastrophes such as hurricanes or tsunamis;
outbreaks of disease such as Ebola; political volatility as has been seen
in
Egypt and Greece in recent years; the implications of war in countries
close
to our source markets and destinations; and terrorist events such as the
tragic incident in Tunisia last year and in Turkey in January 2016.
There is the risk that if such an event occurs which impacts on one or more
of our destinations that we could potentially suffer significant
operational
disruption and costs in our businesses. We may possibly be required to
repatriate our customers and / or the event could lead to a significant
decline in demand for holidays to the affected destinations over an
extended
period of time.
MACROECONOMIC RISKS
Spending on travel and tourism is discretionary and price sensitive. The
economic outlook remains uncertain with different source markets at
different points in the economic cycle. Furthermore, terrorist incidents in
source markets can influence the overall demand for overseas travel in
those
markets. Consumers are also waiting longer to book their trips in order to
assess their financial situation.
There is the risk that fluctuations in macroeconomic conditions in our
source markets will impact on the spending power of our customers which
could impact on our short-term growth rates and lead to margin erosion.
Furthermore, changes in macroeconomic conditions can have an impact on
exchange rates which, particularly for the £ / EUR rate, has a direct
impact
on the translation of non-euro source market results into euros, the
reporting currency of our Group.
COMPETITION & CONSUMER PREFERENCES
The tourism industry is fast-paced and competitive with the emergence of
new
market participants operating new business models, combined with consumer
tastes and preferences evolving all the time.
In recent years there has been an emergence of successful substitute
business models such as web-based travel and hotel portals which allow end
users to combine the individual elements of a holiday trip on their own and
book them separately.
Consumer tastes and preferences have evolved in recent years as well, with
more consumers booking their holidays online and via mobiles and tablets,
and booking closer to the time of travel.
There is the risk that if we do not respond adequately to such business
model disruption or if our products and services fail to meet changing
customer demands and preferences, that our turnover, market share and
profitability will suffer as a result.
INPUT COST VOLATILITY
A significant proportion of operating expenses are in non-local currency
and
/ or relate to aircraft fuel which therefore exposes the business to
changes
in both exchange rates and fuel prices.
There is the risk that if we do not manage adequately the volatility of
exchange rates, fuel prices and other input costs, then this could result
in
increased costs and lead to margin erosion, impacting on our ability to
achieve profit targets.
There is also the risk that if our hedging policy is too rigid, we may find
ourselves unable to respond to competitive pricing pressures during the
season without it having a direct detrimental impact on our market position
and / or profitability.
SEASONAL CASHFLOW PROFILE
Tourism is an inherently seasonal business with the majority of profits
earned in the European summer months. Cash flows are similarly seasonal
with
the cash high occurring in the summer as advance payments and final
balances
are received from customers, with the cash low occurring in the winter as
liabilities have to be settled with many suppliers after the end of the
summer season.
There is the risk that if we do not adequately manage cash balances through
the winter low period this could impact on the Group's liquidity and
ability
to settle liabilities as they fall due whilst ensuring that financial
covenants are maintained.
LEGAL & REGULATORY COMPLIANCE
Most providers of holiday and travel services operate across a number of
economies and jurisdictions which therefore exposes them to a range of
legal, tax and other regulatory laws which must be complied with.
As the TUI Group is the world's leading tourism business operating from 31
source markets and providing holidays in 180 destinations, we are exposed
to
a range of laws and regulations with which we must comply or else risk
incurring fines or other sanctions from regulatory bodies.
HEALTH & SAFETY
For all providers of holiday and travel services, ensuring the health and
safety of customers is of paramount importance. This is especially so for
TUI as we are the world's leading tourism business selling holidays to over
20 million customers per annum.
There is the risk of accidents or incidents occurring causing illness,
injury or death to customers or colleagues whilst on a TUI holiday. This
could result in reputational damage to the business and / or financial
liabilities through legal action being taken by the affected parties.
SUPPLY CHAIN RISK
Providers of holiday and travel services are exposed to the inherent risk
of
failure in their key suppliers, particularly hotels. This is further
heightened by the industry convention of paying in advance ('prepayment')
to
secure a level of room allocation for the season.
There is the risk that we do not adequately manage our financial exposure
should demand drop either for individual hotels and / or for the
destination
in which the hotels are located and to which the tour operator still has a
level of prepayment outstanding which could result in financial losses.
JOINT VENTURE PARTNERSHIPS
It is common for tourism groups to use joint venture partnerships in some
of
their operations in order to reduce the risk of new ventures or to gain
access to additional expertise. TUI has four significant joint ventures -
Riu; TUI Cruises; Sunwing; TUI Russia & Ukraine.
There is the risk that if we do not maintain good relations with our key
partners that the ventures' objectives may not remain consistent with that
of the Group which could lead to operational difficulties and jeopardise
the
achievement of financial targets.
Actively managed principal risks - Strategic & emerging and business change
IT DEVELOPMENT & STRATEGY
Our focus is on enhancing customer experience by providing engaging,
intuitive, seamless and continuous customer service through delivery of
leading digital solutions, core platform capabilities, underlying technical
infrastructure and IT services required to support the Group's overall
strategy for driving profitable top-line growth.
There is a risk that we fail to keep up with or outpace the market and
evolving consumer preferences, we do not concentrate our activities on the
correct areas for overall business success, do not address legacy
inefficiencies and complexities of our existing infrastructure, do not
ensure continuity of service for critical IT systems and / or do not
execute
our strategy and developments in line with expectations.
If we are ineffective in our strategy or technology development this could
impact on our ability to provide leading technology solutions in our
markets
thereby impacting on our competitiveness, our ability to provide a superior
customer experience and associated impact on quality and operational
efficiency. This would ultimately impact on our customer numbers, revenue
and profitability.
BRAND CHANGE
Our long term strategy is to migrate our many local tour operating brands
in
to one global brand, with the aim of strengthening and enhancing our
competitive position, particularly in the online world. We are aiming to
capitalise on the strength of the TUI brand on a global scale whilst
ensuring we maintain local roots.
There is an inherent risk when executing such a large scale global brand
strategy that we may not be able to maintain the benefits of local brand
equity throughout the process and we recognise that such a large programme
should take place with respect for the interests of all our stakeholders
and
existing contractual obligations.
If we do not successfully deliver against our strategy this could result in
a decline in brand awareness and loyalty with associated decline in
customer
demand or it could impact on our ability to maximise on the opportunities
facilitated by having one brand on a global scale.
GROWTH STRATEGY
We have set ourselves a short-term target of achieving underlying EBITA
CAGR
of at least 10 % (see page 66). The achievement of this target is likely to
require us to achieve growth in revenues of c. 3 % pa. Our focus is on
achieving growth in accommodation by:
* opening new hotels;
* growing our powerful and exclusive international hotel concepts;
* continuing to expand the Cruise fleet
Additionally, we are looking to broaden our offering to customers by
introducing extra flexibility into our packages, and to expand our
long-haul
offering by taking advantage of the capabilities of the Boeing 787
Dreamliners which we have and are due to receive via our order book.Note
that availability of aircraft finance is a key assumption of our business
model.
Whilst managing this expansion, we must continue to adapt to changes in
consumer tastes and booking profiles, and we must continue to match our
capacity to consumer demand. Asset utilisation - of aircraft, cruise ships
and hotels - is critical to our financial success particularly when in a
growth phase.
There is a risk that we could be unsuccessful in maximising opportunities
to
execute our expansion strategy. This could mean that we fail to achieve
some
of the initiatives we have embarked upon, which could result in us falling
short against the overall growth targets we have set for the business.
INTEGRATION & RESTRUCTURING OPPORTUNITIES
Our key rationale for the merger of TUI AG and TUI Travel PLC was growth
and
delivery of significant synergies and to act 'as one' wherever it makes
sense to do so, maintaining local differences where the benefit of that
differentiation is greater than that of harmonisation.
There are a number of restructuring projects underway across the Group as a
result to enable us to achieve these opportunities. There is an inherent
risk with any large restructuring programme that we face challenges in
managing the complexities associated with further integrating our business,
and reducing overlapping activities in order to develop a more lean and
streamlined operating model.
Furthermore, the strategic review of the Group has identified businesses
which would be better positioned outside of the TUI Group. One disposal
(Hotelbeds Group) was successfully completed in the year, one disposal is
underway (Travelopia) and further restructuring opportunities may present
themselves in the future.
If we are not successful in leveraging and optimising the identified
opportunities this could have a significant impact on our ability to
deliver
the identified benefits in line with expectations and enhance shareholder
value.
SUSTAINABLE DEVELOPMENT
Our focus is to reduce the environmental impact of our holidays, creating
positive change for people and communities and being a pioneer of
sustainable tourism across the world.
There is a risk that we are not successful in driving forecast
environmental
improvements across our operations, that our suppliers do not uphold our
sustainability standards and we fail to influence destinations to manage
tourism more sustainably.
If we do not maximise our positive impact on destinations and minimise the
negative impact on the environment to the extent that our stakeholders
expect, this could result in a decline in stakeholder confidence,
reputational damage, reduction in demand for our products and services and
loss of competitive advantage.
Furthermore, if TUI Group falls short of achieving its sustainable
development targets and at the same time the objectives of the UN Paris
Climate Change Agreement (December 2015) are not met, this could lead to
sustained long-term damage to certain of the TUI Group's current and future
destinations, which could also have a material adverse effect on demand for
our products and services.
INFORMATION SECURITY
Our responsibility is to protect the confidentiality, integrity and
availability of the data we have and the services we provide to our
customers, our employees, our suppliers and service delivery teams.
There is a risk that our increasing dependence on online sales and customer
care channels (web / mobile) increases our exposure and susceptibility to
cyber-attacks and hacks.
If we do not ensure we have the appropriate level of security controls in
place across the Group, this could have a significant negative impact on
our
key stakeholders, associated reputational damage and potential for
financial
implications.
TALENT MANAGEMENT
Our success depends on the ability to attract and retain key talent and it
relies on having good relations with colleagues.
There is a risk that we are unable to attract and retain key talent, build
future leadership capability and maintain the commitment and trust of our
employees. This risk is enhanced in periods of uncertainty and in areas of
the business impacted by restructuring programmes.
As we approach the second anniversary of the merger which created TUI
Group,
our view is that we have successfully navigated our way through the initial
period of post-merger concern with regards to retaining key talent. The
heightened risk we perceived in this area has now gone back to normal
'business as usual' levels.
If we face challenges in managing and maintaining our talent pipeline in
order to deliver against our strategy, drive competitiveness and maximise
on
our operating performance, this could impact on our ability to future proof
the Group and the associated potential for negative impact on shareholder
confidence.
CORPORATE STREAMLINING
The merger of TUI AG and TUI Travel PLC has presented us with the
opportunity to reduce Corporate overheads by eliminating duplicate costs.
If we do not deliver the targeted savings of EUR 50 m this may impact on
our
ability to achieve our overall underlying EBITA growth target.
Mitigating Factors
* Whilst we are unable to prevent such events from occurring, we have
well
defined crisis management procedures and emergency response plans which
are implemented when an event of this nature occurs, with the focus
being on the welfare of our customers.
* Where the appropriate course of action is to bring customers home
immediately, our significant fleet of aircraft allows us to do this
smoothly and efficiently.
* Our policy is to follow foreign office advice in each of our source
markets with regards to non-essential travel. This serves to minimise
the exposure of our customers to turbulent regions.
* Due to our presence in all key holiday regions, when a specific
destination has been impacted by an external event, we are able to
offer
alternative destinations to our customers and to remix our destination
portfolio away from the affected area in future seasons if necessary.
* We always assume some level of destination disruption each year when
setting financial plans and targets, so that we are able to cope with a
'normal' level of disruption without it jeopardising achievement of our
targets.
* Many consumers prioritise their spending on holidays above other
discretionary items.
* Creating unique and differentiated holiday products which match the
needs of our customers.
* Leveraging our scale to keep costs down and prices competitive.
* Having a range of source markets so that we are not over exposed to one
particular economic cycle.
* Expressing our key profit growth target in constant currency terms so
that short term performance can be assessed without the distortion
caused by exchange rate fluctuations.
* Promoting the benefits of travelling with a recognised and leading tour
operator to increase consumer confidence and peace of mind.
* Our outstanding market position as a leading tourism group, the
strength
of our brands and our vertically integrated business model enables us
to
respond robustly to competitive threats.
* The TUI Group is characterised by the continuous development of unique
and exclusive holidays, developing new concepts and services which
match
the needs and preferences of our customers.
* Our vertically integrated business model offers end-to-end customer
services, from consultation and booking of holidays via flights with
the
Group's own airlines through to Group-owned or operated hotels, resorts
and cruise ships. Vertical integration thus facilitates the development
and marketing of individual, tailored holiday offerings for customers
which it is difficult for competitors to replicate.
* Building strong and lasting relationships with our key hotel partners,
which further reinforces our ability to develop new concepts exclusive
to the TUI Group which competitors struggle to match.
* Focusing on being online throughout the whole of the customer journey -
from inspiration, to booking, to the holiday itself, as well as
returning and sharing experiences through social media.
* Ensuring that the appropriate derivative financial instruments are used
to provide hedging cover for the underlying transactions involving fuel
and foreign currency.
* Maintaining an appropriate hedging policy to ensure that this hedging
cover is taken out ahead of source market customer booking profiles.
This provides a degree of certainty over input costs when planning
pricing and capacity, whilst also allowing some flexibility in prices
so
as to be able to respond to competitive pressures if necessary.
* Tracking the foreign exchange and fuel markets to ensure the most
up-to-date market intelligence and the ongoing appropriateness of our
hedging policies.
* Detailed information on currency and fuel hedges can be found in Note
Financial Instruments of the consolidated financial statements.
* As our business is spread across a number of source markets within the
Tourism division there are some counter-cyclical features e. g. winter
is a more important season for the Nordic and Canadian source markets.
Some brands, such as the UK ski brand Crystal Ski, have a different
seasonality profile which helps to temper the overall profile.
* The business produces regularly both short term and long term cash
forecasts during the year which the Treasury team use to manage cash
resources effectively.
* Existing credit facilities are considered to be more than sufficient
for
our requirements and provide ample headroom.
* We continue to maintain high-quality relationships with the Group's key
financiers and monitor compliance with the covenants contained within
our financing facilities.
* Raising additional finance from the Capital Markets, should it be
required, remains an option.
* Communication and strong tone from the top concerning compliance with
laws and regulations.
* Legal Compliance Committee established to ensure appropriate oversight,
monitoring and action plans and to further drive the compliance culture
across the Group.
* Embedded legal and tax expertise in all major businesses responsible
for
maintaining high quality relationships with the relevant regulators and
authorities.
* Ongoing review conducted by the Group Legal Compliance team to
centrally
monitor compliance with regulations and provide expert advice to local
teams on specific areas.
* Health and safety functions are established in all businesses in order
to ensure there is appropriate focus on health and safety processes as
part of the normal course of business.
* Ongoing monitoring is conducted by the Group Health & Safety function
to
ensure compliance with minimum standards.
* Appropriate insurance policies are in place for when incidents do
occur.
* Owned and joint venture partner hotels form a substantial part of our
programme which reduces our inherent risk in this area.
* Established and embedded a robust prepayment authorisation process to
both limit the level of prepayments made and ensure that they are only
paid to trusted, credit-worthy counterparties.
* Where prepayments are made to external hoteliers this is to secure
access to unique and differentiated product for which demand is
inherently higher and more resilient to external events than for
commodity product.
* Prepayments are monitored on a timely and sufficiently granular basis
to
manage our financial exposure to justifiable levels.
* Good working relationships exist with all of our main joint venture
partners and they are fully aligned with and committed to the growth
strategy of TUI Group.
* Developed and communicated (in conjunction with Executives, Business &
IT Leadership Teams) the Group's IT Strategy which is clearly aligned
to
our overall business objectives and considers external factors such as
the pace of technology change and internal factors such as the
underlying quality required throughout IT
* Continuing to implement our online platform in order to enhance
customer
experience and drive higher conversion rates
* Implementing a SAP-based central customer platform to collate all
information on our customers across their journey to provide a single
view of the customer alongside an eCRM platform which will support
strategic marketing
* Placing increased focus on ensuring continuity plans for critical IT
systems are in place and regularly tested
* Defined and implemented a programme and project management framework
and
software delivery lifecycle management methodologies, including
associated training and coaching
* Cascaded clear technology standards and associated delivery roadmaps
which are linked to Group wide and source market objectives
* Undertaken detailed market research in each source market to assess
current brand positioning and likely impact of the brand change
* Approved incremental marketing spend to raise the profile of the TUI
brand locally in order to promote the benefits and to manage the
expectations of our customers in relation to the future of our enhanced
products and services
* Established a 'One Brand' programme team responsible for coordinating
and monitoring the brand change activity across all source markets,
with
KPIs identified and tracked on a regular basis by both local and group
colleagues and prompt corrective action taken to address issues as they
arise
* Taking a phased and focussed approach to the brand change by
implementing in one source market at a time. This minimises the risk at
a given point in time and allows us to gain learnings from the source
markets undergoing transition and implement those learnings in the next
source market. Our first brand transition successfully occurred in the
Netherlands in the current financial year 2015 / 16, with Nordics and
Belgium source markets due to transition in financial year 2016 / 17.
* Communicating both internally & externally across multiple media
channels to drive brand awareness, with further plans to increase
awareness through consistent marketing in key destination airports and
changing of the livery on our aircraft in order to support greater
awareness of the TUI Brand
* The Executive Board is very focussed on the strategy and mindful of the
risks, so there is strong direction and commitment from the top.
* The Group Tourism Board plays an important role in co-ordinating,
executing and monitoring the various growth initiatives.
* There are a number of initiatives underway to achieve growth which
reduces the risk through diversification.
* Each of the business teams tasked with achieving an element of the
growth strategy are still required to maintain sound financial
discipline. The Group's investment criteria and authorisation processes
must still be adhered to as we are not prepared to be reckless in the
pursuit of growth.
* We continue to maintain strong relationships with the providers of
aircraft finance.
* Monitoring of overall market conditions continues to occur so that
plans
can be adapted or contingency plans invoked if required.
* Strong project management structures exist for all of the major
restructuring and disposal programmes which are underway to ensure that
they are managed effectively.
* Project reporting tool ensures enhanced visibility of the progress of
major projects as a matter of routine.
* Regular reporting by the major projects to the Executive Board to
ensure
swift resolution of any issues or to enhance co-ordination across the
Group where required.
* Developed and launched in 2015 the 'Better Holidays, Better World' 2020
sustainability strategy framework which includes specific targets for
key sustainability indicators
* Established a dedicated sustainability team to work closely with the
business and other stakeholders to implement the sustainability
strategy
* Operating the most carbon efficient airlines in Europe with continued
investment in new, more efficient aircraft (e. g. Boeing 787
Dreamliner)
and cruise ships
* Implemented an environmental management system with 5 of our airlines
having achieved ISO 14001 certification
* Increased measures to influence accommodation suppliers to achieve
third
party sustainability certification recognised by the Global Sustainable
Tourism Council (GSTC)
* TUI Care Foundation expanded to focus on the achievement of 2020 target
for charitable donations and sustainability projects, with particular
emphasis on sustainable tourism, environmental protection and the
welfare of children
* Renewed commitment from the Executive Board in support of key
initiatives to ensure all existing and future IT systems are secure by
design, that exposure to vulnerability is managed effectively, user
access is sufficiently controlled and colleagues are made aware of
information security risks through appropriate training
* Continuous review and testing of all external devices and ongoing
monitoring of logs in order to identify any potential threats as and
when they arise
* Continuing to extend and embed our established talent management
framework across the Group in order to engage and empower people whilst
delivering results and managing performance
* Assessing our current organisational competence and capability against
that required to maximise current and future shareholder value
* Ensuring succession plans are in place for all identified business
critical roles, in particular emergency successors for all senior
management roles, and that these plans are reviewed every six months
* Developed a structured and standard approach to be applied where
necessary to key individuals during periods of uncertainty and / or
organisational change in order to retain top talent in business
critical
roles
* Implemented a process to identify and deliver programmes targeted at
high potential talent in order to drive competiveness and maximise
operating performance
* Building our pipeline of leadership talent through our International
Graduate Leadership Programme which attracts, develops and retains high
quality graduates to become our future senior Commercial Leaders
* Driving high performance and engagement through our performance review,
development plans and career planning process
* Close monitoring of the delivery of corporate streamlining cost savings
to ensure that they have been achieved in line with expectations.
* To date 80 % of the target savings had been achieved by the end of the
current financial year, with the remainder set to be achieved during
financial year 2016 / 17. The Integration Committee which has overseen
the achievement of these savings met for the last time in September
2016.
Business Review
Macroeconomic industry and market framework
Macroeconomic development
Development of gross domestic product
Var. % 2016 2015
World + 3.1 + 3.2
Eurozone + 1.7 + 2.0
Germany + 1.7 + 1.5
France + 1.3 + 1.3
UK + 1.8 + 2.2
US + 1.6 + 2.6
Russia - 0.8 - 3.7
Japan + 0.5 + 0.5
China + 6.6 + 6.9
India + 7.6 + 7.6
Source: International Monetary Fund (IMF), World Economic Outlook,
September
2016
In calendar year 2016, the global economy continued to grow moderately. In
its most recent outlook (IMF, World Economic Outlook, October 2016), the
International Monetary Fund forecasts growth of 3.1 % for 2016, which is
less than the previous year. With Britain voting to leave the European
Union
and growth in the United States weaker than expected, the experts expect
economic momentum in the advanced economies to decline overall.
Key exchange rates and commodity prices
TUI Group companies operate on a worldwide scale. This presents financial
risks for TUI Group, arising from changes in exchange rates and commodity
prices.
The essential financial transaction risks from operations relate to euros
and US dollars. They mainly result from foreign exchange items in the
individual Group companies, for instance aircraft fuel and bunker oil
invoices, ship handling costs or products and services sourced by hotels.
The parity of sterling against the euro is of relevance for the translation
of results generated in the UK market in TUI's consolidated financial
statements.
Following the UK referendum at the end of June 2016, which resulted in a
vote for Brexit, the currency fluctuations already described in our
Half-Year Financial Report 2015 / 16 continued. They impacted the
translation of results from our UK business. Thanks to our consistent
hedging policy, input costs in foreign currencies incurred for our UK
business in financial year 2015 / 16 remained largely unaffected by the
weakness of sterling. Although the Brexit vote has caused growing
uncertainty about the future performance of the UK economy there is no
apparent decline in bookings in our UK business to date.
In financial year 2015 / 16, the average exchange rate of the US dollar
against the euro rose by around 3.5 % from 1.15 $ / EUR to 1.11 $ / EUR.
The
average exchange rate of sterling against the euro fell by around 16.2 %
from 0.74 £ / EUR to 0.86 £ / EUR in the period under review.
Sterlingsignificantly depreciated against the euro, especially after the
UK's Brexit decision.
Changes in commodity prices affect TUI Group, in particular when procuring
fuels such as aircraft fuel and bunker oil. Following relatively moderate
fluctuations, the price of Brent oil stood at $ 49.06 per barrel as at 30
September 2016, which all in all reflects the low level recorded at the
beginning of the financial year.
In Tourism, most risks relating to changes in exchange rates and price
risks
from fuel sourcing are hedged by derivatives. Information on hedging
strategies and risk management as well as financial transactions and the
scope of such transactions at the balance sheet date is provided in the
sections Financial Position and Risk Report in the Management Report and
the
section Financial Instruments in the Notes to the consolidated financial
statements.
Market environment and competition in tourism
Since the merger between TUI AG and TUI Travel PLC in December 2014, TUI
Group has been the world's number one leisure tourism business. The
development of the international leisure tourism market impacts all
businesses of TUI Group.
Tourism continues global growth
According to the United Nations World Tourism Organization (UNWTO), tourism
comprises the activities of persons travelling to and staying in places
outside their usual environment for not more than one consecutive year for
leisure, business and other purposes. The key tourism indicators to measure
market size are the number of international tourist arrivals, and
international tourism receipts. With international tourism receipts
amounting to $ 1,260 bn and international arrivals amounting to 1.2 m in
2015, the tourism industry is one of the most important sectors in the
world
economy. International tourist arrivals worldwide are expected to increase
by around 3 % a year between 2010 and 2030, reaching 1.8 bn per annum by
2030 (UNWTO Tourism Highlights 2016).
Change of international tourist arrivals vs. prior
year
Var. % 2016- 2015
*
World + +
4.0 4.6
Europe + +
2.6 4.7
Asia and the Pacific + +
8.8 5.6
Americas + +
4.2 5.9
Africa + -
5.4 3.1
Middle East - +
8.6 1.7
Source: UNWTO World Tourism Barometer, September 2016
* Period January till June
In calendar year 2015, international tourist arrivals grew by 4.6 %
worldwide to 1.19 bn. This trend continued in the first half of calendar
year 2016 at a growth rate of 4.0 %. Travel for leisure, recreation and
holidays accounted for 53 %, i.e. just over half of all international
tourist arrivals (UNWTO, Tourism Highlights, 2016 Edition).
At minus 0.7 %, TUI Group customer numbers did not match this growth trend
in financial year 2015 / 16; strong growth in customer numbers in the UK
and
the Netherlands was offset by the impact of lower demand for Turkey and as
a
result of other geopolitical events.
Europe remained the largest and most mature tourism market in the world,
accounting for 51 % of international tourist arrivals and 36 % of receipts
in 2015. Five European countries (France, Spain, Italy, Germany and the
United Kingdom) figured in the top ten international tourism destinations
in
2015. Our three main source markets UK, Germany and France were in the top
five of all source markets worldwide measured by international tourism
expenditure.
Germany continues to be the third largest source market in the world with
international tourism expenditure of approximately $ 77.5 bn in 2015, after
China (approximately $ 292.2 bn) and the US (approximately $ 112.9 bn). In
terms of expenditure per capita, Germany ranks second globally, with
approximately $ 946 spent by the average German tourist in 2015 (Source:
UNWTO, Tourism Highlights, 2016 Edition). Key operators in the German
tourism market are TUI Deutschland, Thomas Cook, DER Touristik, FTI and
Alltours (FVW, Dossier, Deutsche Veranstalter, December 2015).
The United Kingdom is the fourth largest source market in the world, with
approximately $ 63.3 bn spent on tourism activities in 2015 and on average
$
972 spent per capita over the same period (source: UNWTO, Tourism
Highlights, 2016 Edition), the highest amount worldwide. The British
tourism
market is characterised by a high degree of concentration around two key
operators TUI Group and Thomas Cook (Euromonitor, Intermediaries in the
United Kingdom, August 2016).
France was the fifth largest source market in 2015, with international
tourism expenditure of approximately $ 38.4 bn (source: UNWTO, Tourism
Highlights, 2015 Edition). With its main tour operator brands Nouvelles
Frontières and Marmara, TUI has a strong position in the French tourism
market, which has been highly fragmented in the past but has undergone
consolidation in recent months. TUI France will continue to expand its
market position with the purchase of the French tour operator in the
tourism
group Transat completed in October 2016. The merger is to enable TUI France
to achieve robust profitability. In 2015, France was the largest
destination
market in the world with 84.5 million arrivals.
Hotel market
The total worldwide hotel market for business and leisure travel was worth
EUR 440 bn in 2015. By 2020, average annual growth (CAGR) is expected to
amount to 3.1 % (Euromonitor; September 2016). The hotel market is divided
between business and leisure travel. A number of characteristics
differentiate leisure travel hotels from business hotels, including longer
average lengths of stay for guests in leisure hotels. Locations, amenities
and service requirements also differ. From a demand perspective, the
leisure
hotel market in Europe is divided into several smaller submarkets which
cater to the individual needs and demands of tourists. These submarkets
include premium, comfort, budget, family / apartment, and club- or
resort-style hotels. Hotel companies may offer a variety of hotels for
different submarkets, often defined by price range, star ratings,
exclusivity, or available facilities.
Consumers in our three main source markets prefer the following
destinations: the most popular leisure hotel destinations for consumers in
source market Germany are Spain, Italy, Turkey, Austria, France, Croatia,
Greece and the Netherlands. The most popular leisure hotel destinations for
consumers in source market United Kingdom are Spain, France, Italy, the
United States, Portugal, Greece and Turkey. The most popular leisure hotel
destinations for consumers in source market France are Spain, Italy, the
United Kingdom, Belgium and Luxembourg (Mintel, European Leisure Travel
Industry, September 2015).
Hotel operations can generally be divided into the following models: asset
owners whose primary business is to own real estate assets; brand owners
and
operators who typically manage hotel assets themselves or enter into
franchising arrangements with independent operators who, in turn, manage
the
hotel property assets; and independent operators combining the roles of
asset owners, brand owners and operators by managing diverse assets under
different brands, often through franchise agreements.
The upper end of the leisure hotel market is characterised by a high degree
of sophistication and specialisation, with the assets managed by large
international companies and investors. There are also many small, often
family-run businesses, particularly in Europe, not quite so upscale and
with
fewer financial resources. Most family-owned and -operated businesses are
not branded and customers cannot typically access these hotels through
global distribution systems. Given the variety of models for owning and
operating leisure hotels and the fragmented competitive landscape which, at
least in Europe, is not dominated by large hotel chains, conditions differ
greatly between locations.
Cruise market
The global cruise industry estimates that it generated approximately $ 39.6
bn of revenue in 2015 (Cruise Market Watch website,
www.cruisemarketwatch.com/market-share, September 2016). The North American
market is by far the largest and most mature cruise market in the world,
with approximately 12.1 million guests in 2015 and a strong penetration
rate
of 3.8 % of the total population taking a cruise in 2015. By contrast, the
European cruise markets recorded approximately 6.6 million European
passengers, with penetration rates varying significantly from country to
country, but considerably lower overall (Mintel, Cruises − International,
June 2016; CLIA Statistics & Markets, March 2016). In 2015, the global
cruise market grew by around 2.4 %.
Germany, the United Kingdom & Ireland and France are among the five largest
cruise markets in Europe (CLIA Statistics & Markets, March 2016). Germany
is
Europe's largest cruise market, with 1.8 million passengers in 2015.
Germany
has thus witnessed average passenger growth of 8.3 % over the past five
years. At 2.2 %, its penetration rate was lower than in the United Kingdom
&
Ireland in 2015.
The United Kingdom & Ireland is the second largest cruise market in Europe,
with approximately 1.8 million cruise passengers in 2015. The market has
thus grown by 2.1 % on average over the past five years. It shows the
strongest penetration rate in Europe: in 2015, 2.7 % of the total British
population took a cruise. (Mintel, Cruises - International, June 2016).
The European cruise market is divided into submarkets that cater to a
variety of customers: budget, discovery / expedition, premium and luxury.
Cruise operators utilise different cruise formats to target these
submarkets
and the specific demands of their customers. In addition to traditional
formats, operators offer club ship cruises and also more contemporary-style
cruises in the premium submarket. As a cruise ship is often perceived as a
destination in itself, cruise companies, especially in the luxury and
premium cruise submarkets, compete with other destinations such as leading
hotels and resorts.
Brand
Strong master brand TUI
Our brand with the 'smile' - the smiling logo formed by the three letters
of
our brand name TUI - stands for a consistent customer experience, digital
presence and competitive strength. In 2016, TUI (or the local power brand)
was one of the best-known travel brands in core European countries with a
brand awareness rate of almost 90 %. The red 'TUI smile' is a clear
recognition feature and plays in the 'Champions League' of international
brands in almost all markets.
We are aiming to create one global branding and a consistent brand
experience in order to further leverage the appeal and strength of our core
brands and tap the associated growth potential. To achieve that goal, our
core brand TUI will be rolled out in our European source markets to replace
the big local tour operator brands. At the beginning of financial year 2015
/ 16, the TUI brand was introduced in the Netherlands, where it has
successfully replaced the previous world of Arke brands for tour operator,
distribution and flight activities. TUI has rapidly become one of the
strongest travel markets in the Netherlands in terms of brand awareness and
preference. In October 2016 , our rebranding campaign was launched in
Belgium, with the Nordics to follow in Winter 2016 / 17. Brand migration in
the UK will follow at the end of 2017.
In Germany, travel products have been offered under the TUI brand for more
than 45 years. In a survey carried out in 2016, TUI was again rated as
Germany's most trusted travel brand (Source: Reader's Digest Trusted Brands
2016).
Changes in the legal framework
In financial year 2015 / 16, there were no changes in the legal framework
with material impacts on TUI Group's business performance.
Group earnings
Comments on the consolidated income statement
Financial year 2015 / 16 brought a markedly positive development in the TUI
Group's earnings position. The operating result (underlying EBITA) of TUI
Group's continuing operations improved by 5.0 % to EUR 1,000.5 m in the
period under review, or by 14.5 % year-on-year on a constant currency
basis.
This growth was driven in particular by the continued good performance of
Northern Region and in the segments Hotels & Resorts and Cruises.
Income Statement of the TUI Group for the
period from 1 Oct 2015 to 30 Sep 2016
EUR million 2015 / 2014 / 15 Var.
16 restated %
Turnover 17,184.6 17,515.5 - 1.9
Cost of sales 15,278.1 15,549.5 - 1.7
Gross profit 1,906.5 1,966.0 - 3.0
Administrative expenses 1,216.9 1,352.6 -
10.0
Other income 36.3 42.9 -
15.4
Other expenses 7.4 5.7 +
29.8
Financial income 58.5 35.8 +
63.4
Financial expenses 345.9 364.5 - 5.1
Share of result of joint ventures and 187.2 143.9 +
associates 30.1
Earnings before income taxes 618.3 465.8 +
32.7
Income taxes 153.4 58.2 +
163.6
Result from continuing operations 464.9 407.6 +
14.1
Result from discontinued operations 687.3 - 28.0 n. a.
Group profit for the year 1,152.2 379.6 +
203.5
Group profit for the year attributable to 1,037.4 340.4 +
shareholders of TUI AG 204.8
Group profit for the year attributable to 114.8 39.2 +
non-controlling interest 192.9
Turnover and cost of sales
Turnover
EUR million 2015 / 16 2014 / 15 Var. %
restated
Northern Region 7,001.5 7,348.4 - 4.7
Central Region 5,566.6 5,600.9 - 0.6
Western Region 2,869.9 2,847.0 + 0.8
Hotels & Resorts 618.6 574.8 + 7.6
Cruises 296.7 273.3 + 8.6
Other Tourism 665.5 704.8 - 5.6
Tourism 17,018.8 17,349.2 - 1.9
All other segments 165.8 166.3 - 0.3
TUI Group 17,184.6 17,515.5 - 1.9
Discontinued operations 2,321.6 2,565.8 - 9.5
Total 19,506.2 20,081.3 - 2.9
In financial year 2015 / 16, turnover by TUI Group declined by 1.9 % to EUR
17.2 bn due to foreign exchange effects. On a constant currency basis,
turnover grew by 1.4 % despite the year-on-year decline in customer numbers
of 0.7 %. Turnover is presented alongside the cost of sales, which was down
1.7 % in the period under review.
Gross profit
Gross profit, i.e. the difference between turnover and the cost of sales,
decreased by EUR 59.5 m to around EUR 1.9 bn in financial year 2015 / 16.
Administrative expenses
Administrative expenses declined by EUR 135.7 m year-on-year to EUR 1,216.9
m. The decrease was driven by the synergies delivered in the period under
review and higher one-off expenses incurred in the previous year.
Other income/Other expenses
In financial year 2015 / 16, other income of EUR 36.3 m comprised gains
from
the sale of a Riu Group hotel, a joint venture, a cruise ship, commercial
real estate and vehicles of incoming agencies. Other expenses in 2015 / 16
totalled EUR 7.4 m, primarily for the disposal of aircraft spare parts.
Financial result
The financial result improved by EUR 41.3 m to EUR - 287.4 m. The increase
was essentially due to the year-on-year decline in expenses resulting from
the measurement of the stake in Hapag-Lloyd AG.
Share of results of joint ventures and associates
The result from joint ventures and associates comprises the proportionate
net profit for the year of these companies measured at equity and where
appropriate impairments of goodwill for these companies. In the period
under
review, the at equity result totalled EUR 187.2 m. The significant increase
of EUR 43.3 m partly resulted from the improvement in the operating
performance of Riu hotels and a higher profit contribution by TUI Cruises.
Income taxes
The year-on-year increase in income taxes in financial year 2015 / 16 is
mainly attributable to the one-off effect recognised in the previous year
of
the revaluation of deferred tax assets for loss carryforwards following the
merger between TUI AG and TUI Travel PLC.
Result from discontinued operation
The result from discontinued operation shows the after-tax result of
Specialist Group, classified as a discontinued operation, as well as
LateRooms Group and Hotelbeds Group until these operations were sold.
Group profit
Group profit increased by EUR 772.6 m year-on-year to EUR 1,152.2 m in
financial year 2015 / 16.
Share in Group profit attributable to TUI AG shareholders
The share in Group profit attributable to the TUI AG shareholders improved
from EUR 340.4 m in the prior year to EUR 1,037.4 m in financial year 2015
/
16. Apart from the sound operating performance of the Group, the increase
is
attributable to the gain on disposal from the sale of Hotelbeds Group.
Non-controlling interests
Non-controlling interests in Group profit for the year totalled EUR 114.8
m.
They related to companies in Hotels & Resorts and, in the prior year, the
external shareholders of TUI Travel PLC until the completion of the merger
with TUI AG. The share in Group results attributable tonon-controlling
interests in Hotels & Resorts mainly derives from the RIUSA II Group.
Earnings per share
The interest in Group profit for the year attributable to TUI AG
shareholders after deduction of non-controlling interests totalled EUR
1,037.4 m (previous year EUR 340.4 m) in 2015 / 16. Basic earnings per
share
therefore amounted to EUR 1.78 (previous year EUR 0.64) in financial year
2015 / 16.
EBITA, underlying EBITA und underlying earnings
per share
Key indicators used to manage the TUI Group are EBITA and underlying EBITA.
We consider EBITA to be the most suitable performance indicator for
explaining the development of the TUI Group's operating performance. EBITA
comprises earnings before interest, taxes and goodwill impairments; it does
not include the results from container shipping operations nor the results
from the measurement of interest hedging instruments.
Reconciliation to underlying earnings
EUR million 2015 / 2014 / 15 Var.
16 restated %
Earnings before income taxes 618.3 465.8 +
32.7
less: Profit on Container Shipping measured - - 0.9 n.
at equity a.
plus: Loss on measurement of financial 100.3 147.1 -
investment in Container Shipping 31.8
plus: Net Interest expense and expense from 179.5 182.6 -
the measurement of interest hedges 1.7
EBITA 898.1 794.6 +
13.0
Adjustments:
plus: Loss on disposals / less: Gain on 0.8 - 3.3 n.
disposals a.
plus: Restructuring expense 12.0 59.4 -
79.8
plus: Expense from purchase price allocation 41.9 42.1 -
0.5
plus: Expense from other one-off items 47.7 60.5 -
21.2
Underlying EBITA 1,000.5 953.3 +
5.0
Reported earnings (EBITA) of TUI Group rose by EUR 103.5 m to EUR 898.1 m
due to the very good operating performance in financial year 2015 / 16.
EBITA
EUR million 2015 / 16 2014 / 15 Var. %
Northern Region 440.4 513.4 - 14.2
Central Region 67.3 72.9 - 7.7
Western Region 72.1 57.7 + 25.0
Hotels & Resorts 285.1 195.7 + 45.7
Cruises 129.6 80.5 + 61.0
Other Tourism - 6.2 - 4.1 - 51.2
Tourism 988.3 916.1 + 7.9
All other segments - 90.2 - 121.5 + 25.8
TUI Group 898.1 794.6 + 13.0
Discontinued operations 14.7 2.6 + 465.4
Total 912.8 797.2 + 14.5
In order to explain and evaluate the operating performance of the segments,
earnings adjusted for special one-off effects (underlying EBITA) are
presented below. Underlying EBITA has been adjusted for gains on disposal
of
financial investments, restructuring expenses according to IAS 37, all
effects from purchase price allocations, ancillary acquisition costs and
conditional purchase price payments and other expenses for and income from
one-off items.
One-off items carried here include adjustments for income and expense items
that reflect amounts and frequencies of occurrence rendering an evaluation
of the operating profitability of the segments and the Group more difficult
or causing distortions. These items include in particular major
restructuring and integration expenses not meeting the criteria of IAS 37,
material expenses for litigation, gains and losses from the sale of
aircraft
and other material business transactions with a one-off character.
TUI Group's underlying EBITA rose by EUR 47.2 m to EUR 1,000.5 m in
financial year 2015 / 16.
Underlying EBITA
EUR million 2015 / 16 2014 / 15 Var. %
Northern Region 460.9 538.4 - 14.4
Central Region 88.5 103.5 - 14.5
Western Region 86.1 68.7 + 25.3
Hotels & Resorts 287.3 234.6 + 22.5
Cruises 129.6 80.5 + 61.0
Other Tourism 4.6 8.4 - 45.2
Tourism 1,057.0 1,034.1 + 2.2
All other segments - 56.5 - 80.9 + 30.2
TUI Group 1,000.5 953.3 + 5.0
Discontinued operations 92.9 107.3 - 13.4
Total 1,093.4 1,060.5 + 3.1
In financial year 2015 / 16, adjustments worth EUR 3.2 m were carried for
income, compared with adjustments on underlying expenses amounting to EUR
63.8 m, without taking account of the expenses for purchase price
allocations. Overall, net one-off expenses worth EUR 11.1 m were incurred
in
connection with the merger between TUI AG and the former TUI Travel PLC.
They included an amount of EUR 4.2 m for restructuring the corporate centre
and EUR 6.9 m for integrating the incoming agencies into Tourism.
The adjustments primarily related to the following facts and circumstances:
Gains on disposal
In financial year 2015 / 16, gains on disposal worth EUR 0.8 m had to be
adjusted for. They related in particular to capital reductions in
subsidiaries.
Restructuring costs
In financial year 2015 / 16 ,restructuring costs of EUR 12.0 m had to be
adjusted for. They related to smaller reorganisations in Northern, Central
and Western Regions and the restructuring of the corporate centre as well
as
the transfer of incoming agencies to the source market organisations.
Expenses for purchase price allocations
In financial year 2015 / 16, expenses for purchase price allocations worth
EUR 41.9 m were adjusted for; they related in particular to scheduled
amortisation of intangible assets from acquisitions made in previous years.
One-off items
Net expenses for one-off items of EUR 47.7 m included in particular an
amount of EUR 17.9 m relating to reorganisation in Central and Western
Regions and at Corsair, an amount of EUR 5.7 m for consultancy costs for
planned corporate transactions, and EUR 4.7 m for the restructuring of the
corporate centre and the transfer of incoming agencies to the source market
organisations.
Pro forma underlying earnings per share
In order to provide a comparable basis for TUI Group's underlying earnings
per share going forward, a pro forma calculation is included below. The
calculation is based on the issued share capital at the balance sheet date
and therefore adjusts for the impact of bond conversions in 2014 / 15.
Pro forma underlying earnings per share TUI
Group
EUR million 2015 / 2014 / 15
16 restated
EBITA (underlying) 1,000.5 953.3
less: Net interest expense - 179.5 - 182.6
plus: Interest expense on convertible bonds - 19.0
Underlying profit before tax 821.1 789.7
Income taxes (underlying) 205.3 197.4
Underlying Group profit 615.8 592.3
Minority interest 111.5 90.0
Hybrid interest expense - 11.0
Underlying Group profit attributable to TUI 504.3 491.3
shareholders of TUI AG
Number of shares (pro forma)No. million 587.0 587.0
Pro forma underlying earnings per share 0.86 0.84
Segmental performance
Current and future trading in Tourism
In Tourism, travel products are booked on a seasonal basis with different
lead times. The release of bookings for individual seasons takes place at
different points in time, depending on the design of the booking and
reservation systems in each source market. Moreover, load factor management
ensures that the tour operator capacity available for bookings is
seasonally
adjusted to actual and expected demand.
At the end of financial year 2015 / 16, current trading by source market
for
Winter 2016 / 17 compared as follows with the previous year:
Current Trading1
Winter season 2016 /
17
Var. % Average selling Total Total customers
price2 sales2 2
Northern Region + 3 + 14 + 11
UK + 6 + 26 + 18
Nordics - 3 - 6 - 3
Central Region + 7 + 4 - 3
Germany + 7 + 2 - 5
Western Region + 3 + 7 + 4
Benelux + 3 + 4 + 1
Total source + 5 + 9 + 4
markets
1 As at 20 November 2016 (on a constant currency basis)
2 These statistics relate to all customers whether risk or non-risk.
For the 2017 Summer season, already available for bookings in the UK,
booked
revenues were around 15 % ahead of the prior year in November 2016.
Trading by the Hotels & Resorts segment largely mirrors customer volumes in
the source markets, as a high proportion of the Group-owned hotel beds are
taken up by TUI tour operators. In the Cruises segment, advance bookings
were up year-on-year at the balance sheet date with sound demand levels,
primarily due to continued fleet expansion by TUI Cruises in the period
under review.
Disclosures on current trading are regularly published on TUI's website in
the framework of TUI Group's quarterly reporting.
See www.tuigroup.com/en-en/investors
Our key operating indicators developed as follows in our source markets:
Source markets
Direct Online Customer-
distribution mix2 in % s3 in
miX1 in % '000
Var. Var. Var. %
percentage percentage
points points
2015 / 16 2015 / 16 2015 /
16
(2014 / (2014 / (2014 /
15) 15) 15)
Source markets
+ 2 % points 72 (70) + 2 % 43 (41) - 0.7 % 19,231
points (19,361)
Northern
Region4
+ 1 % point 92 (91) + 4 % 62 (58) + 2.0 % 7,388
points (7,240)
Central Region
+ 3 % points 47 (44) - 15 (15) - 4.7 % 6,828
(7,168)
Western Region
+ 2 % points 70 (68) + 4 % 52 (48) + 1.3 % 5,016
points (4,953)
1 Share of sales via own channels (retail and online)
2 Share of online sales
3 Previous year's figures included Italy which has been transferred to All
other Segments.
4 Customer numbers of Northern Region now include Crystal Ski and Thomson
Lakes & Mountains (formerly Specialist Group)
Northern Region
Northern Region comprises TUI's tour operators and airlines and the cruise
business in the UK, Ireland and the Nordics. In the run-up to the sale of
large parts of Specialist Group, the skiing tour operators previously
forming part of Specialist Group were allocated to source market UK. The
segment also comprises the strategic stake held in Sunwing in Canada, and
TUI Russia, which operates in the CIS countries.
Northern Region - Key figures
EUR million 2015 / 16 2014 / 15 Var. %
restated
Turnover 7,001.5 7,348.4 - 4.7
Underlying EBITA 460.9 538.4 - 14.4
EBITA 440.4 513.4 - 14.2
In financial year 2015 / 16, the Northern Region tour operators continued
their positive development. In particular due to the increase in TUI UK
customers, customer volumes rose by 2.0 % year-on-year in Northern Region.
Due to the year-on-year weakening of the exchange rate for sterling during
the key travel months, turnover by Northern Region declined by 4.7 % to EUR
7,001.5 m. By contrast, turnover rose by 2.6 % on a constant currency
basis.
Northern Region underlying EBITA declined by EUR 77.5 m year-on-year to EUR
460.9 m due to foreign exchange effects. By contrast, earnings by Northern
Region improved by 3.3 % year-on-year on a constant currency basis.
In the UK, tour operators again delivered a sound business performance,
driven in particular by the strength of customer demand for TUI's unique
holidays with growth across short-, medium- and long-haul destinations. The
cruise business benefited from the launch of TUIDiscovery in June 2016.
Customer volumes, adjusted for the skiing tour operator customers during
the
reporting periods, rose by 4.0 % overall in 2015 / 16. We continued to
drive
growth in online bookings, with that channel accounting for 58 % of all
holidays, up around 4 percentage points year-on-year.
In the Nordics, our performance in the financial year was impacted by
growing price pressure in the lates market and lower demand for Turkey.
This
impact was not fully mitigated by the increase in the proportion of the
programme remixed to alternative destinations and the inclusion of Riu
hotels in the long-haul segment. Upfront costs were also incurred for the
TUI brand migration in the Nordics. The online channel accounted for around
75 % of all bookings, up by around three percentage points.
Sunwing recorded an increase in direct costs driven by the small decline in
the Canadian dollar against the US dollar. Despite a good Summer season, it
therefore posted an overall decline year-on-year. On the other hand, there
was a positive impact from the continued expansion of our differentiated
hotel portfolio in the Caribbean and Mexico.
Central Region
Central Region comprises the TUI tour operators in Germany, Austria,
Switzerland and Poland and the TUI fly airline.
Central Region - Key figures
EUR million 2015 / 16 2014 / 15 Var. %
restated
Turnover 5,566.6 5,600.9 - 0.6
Underlying EBITA 88.5 103.5 - 14.5
EBITA 67.3 72.9 - 7.7
With customer volumes down by 4.7 % year-on-year, turnover by Central
Region
was almost flat on the prior year on a slight decline of 0.6 % in financial
year 2015 / 16. Central Region underlying EBITA was also broadly stable. In
the period under review, a major adverse effect was caused by the
geopolitical events in Egypt and Turkey and the resulting subdued demand
for
these important destinations and an intensification of price competition
for
flights to Spain. In Germany, market conditions therefore remained
challenging in a highly competitive environment. The result includes the
impact of a court ruling in November regarding airport services and
marketing agreements with an Austrian airport, and the partial impact on
holidays commenced in September of unexpectedly high levels of sickness
among TUI fly flight crew. However, TUI Deutschland continued to strengthen
its core brand TUI through stronger marketing measures and managed to
further grow its market share.
Western Region
Western Region combines TUI tour operators and Group-owned airlines in
Belgium and the Netherlands as well as tour operators in France.
Western Region - Key figures
EUR million 2015 / 16 2014 / 15 Var. %
restated
Turnover 2,869.9 2,847.0 + 0.8
Underlying EBITA 86.1 68.7 + 25.3
EBITA 72.1 57.7 + 25.0
With customer volumes up by 1.3 % in Western Region, turnover grew by 0.8 %
in financial year 2015 / 16. Underlying EBITA grew by EUR 17.4 m to EUR
86.1
m. The French tour operating business improved year-on-year due to the
expansion of its offering to EU destinations and positive effects from
restructuring measures. Business in the Netherlands benefited from the TUI
brand migration in Autumn 2015 and a 3.0 % increase in customer volumes.
These positive effects were partly offset by the weaker performance of the
Belgian market, which was adversely impacted by the aftermath of the
terrorist attacks in Brussels in March 2016.
Hotels & Resorts
The Hotels & Resorts segment comprises all TUI Group hotels and hotel
companies, including the hotel business of former TUI Travel. They include
subsidiaries, joint ventures with local partners, associates over which
significant influence is held, and hotels operated under management
contracts.
Hotels & Resorts - Key figures
EUR million 2015 / 16 2014 / 15 Var. %
Total turnover 1,278.4 1,252.2 + 2.1
Turnover 618.6 574.8 + 7.6
Underlying EBITA 287.3 234.6 + 22.5
EBITA 285.1 195.7 + 45.7
Total turnover by the Hotels & Resorts segment rose by 2.6 % to EUR 1,278.4
m year-on-year in 2015 / 16. Capacity declined overall; the expanded
offering of our core brands Riu and Robinson was offset by cuts in hotel
capacities in North Africa and Turkey driven by geopolitical events.
Occupancy of TUI hotels was slightly down year-on-year, while average
revenues per bed grew considerably in the period under review. Turnover
with
third parties grew to EUR 618.6 m in 2015 / 16, up by 7.6 % year-on-year.
Underlying EBITA amounted to EUR 287.3 m, up by EUR 52.7 m on the prior
year. This significant increase was mainly driven by the sustained positive
business development of hotel brand Riu, which benefited in particular from
its strong market position in the western Mediterranean and in the
long-haul
segment.
Hotels & Resorts
Capaci- Occupancy Average
ty1 in rate2 in % revenue per
'000 bed3 in EUR
Var. % Var. Var. %
percentage
points
2015 / 16 2015 / 16 2015 / 16
(2014 / (2014 / (2014 /
15) 15) 15)
Hotels
total4
- 1.9 % 35,031 - 1.2 % 77.5 + 5.5 % 58.00
(35,706) points (78.7) (55.00)
Riu
+ 0.7 % 17,396 + 3.7 % 89.6 + 5.6 % 60.34
(17,272) points (85.9) (57.13)
Robinson
+ 6.3 % 3,081 - 5.5 % 67.1 - 0.6 % 90.10
(2,898) points (72.6) (90.67)
1 Group owned or leased hotel beds multiplied by opening days per annum
2 Occupied beds dividied by capacity
3 Arrangement revenue divided by occupied beds
4 Incl. former TUI Travel hotels
Riu
Riu, one of Spain's leading hotel chains, operated a total of 94 hotels
(prior year: 104) with 86,184 beds at the end of financial year 2015 / 16.
The year-on-year decline was driven by the termination of management
contracts in Tunisia following the terrorist attacks in Summer 2015.
Capacity increased slightly by 0.7 % year-on-year. Average occupancy of Riu
hotels rose slightly by 3.7 percentage points to 89.6 %. This increase
above
all reflects strong demand for hotels in Spain and Portugal, and for the
Cape Verde Islands, Mauritius and St Martin in the long-haul segment.
Average revenues per bed rose by 5.6 %. The individual regions developed as
follows in the period under review:
Riu hotels in the Canaries recorded strong demand and benefited from the
shift in demand driven by geopolitical events in the eastern Mediterranean.
Occupancy of hotel beds rose by 4.7 percentage points to 97.2 %. Moreover,
average revenues per bed also increased by 9.3 %.
Riu hotels in the Balearics also recorded a very positive performance in
the
period under review. At 84.7 %, occupancy was 2.1 percentage points up
year-on-year. Average revenues per bed rose by 8.3 % in the period under
review.
At 90.5 %, average occupancy of Riu hotels in mainland Spain was 5.0
percentage points up year-on-year, with average revenues per bed up by 7.8
%.
Riu hotels in long-haul destinations reported average occupancy of 84.7 %.
This was an increase of 2.3 percentage points on the prior year, driven by
higher occupancy in the hotels in St Martin, Mauritius and the Cape Verde
Islands. Average revenues per bed posted for long-haul destinations grew by
5.4 % year-on-year, driven partly by exchange rate fluctuations.
Robinson
Robinson, market leader in the premium club holiday segment, operated a
total of 24 club facilities with 15,342 beds in twelve countries at the end
of the financial year under review, as in the prior year. Capacity rose by
6.3 % year-on-year. This growth was mainly driven by the additional club
facility Kyllini Beach in Greece and the first-time full-year inclusion of
the club resort in Tunisia. Occupancy of Robinson Group was 5.5 percentage
points down year-on-year in financial year 2015 / 16, with the club resorts
in Turkey, Morocco and Tunisia, in particular, falling short of the prior
year's levels. Average revenues per bed were slightly down at 0.6 % under
the prior year's level.
Other hotels
Other hotels mainly comprise the hotel brands TUI Blue, Grupotel, Iberotel
and Magic Life and the further hotel activities by former TUI Travel. The
indicators for Other hotels were also impacted by the aftermath of the
geopolitical situation.
The first two hotels to operate under our new hotel brand TUI Blue opened
in
Turkey in May 2016. The portfolio has been further expanded for the current
financial year; a total of seven hotels are now available in six countries
(Germany, Austria, Italy, Spain, Croatia and Turkey). They offer our
customers a consistent TUI holiday experience with a premium all-inclusive
concept.
Cruises
The Cruises segment comprises Hapag-Lloyd Cruises and the joint venture TUI
Cruises.
Cruises - Key figures
EUR million 2015 / 16 2014 / 15 Var. %
Turnover 296.7 273.3 + 8.6
Underlying EBITA 129.6 80.5 + 61.0
EBITA 129.6 80.5 + 61.0
At EUR 296.7 m, turnover by Hapag-Lloyd Cruises was 8.6 % up on the prior
year in financial year 2015 / 16. No turnover is carried for TUI Cruises as
the joint venture is measured at equity in the consolidated financial
statements.
Cruises underlying EBITA increased to EUR 129.6 m in 2015 / 16, up by EUR
49.1 m year-on-year. On a persistently sound operating performance for the
two companies, this was also driven by the expansion of the TUI Cruises
fleet. With the successful market launch of Mein Schiff 4 in June 2015 and
Mein Schiff 5 in July 2016, TUI Cruises continued to build on its
competitive position. In the period under review, Hapag-Lloyd Cruises also
benefited from lower financing costs due to the acquisition of Europa 2 in
the prior year.
Cruises
Occupancy Passenger Average
in % days in daily rates*
'000 in EUR
Var. Var. % Var. %
percentage
points
2015 / 16 2015 / 16 2015 / 16
(2014 / (2014 / (2014 /
15) 15) 15)
Ha-
pag-Lloyd
Cruises
+ 0.6 % 76.8 + 1.9 % 355 (348) + 8.0 % 579 (536)
points (76.2)
TUI
Cruises
- 0.1 % 102.6 + 30.0 % 3,482 + 1.2 % 171 (169)
point (102.7) (2,679)
* Per day and passenger
Hapag-Lloyd Cruises
In financial year 2015 / 16, the sound operating performance of Hapag-Lloyd
Cruises benefited from the successful realignment of the brand, which had
resulted in a turnaround in the previous year. Occupancy of its fleet was
stable at 76.8 %, a slight increase of 0.6 percentage points versus the
prior year. The average daily rate grew substantially by 8.0 % to EUR 579.
In the period under review, passenger days grew by 1.9 % year-on-year to
354,611.
TUI Cruises
In financial year 2015 / 16, occupancy of TUI Cruises' ships was 102.6 %
(based on the double occupancy calculation conventionally used in the
sector), maintaining the very high level recorded in the prior year. Due to
the successful expansion of the TUI Cruises fleet to include Mein Schiff 4
in June 2015 and Mein Schiff 5 in July 2016, capacity grew to 3.5 m
passenger days in financial year 2015 / 16, considerably up year-on-year.
The average daily rate rose by 1.2 % to EUR 171 year-on-year. In November
2015, cruises in South East Asian lanes were newly included in the
programme
served by TUI Cruises' fleet.
At the end of financial year 2015 / 16, the fleet consisted of five ships.
The maiden voyage of Mein Schiff 6 is expected for Summer 2017. In 2018 and
2019, two further newbuilds will be launched. They will then replace Mein
Schiff 1 and Mein Schiff 2, currently still in service, as part of the
fleet
modernisation programme.
All other segments
The category 'All other segments' refers, in particular, to the corporate
centre functions of TUI AG and the intermediate holdings as well as the
Group's real estate companies.
All other segments - Key figures
EUR million 2015 / 16 2014 / 15 Var. %
restated
Turnover 165.8 166.3 - 0.3
Underlying EBITA - 56.5 - 80.9 + 30.2
EBITA - 90.2 - 121.5 + 25.8
All other segments underlying EBITA cost declined by 30.1 % year-on-year to
EUR 56.5 m in the period under review. The improvement was driven by the
delivery of corporate streamlining synergies worth EUR 30 m, higher
proceeds
from sales of land, and positive impacts of foreign exchange translation.
Net assets
Development of the Group's asset
structure
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Fixed assets 8,345.0 8,902.7 - 6.3
Non-current receivables 786.8 711.3 +
10.6
Non-current assets 9,131.8 9,614.0 - 5.0
Inventories 105.2 134.5 -
21.8
Current receivables 2,218.2 2,623.1 -
15.4
Cash and cash equivalents 2,072.9 1,672.7 +
23.9
Assets held for sale 929.8 42.2 n. a.
Current assets 5,326.1 4,472.5 +
19.1
Assets 14,457.9 14,086.5 + 2.6
Equity 3,248.2 2,417.3 +
34.4
Liabilities 11,209.7 11,669.2 - 3.9
Equity and liabilities 14,457.9 14,086.5 + 2.6
The Group's balance sheet total increased by 2.6 % as against 30 September
2015 to EUR 14.5 bn.
Vertical structural indicators
Non-current assets accounted for 63.2 % of total assets, compared with 68.2
% in the previous year. The capitalisation ratio (ratio of fixed assets to
total assets) decreased from 63.2 % to 57.5 %.
Current assets accounted for 36.8 % of total assets, compared with 31.8 %
in
the previous year. The Group's cash and cash equivalents increased by EUR
400.2 m year-on-year to EUR 2,072.9. They thus accounted for 14.3 % of
total
assets, as against 11.9 % in the previous year.
Horizontal structural indicators
At the balance sheet date, the ratio of equity to non-current assets was
35.6 %, as against 25.1 % in the previous year. The ratio of equity to
fixed
assets was 38.9 % (previous year 27.2 %). The ratio of equity plus
non-current financial liabilities to fixed assets was 56.9 %, compared with
48.3 % in the previous year.
Structure of the Group's non-current
assets
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Goodwill 2,853.5 3,220.4 -
11.4
Other intangible assets 545.8 911.5 -
40.1
Investment property - 7.2 n. a.
Property, plant and equipment 3,714.5 3,636.8 + 2.1
Companies measured at equity 1,180.8 1,077.8 + 9.6
Financial assets available for sale 50.4 56.2 -
10.3
Fixed assets 8,345.0 8,902.7 - 6.3
Receivables and assets 442.1 380.6 +
16.2
Deferred tax claims 344.7 330.7 + 4.2
Non-current receivables 786.8 711.3 +
10.6
Non-current assets 9,131.8 9,614.0 - 5.0
Development of the Group's non-current assets
Goodwill
Goodwill declined by EUR 366.9 m to EUR 2,853.5. The decrease in the
carrying amount is essentially due to the translation of goodwill not
managed in the TUI Group's functional currency into euros. It was also
driven by the disposal of Hotelbeds Group and recognition of Specialist
Group as a discontinued operation. In the period under review, no
adjustments were required as a result of impairment tests.
Property, plant and equipment
Property, plant and equipment increased to EUR 3,714.5 m in the period
under
review, primarily driven by the acquisition of a cruise ship in Northern
Region and the capitalisation of one aircraft as well as down payments on
aircraft orders, partly offset by the reclassification of the segments
Hotelbeds Group and Specialist Group to assets held for sale. Property,
plant and equipment also comprised leased assets in which Group companies
held economic ownership. At the balance sheet date, these finance leases
had
a carrying amount of EUR 1,230.0 m, up 21.8 % year-on-year.
Development of property, plant and
equipment
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Real estate with hotels 978.9 971.2 + 0.8
Other land 155.4 170.2 - 8.7
Aircraft 1,202.0 1,166.0 + 3.1
Ships 674.3 706.7 - 4.6
Machinery and fixtures 335.5 391.9 -
14.4
Assets under construction, payments on 368.4 230.8 +
accounts 59.6
Total 3,714.5 3,636.8 + 2.1
Companies measured at equity
Thirteen associated companies and 27 joint ventures were measured at
equity.
At EUR 1,180.8 m, their value increased by 9.6 % year-on-year as at the
balance sheet date.
Structure of the Group's current assets
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Inventories 105.2 134.5 -
21.8
Financial assets available for sale 265.8 334.9 -
20.6
Trade accounts receivable and other 1,864.7 2,229.7 -
assets* 16.4
Current tax assets 87.7 58.5 +
49.9
Current receivables 2,218.2 2,623.1 -
15.4
Cash and cash equivalents 2,072.9 1,672.7 +
23.9
Assets held for sale 929.8 42.2 n. a.
Current assets 5,326.1 4,472.5 +
19.1
* incl. receivables from derivative financial instruments
Development of the Group's current assets
Financial assets available for sale
Financial assets available for sale comprised the remaining interests in
Hapag-Lloyd AG as at 30 September 2016.
Current receivables
Current receivables comprise trade accounts receivable and other
receivables, current income tax assets and claims from derivative financial
instruments. At EUR 2,218.2 m, current receivables decreased by 15.4 %
year-on-year.
Cash and cash equivalents
At EUR 2,072.9 m, cash and cash equivalents increased by 23.9 %
year-on-year.
Assets held for sale
Assets held for sale increased by EUR 887.6 m to EUR 929.8 m. The increase
is primarily attributable to the reclassification of Specialist Group to
assets held for sale.
Unrecognised assets
In the course of their business operations, Group companies used assets of
which they were not the economic owner according to the IASB rules. Most of
these assets were aircraft, hotel complexes or ships for which operating
leases, i.e. rental, lease or charter agreements, were concluded under the
terms and conditions customary in the sector.
Operating rental, lease and charter
contracts
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Aircraft 1,886.3 2,144.7 -
12.0
Hotel complexes 731.9 793.6 - 7.8
Travel agencies 229.1 263.7 -
13.1
Administrative buildings 271.2 327.5 -
17.2
Ships, Yachts and motor boats 204.6 195.0 + 4.9
Other 114.3 118.8 - 3.8
Total 3,437.4 3,843.3 -
10.6
Fair value 3,319.6 3,540.6 - 6.2
The fair value of financial liabilities from operating rental, lease and
charter agreements declined by EUR 221.0 m to EUR 3,319.6 m. At 54.9 %,
aircraft accounted for the largest portion, with hotel complexes accounting
for 21.3 %.
Further explanations as well as the structure of the remaining terms of the
financial liabilities from operating rental, lease and charter agreements
are provided in the section Other financial liabilities in the Notes to the
consolidated financial statements.
Information on other intangible, non-recognised assets in terms of brands,
customer and supplier relationships and organisational and process benefits
is provided in the section on TUI Group fundamentals; relationships with
investors and capital markets are outlined in the section on TUI share
performance.
Financial position of the Group
Principles and goals of financial management
Principles
TUI Group's financial management is centrally operated by TUI AG, which
acts
as the Group's internal bank. Financial management covers all Group
companies in which TUI AG directly or indirectly holds an interest of more
than 50 %. It is based on policies covering all cash flow-oriented aspects
of the Group's business activities. In the framework of a cross-national
division of tasks within the organisation, TUI AG has outsourced some of
the
operating finance operations to First Choice Holidays Finance Ltd, TUI
Travel's former financing company. However, the operating finance
operations
are carried out on a coordinated and centralised basis.
Goals
TUI's financial management goals include ensuring sufficient liquidity for
TUI AG and its subsidiaries and limiting financial risks from fluctuations
in currencies, commodity prices and interest rates.
Liquidity safeguards
The Group's liquidity safeguards consist of two components:
* In the course of the annual Group planning process, TUI draws up a
multi-annual finance budget, which forms the basis to determine the
long-term financing and refinancing requirements. Using this
information
and observing the financial markets in order to identify refinancing
opportunities create a basis for decision-making to enable appropriate
financing instruments for the long-term funding of the Company to be
adopted early on.
* TUI uses syndicated credit facilities and bilateral bank loans as well
as its liquid funds to secure sufficient short-term cash reserves.
Through intra-Group cash pooling, the cash surpluses of individual
Group
companies are used to finance the cash requirements of other Group
companies. Planning of bank transactions is based on a monthly rolling
liquidity planning system.
Limiting financial risks
The Group companies operate on a worldwide scale. This gives rise to
financial risks for the TUI Group, mainly from changes in exchange rates,
commodity prices and interest rates.
The key operating financial transaction risks relate to the euro, US dollar
and pound sterling and changing fuel prices. They mainly result from cost
items in foreign currencies held by individual Group companies, e. g. hotel
sourcing, aircraft fuel and bunker oil invoices or ship handling costs.
The Group has entered into derivative hedges in various foreign currencies
in order to limit its exposure to risks from changes in exchange rates for
the hedged items. Changes in commodity prices affect the TUI Group, in
particular in procuring fuels such as aircraft fuel and bunker oil. These
price risks related to fuel procurement are largely hedged with the aid of
derivative instruments. Where price increases can be passed on to customers
due to contractual agreements, this is also reflected in our hedging
behaviour. In order to control risks related to changes in interest rates
arising on liquidity procurement in the international money and capital
markets and investments of liquid funds, the Group uses derivative interest
hedges on a case-by-case basis as part of its interest management system.
The use of derivative hedges is based on underlying transactions; the
derivatives are not used for speculation purposes.
More detailed information on hedging strategies and risk management as well
as financial transactions and the scope of such transactions at the balance
sheet date is provided in the Risk Report within the Management Report and
the section Financial instruments in the Notes to the consolidated
financial
statements.
Capital structure
Capital structure of the Group
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Non-current assets 9,131.8 9,614.0 - 5.0
Current assets 5,326.1 4,472.5 +
19.1
Assets 14,457.9 14,086.5 + 2.6
Subscribed capital 1,500.7 1,499.6 + 0.1
Reserves including net profit available for 1,174.4 413.8 +
distribution 183.8
Non-controlling interest 573.1 503.9 +
13.7
Equity 3,248.2 2,417.3 +
34.4
Non-current financial liabilities 2,213.3 1,860.8 +
18.9
Current provisions 415.4 495.8 -
16.2
Provisions 2,628.7 2,356.6 +
11.5
Non-current liabilities 1,503.4 1,653.3 - 9.1
Current financial liabilities 537.7 233.1 +
130.7
Financial liabilities 2,041.1 1,886.4 + 8.2
Other non-current financial liabilities 272.7 456.1 -
40.2
Other current financial liabilities 5,794.9 6,938.6 -
16.5
Other financial liabilities 6,067.6 7,394.7 -
17.9
Debt related to assets held for sale 472.3 31.5 n. a.
Liabilities 14,457.9 14,086.5 + 2.6
Capital ratios
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Non-current capital 7,237.6 6,387.5 +
13.3
Non-current capital in relation to balance 50.1 45.3 +
sheet total 4.7*
Equity ratio 22.5 17.2 +
5.3*
Equity and non-current financial liabilities 4,751.6 4,070.6 +
16.7
Equity and non-current financial liabilities in 32.9 28.9 +
relation to balance sheet total 4.0*
Gearing 41.9 48.7 -
6.8*
* percentage points
Overall, non-current capital increased by 13.3 % to EUR 7,237.6 m. As a
proportion of the balance sheet total it amounted to 50.1 % (previous year
45.3 %).
The equity ratio was 22.5 % (previous year 17.2 %). Equity and non-current
financial liabilities accounted for 32.9 % (previous year 28.9 %) of the
balance sheet total at the reporting date.
The gearing, i.e. the ratio of average net debt to average equity, moved to
41.9 %, down from the previous year (48.7 %).
equity
Composition of equity
EUR million 30 Sep 2016 30 Sep 2015 Var. %
Subscribed capital 1,500.7 1,499.6 + 0.1
Capital reserves 4,192.2 4,187.7 + 0.1
Revenue reserves - 3,017.8 - 3,773.9 + 20.0
Non-controlling interest 573.1 503.9 + 13.7
Equity 3,248.2 2,417.3 + 34.4
Subscribed capital and the capital reserves rose slightly year-on-year. The
increase of 0.1 % each was driven by the issue of employee shares. Revenue
reserves rose by EUR 756.1 m to EUR- 3,017.8 m. Non-controlling interests
accounted for EUR 573.1 m of equity.
Provisions
Provisions mainly comprise provisions for pension obligations, current and
deferred tax provisions and provisions for typical operating risks
classified as current or non-current, depending on expected occurrence. At
the balance sheet date, they accounted for a total of EUR 2,628.7 m, up by
EUR 272.1 m or 11.5 % year-on-year.
Financial liabilities
Composition of liabilities
EUR million 30 Sep 2016 30 Sep 2015 Var. %
Bonds 306.5 293.7 + 4.4
Liabilities to banks 410.8 494.1 - 16.9
Liabilities from finance leases 1,231.7 982.0 + 25.4
Other financial liabilities 92.1 116.6 - 21.0
Financial liabilities 2,041.1 1,886.4 + 8.2
Structural changes in financial liabilities
The Group's financial liabilities rose by a total of EUR 154.7 m to EUR
2,041.1 m, in particular due to the increase in finance leases. The change
was driven in particular by the acquisition of a new Boeing B787-9
aircraft,
which was refinanced by means of a sale-and-lease-back arrangement via
finance leases as well as a cruise ship financed by a finance lease
arrangement. Apart from that, the structure of financial liabilities was
basically retained.
Overview of TUI's listed bonds
The tables below list the maturities, nominal volumes and annual interest
coupon of listed bonds.
On 26 October 2016, TUI AG issued bonds with a nominal value of EUR 300.0 m
with a 5-year team. On 18 November 2016, the proceeds from this bond
issuance were used to repay the five-year bonds issued in September 2014
with a nominal value of EUR 300.0 m.
Listed
Bonds
Capital Issuan- Matu- Nominal value Nominal value Interest
measures ce rity initial EUR outstanding EUR rate % p.
million million a.
Senior Septem- Octo- 300.0 300.0 4.500
Notes ber ber
2014 1 2014 2019
Senior Octo- Octo- 300.0 300.0 2.125
Notes ber ber
2016 2 2016 2021
1 Early termination and repayment on 18 November 2016
2 Not included in the consolidated financial statements
Bank loans and other liabilities from finance leases
Apart from the bonds worth EUR 300.0 m, used for general corporate
financing, the Hotels & Resorts segment, in particular, incurred separate
bank loans, primarily in order to finance investments by these companies.
Most liabilities from finance lease contracts are attributable to aircraft
leases.
More detailed information, in particular on the remaining terms, is
provided
under Financial liabilities in the Notes to the consolidated financial
statements.
Other financial liabilities
Other liabilities totalled EUR 6,067.6 m, down by EUR 1,327.1 m or 17.9 %
year-on-year.
Off-balance sheet financial instruments and key credit facilities
Operating Leases
The development of operating rental, leasing and charter contracts is
presented in the section Net assets in the Management Report.
More detailed explanations and information on the structure of the
remaining
terms of the associated financial liabilities are provided in the section
Other financial liabilities in the Notes to the consolidated financial
statements. There were no contingent liabilities related to special-purpose
vehicles.
Syndicated credit facilities of TUI AG
TUI AG signed a syndicated credit facility worth EUR 1.75 bn in September
2014. This syndicated credit facility is available for general corporate
financing purposes (in particular in the winter months). It carries a
floating interest rate which depends on the short-term interest rate level
(EURIBOR or LIBOR) and TUI's credit rating plus a margin. This syndicated
credit facility was originally to mature in June 2018, but in the financial
year under review, its maturity was extended ahead of the due date to
December 2020. At the balance sheet date, an amount of EUR 120.5 m from
this
credit facility had been utilised in the form of bank guarantees.
Bilateral guarantee facilities of TUI AG with insurance companies
In September 2015 and in the completed financial year, TUI AG concluded
several bilateral guarantee facilities with various insurance companies
with
a total volume of £ 98.5 m and EUR 100.0 m. These guarantee facilities are
required in the framework of the delivery of tourism services in order to
ensure that Group companies are able to meet, in particular, the
requirements of European oversight and regulatory authorities on the
provision of guarantees and warranties. The guarantees granted usually have
a term of 12 to 18 months. The guarantees granted give rise to a commission
in the form of a fixed percentage of the maximum guarantee amount. At the
balance sheet date, an amount of £ 48.6 m and EUR 43.0 m from these
guarantee facilities had been utilised.
Commitments in financing instruments
The EUR 300.0 m bond from October 2016 (and the bond worth EUR 300.0 m from
September 2014, repaid in November 2016) and the credit and guarantee
facilities of TUI AG contain a number of obligations.
TUI AG has a duty to comply with certain financial covenants (as defined in
the respective contracts) from its syndicated credit facility worth EUR
1.75
bn and a number of bilateral guarantee lines. These require (a) compliance
with an EBITDAR-to-net interest expense ratio measuring TUI Group's
relative
charge from the interest result and the lease and rental expenses; and (b)
compliance with a net debt-to-EBITDA ratio, calculating TUI Group's
relative
charge from financial liabilities. The EBITDAR-to-net interest expense
ratio
must have a coverage multiple of at least 1.5; net debt must not exceed 3.0
times EBITDA. The financial covenants are determined every six months. They
restrict, inter alia, TUI's scope for encumbering or selling assets,
acquiring other companies or shareholdings and effecting mergers.
The bond worth EUR 300.0 m from October 2016 (and the bond worth EUR 300.0
m
from September 2014, repaid in November 2016) and the credit and guarantee
facilities of TUI AG also contain additional contractual clauses typical of
financing instruments of this type. Non-compliance with these obligations
awards the lenders the right to call in the facilities or terminate the
financing schemes for immediate repayment.
Ratings by Standard & Poor's and Moody's
TUI AG Ratings
2011 / 2012 / 2013 / 2014 / 2015 / Outlook
12 13 14 15 16
Standard & B - B B+ BB - BB - positi-
Poor's ve
Moody's B3 B3 B2 Ba3 Ba2 stable
Due to the level of certain metrics relevant for the credit rating in
financial year 2014 / 15 and the Company's goal to further improve these
metrics, Standard & Poor's assigned a 'positive' outlook to the corporate
rating ('BB -') in February 2016. In the light of improved metrics and the
resilience shown in facing negative geopolitical events, Moody's also
upgraded its corporate rating from 'Ba3' to 'Ba2' in April 2016.
TUI AG's bonds worth EUR 300.0 m from September 2014 was and TUI AG's bonds
worth EUR 300.0 m from October 2016 are assigned a 'BB -' rating by
Standard
& Poor's and a 'Ba2' rating by Moody's. TUI AG's syndicated credit facility
worth EUR 1.75 bn is assigned a 'BB -' rating by Standard & Poor's.
Financial stability targets
TUI considers a stable credit rating to be a prerequisite for the further
development of the business. In response to the merger between TUI AG and
TUI Travel and the operating performance observed over the past few years,
Standard & Poor's and Moody's both lifted their TUIratings. Apart from
advantageous financing conditions, we are seeking further improvements so
as
to ensure better access to the debt capital markets even in difficult
macroeconomic situations. The financial stability ratios we have defined
are
leverage ratio and coverage ratio, based on the following basic
definitions:
Leverage ratio = (gross financial liabilities + fair value of financial
commitments from lease, rental and leasing agreements + pension provisions
and similar obligations) / (reported EBITDA + long-term leasing and rental
expenses)
Coverage ratio = (reported EBITDA + long-term leasing and rental expenses)
/
(net interest expense + ⅓ of long-term leasing and rental expenses)
These basic definitions are subject to specific adjustments in order to
reflect current circumstances.
For the completed financial year, the leverage ratio was 3,3(x), while the
coverage ratio was 4,8(x). We aim to achieve a leverage ratio between
3.25(x) and 2.50(x) and a coverage ratio between 4.75(x) and 5.75(x) for
financial year 2016 / 17.
Interest and financing environment
In the period under review, short-term interest rates remained at an
extremely low level compared with historical rates. In some currency areas,
the interest rate was even negative, with corresponding impacts on returns
from money market investments but also on reference interest rates for
floating-rate debt.
Quoted credit margins (CDS levels) for corporates in the sub-investment
trade area remained almost flat year-on-year. On overall weak demand for
CDS
titles, quotations were on a very low level for TUI AG. Refinancing options
were available against the backdrop of the receptive capital market
environment, and TUI AG took advantage of this towards the end of the
financial year by preparing for issuing bonds worth EUR 300.0 m which
occurred in October 2016.
TUI also took advantage of the sound condition of the syndicated credit
market in order to extend the maturity of TUI AG's syndicated credit
facility worth EUR 1.75 bn to December 2020 ahead of the due date.
In the completed financial year, no major new large-volume financing
schemes
were incurred apart from a refinancing of a collateralised aircraft
financing scheme and finance lease contracts.
Liquidity analysis
Liquidity reserve
In the completed financial year, the TUI Group's solvency was secured at
all
times by means of cash inflows from operating activities, liquid funds, and
bilateral and syndicated credit agreements with banks.
At the balance sheet date, cash and cash equivalents of TUI AG, TUI Group's
parent company, totalled EUR 637.0 m.
Restrictions of the transfer of liquid funds
At the balance sheet date, there were restrictions worth around EUR 0.1 bn
on the transfer of liquid funds within the Group that might significantly
impact the Group's liquidity, such as restrictions on capital movements and
restrictions due to credit agreements concluded.
Change of control
Significant agreements taking effect in the event of a change of control
due
to a takeover bid are outlined in the chapter on Information required under
takeover law.
Cash flow statement
Summary cash flow statement
EUR million 2015 / 2014 /
16 15
Net cash inflow from operating activities + + 790.5
1,034.7
Net cash in/ outflow from investing activities + 239.0 - 216.8
Net cash outflow from financing activities - 662.1 -
1,116.7
Change in cash and cash equivalents with cash + 611.6 - 543.0
effects
The cash flow statement shows the flow of cash and cash equivalents with
cash inflows and outflows presented separately for operating, investing and
financing activities. The effects of changes in the group of consolidated
companies are eliminated.
Net cash inflow from operating activities
In the financial year under review, the cash inflow from operating
activities amounted to EUR 1,034.7 m (previous year EUR 790.5 m). It
included interest of EUR 21.1 m and dividends of EUR 84.7 m in the
reporting
period. A cash outflow of EUR 186.4 m resulted from income tax payments.
Tax
payments of EUR 94.9 m in connection with the sale of Hotelbeds Group were
included in the cash inflow from investing activities.
Net cash outflow/inflow from investing activities
In the financial year under review, the cash inflow from investing
activities including the payments received for the sale of Hotelbeds Group
totalled EUR 239.0 m (previous year cash outflow of EUR 216.8 m). The cash
outflow of EUR 605.6 m for capital expenditure related to property, plant
and equipment and intangible assets primarily included 243.1 m for tour
operators and airlines and EUR 262.3 m for Hotels & Resorts. The cash
inflow
from the disposal of property, plant and equipment and intangible assets
totalled EUR 72.2 m. The cash outflows for capital expenditure on property,
plant and equipment and intangible assets and the corresponding cash
inflows
do not match the additions and disposals shown in the development of fixed
assets, as these also include the non-cash investments and disposals.
Net cash outflow from financing activities
In the period under review, the cash outflow from financing activities
declined by EUR 454.6 m year-on-year to EUR 662.1 m.
Major cash outflows resulted from the repayment of finance lease
obligations
(EUR 78.1 m) and other financial liabilities (197.3 m), interest payments
(EUR 92.3 m) and dividend payments to TUI AG shareholders (EUR 327.0 m).
Change in cash and cash equivalents
EUR million 2015 / 2014 /
16 15
Cash and cash equivalents at the beginning of + +
period 1,682.2 2,258.0
Changes due to changes in exchange rates + 105.8 - 33.1
Change in cash and cash equivalents due to + 4.0 + 0.3
changes in the group of consolidated companies
Cash changes + 611.6 - 543.0
Cash and cash equivalents at the end of period + +
2,403.6 1,682.2
Cash and cash equivalents comprise all liquid funds, i. e. cash in hand,
bank balances and cheques.
The detailed cash flow statement and additional explanations are provided
in
the consolidated financial statements and in the section Notes to the cash
flow statement in the Notes to the consolidated financial statements.
Analysis of investments
The development of fixed assets, including property, plant and equipment,
intangible assets and shareholdings and other investments is presented in
the section on Net assets in the Management Report. Additional explanatory
information is provided in the Notes to the consolidated financial
statement.
Additions to property, plant and equipment
The table below lists the cash investments in intangible assets and
property, plant and equipment. This indicator does not include financing
processes such as the taking out of loans and finance leases.
Net capex and investments
EUR million 2015 / 2014 / 15 Var.
16 restated %
Northern Region 86.4 69.9 +
23.6
Central Region 20.6 23.6 -
12.7
Western Region 21.6 23.5 -
8.1
Hotels & Resorts 262.3 173.3 +
51.4
Cruises 10.7 88.5 -
87.9
Other Tourism 101.0 102.2 -
1.2
Tourism 502.6 481.0 +
4.5
All other segments 20.8 45.7 -
54.5
TUI Group 523.4 526.7 -
0.6
Discontinued operations 82.2 75.3 +
9.2
Sum of the segments 605.6 602.0 +
0.6
Net pre delivery payments on aircraft 48.7 - 11.9 n.
a.
Financial investments 132.0 158.0 -
16.5
Divestments (without proceeds from - 95.3 - 89.1 -
Hotelbeds sale) 7.0
Net capex and investments 691.0 659.0 +
4.9
Investments in other intangible assets and property, plant and equipment
totalled EUR 605.6 m in the period under review, up 0.6 % year-on-year.
In the period under review, investments mainly related to the construction
of hotels in the Caribbean, Mexico and the Mediterranean, the development
and launch of new booking and reservation systems and down payments on
ordered aircraft. Investments were also effected for renovation and
maintenance in all areas.
The table below shows a reconciliation of investments to additions to TUI
Group's other intangible assets and property, plant and equipment.
Reconciliation of capital expenditure
EUR million 2015 2014 / 15
/ 16 restated
Capital expenditure 605.6 602.0
Debt financed investments - 211.0
Finance leases 315.5 477.4
Advance payments 91.8 224.4
Additions to the group of consolidated 2.7 8.6
companies
Additions to discontinued operations - -
20.6
Additions to other intangible assets and 995.0 1,523.4
property, plant and equipment
Amortisation (+)/write-backs (-) of other intangible
assets and depreciation (+)/write-backs (-) of
property, plant and equipment
EUR million 2015 2014 Var.
/ 16 / 15 %
Northern Region 94.2 105.9 -
11.0
Central Region 22.7 28.2 -
19.5
Western Region 25.8 20.3 +
27.1
Hotels & Resorts 95.0 113.0 -
15.9
Cruises 19.3 17.1 +
12.9
Other Tourism 60.7 64.7 -
6.2
Tourism 317.7 349.2 -
9.0
All other segments 89.3 71.0 +
25.8
TUI Group 407.0 420.2 -
3.1
Discontinued operations 70.9 132.5 -
46.5
Sum of the segments 477.9 552.7 -
13.5
Investment obligations
Order commitments
Due to agreements concluded in financial year 2015 / 16 or in prior years,
order commitments for investments totalled EUR 4,786.7 m; this total
includes an amount of EUR 657.1 m for scheduled deliveries in financial
year
2016 / 17.
At the balance sheet date, order commitments for aircraft comprised 73
planes (3 B787s and 70 B737s), to be delivered by the end of financial year
2022 / 23. Delivery of one aircraft has been scheduled for financial year
2016 / 17.
More detailed information is provided in the section Other financial
liabilities in the Notes to the consolidated financial statements.
Sustainable development
Commitment to sustainability: responsibility for the environment, society
and our people
For TUI Group, economic, environmental and social sustainability is a
fundamental management principle and a cornerstone of our strategy for
continually enhancing the value of our Company. This is the way we create
the conditions for long-term economic success and assume responsibility for
sustainable development in the tourism sector.
Better Holidays, Better World
In 2015, TUI Group presented its sustainability strategy for the period
until 2020. The strategy was devised with the involvement of managers from
across the business operations and fine-tuned in cooperation with
international stakeholders (e. g. non-governmental organisations,partners,
customers and academics).
More on TUI's sustainability strategy at www.tui-sustainability.com
Under the title 'Better Holidays, Better World', TUI's sustainability
efforts comprise three major ambitions: 'step lightly', 'make a difference'
and 'lead the way'.
Our goal is to make positive contributions towards sustainable
environmental
and social development, both in the host countries and at our home markets.
We also consistently work to prevent and minimise any negative impacts from
our business activities on our natural and social environment. To play our
part in shaping the future of sustainable tourism, TUI invests in young
people, skills and tourism training programmes, and works in partnership
with the destination markets.
In the period under review, our strategy was implemented more broadly
within
our Group, and the first results were measured. In July 2016, TUI Group
published its first status report on 'Better Holidays, Better World'. The
report is available for download on the Group's website. It offers
comprehensive information about our goals, activities, progress and metrics
in the field of sustainability.
Report online at www.tuigroup.com/en-en/sustainability/reporting-downloads
TUI Care Foundation
A further key milestone was the Group-wide launch of TUI Care Foundation in
the period under review. It pools and expands the social commitment
expressed across TUI Group. TUI Care Foundation operates globally but
always
focuses on the local situation. It thus builds on strong partnerships with
regional and international organisations in order to create sustainable,
positive change. The non-profit foundation has committed to transparency
and
an efficient use of funds. 100 % of the donations go to projects and
project
partnerships, with all overhead costs for the foundation covered by TUI.
More on TUI Care Foundation in the Magazine on page 58 and on the Internet
at www.tuicarefoundation.com
The TUI Care Foundation supports projects for children and young people,
nature conservation and environmental protection, and development for
destinations, e. g. through education and training.
Current projects and initiatives are regularly published on our website. In
addition, many TUI Group companies describe their sustainability activities
in detail on their local websites and integrate sustainability information
into customer communication.
Current projects and initiatives at www.tui-sustainability.com
Sustainability indices
In September 2016, TUI AG was once again listed in the renowned Dow Jones
Sustainability Index (DJSI) for the eleventh time in succession. TUI is the
only tourism group admitted to the World and Europe indices. TUI is also
listed as industry leader. At this year's review of the composition of the
index, TUI achieved particularly high scores in the categories Corporate
Citizenship, Climate Strategy and Eco-Efficiency.
TUI AG is also represented in the sustainability indexes FTSE4Good, STOXX
Global ESG Leaders Index, Ethibel Excellence Index and ECPI Ethical Index
EURuro. TUI is listed in the Climate Disclosure Leadership Index (CDLI) in
the UK and in Germany.
The environment
Respecting the environment in our products, services and processes is an
essential feature of our quality standards. Conserving natural resources
and
mitigating negative environmental impacts secure TUI's success. We place
priority on climate protection, resource efficiency and biodiversity.
Group-wide environmental monitoring
Group-wide processes to monitor environmental performance and determine
meaningful indicators were further pursued in financial year 2015 / 16.
These are based on internationally acknowledged standards such as the
Greenhouse Gas Protocol. Group-wide monitoring focuses on business
activities impacting the environment and is used as a control parameter to
improve environmental performance.
To establish the relevant indicators, our businesses use an internal system
to report their consumption and activities on an annual basis. The
quantitative data is then consolidated at Group level and aggregated into
metrics. A web-based system is used to further enhance data quality and
increase the efficiency of the data capture process for the companies
concerned.
Focus on climate protection and emissions
Our special focus is on improving carbon emissions, in particular by the
TUI
Group's airlines, which account for more than 80 % of our CO2 emissions.
Details about our carbon footprint can be found in TUI Group's
Sustainability Report at www.tui-sustainability.com
Carbon dioxide emissions (CO2)
tons 2015 / 16 2014 / 15 Var. %
Airlines & Aviation 5,842,427 5,615,386 + 4.0
Hotels & Resorts 510,719 510,492 + 0.0
Cruises 686,791 639,119 + 7.5
Major Premises / Shops 32,617 38,115 - 14.4
Ground Transport 17,751 17,761 - 0.1
Scope 3 (Other) 71,713 68,403 + 4.8
Group 7,162,018 6,889,276 + 4.0
In financial year 2015 / 16, TUI Group's total emissions rose year-on-year
in absolute terms, primarily due to growth in its airlines and aviation
segment. The increase in absolute carbon emissions in Cruises of 7.5 % is
mainly driven by the launch of Mein Schiff 5, operated by TUICruises, and
the inclusion of Mein Schiff 4 for a full financial year. Emissions from
offices and retail shops declined significantly, driven partly by more
efficient energy use.
Climate protection by TUI airlines
We already operate one of Europe's most carbon-efficient airlines. CO2
emissions by TUI airlines are 30 % below the average for the entire sector.
TUI Airlines have launched numerous measures to secure our top position and
further enhance the efficiency of aircraft.
Apart from continuous renewal of our aircraft fleet, we have launched the
following measures to support our efficiency goals:
* Fitting our aircraft with split scimitar winglets and blended winglets
to save fuel
* Process optimisation, e. g. single-engine taxiing
* Weight reduction, e. g. by means of lighter trolleys and seats, use of
iPads, introduction of carbon brakes and optimisation of on-board water
and goods volumes
* Washing engines, using lighter paint and surface sealants to prevent
soiling and further improving aircraft aerodynamics
* Replacing fluorescent lamps in aircraft cabins by LEDs
TUI's airlines play a pioneering role in introducing environmental
management systems based on the internationally recognised ISO 14001
standard. In the period under review, each of our five tour operator
airlines and hence 95 % of our aircraft achieved ISO 14001 certification.
In the Atmosfair Airline Index 2015 TUI fly Germany was named 'most
climate-efficient airline in the world' for the third consecutive time.
Thomson Airways took second place as the 'most climate-efficient airline in
the world in the medium- and long-haul segment'.
The ecoDemonstrator project carried out in collaboration with Boeing and
NASA to test new technologies aimed at reducing CO2 and noise emissions was
successfully completed in the period under review. The tests included
special coatings for aircraft wings to protect the leading edge from insect
soiling. This reduces the aerodynamic drag of the aircraft. After the end
of
the series of test flights, the aircraft was dismantled and 90 % of its
parts recycled by means of new methods.
In our sustainability strategy 'Better Holidays, Better World', we set
ourselves the goal to defend our position as Europe's most
emission-efficient airline fleet. We also aim to reduce the CO2 intensity
of
our global operations, including TUI's airlines, by 10 % by 2020: We aim to
reduce specific CO2 emissions (g CO2 / PKM) by 10 % (baseline 2013 / 14).
TUI Airlines - Fuel consumption
and related emissions
2015 / 16 2014 / 15 Var.
2 %
Specific fuel consumption l / 100 2.65 2.62 +
rpk1 1.2
Carbon dioxide (CO2) - total t 5,277,065 5,034,264 +
4.8
Carbon dioxide (CO2) - specific kg / 100 6.68 6.60 +
rpk1 1.2
Nitrogen oxide (NOX) - total t 29,417 30,754 -
4.3
Nitrogen oxide (NOX) - specific g / 100 37.34 41.38 -
rpk1 9.8
Carbon monoxide (CO) - total t 1,583 1,523 +
3.9
Carbon monoxide (CO) - specific g / 100 2.00 2.05 -
rpk1 2.4
Hydrocarbon (HC) - total t 142 130 +
9.2
Hydrocarbon (HC) - specific g / 100 0.18 0.17 +
rpk1 5.9
1 rpk = Revenue Passenger Kilometer
2 Presentation of the nitrogen oxide, carbon monoxide and hydrocarbon
emissions for financial year 2014 / 15 is based on total fuel burn.
Specific fuel consumption and specific emissions rose slightly in the
period
under review. This is attributable to changes in the fleet's load factor
and
a higher frequency of short-haul flights.
TUI Airlines - Carbon
intensity
2015 / 2014 / Var. g CO2e /
16 15 % rpk*
TUI Airline fleet g CO2 / 66.8 66.0 + 67.5
rpk* 1.2
Corsair International g CO2 / 82.4 79.8 + 83.2
rpk* 3.3
Thomson Airways g CO2 / 63.8 63.7 + 64.4
rpk* 0.2
TUI fly Belgium g CO2 / 71.4 69.6 + 72.1
rpk* 2.6
TUI fly Germany g CO2 / 64.4 63.4 + 65.0
rpk* 1.6
TUI fly Netherlands g CO2 / 64.1 63.8 + 64.7
rpk* 0.5
TUI fly Nordic g CO2 / 61.4 60.6 + 62.0
rpk* 1.3
* rpk = Revenue Passenger Kilometer
We have requested PwC, TUI Group's auditors, to provide assurance on the
carbon intensity metrics displayed in the table 'TUI Airlines - Carbon
intensity' above. To read our airline carbon data methodology document and
PwC's Assurance Report in full, please visit
www.tuigroup.com/en-en/sustainability/reporting-downloads
To enhance the information content, specific emissions are also shown in
the
form of CO2 equivalents (CO2e). Apart from carbon dioxide (CO2), they
include the other five greenhouse gases impacting the climate as listed in
the Kyoto Protocol: methane (CH4), nitrous oxide (N2O), hydro-fluorocarbons
(HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).
Climate protection in Cruises
In 2016, TUI Cruises launched Mein Schiff 5. Like her sister ships Mein
Schiff 3 and Mein Schiff 4, the newbuild is 30 % more energy efficient than
comparable vessels. The ships save fuel through a combination of the latest
technologies. A smart energy management system, efficient air conditioning,
innovative lighting controls and the use of waste heat from the engines all
contribute to a significantly reduced carbon footprint. Sulphur emissions
from the newbuilds in the fleet are also 90 % lower thanks to new systems
that treat exhaust fumes before releasing them. Moreover, the average
sulphur content of fuel was considerably reduced year-on-year. In the
period
under review, it stood at 1.16 %.
More in the TUI Cruises Environment Report:
www.tuicruises.com/nachhaltigkeit/umweltbericht/
The ships are fitted with advanced emission purification systems, which
operate around the clock worldwide - even outside Emission Control Areas,
where use of scrubbers when using heavy fuel oil has been required since
2015.
At Hapag-Lloyd Cruises, the expedition ships Hanseatic and Bremen were
fitted with new zodiacs in the period under review. These motor-driven
rubber boats are equipped with Torqueedo electric motors in order to reduce
air and noise emissions. Hapag-Lloyd Cruises is the first provider of
expedition cruises to use this environmentally friendly technology.
Human resources
We successfully operate in a dynamic, challenging environment with around
67,000 employees worldwide. In financial year 2015 / 16, the new Group HR
Strategy was developed in conjunction with the global HR Leadership Team in
order to ensure lasting achievement of our goal - long-term success. Apart
from anchoring joint corporate values, the focus is on the five strategic
key areas Engagement, Leadership, People Development, Organisational
Effectiveness and HR Function Development. For each of these pillars,
specific projects have been defined so that TUI Group's cultural
transformation can be experienced by managers and employees. The 15
projects
are all in different implementation stages and will be the focus of our
activities in the next few years.
One of the key cornerstones in the strategic HR process and towards
cultural
integration is our employee survey TUIgether. Our first survey was carried
out in September 2015. We invited our employees in more than 100 countries
with 18 languages to give us their feedback. The response rate was 66 %. In
our first employee survey, we achieved an Engagement Index of 73. We
followed up on the results in a well-defined process and agreed to
implement
around 5,000 measures across all levels. In the second employee survey,
carried out in September 2016, the response rate rose by around 10
percentage points to 77 %, while the Engagement Index climbed to 77.
Changes in headcount
At the balance sheet date, TUI Group's worldwide headcount was 66,779, down
12.2 % 0year-on-year. This is primarily due to the disposal of Hotelbeds
Group.
In the period under review, the headcount strongly reflected the seasonal
employment structures, in particular in hotels and incoming agencies.
Tourism continues to employ the largest number of Group employees.
Personnel by segment
30 Sep 2016 30 Sep 2015 Var. %
restated
Northern Region 14,943 14,518 + 2.9
Central Region 11,741 12,167 - 3.5
Western Region 5,631 5,431 + 3.7
Hotels & Resorts 24,363 24,373 - 0.0
Cruises 246 232 + 6.0
Other Tourism 4,573 4,806 - 4.8
Tourism 61,497 61,527 - 0.0
All other segments 1,744 1,322 + 31.9
TUI Group 63,241 62,849 + 0.6
Discontinued operations 3,538 13,187 - 73.2
Total 66,779 76,036 - 12.2
Tourism
At the end of financial year 2015 / 16, the headcount in Tourism was almost
flat year-on-year at 61,497. The individual segments recorded different
trends.
Northern Region
Northern Region reported a year-on-year increase in headcount of 2.9 % to
14,943. This increase mainly resulted from recruitment in tour operation
and
the UK airline. On the other hand, Crystal Ski reported a slight reduction.
Central Region
At the balance sheet date, Central Region recorded a headcount of 11,741,
down 3.5 % year-on-year. The decline was driven by lower staffing numbers
in
Austria, Switzerland and Poland and in tour operation in Germany. In
addition, 375 employees were transferred from TUICustomer Operations to TUI
Business Services GmbH, a wholly owned subsidiary of TUI AG, in the period
under review in order to further develop an international, source
market-independent shared service platform. On the other hand, the
headcount
increased in the retail segment in Germany and at TUI Service AG.
Western Region
Western Region saw an increase in headcount of 3.7 % to 5,631, primarily
due
to the increase in staffing numbers in tour operation in France, the
Netherlands and Belgium.
Hotels & Resorts
At the balance sheet date, Hotels & Resorts reported 24,363 employees, flat
year-on-year. At 10,775, Riu Group, the largest hotel company in the
portfolio, maintained its staffing number roughly at the prior year's
level.
The increase in staff numbers driven by the opening of new hotel facilities
was almost offset by the closure of hotels in Tunisia. Robinson reported an
increase in its headcount of 5.9 % to 3,586 due to new acquisitions.
Cruises
The Cruises segment recorded a year-on-year increase in headcount of 6.0 %
to 246, driven by the newbuild projects.
Other Tourism
Other Tourism reported a decline in headcount of 4.8 % to 4,573,
essentially
driven by the falling headcount for the TUI Destination Services platform
in
Turkey, Tunisia and Morocco. The headcount in IT was 434, up 12.7 %
year-on-year.
All other segments
All other segments recorded an increase in headcount of 31.9 % to 1,744
year-on-year. In the Corporate Centre, the headcount rose by 86.5 % to 235,
mainly due to the integration of Group functions and the creation of new
functions. The headcount growth in All other segments was also driven by
the
first-time inclusion of TUI Business Services GmbH and growth in the
longtail platform.
Discontinued operation
At the balance sheet date, the headcount in discontinued operations was
73.2
% down versus the prior year from 13,187 to 3,538. This was driven by the
sale of Hotelbeds Group and LateRooms Group and the associated
non-inclusion
of around 9,000 employees. Specialist Group recorded a decline in its
headcount of 8.1 % to 3,538, primarily due to the sale of companies such as
the language tour operations, not forming part of the Specialist Group
companies to be sold in one deal.
Global headcount
Personnel by region*
30 Sep 2016 30 Sep 2015 Var. %
restated
Germany 10,170 10,047 + 1.2
Great Britain 13,409 13,036 + 2.9
Spain 8,967 9,115 - 1.6
Other EU 19,895 19,301 + 3.1
North and South America 3,768 3,428 + 9.9
Other regions 7,032 7,922 - 11.2
TUI Group 63,241 62,849 + 0.6
Discontinued operations 3,538 13,187 - 73.2
Total 66,779 76,036 - 12.2
* By domicile of company
As a global player, TUI Group operates in around 180 destinations worldwide
with its employees. The number of employees working in Germany rose by 1.2
%
to 10,170. The Group's headcount in Europe increased by 1.8 % to 52,441, or
82.9 % of the Group's overall headcount. Due to a reduction in the number
of
employees working in other regions, the headcount in non-European countries
declined by 4.8 % to 10,800, or 17.1 % of the overall headcount. The
year-on-year change is primarily driven by staff reductions in the
destinations Tunisia, Morocco and Egypt.
Mixed leadership
As at 30 September 2016, the balance sheet date, the share of women as a
proportion of the overall headcount was almost flat year-on-year at 56.0 %.
The proportion of women in leadership positions decreased slightly from
31.3
% to 29.4 %.
The proportion of women on our German supervisory bodies continued to rise
in the period under review. On 30 September 2016, women accounted overall
for around 38 % of members, up 8 percentage points year-on-year. At TUI AG,
the share of women on the Supervisory Board was already 35 %. The statutory
requirements were therefore met.
In Germany, advantage was taken of the self-commitment mechanism provided
for under the German Stock Corporation Act (AktG) and the Act on Limited
Liability Companies (GmbHG) to fix specific targets for TUI AG, TUI
Deutschland and TUI fly in financial year 2014 / 15. In financial year 2015
/ 16, implementation of these targets made good progress. At the Executive
Board and Management Board levels, the roles of Labour Director within TUI
AG and TUI Deutschland were filled with female candidates. In the period
under review, additional measures were initiated to promote female
executives, in particular at the two management levels below the Executive
Board, in the framework of the HR strategy.
proportion of women in
managerial positions 30
September 2016
TUI TUI TUI
AG Deutsch- fly
land
% Actu- Target Actual Tar- Ac- Tar-
al get tu- get
al
Executive Board one at least 20 20 0 20
fema- one
le female
First management level below 10 20 36 30 40 30
Executive Board
Second management level below 22 30 40 40 44 40
Executive Board
Other staff indicators
TUI Germany
Group
% 30 Sep 30 Sep 30 Sep 30 Sep
2016 2015 2016 2015
Employment structure
Number of employees 66,779 76,036 10,170 10,047
Employees - female 56.0 56.2 68.5 68.2
Females in managerial positions 29.4 31.3 32.8 32.6
Employees in part-time, total 18.8 19.7 36.4 35.8
Employees in part-time, female 28.8 28.7 46.1 44.7
Employees - fixed-term employment 33.1 30.8 15.5 16.0
contract
Age structure
Employees up to 20 years 5.3 5.4 2.9 3.0
Employees 21 - 30 years 30.1 29.3 20.1 19.6
Employees 31 - 40 years 27.1 28.1 24.2 25.5
Employees 41 - 50 years 23.9 23.0 31.4 31.8
Employees more than 50 years 13.6 14.2 21.4 20.1
Average company affiliation
up to 5 years 54.3 56.9 33.2 33.0
6 - 10 years 15.8 17.0 13.3 14.5
11 - 20 years 20.2 17.8 31.8 32.5
21 - 30 years 7.6 6.6 16.9 15.2
more than 30 years 2.1 1.7 4.8 4.8
Vocational training in Germany
Number of trainees 569 576
Trainees - female 79.3 80.6
Training rate 5.7 5.8
Number of trainees gained 183 171
certification in finanical year
Hiring rate 70.5 67.8
Personnel costs
The pay package offered by the TUI Group reflects the appropriateness of
compensation and customary market rates. It varies in its composition, as
it
is influenced by framework conditions in different countries and companies.
Depending on the function concerned, a fixed basic salary may go hand in
hand with variable components. TUI Group uses these variable factors to
honour individual performance and to enable employees to participate in the
Company's strategic and long-term success. Moreover, senior management have
share options and are thus able to benefit directly when the Company grows
in value.
In the period under review, the TUI Group's personnel costs declined by 1.4
% to EUR 2,272.0 m. The year-on-year decrease in expenses for wages and
salaries was mainly attributable to foreign exchange effects and higher
expenses incurred in the prior year in connection with restructuring
measures. Moreover, expenses for share-based payments carried in
administrative expenses declined year-on-year due to changes in the
structure of remuneration models and the development of the share price. An
opposite trend was reported by the operating areas, in particular airlines
and hotels, some of which recorded a year-on-year increase in personnel
costs. This trend is reflected in a slight overall increase in the cost of
sales.
Personnel costs
EUR million 2015 / 16 2014 / 15 Var. %
restated
Wages and salaries 1,846.7 1,869.7 - 1.2
Social security 425.3 435.7 - 2.4
contributions
Total 2,272.0 2,305.4 - 1.4
Pension schemes
The companies in the TUI Group offer their employees benefits from the
company-based pension schemes funded by the employer. Options for the
employees include pension schemes, direct insurance contracts and
individual
or direct commitments to build up a private pension. These schemes were
devised so as to take advantage of fiscal and social security
co-sponsorship
opportunities. To enable their employees to convert their gross pay into
pension contributions, TUI AG has concluded advantageous collective
contracts with an established insurance undertaking, and all our German
employees can sign up to these.
Part-time early retirement
In order to further increase the flexibility of their company HR and
succession planning, Group companies in Germany are able to make use of the
opportunities provided under the German Part-Time Early Retirement Act to
shift gradually from employment to retirement. At the balance sheet date,
EUR 9.6 m was provided through a capital investment model for the 180
employees working under part-time early retirement contracts in order to
hedge their accrued assets against employer insolvency.
Security, Health & Safety
In the framework of the integration process, Security, Health & Safety has
been integrated across all companies and further expanded. The goal of the
new structure is to guarantee comprehensive Group-wide safety management
based on common safety standards, and coordinated workflows ensuring
networked, aligned action. The analyses performed under this Group-wide
safety management system provide the basis for the definition of prevention
measures, framework concepts and guidelines for action in Security, Health
&
Safety, which are used across the Group. The effectiveness of these
measures
is continually evaluated.
In addition, well-coordinated event and crisis management ensures that
rapid, structured and comprehensive support is provided to our customers
and
employees if needed, drawing on the resources and experience of a globally
operating tourism group. To this end, TUI has established a structure
including crisis centres that coordinate all measures required in the event
of an incident, emergency care teams to support our guests locally in
emergency and crisis situations, and close contacts with the foreign
offices
in the source markets and foreign ministries worldwide. TUI benefits from
the interdisciplinary networking of expertise in different areas. Our
employees contribute the experience they have gained in tourism, crisis
management and security agencies to TUI Group's integrated Group-wide
safety
management concept.
Annual financial statements of TUI AG
Condensed version according to German Commercial Code (HGB)
Earnings position of TUI AG
The annual financial statements of TUI AG were prepared in accordance with
the provisions of the German Commercial Code (HGB), taking account of the
complementary provisions of the German Stock Corporation Act (AktG), and
audited by the auditors PricewaterhouseCoopers Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft, Hanover. They are published in the
electronic federal gazette. The annual financial statements have been made
permanently available on the Internet at www.tuigroup.com and can be
requested in print from TUI AG.
Annual financial statements TUI AG 2015 / 16 online at
www.tuigroup.com/en-en/investors
In the present Annual Report, the Management Report of TUI AG has been
combined with the Management Report of TUI Group.
Income statement of TUI AG
EUR million 2015 / 16 2014 / 15 Var. %
Other operating income 637.0 508.8 + 25.2
Personnel costs 50.3 37.8 + 33.1
Depreciation 0.5 0.6 - 16.7
Other operating expenses 762.9 568.6 + 34.2
Net income from investments 353.4 1,420.0 - 75.1
Write-downs of investments 3.7 24.6 - 85.0
Net interest - 24.6 - 28.9 + 14.9
Profit on ordinary activities 148.4 1,268.3 - 88.3
Taxes 8.5 11.6 - 26.7
Net profit / loss for the year 139.9 1,256.7 - 88.9
The earnings position of TUI AG, the Group's parent company, is primarily
determined by the appropriation of profits by its Group companies, either
directly associated with TUI AG via profit and loss transfer agreements or
distributing their profits to TUI AG based on appropriate resolutions.
Other operating income
The increase in other operating income was mainly driven by a significant
year-on-year increase in gains on exchange. This income was offset by
expenses for exchange losses of a similar amount, carried in Other
operating
expenses. Apart from the gains on exchange, Other operating income
primarily
included income from the elimination of intercompany services, carried
alongside expenses of almost the same amount passed on to TUI AG from other
Group companies, also shown in Other Operating expenses.
Personnel costs and other operating expenses
Personnel costs rose in financial year 2015 / 16, mainly due to higher
expenses for members of the management body. Personnel costs also rose due
to transfers to pension provisions, recruitment of new staff and the
transfer of staff from a subsidiary to TUI AG.
Other operating expenses comprise, in particular, the cost of financial and
monetary transactions, charges, fees, services, transfers to impairments
and
other administrative costs as well as expenses for exchange losses and the
intercompany elimination of services. Other operating expenses rose in
particular due to the increase in expenses for exchange losses.
Net income from investments
In the financial year under review, TUI AG'S net income from investments
was
driven, in particular, by the distribution of pre-fiscal unity profits of
Leibniz-Service GmbH and the distribution of profits by TUI Cruises GmbH.
Net income from investments also included income from profit transfers from
hotel companies and companies allocable to central operations. It also
comprised expenses for loss transfers from Group companies, resulting in a
corresponding reduction in net income from investments. A negative effect
was driven in particular by the loss taken over by TUI-Hapag Beteiligungs
GmbH from the impairment of the interests in Hapag-Lloyd
Aktiengesellschaft.
In the prior year, net income from investments had been impacted in
particular by the high amount of profits distributed by TUI Travel Ltd.
Write-downs of investments
In the period under review, write-downs of investments exclusively related
to write-downs of hotel investments.
Interest result
The interest result improved as a result of lower interest expenses driven
by the redemption of bonds. Interest expenses also declined due to changes
in the parameters used to calculate pension provisions. An opposite trend
was driven by charges in connection with the syndicated credit facility.
Taxes
In the period under review, taxes related to income taxes and other taxes.
They did not include deferred taxes.
Net profit for the year
For financial year 2015 / 16, TUI AG posted a net profit for the year of
EUR
149.9 m.
Net assets of TUI AG
TUI AG's net assets and financial position as well as its balance sheet
structure reflect its function as the TUI Group's parent company. The
balance sheet total rose by 23.5 % to EUR 9.2 bn in financial year 2015 /
16.
Abbreviated balance sheet of TUI AG (financial
statement according to German Commercial Code)
EUR million 30 Sep 30 Sep Var.
2016 2015 %
Intangible assets / property, plant and 17.5 13.7 +
equipment 27.7
Investments 6,784.8 5,662.1 +
19.8
Fixed assets 6,802.3 5,675.8 +
19.8
Inventories / Receivables / Trade securities 1,724.4 912.7 +
88.9
Cash and cash equivalents 637.0 833.7 -
23.6
Current assets 2,361.4 1,746.4 +
35.2
Prepaid expenses 0.8 0.8 -
Assets 9,164.5 7,423.0 +
23.5
Equity 4,812.1 4,995.4 - 3.7
Special non-taxed items 0.1 0.5 -
80.0
Provisions 480.8 405.6 +
18.5
Bonds 306.7 300.0 + 2.2
Other liabilities 3,564.8 1,721.5 +
107.1
Liabilities 3,871.5 2,021.5 +
91.5
Liabilities 9,164.5 7,423.0 +
23.5
Fixed assets
At the balance sheet date, fixed assets almost exclusively consisted of
investments. The increase in investments was mainly attributable to the
acquisition of TUI Belgium N. V., TUI Holding Spain SLU and Tantur Turizm
Seyahat Ltd. Financial investments also rose due to loans toGroup
subsidiaries.
Current assets
In the framework of the restructuring of a cash pool, former TUI Travel
subsidiaries were directly included in TUI AG's cash pooling structure in
the period under review, causing an increase in receivables in financial
year 2015 / 16.
Moreover, liquid funds were invested in short-term money market funds in
the
period under review.
TUI AG's capital structure
Equity
TUI AG's equity decreased by EUR 183.3 m to EUR 4,812.1 m. The subscribed
capital of TUI AG consists of no-par value shares, each representing an
equal portion in the capital stock. The proportionate share in the capital
stock per share is around EUR 2.56. At the end of financial year 2015 / 16,
the subscribed capital of TUI AG rose due to the issue of employee shares.
At the end of the financial year under review, subscribed capital comprised
587,038,187 shares.
In financial year 2015 / 16, the capital reserve rose by a total of EUR 2.7
m due to the issue of employee shares. Revenue reserves exclusively
consisted of other revenue reserves. The Articles of Association do not
contain any provisions concerning the formation of reserves.
The profit for the year amounted to EUR 139.9 m. Taking account of the
profit carried forward of EUR 682.4 m, net profit available for
distribution
totalled EUR 822.3 m. A proposal will be submitted to the Annual General
Meeting to use the net profit available for distribution for the financial
year under review to distribute a dividend of EUR 0.63 per no-par value
share and to carry the amount of EUR 452.5 m, remaining after deduction of
the dividend total of EUR 369.8 m, forward on new account. The equity ratio
declined to 52.5 % (previous year 67.3 %) in financial year 2015 / 16.
Provisions
Provisions increased by EUR 75.2 m to EUR 480.8 m. They consisted of
pension
provisions worth EUR 134.8 m (previous year EUR 139.0 m) and other
provisions worth EUR 346.0 m (previous year EUR 266.6 m).
Other provisions increased year-on-year, in particular due to the use of
provisions formed for the assumptions of risks in the framework of the sale
of Hotelbeds Group and an increase in provisions for invoices outstanding.
An opposite effect arose from the decline in provisions for onerous losses
from derivative financial instruments.
Liabilities
TUI AG's liabilities totalled EUR 3,871.5 m, up by EUR 1,850.0 m or 91.5 %.
In September 2014, TUI AG issued an unsecured bond worth EUR 300.0 m
maturing on 1 October 2019. Due to the issue of bonds with a lower interest
coupon, TUI AG cancelled the bond on 18 November 2016 and repaid it ahead
of
its maturity date.
The increase in other liabilities was also associated with the
restructuring
of a cash pool of former TUI Travel subsidiaries, which were included in
TUI
AG's cash pool. Moreover, Group companies fed their gains from the disposal
of stakes in Hotelbeds Group into TUI AG's cash pooling system, resulting
in
a considerable increase in liabilities to Group companies.
TUI's net financial position (funds and marketable securities less bonds)
improved year-on-year, amounting to a clearly positive position of EUR
630.2
m in the period under review.
Capital authorisation resolutions
Information on new or existing resolutions concerning capital
authorisation,
adopted by Annual General Meetings, is provided in the next chapter on
Information Required under Takeover Law.
TUI share
TUI share price performance reflects challenging market environment this
year
The TUI share performed well at the start of the financial year, but was
subsequently impacted by the challenging market environment. The terrorist
attacks in Paris on 13 November 2015, in particular, resulted in a slump in
equity prices on international stock exchanges.
Supported by the best business results in the history of the Company, the
TUI share price climbed during December, before the attacks in Istanbul in
early 2016 again impacted tourism shares. In February 2016, market
participants were unsettled by the slump in oil prices, which drove
international lead indices further into losses.
In the course of the financial year, the TUI share was caught, time and
again, between sound operating results and macroeconomic as well as
geopolitical turbulence. While the TUI share was supported by a strong
overall trading performance and half-year results in March and May 2016,
the
terrorist attacks in Ankara, Brussels and Nice impacted the financial
markets.
Major stock market distortions also followed the British decision on 23
June
2016 to leave the EU, and concerns about the consequences of Brexit
impacted
share prices, in particular for shares exposed to the UK source market.
In August and September 2016, the TUI share recovered again, benefiting
from
sound interim results and a good trading performance. This once again
demonstrated the strength of the integrated business model and the success
of the Group's content-centric strategy.
TUI share data
30 September 2016
WKN TUAG00
ISIN DE000TUAG000
Stock exchange centres London, Xetra, Hannover
Reuters / Bloomberg TUIGn.DE/TUI1.GR (Frankfurt);
TUIT.L/TUI:LN (London)
Stock category Registered ordinary shares
Capital stockEUR 1,500,739,295
Number of shares 587,038,187
Market capitalisationbn EUR 7.4
Market capitalisationbn £ 6.4
Long-term development of the TUI
share (Xetra)
EUR 2011 / 2012 / 2013 / 2014 / 2015 /
12 13 14 15 16
High 9.05 10.86 6.97 17.71 17.21
Low 4.69 3.68 3.14 9.84 10.17
Year-end share price 8.98 3.88 6.70 16.35 12.69
Quotations, indices and trading
The TUI share has its primary listing in the Premium segment of the Main
Market of the London Stock Exchange and is listed in the FTSE UK Index
series including FTSE 100, the UK's major share index. It also has a
secondary listing in the electronic trading system Xetra and at the Hanover
Stock Exchange.
Among the sustainability indices, TUI was listed for the eleventh time
running in the renowned Dow Jones Sustainability Index (DJSI) in September
2016. TUI was, moreover, the only tourism group to feature in both the
World
and Europe indices. TUI Group is furthermore recognised as industry leader.
At this year's review of the composition of the index, the Company achieved
top scores in the categories Corporate Citizenship, Climate Strategy and
Eco-Efficiency. TUI is likewise listed in the sustainability indices
FTSE4Good, STOXX Global ESGLeaders Index and ECPI Ethical Index EURuro and
is a member of the CDP Climate Disclosure Leadership Index in the UK and
Germany.
In financial year 2015 / 16, the average daily trading volume at the London
Stock Exchange was around 1.1 million shares, while around 0.7 million
shares were traded on Xetra. Both the sterling and the euro line therefore
recorded strong liquidity in trading by institutional and private
investors.
Analyst recommendations
For institutional and private investors, analyses and recommendations by
financial analysts are a key decision-making factor. In the financial year
under review, more than 20 analysts regularly published studies on TUI. In
September 2016, 82 % of analysts issued a recommendation to 'buy' the TUI
share, with 18 % recommending 'hold'. None of the analysts recommended
'sell'.
Shareholder structure
At the end of financial year 2015 / 16, around 81 % of TUI shares were in
free float. Around 6 % of all TUI shares were held by private shareholders,
around 72 % by institutional investors and financial institutes and around
22 % by strategic investors. Analysis of the share register shows that most
shares were held by investors from EU countries.
The current shareholder structure and the voting right notifications
pursuant to section 26 of the German Securities Trading Act are available
online at
www.tuigroup.com/en-en/investors
Dividend
Development of dividends and
earnings of the TUI share
EUR 2011 2012 2013 2014 2015
/ 12 / 13 / 14 / 15 / 16
Earnings per share - - + + +
0.16 0.14 0.26 0.64 1.78
Dividend - 0.15 0.33 0.56 0.63
TUI AG's profit for the year amounted to EUR 139.9 m. Taking account of the
profit carried forward of EUR 682.4 m, net profit available for
distribution
totaled EUR 822.3 m. A proposal will be submitted to the Annual General
Meeting to use the net profit available for distribution for the financial
year under review to distribute a dividend of EUR 0.63 per no-par value
share and to carry the amount of EUR 452.5 m, remaining after deduction of
the dividendtotal of EUR 369.8 m, forward on new account.
Investor Relations
Open and continuous dialogue and transparent communication form the basis
for confidence in our dealings with shareholders, institutional investors,
equity and credit analysts and lenders. Many discussions were held with TUI
shareholders and bondholders; they centred on Group strategy and the
development of business in the various Sectors, enabling stakeholders to
make a realistic assessment of TUI's future development.
More details about Investor Relations online at
www.tuigroup.com/en-en/investors
Apart from the development of business operations in Tourism, Investor
Relations activities in the period under review focused in particular on
exogenous impacts on the business model and the growth strategies of the
integrated tourism group. TUI's management team commented on these central
issues at roadshows in London, Frankfurt, Paris, Edinburgh, Stockholm,
Copenhagen, Zurich, Milan, Amsterdam, Brussels, New York, Philadelphia and
Boston.
Questions from analysts and investors were also discussed at the conference
calls held upon publication of interim reports, during analysts' meetings,
at many investor conferences in Europe and the US and at numerous
one-on-ones. Many of these meetings were personally attended by management.
Investor Relations also makes every effort to engage in direct contact with
private investors. The IR team sought dialogue with this target group on
many occasions, such as events organised by shareholder associations.
Another key platform for exchanges with private shareholders was the IR
stall at TUI's Annual General Meeting. TUI also uses a new website to
address its private investors. Apart from the comprehensive information
that
is made available, online, quarterly updates are hosted via conference
cells
and can be listened live through our Investor Relations website.
Information required under takeover law
pursuant to sections 289 (4) and 315 (4) of the German Commercial Code
(HGB)
and explanatory report
Composition of subscribed capital
The subscribed capital of TUI AG consists of no-par value shares, each
representing an equal share of the capital stock. As a proportion of the
capital stock, the value of each share is around EUR 2.56.
The subscribed capital of TUI AG, registered in the commercial registers of
the district courts of Berlin-Charlottenburg and Hanover, consisted of
587,038,187 shares at the end of financial year 2015 / 16 (previous year
586,603,217 shares) and totalled EUR 1,500,739,294.83. Each share confers
one vote at the Annual General Meeting.
Restrictions on voting rights and share transfers
The Executive Board of TUI AG is not aware of any restrictions on voting
rights or the transfer of shares.
Equity interests exceeding 10 % of the voting rights
The Executive Board of TUI AG has been notified of the following direct or
indirect equity interests reaching or exceeding 10 % of the voting rights:
Alexey Mordashov, Russia, notified us on 25 November 2015 pursuant to
section 21 (1) of the German Securities Trading Act that the voting shares
in TUI AG, Hanover, Germany, attributable to him exceeded the 15 %
threshold
on 20 November 2015. As per that date, voting shares totalling 15.02 % (or
88,146,961 voting rights) were attributable to Alexey Mordashov pursuant to
section 22 sentence 1 no. 1 of the German Securities Trading Act.
At the end of financial year 2015 / 16, around 81 % of TUI shares were in
free float. Around 6 % of all TUI shares were held by private shareholders,
around 72 % by institutional investors and financial institutions, and
around 22 % by strategic investors. According to an analysis of the share
register, most shares are held by investors in the European Union.
Shares with special control rights
There have not been any shares, nor are there any shares, with special
control rights.
System of voting right control of any employee share scheme where the
control rights are not exercised directly by the employees
Where TUI AG grants shares to employees under its employee share programme,
the shares are directly transferred to the employees with a lock-up period.
Beneficiaries are free to directly exercise the control rights to which
employee shares entitle them, in just the same way as other shareholders,
in
line with legal requirements and the provisions of the Articles of
Association.
Appointment and removal of Executive Board members and amendments to the
Articles of Association
The appointment and removal of Executive Board members is based on sections
84 et seq. of the German Stock Corporation Act in combination with section
31 of the German Codetermination Act. Amendments to the Articles of
Association are based on the provisions of sections 179 et seq. of the
German Stock Corporation Act in combination with section 24 of the Articles
of Association of TUI AG.
Powers of the Executive Board to issue or buy back shares
The Annual General Meeting of 9 February 2016 authorised TUI AG's Executive
Board to acquire own shares of up to 5 % of the capital stock. The
authorisation will expire on 8 August 2017. To date, the option to acquire
own shares has not been used.
Conditional capital of EUR 150.0 m was resolved by the Annual General
Meeting of 9 February 2016. Bonds with conversion options or warrants as
well as profit-sharing rights and income bonds (with or without fixed
terms)
of up to a nominal amount of EUR 2.0 bn may be issued up to 8 February
2021.
The Annual General Meeting of 13 February 2013 adopted a resolution to
create authorised capital for the issue of employee shares worth EUR 10.0
m.
The Executive Board of TUI AG is authorised to use this approved capital by
12 February 2018 in one or several transactions by issuing employee shares
against cash contribution. In the completed financial year, 434,970 new
employee shares were issued, resulting in authorised capital of around EUR
8.3 m at the balance sheet date.
The Annual General Meeting of 28 October 2014 adopted a resolution to
create
authorised capital for the issue of new shares against cash contribution
worth EUR 18.0 m in order to be able to fulfil claims for shares in TUI
Travel granted by TUI Travel to its employees in the form of new shares in
TUI AG. The authorisation for this approved capital ends on 27 October
2019.
The Annual General Meeting of 9 February 2016 adopted a resolution to
create
authorised capital for the issue of new registered shares against cash
contribution worth a maximum of EUR 150.0 m. The authorisation will expire
on 8 February 2021.
The Annual General Meeting on 9 February 2016 also resolved to create
conditional capital to issue new shares of EUR 570.0 m against cash
contributions or contributions in kind. The issue of new shares against
contributions in kind has been limited to EUR 300.0 m. The authorisation
for
this conditional capital will expire on 8 February 2021.
Significant agreements taking effect in the event of a change of control of
the Company following a takeover bid, and the resulting effects
Some of TUI AG's outstanding financing instruments contain change of
control
clauses. A change of control occurs in particular if a third partly
directly
or indirectly acquires control over at least 50 % or the majority of the
voting shares in TUI AG.
In the event of a change of control, the holders of the fixed-interest bond
worth EUR 300.0 m from October 2016 (and the bond worth EUR 300.0 m from
September 2014 repaid in November 2016) must be offered a buyback.
For the syndicated credit line worth EUR 1.75 bn, of which EUR 120.5 m had
been used via bank guarantees as at the balance sheet date, a right of
termination by the lenders has been agreed in the event of a change of
control. This also applies to several bilateral guarantee lines with a
total
volume of £ 98.5 m, concluded with various insurance companies. At the
balance sheet date, an amount of 48.6 m pounds had been used.
Beyond this, there are no agreements in guarantee, leasing, option or other
financial contracts that might cause material early redemption obligations
that would be of significant relevance for the Group's liquidity.
Apart from the financing instruments mentioned above, a framework agreement
between the Riu family and TUI AG includes a change of control clause. A
change of control occurs if a shareholder group represents a predefined
majority of AGM attendees or if one third of the shareholder
representatives
on the Supervisory Board are attributable to a shareholder group. In the
event of a change of control, the Riu family is entitled to acquire at
least
20 % and at most all shares held by TUI in RIUSA II S. A.
A similar agreement concerning a change of control at TUI AG has been
concluded with the El Chiaty Group. Here, too, a change of control occurs
if
a shareholder group represents a predefined majority of AGM attendees or if
one third of the shareholder representatives on the Supervisory Board are
attributable to a shareholder group. In that case, the El Chiaty Group is
entitled to acquire at least 15 % and at most all shares held by TUI in the
joint hotel companies in Egypt and the United Arab Emirates.
A change of control agreement has also been concluded for the joint venture
TUI Cruises between Royal Caribbean Cruises Ltd and TUI AG for the event
that a change of control occurs in TUI AG. The agreement gives the partner
the right to demand termination of the joint venture and to purchase the
stake held by TUI AG at a price which is lower than the selling price of
their own stake.
Compensation agreements between the Company and Executive Board members or
employees in the event of a takeover bid have not been concluded.
Report on
subsequent events
On 26 October 2016, TUI AG issued a fixed-interest bond with a coupon of
2,125 % p.a. and a nominal volume of EUR 300.0 m. The bond was issued at a
price of 99,415 % in denominations with nominal values of EUR 100,000. It
will mature on 26 October 2021.
On 18 November 2016, TUI AG redeemed the fixed-interest bond issued on 26
September 2014, originally maturing on 1 October 2019, ahead of maturity.
The bond was redeemed at a price of 102.25 % plus accrued interest. The
cash
inflow of EUR 298.2 m received by TUI AG from issuing the bond on 26
October
2016 was used to redeem the bond.
On 21 June 2016, TUI had concluded an agreement with Transat A.T. Inc. to
acquire tour operator Transat France S. A., France, and its subsidiaries
for
a purchase price of EUR 64.9 m. Following regulatory approvals, the
acquisition was completed on 31 October 2016. For further details on the
acquisition, reference is made to the section on Acquisitions - Divestments
- Discontinued Operations.
On 23 November 2016, the supervisory board of TUI AG approved the agreement
of a term sheet with Etihad Aviation Group. This agreement is the basis for
the acquisition of a minority share in a company through the contribution
of
the shares in TUIfly GmbH. The Etihad Group will also invest in this
company. The minority share is likely to be accounted for at equity. It is
expected that the contractual negotiations will be finalised within the
next
few weeks. The transaction is subject to approval of the relevant aviation
and competition authorities.
Executive Board and Supervisory Board
Superviso-
ry Board
Name Function Lo- Ini- Ap- Other
Number
/ ca- tial poin- Board of
TUI
Occupati- ti- Ap- ted Member-
AGshares
on on poin- un- ships 2
(direct
tmen- til and
t AGM
indirect-
)
on 30
Septem-
ber
2016
/
Date
of
withdra-
wal
Prof. Dr Chairman St- 7 2021 a) b) Alstom 0
Klaus of the ut- Jan Continen- S. A.
Mangold Superviso- tg- 2010 tal AG Baiterek
ry Board ar- Holding
of TUI AG t JSC Ernst
Chairman & Young
of the Roth-
Superviso- schild
ry Board GmbH 3
of
Roth-
schild
GmbH
Frank Deputy Ha- 15 2021 590
Jakobi 1 Chairman mb- Aug
of the ur- 2007
Superviso- g
ry Board
of TUI AG
Travel
Agent
Sir Deputy Lo- 11 2021 b) Keolis
7,980
Michael Chairman nd- Dec (UK)
Hodgkin- of the on 2014 Limited 3
son Superviso- Keolis
ry Board Amey
of TUI AG Docklands
Ltd. World
Airport
Partners
GmbH
Andreas Aircraft Ha- 10 2021 a) TUIfly 0
Barczew- Captain no- May GmbH
ski 1 ve- 2006
r
Peter Regional Ha- 2 2021 a) TÜV 0
Bremme1 Head of mb- Jul Nord AG
the ur- 2014
Special g
Division
of ver.di
-
Vereinte
Dienst-
leistungs-
gewerk-
schaft
Prof. Dr President Be- 9 2021 a) 0
Edgar of rl- Feb Deutsche
Ernst Deutsche in 2011 Postbank
Prüfstel- AG DMG
le für Mori AG
Rechnungs- VONOVIA SE
legung
(DPR)
Wolfgang Director Gr- 13 2021 a) TUI 0
Flinter- Financial oß- Jun Deutsch-
mann Accoun- bu- 2016 land GmbH
(since 13 ting rg- Deutscher
June Group at we- Reise-
2016)1 TUI AG de- preisSiche-
l rungsver-
ein V. V.
a. G.
Angelika Vice Kr- 26 2021 a) b)
4,100
Gifford President an- Mar ProSie- Roth-
(since 9 Hewlett zb- 2012 benSat1 schild &
February Packard er- Media SE Co
2016) Enterpri- g
se and
Director
Software
Germany
Valerie Member of We- 11 2020 b) Premier 994
Gooding superviso- yb- Dec Farnell 3
ry bodies ri- 2014 Vodafone
in dg- PLC
different e
companies
Dr Dierk Business Be- 16 2021 a) DZ-Bank 0
Hirschel unit rl- Jan AG
1 manager in 2015
of the
trade-uni-
tion
ver.di -
Vereinte
Dienst-
leistungs-
gewerk-
schaft
Janis Member of Lo- 11 2020 b) Bristol Portmeiri-
5,985
Kong superviso- nd- Dec Airport on Group
ry bodies on 2014 Ltd. PLC South
in Copenhagen West
different Airport Airports
companies Ltd.
Peter Chairman Lo- 9 2021 b) Royal Parques
1,207,31-
Long Royal nd- Feb Mail Group Reunidos 7
(since 9 Mail on 2016 PLC3 Servicios
February Group PLC Countrywi- Centrales
2016) de PLC S. A.
Coline Member of Lo- 11 2020 b) Travis 0
McCon- superviso- nd- Dec Fevertree Perkins
ville ry bodies on 2014 Drinks PLC PLC
in Inchape
different PLC
companies
Alexey Chairman Mo- 9 2021 b) AO ZAO
113,790,-
Mordashov Board of sc- Feb 'Severstal SVEZA3 116
(since 9 Directors ow 2016 Manage- Nordgold
February of PAO ment' 3 N. V.
2016) Severstal OAO 'Power
Machines'
3
Michael Hotel Ha- 17 2021 a) TUI b) TUI 292
Pönipp1 Manager no- Apr Deutsch- BKK
ve- 2013 land GmbH
r MER-Pensi-
onskasse
V. V. a.
G.
Timothy Member of Lo- 11 b)
2,749
Powell superviso- nd- Dec Computacen-
(until 9 ry bodies on 2014 ter PLC
February in Supergroup
2016) different PLC
companies
Wilfried Director Ha- 3 a) TUI
H. Rau1 Group no- Dec Deutsch-
(deceased Audit ve- 2014 land GmbH
on 30 r
March
2016)
Carmen Managing Pa- 14 2021 b) Hotel Riu
19,854,6-
Riu Güell Director lm- Feb San Hotels S. 16
RIUSA II a 2005 Francisco A. RIUSA
S. A. de S. A. II S. A.
Ma- Producto-
ll- res
or- Hoteleros
ca Reunidos
S. A.
Carola Depart- Be- 1 2021 0
Schwirn1 ment rl- Aug
Coordina- in 2014
tor in
the
Transpor-
tation
Division
of ver.di
-
Vereinte
Dienst-
leistungs-
gewerk-
schaft
Maxim Head of Mo- 14 0
Shemetov Invest- sc- Mar
(until 9 ment ow 2014
February Manage-
2016) ment,
Travel
Sector,
ZAO Sever
Group
Anette Travel He- 2 2021
1,280
Strempel Agent mm- Jan
1 in- 2009
ge-
n
Prof. Member of Fr- 9 a) b) The 0
Christian superviso- an- Feb Deutsche Germany
Strenger ry bodies kf- 2011 Asset & Funds,
(until 9 in ur- Wealth Inc.3
February different t Management
2016) companies / Investment
Ma- GmbH ItN
in Nanovation
AG
Ortwin Travel Ha- 3 2021
3,355
Strubelt1 Agent mb- Apr
ur- 2009
g
Stefan Interna- Wi- 9 2021 b) TUI 0
Weinho- tional en Feb Austria
fer1 Employee 2016 Holding
(since 9 Relations GmbH
February Coordina-
2016) tor at
TUI AG
Marcell Referee Ha- 16
1,850
Witt1 of Group no- Jan
and ve- 2015
European r
works
council
of TUI AG
1 Representative of the employees
2 Information refers to 30 September 2016 or date of resignation from the
Supervisory Board of TUI AG in financial year 2015 / 16.
3 Chairman
a) Membership in supervisory boards within the meaning of section 125 of
the
German Stock Corporation Act (AktG)
b) Membership in comparable German and non-German bodies of companies
within
the
meaning of section 125 of the German Stock Corporation Act (AktG)
Executive Board1
Name De- Other Board Number of
part- Memberships TUI AG
ment shares
(direct
and
indirect)
on 30 Sep
2016 /
Date of
withdra-
wal
Friedrich Joussen CEO 278,081
(Age 53) Member of
the Executive Board
since Oct 2012, CEO
of the Executive
Board from Feb
2013, Joint-CEO
since December 2014
CEO since February
2016 Current
appointment until
October 2020
Peter Long (Age 64) Joint- b) Royal Mail 1,207,317
Member of the -CEO Group PLC 2
Executive Board
since 2007,
Joint-CEO December
2014 until February
2016
Horst Baier (Age Fi- a) TUI b) RIUSA II S. 40,717
59) Member of the nance Deutschland A.2 TUI Canada
Executive Board GmbH 2 Holdings Inc.
since 2007 Current Sunwing Travel
appointment until Group Inc.
November 2018
David Burling (Age Nor- b) TUI Travel TUI Travel 18,300
48) Member of the thern Holdings Ltd. Overseas
Executive Board Regi- TUI Travel Ltd. Holdings Ltd.
since June 2015 on First Choice TUI Canada
Current appointment Airli- Holidays Ltd. Holdings Inc.
until May 2018 nes Sunwing Travel TUI Northern
Hotel Group Inc. Europe Ltd. TUI
Purch- Thomson Travel Travel Group
asing Group Management
(Holdings) Ltd. Services Ltd.
TTG (Jersey) TUI UK Ltd. TUI
Ltd. UK Transport
Ltd.
Sebastian Ebel (Age Cen- a) TUI Cruises b) RIUSA II S. 250
53) Member of the tral GmbH TUIfly A. TUI Spain S.
Executive Board Regi- GmbH BRW A.
since December 2014 on Beteiligungs AG
Current appointment Ho- Eintracht
until November 2017 tels Braunschweig
Crui- GmbH & Co KG2
ses Eves
TUI Information
Desti- Technology AG2
nati-
on
Ser-
vices
IT
Dr Elke Eller (Age Human a) Nord LB TUI 12,545
54) Member of the Re- Deutschland
Executive Board sourc- GmbH TUIfly
since October 2015 es GmbH TUI
Current appointment Per- Nederland N. V.
until October 2018 son-
nel
Direc-
tor
William Waggott Spe- b) TUI 1,089
(Age 53) Member of cia- Nederland N. V.
the Executive Board list TUI Nederland
December 2014 until Group Holding N. V.
June 2016 Ho-
tels-
beds
Group
1 Information refers to 30 Sep 2016 or date of resignation from the
Excecutive Board
in financial year 2015 / 16.
2 Chairman
a) Membership in Supervisory Boards required by law within the meaning of
section 125 of the German Stock Corporation Act (AktG)
b) Membership in comparable Boards of domestic and foreign companies within
the meaning of section 125 of the German Stock Corporation Act (AktG)
Corporate Governance
Corporate Governance Report / Statement on Corporate Governance
(as part of the Management Report)
The actions of TUI AG's management and oversight bodies are determined by
the principles of good and responsible corporate governance.
The Executive Board and the Supervisory Board comprehensively discussed
Corporate Governance issues in financial year 2015 / 16. In this chapter,
the Executive Board and the Supervisory Board provide their report on
Corporate Governance in the Company pursuant to sub-section 3.10 of the
German Corporate Governance Code (the German Code, DCGK) and section 289a
of
the German Commercial Code (HGB) as well as Disclosure and Transparency
Rule
(DTR) 7.2 and Listing Rule (LR) 9.8.7R.
1. Declaration of Compliance pursuant to section 161 of the German Stock
Corporation Act (AktG)
In December 2016, the Executive Board and the Supervisory Board jointly
submitted the declaration of compliance for 2016 pursuant to section 161 of
the German Stock Corporation Act. The declaration was made permanently
accessible to the general public on TUI AG's website in December 2016.
www.tuigroup.com/de-de/investoren/corporate-governance
Wording of the declaration of compliance for 2016
'In accordance with section 161 of the German Stock Corporation Act, the
Executive Board and Supervisory Board of TUI AG hereby declare:
The recommendations of the German Corporate Governance Code in its version
of 5 May 2015 have been fully observed since the last annual declaration of
compliance was submitted in December 2015.'
2. Declaration of Compliance pursuant to DTR 7.2
and LR 9.8.7R
As a stock corporation company under German law, TUI AG's Executive Board
and Supervisory Board are obliged to submit a declaration of compliance
with
the German Corporate Governance Code pursuant to section 161 of the German
Stock Corporation Act
www.dcgk.de/en/code.html
At the time of the merger TUI AG had announced it would comply with the UK
Corporate Governance Code (the UK Code)
to the extent practicable. In many respects, the requirements of the German
Code and the UK Code are similar. However, there are certain aspects which
are not compatible (in some cases due to the different legal regimes for
German and UK companies). Therefore some deviations from best practice in
the UK have been necessary.
Under the German Stock Corporation Act, the legislation applicable to TUI
AG, a two-tier board system is mandatory (as explained in the merger
documentation; see below section Functioning of the Executive and
Supervisory Board). The two-tier board structure is different to the UK
unitary board structure on which the UK Code is based. Some of the
principles of composition and operation of the boards of a German stock
corporation also differ from those of a UK company (for example, there is
no
Company Secretary). For this reason, TUI AG has set out below circumstances
where it considers not to comply with the UK Code. TUI AG has also
explained
those instances where it considers not to be compliant with the UK Code in
the literal or legal sense but where TUI AG is convinced that it complies
with the spirit and meaning of the UK Code. Sub-headings refer to sections
of the UK Code for ease of reference for investors.
Pursuant to DTR 7.2 and LR 9.8.7R, the Executive Board and the Supervisory
Board therefore declare as follows:
Wording of the UK Corporate Governance Statement
'Throughout the reporting period, TUI AG has complied with the provisions
of
the UK Code, including its main principles, except as set out and explained
below.
Identification of Senior Independent Director
(A1.2, A4.1)
Under German law and the German Code, there is no concept of a 'Senior
Independent Director'. Instead, shareholders may raise any issues at the
Annual General Meeting (AGM). In this forum, the Executive Board and, with
respect to certain matters, the Chairman of the Supervisory Board are
available to address any issues and are legally obliged to provide adequate
responses.
Outside the AGM, shareholders may approach the Executive Board, in
particular the CEO or the CFO, or, in exceptional cases, the Chairman of
the
Supervisory Board or any of his Deputies. Sir Michael Hodgkinson, who was
the Deputy Chairman and Senior Independent Director of TUI Travel PLC
before
the merger, was re-elected as Second Deputy Chairman of the Supervisory
Board of TUI AG in February 2016 alongside Frank Jakobi (First Deputy
Chairman who, under the German Co-Determination Act, must be an Employee
Representative).
Division of Responsibilities - Chairman & Chief Executive (A2.1)
The separation of the roles of the Chairman of the Supervisory Board (Prof.
Klaus Mangold) and the CEO (Friedrich Joussen) is clearly defined under
German law as part of the two-tier board structure. Therefore, no further
division of responsibilities is required and both the Executive Board and
the Supervisory Board consider that TUI AG complies with the spirit of the
UK Code.
Independence of Supervisory Board Members (B1.1)
Under the UK Code, the Board must identify in the annual report each
non-executive director it considers to be 'independent' for the purposes of
the UK Code. As explained above, the members of the Supervisory Board are
considered to be non-executive directors for the purposes of the UK Code.
Under the UK Code, persons are 'independent' if they are independent in
character and judgement and if there are no relationships or circumstances
which are likely to affect, or could appear to affect, their judgement. TUI
AG does not, however, extend its independence disclosures to employee
representatives on the Supervisory Board (for a detailed explanation of
shareholder and employee representations and the underlying considerations,
please see below).
The Supervisory Board has determined that six of its nine shareholder
representative members (excluding the Chairman, as required by the UK Code)
are independent for the purposes of the UK Code. The shareholder
representatives of the Supervisory Board considered to be independent are:
Prof. Edgar Ernst, Valerie Gooding, Sir Michael Hodgkinson, Janis Kong,
Coline McConville and Angelika Gifford. The Chairman was independent on
election in 2011 and re-election in February 2016 and is still considered
independent (Prof. Mangold also was independent when he was elected to the
Supervisory Board in January 2010).
The members of the Supervisory Board not considered to be independent for
the purposes of the UK Code are Carmen Riu Güell, Alexey Mordashov and
Peter
Long.
In reaching its determination, the Supervisory Board has considered, in
particular, the factors set out below.
Performance-related pay
Until the end of financial year 2014, all Supervisory Board members
received
a performance-related pay element in addition to their fixed pay, as
approved by shareholders at the 2013 AGM and in line with a specific
recommendation of the German Code at that time.
This recommendation in the German Code has meanwhile been withdrawn, and at
the 2016 AGM shareholders approved the replacement of the
performance-related pay element with a fixed fee with retroactive effect
from the beginning of financial year 2015 / 16.
Shareholder and Employee Representatives
The Supervisory Board of TUI AG consists of ten members who are elected by
shareholders at AGMs (the 'Shareholder Representatives') and ten members
who
represent the employees of TUI AG (the 'Employee Representatives'). This
differs from UK practice where only those board members representing major
shareholders are typically referred to as 'Shareholder Representatives' and
are not considered independent under the UK Code because of their link to a
significant shareholder.
In TUI AG, only Carmen Riu-Güell and Alexey Mordashov are connected to
significant shareholders, namely Riu Hotels (approx. 3.4 %) and Alexey
Mordashov (approx. 19.3 %), respectively. It should also be noted that
joint
ventures exist between TUI AG and both Riu Hotels S. A. and TUI Russia &
CIS
(in which a majority controlling interest is held by Mr Mordashov) (for
further details see page 109 of the Annual Report). Until his election to
the Supervisory Board in February 2016, Peter Long was Co-CEO of TUI AG
from
December 2014 to February 2016. Prior to that, he was a member of the
Executive Board of TUI AG from 2007 and CEO of TUI Travel PLC. Therefore,
neither Ms Riu-Güell nor Mr Mordashov nor Mr Long are considered
independent
for the purposes of the UK Code.
Therefore, excluding the Chairman (as required by the UK Code), six of the
nine shareholder representatives are considered independent for the
purposes
of the UK Code.
Seven of the ten employee representatives of the Supervisory Board are
elected by the employees of TUI Group entitled to vote. Three employee
representatives are nominated by a German trade union (ver.di).
Under the UK Code, directors who are or have been employees of the Group in
the last five years or who participate in the Group's pension arrangements
would generally not be considered independent. In the UK, directors with an
employment relationship are normally current or former executives. By
contrast, under German law, employee representatives of the Supervisory
Board must be employees of the Group, and must be elected by the employees
without any involvement of the Executive or Supervisory Boards. In
addition,
the employment agreementof employee representatives may only be terminated
in exceptional circumstances.
The employee representatives may also participate in Group pension schemes
as is normal for employees and in their capacity as employees.
Union representatives are nominated, and employed by, the trade union but
are still classified as employee representatives. The trade union
representatives are nominated, and may only be removed from the Supervisory
Board, by their respective union and neither the Executive nor the
Supervisory Board has any role in their appointment or removal.
Half the board should be independent non-executive directors (B1.2)
Since, for the purpose of the UK Code, only the shareholder representatives
on the Supervisory Board are taken into account, more than half of its
members are considered independent with six independent members (excluding
the Chairman of the Supervisory Board).
Nomination Committee - composition and responsibilities (B2.1)
The role of the Nomination Committee in a typical UK company is fulfilled
in
TUI AG by two Committees of the Supervisory Board: Under the Rules of
Procedure for the Supervisory Board and its Committees (which are
equivalent
to the Terms of Reference in the UK) the Nomination Committee considers and
proposes suitable candidates for election as shareholder representatives on
the Supervisory Board by the shareholders at the AGM. The Presiding
Committee determines the requirements and remuneration for any new
appointments to the Executive Board and recommends suitable candidates to
the Supervisory Board. On that basis, the Supervisory Board appoints
Executive Board members. This approach is different from the UK where all
director appointments are approved by shareholders at the AGM.
However, as is common practice in Germany, at each AGM shareholders are
asked to decide whether they approve the actions of the Executive Board and
Supervisory Board members during the past financial year. Since the AGM
2015, in the light
of UK practice TUI AG has changed its procedure to allow a separate vote on
each individual Executive Board and Supervisory Board member, as customary
in the UK. This approach was also used at the AGM in February 2016. TUI AG
intends to continue this practice. Accordingly, the Supervisory Board
considers that TUI AG complies with the spirit of the UK Code to the extent
practicable.
There is no requirement under German law or the German Code for the
majority
of the Nomination Committee members to be independent. Of the four members
of the Nomination Committee, two are representatives of significant
shareholders (Carmen Riu Güell and Alexey Mordashov) and therefore not
independent for the purposes of the UK Code. The remaining two members are
Sir Michael Hodgkinson and Prof. Klaus Mangold (Chairman) who are both
independent. Therefore TUI AG is not compliant with the UK Code which
requires a majority of the Nomination Committee to be independent. However,
TUI AG considers that the current membership of the Nomination Committee
provides a strong and experienced pre-selection of Supervisory Board
shareholder representation members, while keeping the Committee to a
manageable size.
The Rules of Procedure for the Supervisory Board and its Committees
(including the Audit Committee) are not made available for the public.
Therefore TUI AG is not compliant with this provision of the UK Code.
Length of tenure for Non-Executive Directors (B2.3)
In accordance with German law and common practice, shareholder
representatives are generally elected for five-year terms. Employee
representatives are also generally appointed for five years. Therefore,
neither Executive nor Supervisory Board members are re-elected or
re-appointed annually by shareholders. TUI AG therefore does not comply
with
this provision of the UK Code.
Under the UK Code, any term beyond six years should be subject to rigorous
review and no term should extend beyond nine years (as it could affect the
independence of the Non-Executive Director). However, in the German
Corporate Governance context, a longer length of service is quite normal as
Supervisory Board members are usually elected for five years and
re-election
is common.
Nomination Committee section in the Annual
Report & Accounts (B2.4)
For the activities of the Nomination Committee, see page 15 which is part
of
the Chairman's letter to shareholders.
During the year, neither a personnel consultancy nor external
advertisements
were used to search any potential Supervisory Board members. Succession
planning for management members below Executive Board level is carried out
by the Executive Board. The Presiding Committee is only responsible for
succession planning for the Executive Board.
Terms & Conditions of appointments of Non-Executive Directors (B3.2)
The terms and conditions of Supervisory Board members' appointments follow
the provisions of the German Stock Corporation Act and the Articles of
Association of TUI AG. The Articles of Association are available on the
website at www.tuigroup.com/en-en/investors/corporate-governance.
External Non-Executive/Chairman Roles (B3.3)
Peter Long was Joint-CEO of TUI AG since the merger from 1 October 2015
until the close of the AGM 2016 on 9 February 2016. From 1 September 2015,
Peter Long was also Chairman of Royal Mail PLC. This appointment led to a
short period of overlap during which TUI AGwas not compliant with the UK
Code.
Advice and services of the Company Secretary (B5.2)
There is no specific role of Company Secretary in German companies.
However,
Executive and Supervisory Board members have access to the Board Office of
TUI AG if they need any advice or services. The Board Office acts as an
interface in corporate matters for the Executive and Supervisory Board
members and is responsible for ensuring that the requisite processes and
procedures are in place governing all Executive and Supervisory Board
meetings (i.e. preparation of agendas, minuting of meetings and ensuring
compliance with German and UK law, as appropriate, and with recommendations
for corporate governance). The Board Office also supports the Chairman, the
CEO, the CFO and the Chairmen of the Audit Committee and the Strategy
Committee. Executive and Supervisory Board members also have access to
legal
advice via the Group Legal Director and the Board Office. The Supervisory
Board can also approach the Executive Board directly for specific advice on
any matters. Accordingly, the Executive Board and the Supervisory Board
consider that TUI AG complies with the spirit of the UK Code.
Board performance evaluation (B6)
The performance of each individual Executive Board member is evaluated
annually by the Supervisory Board for the annual performance-based
remuneration. In this context, the Supervisory Board also reviews the
individual member's overall performance as part of the Executive Board.
However, no external performance evaluation is done for the Executive
Board.
It is not customary to conduct annual reviews of the Supervisory Board's
efficiency. Each Supervisory Board member can give feedback to the
Chairman,
the Deputy Chairmen or the Supervisory Board as a whole as and when
appropriate or required.
External evaluation is limited to Supervisory Board members and is
performed
by means of individual interviews and anonymous reviews. Consolidated
results are shared with the entire Supervisory Board and appropriate
actions
are suggested and discussed as appropriate. The last external review of the
Supervisory Board was undertaken during 2015 by Board Consultants
International (Hamburg / Germany). The results were presented during the
meeting of the Supervisory Board in December 2015. Board Consultants
International has no other connection withTUI AG.
The appraisal of the Chairman of the Supervisory Board is covered during
the
external evaluation process and Executive Board members are invited to
contribute to the process.
Annual re-election by Shareholders at the AGM (B7.1)
None of the Executive or Supervisory Board members is re-elected annually.
However, as noted above, in light of the UK Code and UK best practice, TUI
AG voluntarily puts individual resolutions approving the actions of each
Executive and Supervisory Board member to the AGMresolving on the annual
financial statements for the previous year, and TUI AG intends to continue
this practice.
The end of appointment periods for Supervisory Board members are disclosed
in the table following the Chairman's letter on page 114. In respect of the
shareholder representatives, the Supervisory Board - based on the
recommendations of its Nomination Committee - proposed the re-election of
Prof. Klaus Mangold, Sir Michael Hodgkinson, Carmen Riu Güell and Prof.
Edgar Ernst to the AGM 2016. Peter Long, Angelika Gifford and Alexey
Mordashov were also proposed for election by the shareholders. Biographical
details were included in the invitation to the AGM to enable a
well-informed
decision by the shareholders. Additionally, the curricula vitae of all
Executive and Supervisory Board members are published at
www.tuigroup.com/en-en/investors/corporate-governance.
Wolfgang Flintermann was appointed as member of the Supervisory Board of
TUI
AG by the court of registration with effect from 13 June 2016 to replace
Wilfried Rau, who had passed away on 30 March 2016.
Fair, balanced and understandable Annual Report and Accounts (C1.1)
In a German stock corporation the Executive Board is responsible for
drafting the Annual Report & Accounts (ARA). According to section 243 (2)
of
the German Commercial Act (HGB) the ARA must be clearly arranged and should
present a realistic picture of the Company's economic situation. This is
equivalent to the UK Code requirement for the ARA to be fair, balanced and
understandable. Although this assessement has not been delegated to the
Audit Committee (C3.4), the Executive Board is convinced that this ARA
satisfies both requirements.
Establishment and operation of Remuneration Committee (D2), Remuneration
(D1)
In the German governance structure there is no separate Remuneration
Committee. The remuneration of the Executive Board is under involvement of
the employee representatives monitored and agreed by the Supervisory Board
based on recommendations from the PresidingCommittee, which is governed by
the Supervisory Board Rules of Procedure, as referred to above.
Supervisory Board remuneration and the remuneration of Board Committee
members is governed by the Articles of Association as resolved on by the
shareholders at the AGM.
There are no clawback or malus provisions in the service contracts of
Executive Board members. Such provisions would be unusual (and probably
unenforceable) in Germany. However, there are different contractual and
statutory provisions that may allow for a reduction or forfeiture of
remuneration components or allow TUI AG to claim damages from Executive
Board members. First, the service contracts of Executive Board members
provide for forfeiture of the annual bonus and the LTIP if TUI AG
terminates
the service contract for cause without notice before the end of the one
year
performance period in the case of the annual bonus or before the end of the
respective performance period of the LTIP. Second, the Supervisory Board
may, under certain exceptional circumstances, reduce Executive Board
compensation in case of a deterioration of the economic situation of TUI
AG.
Third, Executive Board members may be liable for damages under the German
Stock Corporation Act in case of a breach of their duties of care or
fiduciary duties.
See the Directors' Remuneration Report for full details on Executive and
Supervisory Board member's remuneration.
Compensation commitments in Executive Directors' Service Contracts (D1.4)
The principles that apply for departing Executive Directors are detailed in
the Directors' Remuneration Report (see page 136). The terms are set out in
the Executive Directors' contracts of employment as approved by the
Supervisory Board and take into account the various circumstances in which
a
director may leave. These include maximum limits on the amounts payable on
termination. Given that in Germany contracts are issued for a fixed term,
termination payments may be greater than the one year recommended in the UK
Code. In no case is the amount payable on early termination higher than the
amount that would be payable for the outstanding term of the service
contract at the time of termination.
Notice periods for Executive Directors (D1.5)
Executive Board appointments are normally for a fixed term of three to five
years and therefore do not comply with the UK Code which stipulates that
notice or contract periods should be set at one year or less. However, the
contracts include maximum limits on the amounts payable on termination.
Dialogue with shareholders (E1)
It is not common practice in German companies for Supervisory Board members
to make themselves available for meetings with major shareholders. This
preserves the separation of duties between the Supervisory and Executive
Boards. The AGM is considered the appropriate forum for shareholders to
raise any topics for discussion. Nevertheless, there is a move in Germany
to
allow under the German Code for an appropriate exchange on Supervisory
Board
matters between the Chairman of the Supervisory Board and shareholders.
There have meetings between the Chairman and the Deputy Chairman
(shareholder representative) of the Supervisory Board and shareholders and
investors in the past (most recently in September 2015).
The Supervisory Board receives feedback from the Chairman and Deputy
Chairman (shareholder representative) and Executive Board members following
meetings with major shareholders or investors. Additionally, a monthly
Investor Relations Report and event-driven assessmants of brokers are
forwarded to the Executive and the Supervisory Board. They contain updates
on the share price development, analyses by sellers and feedback and
assessments from investors.
The following meetings between management and investors (attended by the
Chief Executive Officer and / or the Chief Financial Officer and members of
the Investor Relations team, where appropriate) took place during the year
ended 30 September 2016:
dialogue with
shareholders
Date Event Attende-
es
November 2015 Global Income Corporate Day London HB
December 2015 Roadshow Edinburgh FJ, HB
Roadshow London FJ, HB
January 2016 German Investment Seminar HB
German Corporate Conference HB
March 2016 Roadshow Amsterdam HB
April 2016 Barclays Leisure and Transport HB
Conference
Investor Dinner London FJ, HB
MS Roundtable FJ
May 2016 Roadshow UK FJ, HB
Roadshow Copenhagen HB
Barclays Select Corporate Day HB
Stockholm
Roadshow Zurich HB
June 2016 Roadshow Frankfurt HB
Roadshow Paris HB
Roadshow US FJ, HB
dbAccess German, Swiss and Austrian HB
Conference
July 2016 Investor Meeting - Invesco FJ, HB
August 2016 Coba Sector Conference 2016 HB
September 2016 Berenberg & Goldman Sachs GCC HB
Conference
Key: Friedrich Joussen (FJ), Horst Baier (HB)
Key topics discussed at meetings between shareholders and Executive Board
members included:
* Development of business operations in Tourism
* Exogenous impacts on the business model
* Growth strategy of the integrated tourism group
Accordingly, TUI AG considers that it complies with the spirit of the UK
Code.
AGM Resolution on Financial Statements and Consolidated Financial
Statements
(E2.1)
It is not common practice in Germany to pass a resolution at the AGM to
approve the financial statements and consolidated financial statements.
Therefore, this was not done at the AGM in 2016 and it is not intended to
do
so at the AGM in 2017. However, as required by German law the first item on
the agenda of TUI AG's AGM is the presentation of the financial statements
and consolidated financial statements to the AGM. Under this item, the
Executive Board will explain the financial statements and consolidated
financial statements and the Chairman will explain, in particular, the
report of the Supervisory Board (including this UK Corporate Governance
Statement). Shareholders will have the opportunity to raise questions.
Questions are typically raised, as is normal in the AGMs of German
companies, and, as a general rule, answers must be provided under German
law.
This is the standard practice for a German company and is in full
compliance
with the German Code. While the lack of a resolution to approve the Annual
Report & Accounts is not in compliance with the UK Code, TUI AG considers
that the arrangements afford shareholders with sufficient opportunity to
raise any questions or concerns that they may have in relation to the
Annual
Report & Accounts, and to receive answers, in the AGM. Accordingly, the
Executive Board and the Supervisory Board consider that TUI AG complies
with
the spirit of the UK Code to the extent practicable.
Circulation of AGM documentation to shareholders (E.2.4)
The 2016 AGM of TUI AG was held on 9 February 2016. As required by German
law, the notice convening TUI AG's 2016 AGM (including the agenda and the
voting proposals of the Executive Board and the Supervisory Board) was
published in the Federal Gazette in Germany on30 December 2015.
Shareholders
then had the right under German law to request additional agenda items at
any time up to 30 days before the AGM. In accordance with German practice,
once this deadline had expired the combined invitation and explanatory
notes
relating to theAGM were sent to shareholders on 14 January 2016, which was
less than the 20 working days before the AGM recommended in the UK Code
(but
more than the 21 days' notice required by German law). However, in addition
to the original publication of the Invitation in the Federal Gazette in
Germany, the combined invitation and explanatory notes relating to the AGM
was published on TUI AG's website on 30 December 2015. As no additional
agenda items were requested by shareholders, this was in the same form as
the final combined invitation and explanatory notes relating to the AGM
later sent to shareholders. Further, TUI AG's Annual Report and Accounts
for
the financial year to 30 September 2015 was published on 10 December 2015,
significantly more than 20 working days before the 2016 AGM. Accordingly,
TUI AGconsiders that it complied with the spirit of the UK Code
requirements. A similar timetable will be followed in relation to the 2017
AGM.'
3. Further information on Corporate Governance
Functioning of the Executive and Supervisory Boards
TUI AG is a company under German law. One of the fundamental principles of
German stock corporation law is the dual management system involving two
bodies, the Executive Board in charge of managing the company and the
Supervisory Board in charge of monitoring the company. TUI AG's Executive
Board and Supervisory Board cooperate closely and in a spirit of trust in
managing and overseeing the Company, with strict separation between the two
bodies in terms of their membership and competences. Both bodies are
obliged
to ensure the continued existence of the Company and sustainable creation
of
added value in harmony with the principles of the social market economy.
TUI AG's Executive Board comprised five members as at the closing date 30
September 2016. The Executive Board is responsible for managing the
Company's business operations in the interests of the Company. The
allocation of functions and responsibilities to individual Board members is
presented in a separate section.
In accordance with the law and the Articles of Association, the Supervisory
Board had 20 members at the balance sheet date, i. e. 30 September 2016.
The
Supervisory Board advises and oversees the Executive Board in the
management
of the Company. It is involved in strategic and planning decisions and all
decisions of fundamental importance to the Company. When the Executive
Board
takes decisions on major transactions, such as the annual budget, major
acquisitions or divestments, it is required by its terms of reference to
seek the approval of the Supervisory Board. The Chairman of the Supervisory
Board coordinates the work in the Supervisory Board, chairs its meetings
and
represents the concerns of the body externally. The Supervisory Board and
the Audit Committee have adopted terms of reference for their own work. In
the run-up to the Supervisory Board meetings, the representatives of
shareholders and employees meet separately.
The Executive Board provides the Supervisory Board at regular meetings and
in writing with comprehensive, up-to-date information about the strategy,
the budget, business performance and the situation of the Group, including
risk management and compliance. The Executive Boardworks on the basis of
terms of reference issued by the Supervisory Board.
TUI AG has taken out a D&O insurance policy with an appropriate deductible
for all members of the Executive Board and Supervisory Board. The
deductible
amounts to 10 % of the loss up to the amount of one and a half times the
fixed annual compensation.
Composition of the Supervisory Board
As at the balance sheet date, 30 September 2016, the Supervisory Board of
TUI AG comprised 20 members. The composition of the Supervisory Board in
financial year 2015 / 16 ensured that its members as a group had the
knowledge, ability and expert experience required to properly complete
their
tasks. The goals set by the Supervisory Board itself for its composition
include in particular comprehensive industry knowledge, at least five
independent shareholder representatives, at least five members with
international experience, and diversity.
Twelve members of the Supervisory Board had considerable international
experience. Due to the different professional experiences of its members,
the composition of the Supervisory Board overall reflects a great diversity
of relevant experience, ability and industry knowhow. None of the
shareholder representatives on the Supervisory Board had any commercial or
personal relationship with the Company, its Executive Board or third
parties
that might cause a material clash of interests. Seven shareholder
representatives are independent.
In accordance with the recommendations of the German Corporate Governance
Code, the original shareholder representatives were individually elected
for
five-year terms of office during elections to the Supervisory Board at the
relevant General Meetings (October 2014, February 2016). Only Prof. Klaus
Mangold and Sir Michael Hodgkinson were older than 68 years when they were
elected as members of the Supervisory Board. In both cases, the Supervisory
Board deemed it appropriate to deviate from the regular age limit in order
for the Company to benefit from Prof. Klaus Mangold's and Sir Michael
Hodgkinson's extensive experience in order to complete the integration
process and in order to ensure continuity. With Peter Long, a former member
of the Executive Board has been a Supervisory Board member since the Annual
General Meeting 2016 held on 9 February 2016.
Committees of the Supervisory Board and their composition
At 30 September 2016, the balance sheet date, the Supervisory Board had
established five committees from among its members to support its work: the
Presiding Committee, the Audit Committee, the Nomination Committee, the
Integration Committee (until December 2016) and the Strategy Committee
(since 9 February 2016).
A Mediation Committee was furthermore established in accordance with
section
27 (3) of the German Co-Determination Act.
The Presiding Committee and Audit Committee have eight members each, with
an
equal number of shareholder representatives (including the respective
chairpersons of the committees) and employee representatives. The Presiding
Committee prepares, in particular, the appointment of Executive Board
members, including the terms and conditions of service contracts and
remuneration proposals. The Audit Committee's task is to support the
Supervisory Board in exercising its oversight function. The Chairman of the
Audit Committee is an independent financialexpert and has particular
knowledge and experience in the application of accounting principles and
internal control methods from his own professional practice.
The Nomination Committee consists exclusively of shareholder
representatives, in keeping with the recommendation in the German Corporate
Governance Code. The task of its four members is to suggest suitable
candidates for the Supervisory Board to propose to the Annual General
Meeting.
The Integration Committee was set up to advise and supervise the Executive
Board in the integration process following the merger for two years after
the merger's completion. It prepares proposals for resolutions for the
Supervisory Board but does not have a mandate to take anydecisions on
behalf
of the Supervisory Board. It comprises five shareholder representatives and
one employee representative.
The Strategy Committee began its work after the Annual General Meeting
2016.
Its task is to comprehensively advise and oversee the Executive Board in
developing and implementing the corporate strategy. It prepares the annual
strategy offsite meeting for the Supervisory Board, but does not have a
mandate to take any decisions on behalf of the Supervisory Board. It
comprises five shareholder representatives and one employee representative.
Conflicts of interest
Executive and Supervisory Board members have a duty to act in TUI AG's best
interests. In the completed financial year 2015 / 16, there were no
conflicts of interest requiring disclosure to the Supervisory Board. None
of
the Executive Board or Supervisory Board members has a board role or a
consultancy contract with one of TUI's competitors. Peter Long did not take
part in the Supervisory Board resolution regarding payment of remuneration
entitlements still arising from his Executive Board role adopted on 15
September 2016.
Specifications pursuant to sections 76 (4), 111 (5)
of the German Stock Corporation Act
At least 30 % of the Supervisory Board members were women and at least 30 %
were men at the balance sheet date. The Supervisory Board was therefore
compliant with section 96 (2) sentence 1 of the German Stock Corporation
Act. Neither the shareholder nor the employee representatives on the
Supervisory Board objected to overall compliance in accordance with section
96 (2) sentence 2 of the German Stock Corporation Act.
The Supervisory Board resolved, in keeping with section 111 (5) of the
German Stock Corporation Act, that a woman should be recruited to the
Executive Board. This objective has been implemented with Dr Elke Eller
joining the Executive Board as at 15 October 2015.
In turn, the Executive Board resolved, in keeping with section 76 (4) of
the
German Stock Corporation Act, that women should account for 20 % of
executives at the level immediately below the Executive Board and 30 % at
the level below this. Both targets are to be achieved by 30 June 2017.
Shareholders and Annual General Meeting
TUI AG shareholders exercise their co-determination and monitoring rights
at
the Annual General Meeting, which takes place at least once a year. The AGM
takes decisions on all statutory matters, and these are binding on all
shareholders and the Company. For voting on resolutions, each share confers
one vote.
All shareholders registering in due time are entitled to participate in the
Annual General Meeting. Shareholders who are not able to attend the AGM in
person are entitled to have their voting rights exercised by a bank, a
shareholder association, one of the representatives provided by TUI AG and
acting on the shareholders' behalf in accordance with their instructions,
or
some other proxy of their own choosing. Shareholders also have the
opportunity of authorising the representative provided by TUI AG via the
web
in the run-up to the AGM. Shareholders can, moreover, register for
electronic dispatch of the AGM documents.
The invitation to the AGM and the reports and information required for
voting are published in accordance with the provisions of the German Stock
Corporation Act and provided in German and English on TUI AG's website.
During the AGM, the presentations by the chairman of the Supervisory Board
and the Executive Board members can be followed live over the Internet.
Risk management
Good corporate governance entails the responsible handling of commercial
risks. The Executive Board of TUI AG and the management of the TUI Group
have comprehensive general and company-specific reporting and monitoring
systems available to identify, assess and manage these risks. These systems
are continually developed, adjusted to match changes in overall conditions
and reviewed by the auditors. The Executive Board regularly informs the
Supervisory Board about existing risks and changes to these risks. The
Audit
Committee deals in particular with monitoring the accounting process,
including reporting, the effectiveness of the internal control and risk
management systems and the internal auditing system, compliance and audit
of
the annual financial statements.
More detailed information about risk management in the TUI Group is
presented in the Risk Report. It also contains the report on the
accounting-related internal control and risk management system required in
accordance with the German Commercial Code (sections 289 (5), 315 (2) no. 5
HGB).
Transparency
TUI provides immediate, regular and up-to-date information about the
Group's
economic situation and new developments to capital market participants and
the interested public. The Annual Report and the Interim Reports are
published within the applicable timeframes. TheCompany publishes press
releases and ad hoc announcements, if required, on topical events and any
new developments. Moreover, the company website at www.tuigroup.com
provides
comprehensive information on TUI Group and the TUI share.
The scheduled dates for the principal regular events and publications -
such
as the AGM, Annual Report and Interim Reports - are set out in a financial
calendar. The calendar is published well in advance and made permanently
accessible to the public on TUI AG's website.
Directors' dealings
The Company was informed by Prof. Klaus Mangold, Alexey Mordashov,
Friedrich
Joussen, Horst Baier, Dr Elke Eller and William Waggott of notifiable
purchase and sale transactions of TUI AG shares or related financial
instruments by directors (directors' dealings or managers' transactions)
concerning financial year 2015 / 16. Details are provided on the Company's
website.
Purchase and sales transactions by members of the boards were governed by
the TUI Share Dealing Code, adopted by the Executive Board on 16 December
2014 for TUI Group, alongside corresponding statutory provisions. The TUI
Share Dealing Code will be adjusted as Regulation (EU) 596 / 2014 ('Market
Abuse Regulation') has entered into force.
Apart from Alexey Mordashov (share ownership: approx. 19.3 %), no member of
the Executive Board or Supervisory Board holds shares in TUI AG, related
options or other derivatives representing 1 % or more of the capital stock.
Details regarding share ownership of individualmembers are presented in the
table on the Supervisory Board and Executive Board.
Accounting and auditing
TUI AG prepares its consolidated financial statements and consolidated
interim financial statements in accordance with the provisions of the
International Financial Reporting Standards (IFRS) as applicable in the
European Union. The statutory annual financial statements of TUI AG, which
form the basis for the dividend payment, are prepared in accordance with
the
German Commercial Code (HGB). The consolidated financial statements are
prepared by the Executive Board, audited by the auditors and approved by
the
Supervisory Board. The interim reports are discussed between the Audit
Committee and the Executive Board prior to publication. The consolidated
financial statements and the financial statements of TUI AG were audited by
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,
Hanover, the auditorselected by the 2016 Annual General Meeting. The audit
was based on German auditing rules, taking account of the generally
accepted
auditing standards issued by the German Auditors' Institute as well as the
International Standards on Auditing. It also covered risk management and
compliance with reporting requirements on corporate governance pursuant to
section 161 of the German Stock Corporation Act and Listing Rules 9.8.7 R
and 9.8.10.
The condensed consolidated interim financial statements and management
reports as at 31 December 2015, 31 March and 30 June 2016 were examined by
the auditors.
In addition, a contractual agreement was concluded with the auditors to the
effect that the auditors will immediately inform the Supervisory Board of
any grounds for disqualification or partiality as well as of all findings
and events of importance arising during the performance of the audit. There
were no grounds to provide such information in the framework of the audit
of
financial year 2015 / 16.
Compliance
TUI Group's Compliance Management System is a fundamental element of our
commitment to commercial, environmental and socially responsible activity
and operations. It is underlined by our membership in the UN Global Compact
and therefore forms an indispensable part of TUI Group's corporate culture
and our corporate governance activities.
The strategic goal of TUI Group's Compliance Management System is to
prevent
misconduct and avoid liability risks for the Company, its legal
representatives, executives and employees and protect the reputation of the
Company.
Compliance Management System
TUI Group's Compliance Management System is based on three pillars:
prevention, discovery and response, which, in turn, comprise a large number
of internal measures and processes.
Compliance Management Processes
Prevention Expos- Reaction
ure
* Compliance Policies and Group * * Implementation
of
Policies * Compliance Training * Repor- Process Controls
*
Compliance Communication * ting * Exchange with
Compliance Information * Leads * Management and
local
Compliance Risk Identification Investi- Compliance
Officers *
and Risk Assessment gations Disciplinary
Measures
In the completed financial year, TUI Group's Compliance Management System
was subjected to a design audit by a leading auditing firm in accordance
with auditing standard PS 980 of the German Institute of Auditors. The
audit
confirmed that TUI Group's Compliance Management System has been designed
so
as to meet the requirements of that certification standard. In the run-up
to
the audit, the Group-wide Compliance Management System had been readjusted
and compliance processes had been harmonised aross the Group.
Compliance culture
The compliance culture forms the basis for the appropriateness and
effectiveness of the Compliance Management System. It reflects management's
fundamental attitude and conduct and the role of the supervisory body.
It is expressed in our corporate value 'Trusted', appealing to our
employees' personal responsibility and their honesty and sincerity in
handling customers, stakeholders and employees.
Code of Conduct/Suppliers' Code of Conduct
The Code of Conduct, drawn up for the entire TUI Group, is a further
embodiment of our compliance culture and enshrines guiding principles for
everyone to follow, from executives and senior management to every Group
employee. It defines minimum standards aimed at assisting our employees in
their everyday work and providing orientation in conflict situations.
Compliance online: www.tuigroup.com/en-en/about-us/compliance
The Suppliers' Code of Conduct forms the counterpart to TUI's Code of
Conduct. It details our ethical, social and legal expectations of our
business partners. All business partners are required by contract to
observe
all national and international anti-corruption laws applicable to the
supplier relationship. This places our business relationship with our
partners on a solid legal and social basis.
Compliance Rules
In addition, the principles set out in the Code of Conduct are detailed in
various policies and rules reflecting the legal requirements. This is
supported by our Group-wide policy management, developing the standards for
Group-wide policies and coordinating incorporation of the relevant internal
stakeholder groups, e. g. other departments or the works council. This
approach is designed to provide TUI Group with a set of policies which are
as complete and comprehensible as possible without seeking overregulation.
TUI Group's Compliance Rules offer guidance on appropriate conduct
regarding
gifts and invitations, data protection and trade sanctions. All groups of
employees have thus been acquainted with the policies of relevance to their
everyday work.
Compliance Programme
In the period under review, the Compliance Programme focused on various
issues including anti-corruption measures, protecting free and fair
competition, data protection and the handling of trade sanctions including
anti-money laundering.
In the completed financial year, a software was used to facilitate risk
identification based on self-disclosure by TUI Group companies, above all
for the above topics: it was evaluated on the basis of the criteria of
likelihood of occurrence and potential damage (including reputational
damage). The results of identified compliance risks are used to derive
corresponding risk-minimising measures, which are agreed with the relevant
bodies, and implementation of the measures is automated.
Moreover, TUI Group focused even more strongly on data protection, which
had
already played a major role. Numerous measures were initiated, e. g.
structured coordination of all technical functions in the Company relating
to data protection law. As an international organisation,TUI Group will
therefore be prepared for future European changes in the overall framework
for data protection law.
Compliance training
Compliance training is a key element of TUI's Compliance Management System,
with its focus on preventing misconduct, and a crucial component of TUI
Group's Compliance culture. It is carried out according to a graded
concept:
managers and staff at TUI have all benefited from face-to-face teaching and
online programmes. This enables all our employees to acquaint themselves
with Compliance and the underlying corporate values, regardless of their
position in the company hierarchy and their geographical location. In the
completed financial year, the online training programme was extended so as
to include a refresher course on TUI's Code of Conduct. It has now been
rolled out in the Group companies. In addition, TUI companies and sectors
offered training schemes with their own specific focus to raise awareness
of
challenges they might face.
Whistleblowing
In agreement with various stakeholder groups, TUI offers its managers and
employees a Group-wide whistleblower system to enable serious infringements
of the corporate values anchored in TUI's Code of Conduct to be reported
anonymously and without reprisals. This whistleblowing system is currently
available to staff in 47 countries. All reports are followed up in the
interests of all stakeholders and the Company. Our top priority is to
ensure
confidentiality and handle information discreetly. Any incidents resulting
from the use of the whistleblower system are reviewed by Group Legal
Compliance in conjunction with Group Audit. Infringements are fully
investigated in the interests of all our staff and the Company itself.
Compliance structure
TUI Group's Compliance structure supports those responsible in the task of
communicating the values and rules and anchoring them in the Group. It
ensures that Compliance requirements are implemented throughout the Group
in
different countries and cultures. The decentralised Compliance structure
was
reinforced by additional staff resources in recent months in order to
respond to the requirements resulting from structural change and
internationalisation. Under the aegis of the Chief Legal Compliance
Officer,
Group Legal Compliance work with the decentralised Compliance Officers to
perform the following tasks at different management levels:
* Raising awareness of Compliance and the technical issues allocated to
Legal Compliance
* Achieving the goals of the Code of Conduct and the Compliance Rules
* Providing training
* Advising managers and employees
* Securing the necessary exchange of information
* Monitoring national and international legislative initiatives
* Providing regular reports
Remuneration Report
The remuneration report outlines the remuneration of the members of the
Executive Board of TUI AG as well as the remuneration of the members of its
Supervisory Board in accordance with the articles of association. The
remuneration report is based, in particular, on therecommendations of the
German Corporate Governance Code ('GCGC'), the requirements of the German
Commercial Code (Handelsgesetzbuch) and the German Stock Corporation Act
(Aktiengesetz) and, to the extent practicable, the requirements of the UK
Corporate Governance Code ('UK-CGC').
TUI AG is a German stock corporation that is also listed on the London
Stock
Exchange. Where mandatory provisions regarding the governance of or legal
requirements for a German stock corporation are affected these are
disclosed
in this report and placed in context with the UK-CGC, as required.
Remuneration of the Executive Board
I. Approval of the remuneration scheme by shareholders
A new remuneration scheme was proposed for Executive Board members in
financial year 2009 / 10 and approved by the shareholders of TUI AG at the
Annual General Meeting on 17 February 2010. The scheme is designed to
create
incentives for sustained growth and robust financial performance in the TUI
Group.
Although common practice at many of the companies applying the UK-CGC, the
shareholders of TUI AG do not currently vote on the remuneration policy on
an annual basis. However, the approach adopted by TUI AG reflects the
practice at most German stock corporations and is in compliance with the
German Stock Corporation Act.
II. General principles
Following a recommendation from the Presiding Committee and according to
section 87(1) sentence 1 German Stock Corporation Act, the Supervisory
Board
determines the remuneration of the individual Executive Board members. It
also regularly reviews the remuneration scheme for the Executive Board.
The following principles, in particular, are taken into account in this
regard:
* Clarity and transparency.
* Appropriateness and conformity with tasks, responsibilities and success
of each individual Executive Board member, including in the relevant
environment of comparable international firms, and taking into account
standard practice at other major German companies.
* Economic position, performance and sustainable development of the
company.
* Appropriate correlation between the levels of fixed remuneration and
performance-based remuneration.
* Tying a material portion of total remuneration to the achievement of
ambitious, long-term performance targets.
* Appropriateness in horizontal and vertical comparison (see page 141).
* Ability to be competitive on the market for highly qualified Executive
Board members.
* Tying shareholder interest to value increase and distribution of
profits
(e. g. total shareholder return indicator) with corresponding
incentives
for Executive Board members.
The remuneration scheme currently does not contain any malus or clawback
terms. This position will continue to be monitored.
III. Remuneration of the Executive Board in financial year 2015/16
In financial year 2015 / 16, the remuneration for the Executive Board
comprises: (1) a fixed remuneration; (2) an annual performance-based
remuneration (Jahreserfolgsvergütung - 'JEV'); (3) virtual shares of TUI AG
in accordance with the Long-Term Incentive Plan ('LTIP'); (4) fringe
benefits; (5) pension entitlements; and (6) a potential additional
remuneration in cash or in virtual shares (Additional Remuneration).
Details are set out in the following tables:
1. Fixed remuneration
Purpose and link to company strategy
Highly-qualified Executive Board members who are needed to develop and
implement company strategy are to be attracted and retained.
The remuneration should be commensurate with the abilities, experience and
tasks of the individual Executive Board member.
Procedure
In determining the fixed remuneration the Supervisory Board takes into
account, in particular, the relevant general principles.
The fixed remuneration is paid in twelve equal instalments at the end of
each month. If the service contract begins or ends in the course of the
year
relevant for payment of the remuneration, the fixed annual remuneration
will
be paid pro-rata for that year.
The remuneration is generally reviewed when service contracts of Executive
Board members are extended, and fixed for the term of the new service
contract. A review of the remuneration can also take place during the term
of a service contract in particular if there is a change with respect to
the
tasks or responsibility of an Executive Board member.
2. Annual performance-based remuneration (Jahreserfolgsvergütung - 'JEV')
Purpose and link to company strategy
The JEV is intended to motivate Executive Board members to achieve
ambitious
and challenging financial and strategic performance targets throughout the
financial year. The performance targets are reflective of the company
strategy and aimed at increasing corporate value.
Procedure
The JEV is calculated on the basis of a group performance indicator and the
individual performance of the Executive Board member. The performance
reference period is the financial year of TUI AG.
An individual target amount ('Target Amount') is agreed for each Executive
Board member in their service contract. Since 1 October 2010 the
performance
target has been the reported earnings before interest, tax and amortisation
of goodwill ('Reported Group EBITA'). The target value for the one-year
performance reference period for the reported group EBITA performance
target
will be set each year by the Supervisory Board.
To measure performance, the expected reported group EBITA will be compared
with the corresponding actual value of the reported group EBITA as reported
in the audited consolidated accounts of TUI AG to be prepared in accordance
with the accounting rules in force at the time. The degree of target
achievement is determined as follows:
* If the value achieved is below the target value by 50 % or more, this
is
equivalent to a target achievement of 0 %.
* If the value achieved corresponds to the target value, this is
equivalent to a target achievement of 100 %.
* If the value achieved exceeds the target value by 50 % or more, this is
equivalent to a target achievement of 187.5 %.
In the event of a reported group EBITA of between 50 % below target value
and target value, any award will be based on a linear interpolation between
0 % and 100 % and in the event of a reported group EBITA of between target
value and 50 % above target value linear interpolation between 100 % and
187.5 % will be used to determine the degree of target achievement. The
degree of target achievement will be rounded to two decimal places, as is
customary in commercial practice.
At the discretion of the Supervisory Board, the degree of target
achievement
for the performance target can be multiplied by a factor of between 0.8 and
1.2, based on the Executive Board member's achievement of individual
performance targets and other performance indicators such as customer
satisfaction and / or employee satisfaction metrics.
The figure resulting from the multiplication of the target amount by the
degree of target achievement for the reported group EBITA and the
discretionary multiplier will be paid out in cash in the month following
the
approval by the Supervisory Board of the annual accounts of TUI AG for the
respective financial year. If the service contract begins or ends in the
course of the financial year relevant for the grant of the JEV, the claims
for payment of the same will generally be pro-rata.
Cap
The JEV is capped annually and individually for each Executive Board
member;
for the figures, see the table on page 132.
In accordance with section 87(1) sentence 3 German Stock Corporation Act,
the Supervisory Board is entitled to limit the amount of the JEV to allow
for extraordinary circumstances (e. g. takeover of the company, sale of
parts of the company, uncovering of hidden reserves, external influences).
3. Virtual Shares according to the Long-Term Incentive Plan ('LTIP')
3.1 Calculation method
Purpose and link to company strategy
The long-term objective is to increase corporate and shareholder value by
defining ambitious goals that are closely linked to the company's earnings,
share price performance and dividends.
Procedure
The LTIP is a performance share plan based on virtual shares and is
assessed
over a period of four years ('Performance Reference Period'). Payments are
granted in annual tranches.
For Executive Board members, an individual target amount ('Target Amount')
is agreed in the service contract. At the beginning of each financial year
a
provisional number of virtual shares, commensurate with the target amount,
will be set. This will constitute the basis for the determination of the
final performance-based payment for the tranche in question at the end of
the respective performance reference period. To set this number, the target
amount will be divided by the average Xetra price of TUI AG shares over the
20 prior trading days. The claim to a payment only arises upon expiry of
the
performance reference period and depends on whether or not the respective
performance target is achieved.
The performance target for determining the amount of the final payout at
the
end of the performance reference period is the development of the total
shareholder return ('TSR') of TUI AG relative to the development of the TSR
of the Dow Jones Stoxx 600 Travel & Leisure ('Index'), whereby the ranking
of the TUI AG TSR in relation to the index companies will be monitored over
the entire performance reference period. The TSR is the aggregate of all
share price increases plus the gross dividends paid over the performance
reference period. Data from a reputable data provider (e. g. Bloomberg,
Thomson Reuters) will be used for the purpose of establishing the TSR
values
for TUI AG and the index. The reference for the purpose of determining the
rankings is the composition of the index on the last day of the performance
reference period. The values for companies that were not listed over the
entire performance reference period will be factored in on a pro-rata
basis.
The level of target achievement is established as follows depending on the
ranking of the TSR of TUI AG relative to the TSR values of the index
companies:
* a TSR value of TUI AG equivalent to the bottom and second to bottom
value of the index corresponds to a target achievement of 0 %.
* a TSR value of TUI AG equivalent to the third to bottom value of the
index corresponds to a target achievement of 25 %.
* a TSR value of TUI AG equivalent to the median of the index corresponds
to a target achievement of 100 %.
* a TSR value of TUI AG equivalent to the third to top value of the index
corresponds to a target achievement of 175 %.
For performance between the third to bottom and the third to top rank,
linear interpolation will be used to determine the level of target
achievement at between 25 % and 175 %. The degree of target achievement
will
be rounded to two decimal places, as is customary in commercial practice.
To determine the final number of virtual shares, the degree of target
achievement will be multiplied by the provisional number of virtual shares
on the final day of the performance reference period ('Final Number Of
Virtual Shares'). The payout is determined by multiplying the final number
of virtual shares by the average Xetra price of TUI AG shares over the 20
trading days prior to the end of the performance reference period. The
payout which is calculated in this way will be due in the month following
the approval of the annual accounts of TUI AG for the fourth financial year
of the performance reference period and the resulting amount is paid out in
cash. If the service contract begins or ends in the course of the financial
year relevant for the grant of the LTIP, the claims for payment of the same
will generally be pro-rata.
Cap
The LTIP is capped annually and individually for each Executive Board
member; for the figures, see the table on page 132.
3.2 Development of aggregate virtual shares of current Executive Board
members (LTIP model)
Number
Balance as at 30 Sep 2015 1,072,420
Virtual shares granted for financial year 2015 / 16* 291,933
Decrease in virtual shares - 378,708
Balance as at 30 Sep 2016 985,645
* William Waggott's LTIP tranche for financial year 2015 / 16 included in
full, since LTIP granted in full at the beginning of the financial year
On 30 September 2016, former Executive Board members held no virtual shares
in TUI AG (previous year: no virtual shares) that were granted after the
merger of TUI AG and TUI Travel PLC ('TUI Travel') in December 2014 (the
'Merger').
There are provisions totalling EUR 6,693.1 thousand and liabilities worth
EUR 1,896.0 thousand (previous year: EUR 1,530.0 thousand) to cover
entitlements under TUI AG's LTIP for current Executive Board members. Those
provisions only cover liabilities arising from the LTIP of TUI AG.
4. Fringe benefits
Purpose and link to company strategy
Fringe benefits offered should be competitive on the market for highly
qualified Executive Board members.
Procedure
Executive Board members receive the following fringe benefits:
* Reimbursement of business travel expenses in accordance with TUI AG's
general business travel guidelines.
* Twice a year, free of charge, a holiday from within the World of TUI
range, without any limitation as to tour operator, type of holiday,
category or price. Spouses / partners are granted a 50 % discount on
the
catalogue price for the aforementioned vacations, and children still in
education or training a 100 % discount. Apart from that, a reduction of
75 % (spouses / partners) / 50 % (children still in education or
training) is granted for flights.
* A suitable company car with driver or alternatively a car allowance of
EUR 1.5 thousand gross per month.
Insurance cover is provided in line with the agreements applicable in
Germany and the United Kingdom. This is offered as follows:
TUI AG provides insurance cover for accidents to the customary extent for
Mr
Joussen, Dr Eller, Mr Baier and Mr Ebel and will pay the corresponding
insurance contributions for the terms of their service contracts. The
coverage amounts to EUR 1,500.0 thousand for death and EUR 3,000.0 thousand
for disablement. Furthermore, Mr Joussen, Dr Eller, Mr Baier and Mr Ebel
receive an allowance towards health and long-term care insurance in the
amount payable if the respective Executive Board member were an employee,
but no more than half of each insurance premium.
Insofar as this is permitted by law, Mr Burling will remain a beneficiary,
at the expense of TUI AG, of the UK term life, vocational disability and
health insurance programmes. Mr Long and Mr Waggott received the fringe
benefits on a pro-rata basis up to the time at which they left the
Executive
Board.
TUI AG also takes out criminal law protection insurance that provides cover
for the Executive Board members regarding criminal and misdemeanour
proceedings, if these proceedings are based on an act or a failure to act
in
the exercise of their duties for TUI AG. TUI AG also takes out suitable D&O
insurance coverage for the Executive Board members to cover possible claims
brought under private law on the basis of statutory liability provisions
against one or more of the Executive Board members by a third party or the
Company for damages for a breach ofduty committed in the exercise of their
duties. The D&O insurance provides for a deductible of 10 % of the damage
up
to 150 % of the fixed annual remuneration.
Amount
The value of the company car, free holidays and insurance benefits received
annually by an individual Executive Board member normally does not exceed
EUR 100.0 thousand.
5. Pension benefits
Purpose and link to company strategy
Highly-qualified Executive Board members who are needed to develop and
implement company strategy are to be acquired and retained.
The pension entitlements should be competitive on the market for highly
qualified Executive Board members and should provide them with a
corresponding pension in their retirement.
Procedure
Pensions are paid to former Executive Board members if they reach the
predefined age limit or are permanently incapacitated. The Executive Board
members are not entitled to receive transition payments upon leaving the
Executive Board, with the exception of Mr Ebel who has an acquired right to
receive transition payments under a legacy contract.
With regard to pension entitlements, different principles apply to Mr
Joussen, Dr Eller, Mr Baier and Mr Ebel on the one hand and Mr Long, Mr
Burling and Mr Waggott on the other hand due to the legacy systems in
Germany and the UK.
Mr Joussen, Dr Eller, Mr Baier and Mr Ebel are entitled to pension benefits
according to the pension commitments granted to Executive Board members of
TUI AG ('TUI AG Pension Scheme'). These Executive Board members receive, on
an annual basis, a contractually agreed amount that is paid into an
existing
pension scheme for the respective Executive Board member. The contributions
to the company pension scheme carry an interest rate established in the
pension commitment. The interest rate currently stands at 5 % p.a. The
beneficiary may choose between a one-off payment, payment by instalments or
pension payments.
The amounts agreed on in the service contracts of the aforementioned
Executive Board members are:
* Mr Joussen: EUR 454.5 thousand per year. Mr Joussen becomes eligible
for
payment of the pension upon reaching the age of 62.
* Dr Eller: EUR 230.0 thousand per year. The amount will be provided on a
pro-rata basis in connection with Dr Eller having taken up office on 15
October 2015. Dr Eller becomes eligible for payment of the pension upon
reaching the age of 63.
* Mr Baier: EUR 267.75 thousand per year. Mr Baier becomes eligible for
payment of the pension upon reaching the age of 60.
* Mr Ebel: EUR 207.0 thousand per year. Mr Ebel becomes eligible for
payment of the pension upon reaching the age of 62.
Should Mr Joussen, Dr Eller, Mr Baier and Mr Ebel retire from TUI AG before
the normal retirement date due to an ongoing occupational disability, they
will receive an occupational disability pension until they are able to work
again, but at most until they reach the normal retirement date.
Under certain circumstances, spouses, partners or cohabitants of the
Executive Board members will, should the respective Executive Board member
die, receive a survivor's pension worth 60 % of the pension for their
lifetime or until remarriage. Children of Executive Board members will,
should the respective Executive Board member die, receive an orphan's
pension, paid as a maximum until they reach the age of 27. Children who
have
lost one parent will receive 20 % of the pension, and those who have lost
both parents will receive 25 %. This claim is subject to the prerequisite
that the child meets the requirements set out in section 32(3), (4),
sentence 1 nos. 1 to 3 and (5) German Income Tax Act
(Einkommensteuergesetz).
Mr Burling receives a fixed annual amount of EUR 225.0 thousand for his
pension. This amount may be paid into a company pension scheme where
possible or where the tax arrangements prevent payment into a pension
scheme
will be payable as cash for this specific purpose. Mr Waggott and Mr Long
received the pension contribution on a pro-rata basis in each case up to
the
time at which they left the Executive Board:
* Mr Long: EUR 164.1 thousand.
* Mr Waggott: EUR 177.2 thousand.
Pensions of current
Executive Board
members under the TUI
AG Pension Scheme
Addition to / Net
reversal of present
pension provisions value as
at
EUR '000 2015 / 16 2014 / 30 Sep 16 30 Sep
15 15
Friedrich Joussen 1,130.2 1,876.7 3,006.9 1,876.7
Horst Baier 966.8 1,193.1 9,020.1 8,053.3
Sebastian Ebel 490.7 784.7 1,275.4 784.7
Dr Elke Eller 435.6 0.0 435.6 0.0
Total 3,023.3 3,854.5 13,738.0 10,714.7
At 30 September 2016, pension obligations for current Executive Board
members totalled EUR 13,738.0 thousand (previous year balance sheet date:
EUR 10,714.7 thousand) according to IAS 19 and EUR 10,745.2 thousand
(previous year balance sheet date: EUR 9,233.1 thousand) according to
commercial law provisions. In the period under review, the provision
according to IAS 19 was increased by an amount of EUR 3,023.3 thousand
(previous year: increase of EUR 3,854.5 thousand), with an increase of EUR
1,512.1 thousand (previous year: increase of EUR 2,861.2 thousand)
according
to the provisions of the German Commercial Code.
Where the above table shows a corresponding amount, the pension obligations
for beneficiaries are funded via the conclusion of pledged reinsurance
policies. As the reinsurance policy fully covers the pension obligations
for
former and current Executive Board members, the insurance was deducted as
an
asset from the pension obligations.
6. Potential additional remuneration in cash or in virtual shares
('Additional Remuneration')
Purpose and link to company strategy
The additional remuneration is intended to compensate exceptional
performance by Executive Board members.
Procedure
The Supervisory Board may grant an additional remuneration in cash or in
virtual shares in exceptional circumstances such as an extraordinarily
heavy
workload in connection with the merger between TUI AG and TUI Travel or a
realization of synergies that exceeds the planned level by more than 20 %
over budget. The Supervisory Board determines whether and to what amount
such additional remuneration will be paid.
Cap
The additional remuneration is capped annually and individually for each
Executive Board member; for the figures, see the table below.
7. Remuneration caps
The following caps apply to the remuneration (remuneration components and
total remuneration) payable to Executive Board members for a financial
year:
Remunerati-
on caps
EUR '000 Fixed JEV LTIP Additional Maximum total
remunera- remunerati- remuneration3
tion2 on
Friedrich 1,100.0 2,070.0 4,440.0 920.0 7,500.0
Joussen
Peter Long 1,100.0 2,070.0 4,440.0 920.0 7,500.0
1
Horst 740.0 1,012.5 2,025.0 450.0 4,200.0
Baier
David 600.0 900.0 1,500.0 400.0 3,450.0
Burling
Sebastian 680.0 720.0 1,500.0 320.0 3,380.0
Ebel
Dr Elke 680.0 675.0 1,260.0 300.0 3,100.0
Eller 1
William 720.0 810.0 2,100.0 360.0 4,080.0
Waggott 1
1 Amount for the whole year (12 months), possibly pro rated caps: see from
page 138
2 Fixed amount, no cap applied
3 Contractually agreed cap for total remuneration (including fixed
remuneration, JEV, LTIP, company pension, additional remuneration and
fringe
benefits)
IV. Rolled-over TUI Travel shares ('Share Awards')
During their period of service as Executive Directors of TUI Travel, Mr
Long
and Mr Waggott received long-term incentives in annual tranches in the form
of share awards with a vesting period of three years. Mr Burling, who was
not an Executive Director of TUI Travel, likewise received these share
awards on the basis of his employment relationship with TUI Travel. The
conditions of the share awards were laid down by TUI Travel's Remuneration
Committee and approved by the shareholders.
Because of the three-year vesting period, some tranches were not yet due
and
payable at the time of the merger. Following the completion of the merger
and the subsequent delisting of TUI Travel, it was agreed that the
outstanding share awards would be rolled over to TUI AG. On the due date,
all share awards were converted into a corresponding number of TUI AG
shares. On the one hand, the share awards result from a Deferred Annual
Bonus Scheme ('DABS'). This comprises deferred annual bonus amounts that
were earned during periods prior to the merger.
On the other hand, share awards arise under the Performance Share Plan
('PSP'). The performance conditions applicable to the PSP are as follows:
The conversion is carried out on the basis of the earnings per share (EPS),
the total shareholder return (TSR) and the return on invested capital
(ROIC)
over a three-year period. The EPS is weighted at 50 %, the TSR at 25 % and
the ROIC at 25 %.
After the merger, the Supervisory Board agreed that the performance would
be
measured up to the date of the merger on the basis of TUI Travel's
performance and from the date of the merger onwards on the basis of TUI
AG's
performance. The aggregate performance would then be assessed for the
underlying assessment period in each case.
Because Mr Long and Mr Waggot left the Executive Board during the course of
financial year 2015 / 16, the Supervisory Board agreed with them that their
outstanding claims to the share awards would be paid out prematurely. Mr
Long received an amount of EUR 5,695.1 thousand as compensation for all of
his outstanding share awards; the payment became due on 30 September 2016.
Mr Long did not take part in the passing of the resolution by the
Supervisory Board on 15 September 2016 on the redemption of any share
awards
still existing at that time. Mr Waggot received an amount of EUR 2,520.0
thousand as compensation for all of his outstanding share awards; the
payment became due on 31 August 2016.
In the context of paying out the rolled-over share awards of Messrs. Long
and Waggot, the Supervisory Board also agreed with Mr Burling that all of
his outstanding claims to the share awards would be paid out. In this
connection, Mr Burling received a compensation payment of EUR 1,741.0
thousand; this payment became due on 30 September 2016.
The share awards of Messrs. Long, Burling and Waggot that became due and
payable and / or were paid out prematurely during financial year 2015 / 16
as well as the share awards of Johan Lundgren, who left the Executive Board
during financial year 2014 / 15, that have become dueand payable and that
are still outstanding are shown in the following table.
For-
mer
Exe-
cuti-
ve
Di-
rec-
tors
of
TUI
Tra-
vel
PLC
Out-
stan-
ding
DABS-
/DAB-
LIS
sha-
re
awar-
ds
at
30
Sep-
tem-
ber
2016
(awa-
rded
by
TUI
Tra-
vel
PLC)
TUI
AG
clo-
sing
sha-
re
pri-
ce
at
30
Sep
2016
(EUR-
):
12.6-
9
Exe- TUI AG Aw- Market T- Market Ma- Pl- TUI AG
Maxi- Maxi-
cuti- shares ar- price U- price rk- an- shares mum
mum
ve / d (TUI I (TUI et ne- / TUI
value
Di- nil-- da- AG) A- AG) va- d nil-- AG
based
rec- cost te per G per lu- / cost
sha- on TUI
tor opti- share s- share e Ac- opti- res
/ AGsha-
ons at h- at at tu- ons
nil-- re
held award a- ves- ve- al lapsed
cost price
at 1 (EUR) r- ting st- ve- during
opti- of EUR
Octo- e- (EUR) in- st- the ons
12.69
ber s g in- year
held at 30
2015 / (E- g ended at
30 Septem-
n- UR- an- 30
Sep- ber
i- ) d Septem-
tem- 2016(E-
l re- ber ber
UR)
c- le- 2016
2016
o- as-
(see
s- e
Note
t da- 5)
o- te
p-
t-
i-
o-
n-
s
v-
e-
s-
t-
e-
d
a-
n-
d
r-
e-
l-
e-
a-
s-
e-
d
d-
u-
r-
i-
n-
g
t-
h-
e
y-
e-
a-
r
e-
n-
d-
e-
d
3-
0
S-
e-
p-
t-
e-
m-
b-
e-
r
2-
0-
1-
6
Pe- D- 102,40- 1 6 8.773 1- 16,289 1,- 6 0 0
0
ter A- 1 De- 0- 66- De-
Long B- c 2- 8,- c
S 12 ,- 01- 15
4- 0
0-
1
D- 409,60- 2 6 8.773 3- 16,289 5,- 6 55,543 0
0
A- 7 De- 5- 76- De-
B- c 4- 7,- c
S 12 ,- 34- 15
0- 8
6-
4
P- 238,83- 3 6 8.773 2- 16.289 3,- 6 32,386 0
0
S- 7 De- 0- 36- De-
P c 6- 2,- c
12 ,- 88- 15
4- 0
5-
1
D- 72,436 1 12 11.249 7- 12.500 90- 30 0 0
0
A- De- 2- 5,- Se-
B- c ,- 46- p
S 13 4- 3 16
3-
6
D- 289,74- 2, 12 11.249 2- 12.500 2,- 30 72,437 0
0
A- 7 4 De- 1- 71- Se-
B- c 7- 6,- p
S 13 ,- 37- 16
3- 8
1-
0
P- 134,97- 3 12 11.249 1- 12.500 1,- 30 33,744 0
0
S- 6 De- 0- 26- Se-
P c 1- 5,- p
13 ,- 40- 16
2- 0
3-
2
D- 64,626 1, 8 14.376 6- 12.500 80- 30 0 0
0
A- 5 De- 4- 7,- Se-
B- c ,- 83- p
S 14 6- 8 16
2-
6
To- 1,312,- 1- 16- 194,11- 0
0
tal 630 ,- ,4- 0
1- 93-
1- ,3-
8- 18
,-
5-
2-
0
Wil- D- 53,548 1 6 8.773 5- 16.289 87- 6 0 0
0
liam A- De- 3- 2,- De-
Wag- B- c ,- 24- c
gott S 12 5- 3 15
4-
8
D- 214,19- 2 6 8.773 1- 16.289 3,- 6 29,045 0
0
A- 4 De- 8- 01- De-
B- c 5- 5,- c
S 12 ,- 89- 15
1- 2
4-
9
P- 92,725 3 6 8.773 8- 16.289 1,- 6 12,574 0
0
S- De- 0- 30- De-
P c ,- 5,- c
12 1- 58- 15
5- 0
1
D- 39,127 1 12 11.249 3- 11.600 45- 31 0 0
0
A- De- 9- 3,- Au-
B- c ,- 87- g
S 13 1- 3 16
2-
7
D- 156,50- 2, 12 11.249 1- 11.600 1,- 31 39,127 0
0
A- 8 4 De- 1- 36- Au-
B- c 7- 1,- g
S 13 ,- 62- 16
3- 0
8-
1
P- 58,224 3 12 11.249 4- 11.600 50- 31 14,556 0
0
S- De- 3- 6,- Au-
P c ,- 54- g
13 6- 9 16
6-
8
D- 17,068 1, 8 14.376 1- 11.600 19- 31 0 0
0
A- 5 De- 7- 7,- Au-
B- c ,- 98- g
S 14 0- 9 16
6-
8
To- 631,39- 5- 7,- 95,302 0
0
tal 4 3- 71-
6- 3,-
,- 74-
0- 5
9-
2
Da- D- 16,858 1 6 8.773 1- 16.289 27- 6 0 0
0
vid A- De- 6- 4,- De-
Bur- B- c ,- 60- c
ling S 12 8- 0 15
5-
8
D- 67,435 2 6 8.773 5- 16.289 94- 6 9,144 0
0
A- De- 8- 9,- De-
B- c ,- 50- c
S 12 2- 2 15
9-
1
P- 42,147 3 6 8.773 3- 16.289 59- 6 5,708 0
0
S- De- 6- 3,- De-
P c ,- 55- c
12 4- 5 15
3-
9
D- 16,077 1 12 11.249 1- 12.500 20- 30 0 0
0
A- De- 6- 0,- Se-
B- c ,- 96- p
S 13 0- 3 16
7-
7
D- 64,310 2, 12 11.249 4- 12.500 60- 30 16,077 0
0
A- 4 De- 8- 2,- Se-
B- c ,- 90- p
S 13 2- 6 16
3-
3
P- 31,758 3 12 11.249 2- 12.500 29- 30 7,939 0
0
S- De- 3- 7,- Se-
P c ,- 73- p
13 8- 1 16
1-
9
D- 9,975 1, 8 11.278 9- 12.500 12- 30 0 0
0
A- 5 De- ,- 4,- Se-
B- c 9- 68- p
S 14 7- 8 16
5
P- 54,902 3, 8 14.376 4- 12.500 51- 30 13,725 0
0
S- 5 De- 1- 4,- Se-
P c ,- 70- p
14 1- 6 16
7-
7
To- 248,56- 2- 3,- 38,868 0
0
tal 0 0- 04-
9- 3,-
,- 94-
6- 5
9-
2
Joha- D- 68,152 1 6 8.773 6- 16.289 1,- 6 0 0
0
n A- De- 8- 11- De-
Lund- B- c ,- 0,- c
gren S 12 1- 12- 15
5- 8
2
D- 272,61- 2 6 8.773 2- 16.289 3,- 6 36,966 0
0
A- 1 De- 3- 83- De-
B- c 5- 8,- c
S 12 ,- 42- 15
6- 1
4-
5
P- 118,01- 3 6 8.773 1- 16.289 1,- 6 16,002 0
0
S- 3 De- 0- 66- De-
P c 2- 1,- c
12 ,- 65- 15
0- 7
1-
1
D- 47,723 1 12 11.249 0 0 12 0
47,72- 605,60-
A- De- De- 3
5
B- c c
S 13 16
D- 190,89- 2, 12 11.249 0 0 12 0
190,8- 2,422,-
A- 2 4 De- De- 92
419
B- c c
S 13 16
P- 74,104 3 12 11.249 0 0 12 0
74,10- 940,38-
S- De- De- 4
0
P c c
13 16
D- 21,723 1, 8 14.376 0 0 8 0
21,72- 275,66-
A- 5 De- De- 3
5
B- c c
S 14 17
To- 771,49- 4- 6,- 52,968
312,7- 3,968,-
tal 5 0- 61- 19
404
5- 0,-
,- 20-
8- 7
0-
8
GRAN- 2,964,- 2- 33- 52,968
312,7- 3,968,-
DTOT- 079 ,- ,8- 19
404
AL 2- 61-
7- ,2-
0- 15
,-
1-
1-
2
All outstanding share awards shown were made over TUI Travel PLC shares. At
vest / exercise, shares will convert to TUI AG shares at the merger
conversion ratio of 0.399.
1 DABS deferred award: The deferred element of annual bonus, subject to
forfeiture for gross misconduct, bankruptcy or certain other circumstances
in accordance with the scheme rules.
2 DABS matching award: A multiple of the deferred award, subject to
performance conditions over the three-year vesting period.
3 PSP award: Subject to performance conditions over the three-year vesting
period.
4 Change to remuneration structure with effect from 1 October 2014 - last
matching awards made in December 2013.
5 All awards made in December 2014 are phantom awards and will therefore be
settled in cash on vesting.
V. Payments/benefits in case of premature termination of Executive Board
membership
1. General contractual framework
The payments to be made to an Executive Board member on the premature
termination of his service contract without good cause have in principle
been limited in the service contracts of Messrs. Joussen and Baier to an
amount equal to twice their annual remuneration. It has been agreed in the
service contracts of Dr Eller, Mr Ebel, Mr Long, Mr Burling and Mr Waggott
that payments to be made on the premature termination of their Executive
Board membership without good cause may not - in the case of premature
termination during the first year after the coming into force of the
service
contract - exceed an amount equal to twice their annual remuneration and -
in the case of premature termination after the end of the first year after
the coming into force of the service contract - an amount equal to their
annual remuneration ('Severance Pay Cap'). In each case, no more than the
remaining term will be compensated. The severance pay cap is calculated on
the basis of the target direct remuneration (fixed remuneration, target JEV
and target LTIP) for the last expired financial year and, if relevant, the
expected target direct remuneration for the current financial year. If the
service contract is terminated for cause without notice, no payments will
be
made to Executive Board members.
In cases of premature termination of the service contract, the JEV and
payments under the LTIP will be governed as follows:
* JEV:
* If the company terminates the service contract without notice
before
the end of the one-year performance reference period for good cause
attributable to the beneficiary or if the beneficiary terminates
the
service contract without good cause, the claim to the JEV for the
performance reference period in question will be forfeited and no
alternative remuneration or compensation will be paid.
* In all other cases of premature termination of the service contract
before the end of the one-year performance reference period, the
JEV
will generally be paid on a pro-rata basis.
* LTIP:
* If the company terminates the service contract without notice
before
the end of the respective performance reference period for good
cause attributable to the Executive Board member, or if the
Executive Board member terminates the service contract without good
cause, all claims under the LTIP will lapse for all tranches not
yet
paid and no alternative remuneration or compensation will be paid.
* If the service contract ends before the expiry of the performance
reference period for other reasons, the claims under the LTIP will
be maintained for tranches not yet paid. The tranche for the
current
financial year will generally be reduced on a pro-rata basis. The
pay-out will be calculated in the same way as in the case of the
continuation of the service contract.
The service contracts of the Executive Board members do not contain change
of control clauses.
2. Payments/benefits in financial year 2015/16
on account of the premature termination of Executive Board membership
The Supervisory Board and Mr Waggott agreed that Mr Waggott would resign as
a member of the Executive Board with effect from 30 June 2016. In this
respect, the Supervisory Board and Mr Waggott agreed that their service
relationship would end by mutual agreement with effect from 30 June 2016.
Mr
Waggott received his fixed remuneration, the fringe benefits, the JEV
(assumption: 100 % target achievement, individual performance factor of
1.0)
and the amount for pension purposes on a pro-rata basis up to the
termination date. Because of the premature termination of his service
contract, Mr Waggott also received a severance payment of EUR 3,681.4
thousand that became due and payable on 31 August 2016. This includes
claims
under the LTIP of TUI AG for financial year 2014 / 15 and part of financial
year 2015 / 16 in the amount of EUR 1,075.0 thousand.
Mr Lundgren, who left the Executive Board during financial year 2014 / 15,
was subject to a post-contractual covenant not to compete that was valid
until 30 September 2016. For the duration of the post-contractual covenant
not to compete (1 June 2015 until 30 September 2016),TUI AG paid Mr
Lundgren
compensation in the amount of EUR 144.9 thousand per month or EUR 1,739.1
thousand for financial year 2015 / 16 as a whole. This includes the
settlement of claims under the LTIP of TUI AG for financial year 2014 / 15
and part of financial year 2015 / 16 in the amount of EUR 1,075.0 thousand.
VI. Other payments/benefits for Executive Board members who left the Board
in financial year 2015/16
Mr Long left the Executive Board as planned with effect from the end of the
Annual General Meeting 2016 held on 9 February 2016. At the same Annual
General Meeting, Mr Long was elected by the shareholders as a member of the
Supervisory Board of TUI AG. The shareholders also passed a resolution
during this Annual General Meeting to change the remuneration of the
members
of the Supervisory Board to fixed remuneration only (cf. page 142). Against
this background, the Supervisory Board deemed it appropriate to agree with
Mr Long that his claims under the variable remuneration components JEV and
LTIP would be paid out prematurely and on a pro-rata basis. As such, Mr
Long
received EUR 396.6 thousand as JEV (assumption: 100 % target achievement,
individual performance factor of 1.2) and a compensation payment of EUR
1,618.6 thousand under the LTIP for financial year 2014 / 15 and a
compensation payment of EUR 404.7 thousand under the LTIP for part of
financial year 2015 / 16 on 30 September 2016. Furthermore, the Supervisory
Board granted Mr Long additional pro-rata remuneration of EUR 179.6
thousand
for exceeding the merger synergies planned for financial year 2015 / 16 and
for his heavy workload connected to the successful post-merger integration.
Mr Long did not take part in the passing of the resolution by the
Supervisory Board on the premature payment of the variable remuneration
components on 15 September 2016.
VII. Pension payments made to past Executive Board members
In financial year 2015 / 16, the pension payments to former Executive Board
members and their surviving dependants totalled EUR 4,933.2 thousand
(previous year: EUR 4,891.1 thousand).
Pension provisions for former members of the Executive Board and their
dependants amounted as at the balance sheet date to EUR 84,294.2 thousand
(previous year: EUR 79,754.3 thousand) as measured according to IAS 19 and
to EUR 65,505.9 thousand (previous year: EUR 68,170.1 thousand) as measured
according to commercial law provisions. In financial year 2015 / 16, the
obligations for this group of persons increased by EUR 4,539.9 thousand (in
financial year 2014 / 15 they decreased by EUR 610.1 thousand) according to
IAS 19 and decreased by EUR 2,664.2 thousand (increased in the previous
year
by EUR 3,088.6 thousand) according to commercial law provisions.
VIII. Overview: Remuneration of individual Executive Board members
1. Remuneration of individual Executive Board members for financial year
2015/16
Remuneration
of individual
Executive
Board members
for financial
year 2015/16
(pursuant to
section
314(6)(a)
German
Commercial
Code)
EUR '000 Fixed JEV Additio- LTIP Total Total
remune- nal 2015 / 2014 /
ration1 Remune- 16 15
ration
Friedrich 1,145.4 970.2 920.0 0.0 3,035.6 11,867.9
Joussen
Peter Long 2 404.0 396.6 179.6 0.0 980.2 5,734.3
Horst Baier 3 821.7 618.8 450.0 0.0 1,890.5 5,492.7
David Burling 642.1 421.8 400.0 0.0 1,463.9 2,077.8
Sebastian Ebel 698.0 337.5 320.0 0.0 1,355.5 3,162.6
Dr Elke Eller 678.0 304.4 300.0 1,269.9 2,552.3 0.0
4
William 553.5 270.0 0.0 0.0 823.5 3,270.1
Waggott 5
Total 4,942.8 3,319.2 2,569.6 1,269.9 12,101.4
Previous year 4,642.7 5,079.6 1,640.0 24,219.0 35,581.4
6
1 Incl. fringe benefits (without insurances under Group coverage).
2 Pro rated disclosure of all remuneration components until 9 February
2016.
3 Fixed remuneration includes EUR 63 k received for his seat on the
supervisory board of Hapag Lloyd AG that is not counted towards fixed
remuneration of TUI AG.
JEV includes cash deferral of EUR 144.2 k from financial year 2013 / 14.
4 Pro rated disclosure of all remuneration components from 15 October 2015
on.
5 Pro rated disclosure of all remuneration components until 30 June 2016.
6 Previous year's values include remuneration of Johan Lundgren.
The discretionary multiplier of between 0.8 and 1.2 used to calculate the
JEV (procedure description see above) and the additional remuneration
(procedure description see above) were resolved under executing discretion
in the framework of the service agreements of the members of the Executive
Board. In terms of the discretionary multiplier the Supervisory Board,
amongst others, considered the significantly increased employee
satisfaction
(engagement index on Group level) on the basis of a global employee survey
conducted in financial year 2015 / 16 (comparison to survey results in
financial year 2014 / 15). The defined discretionary multipliers also
reflect the strong engagement of each member of the Executive Board in
delivering results even though financial year 2015 / 16 has probably been
the most challenging one in the tourism industry in the last decade due to
terrorism and geopolitical events (Turkey demand slump, Brexit decision,
GBP
weakness). Against this background the Supervisory Board also considered
that TUI AG strongly outperformed its key competitors in the industry.
Furthermore, amongst others, the successful implementation of a senior
leadership team, the beneficial disposal of the Hotelbeds Group, the huge
progress in delivering a Group airline platform and the successful efforts
to initiate a solution for the German airline were taken into account.
In terms of the Additional Remuneration the Supervisory Board considered
the
achievements of economic and cultural integration of the merged businesses.
The merger synergies budgeted for financial year 2015/16 were exceeded by
more than 20 % and each member of the Executive Board faced an enormous
additional workload to drive the integration (e. g. intensive strategy
communication, completing the organisational integration, establishing a
common TUI culture).
The LTIP amount disclosed in this table corresponds to the fair value at
grant date (acc. to IFRS 2). This amount takes into account all allocations
accumulated over the entire contract period. The table of the 'remuneration
awarded' according to the GCGC shows the amount allocated in the respective
financial year.
As in the prior year, the members of the Executive Board did not receive
any
loans or advances in financial year 2015 / 16.
Dr Eller received EUR 11.6 thousand from Nord / LB and Mr Long received £
108.3 thousand from Royal Mail PLC for their activities - which were
approved by the Supervisory Board during their Executive Board membership
in
financial year 2015 / 16 - in supervisory boards or comparable domestic and
foreign corporate supervisory bodies to be set up in accordance with
section
125 German Stock Corporation Act, which activities were not carried out on
the basis of a shareholding of TUI AG in the companies concerned. This
remuneration was not counted towards the remuneration of Executive Board
members paid by TUI AG.
Pursuant to 4.2.5, attachment tables 1 and 2 GCGC, the two tables below
(remuneration awarded and remuneration paid) show the benefits granted by
TUI AG and the payments received.
2. Remuneration awarded
Remune-
ration
awarded
Fried- Peter
rich Long
Joussen Joint
Joint CEO, 12
CEO, Decem-
since ber
14 2014
Februa- until 9
ry 2013 Februa-
1 ry 2016
2
EUR 2014 / 2015 2015 2015 / 2014 / 2015 2015 / 2015
/
'000 15 / 16 / 16 16 15 / 16 16 16
(min.- (max.) (min.)
(max.)
)
Fixed 1,080.4 1,100- 1,100- 1,100.0 884.8 397.- 397.2 397.2
remune- .0 .0 2
ration
Fringe 51.6 45.4 45.4 45.4 33.7 6.8 6.8 6.8
bene-
fits
Total 1,132.0 1,145- 1,145- 1,145.4 918.4 404.- 404.0 404.0
.4 .4 0
JEV 920.0 920.0 - 2,070.0 920.0 332.- - 747.5
2
Additio- 500.0 920.0 - 920.0 500.0 179.- - 332.2
nal 6
Remune-
ration
LTIP 1,805.6 1,494- - 4,440.0 1,805.6 539.- -
1,603.3
.8 7
LTIP 1,805.6 1,805.6
(2014 /
15 -
2017 /
18)
LTIP 1,494- - 4,440.0 - 539.- -
1,603.3
(2015 / .8 7
16 -
2018 /
19)
Total 4,357.6 4,480- 1,145- 8,575.4 4,144.0 1,45- 404.0
3,087.1
.2 .4 5.6
Pension 648.9 726.0 726.0 726.0 365.6 164.- 164.1 164.1
/ 1
service
costs5
Total 5,006.5 5,206- 1,871- 7,500.0 4,509.6 1,61- 568.1
2,708.3
remune- .2 .4 9.7
ration
6
Remune-
ration
awarded
Horst David
Baier 3 Bur-
CFO, ling
since 8 Member
Novem- of
ber Execu-
2007 tive
Board,
since
1 June
2015
EUR 2014 / 2015 2015 / 2015 / 2014 / 2015 2015 / 2015 /
'000 15 / 16 16 16 15 / 16 16 16
(min.) (max.) (min.) (max.)
Fixed 791.9 803.- 803.0 803.0 200.0 600.- 600.0 600.0
remune- 0 0
ration
Fringe 20.1 18.7 18.7 18.7 15.3 42.1 42.1 42.1
bene-
fits
Total 811.9 821.- 821.7 821.7 215.3 642.- 642.1 642.1
7 1
JEV 450.0 450.- - 1,012.5 133.3 400.- - 900.0
0 0
Additio- 320.0 450.- - 450.0 - 400.- - 400.0
nal 0 0
Remune-
ration
LTIP 823.5 681.- - 2,025.0 203.3 505.- - 1,500.0
8 0
LTIP 823.5 203.3
(2014 /
15 -
2017 /
18)
LTIP - 681.- - 2,025.0 - 505.- - 1,500.0
(2015 / 8 0
16 -
2018 /
19)
Total 2,405.4 2,40- 821.7 4,309.2 552.0 1,94- 642.1 3,442.1
3.5 7.1
Pension 401.2 22.3 22.3 22.3 75.0 225.- 225.0 225.0
/ 0
service
costs5
Total 2,806.7 2,42- 844.0 4,200.0 627.0 2,17- 867.1 3,450.0
remune- 5.8 2.1
ration
6
Remune-
ration
awar-
ded
Sebasti- Dr
an Ebel Elke
Member Eller
of Mem-
Executi- ber
ve of
Board, Execu-
since tive
12 Board
Decem- /
ber Human
2014 Re-
sourc-
es,
since
15
Octo-
ber
2015
EUR 2014 / 2015 / 2015 2015 / 2014 201- 2015 / 2015
/
'000 15 16 / 16 16 / 15 5 / 16 16
(min.- (max.) 16 (min.)
(max.)
)
Fixed 547.0 680.0 680.0 680.0 - 654- 654.2 654.2
remune- .2
ration
Fringe 14.3 18.0 18.0 18.0 - 23.- 23.8 23.8
bene- 8
fits
Total 561.2 698.0 698.0 698.0 - 678- 678.0 678.0
.0
JEV 257.4 320.0 - 720.0 - 288- - 649.4
.6
Addi- 320.0 320.0 - 320.0 - 300- - 300.0
tional .0
Remune-
ration
LTIP 490.7 505.0 - 1,500.0 - 408- -
1,212.3
.1
LTIP 490.7 -
(2014
/ 15 -
2017 /
18)
LTIP - 505.0 - 1,500.0 - 408- -
1,212.3
(2015 .1
/ 16 -
2018 /
19)
Total 1,629.3 1,843.0 698.0 3,238.0 - 1,6- 678.0
2,839.7
74.-
8
Pensi- 279.2 328.5 328.5 328.5 - 405- 405.0 405.0
on / .0
ser-
vice
costs5
Total 1,908.5 2,171.5 1,026- 3,380.0 - 2,0- 1,083.0
2,982.6
remune- .5 79.-
ration 8
6
Remuneration
awarded
William Waggott4 Member of
Executive Board, 12 December
2014 until 30 June 2016
EUR '000 2014 / 15 2015 / 2015 / 2015 /
16 16 16
(min.) (max.)
Fixed 555.0 540.0 540.0 540.0
remuneration
Fringe 28.5 13.5 13.5 13.5
benefits
Total 583.5 553.5 553.5 553.5
JEV 360.0 360.0 - 810.0
Additional - - - 360.0
Remuneration
LTIP 671.0 707.0 - 2,100.0
LTIP (2014 / 671.0
15 - 2017 /
18)
LTIP (2015 / - 707.0 - 2,100.0
16 - 2018 /
19)
Total 1,614.5 1,620.5 553.5 3,823.5
Pension / 190.0 177.2 177.2 177.2
service
costs5
Total 1,804.5 1,797.7 730.7 4,000.7
remuneration
6
1 Joint CEO until 9 February 2016; Member of the Executive Board since 15
October 2012
2 Member of the Executive Board since 3 September 2007
3 Fixed remuneration includes EUR 63 k received for his seat on the
supervisory board of Hapag Lloyd AG that is not counted towards fixed
remuneration of TUI AG.
4 Pro rated calculation of fixed remuneration, fringe benefits and pension
contribution; disclosure of full-year values for variable remuneration
components.
5 For Mr Joussen, Mr Baier, Mr Ebel and Dr Eller service costs acc. to IAS
19; for Mr Long, Mr Burling and Mr Waggott payments for pension
contribution.
6 When contractually agreed cap for total remuneration to be paid is
exceeded, LTIP is reduced proportionally.
3. Remuneration paid
Remunera-
tion
paid
Friedrich Peter Horst Baier
Joussen Long CFO, since
Joint CEO, Joint 8 November
since 14 CEO, 12 2007
February December
2013 1 2014
until 9
February
2016 2
EUR '000 2014 / 15 2015 / 2014 / 2015 / 2014 / 15 2015 /
16 15 16 16
Fixed 1,080.4 1,100.0 884.8 397.2 791.9 803.0
remunera-
tion
Fringe 51.6 45.4 33.7 6.8 20.1 18.7
benefits
Total 1,132.0 1,145.4 918.4 404.0 812.0 821.7
JEV 1,326.3 970.2 1,326.3 396.6 648.7 474.6
Additio- 500.0 920.0 500.0 179.6 320.0 450.0
nal
Remunera-
tion
LTIP - 820.0 - 2,023.2 1,853.6 1,220.2
Cash 152.4
deferral
(FY 2012
/ 13)
Cash - 171.2 144.2
deferral
(FY 2013
/ 14)
Cash
deferral
(FY 2014
/ 15)
LTIP 1,530.0
(2011 /
12 -
2014 /
15)
LTIP 820.0 1,076.0
(2012 /
13 -
2015 /
16)
LTIP - 1,618.6
(2014 /
15 -
2017 /
18)
LTIP - - 404.7 -
(2015 /
16 -
2018 /
19)
Others - -
Total 2,958.3 3,855.6 2,744.8 3,003.4 3,634.3 2,966.5
Pension 648.9 726.0 365.6 164.1 401.2 22.3
/
service
costs5
Total 3,607.2 4,581.6 3,110.3 3,167.5 4,035.5 2,988.8
remunera-
tion
Remune-
ration
paid
David Burling Sebastian Dr Elke
Member of Ebel Eller
Executive Member of Member of
Board, since Executive Executive
1 June 2015 Board, Board /
since 12 Human
December Re-
2014 sources,
since 15
October
2015
EUR 2014 / 15 2015 / 2014 / 15 2015 / 2014 / 15 2015 /
'000 16 16 16
Fixed 200.0 600.0 547.0 680.0 654.2
remune-
ration
Fringe 15.3 42.1 14.3 18.0 23.8
bene-
fits
Total 215.3 642.1 561.2 698.0 678.0
JEV 192.2 421.8 371.1 337.5 304.4
Addi- - 400.0 320.0 320.0 300.0
tional
Remune-
ration
LTIP -
Cash
defer-
ral
(FY
2012 /
13)
Cash
defer-
ral
(FY
2013 /
14)
Cash
defer-
ral
(FY
2014 /
15)
LTIP
(2011
/ 12 -
2014 /
15)
LTIP
(2012
/ 13 -
2015 /
16)
LTIP
(2014
/ 15 -
2017 /
18)
LTIP -
(2015
/ 16 -
2018 /
19)
Others
Total 407.5 1,463.9 1,252.3 1,355.5 1,282.4
Pensi- 75.0 225.0 279.2 328.5 405.0
on /
ser-
vice
costs5
Total 482.5 1,688.9 1,531.5 1,684.0 1,687.4
remune-
ration
Remuneration paid
William Waggott 4
Member of Executive Board,
12 December 2014
until 30 June 2016
EUR '000 2014 / 15 2015 / 16
Fixed remuneration 555.0 540.0
Fringe benefits 28.5 13.5
Total 583.5 553.5
JEV 475.7 270.0
Additional Remuneration - -
LTIP - 1,075.0
Cash deferral (FY 2012 / 13)
Cash deferral (FY 2013 / 14) -
Cash deferral (FY 2014 / 15)
LTIP (2011 / 12 - 2014 / 15)
LTIP (2012 / 13 - 2015 / 16)
LTIP (2014 / 15 - 2017 / 18) - 550.0
LTIP (2015 / 16 - 2018 / 19) - 525.0
Others
Total 1,059.2 1,898.5
Pension / service costs5 190.0 177.2
Total remuneration 1,249.2 2,075.7
1 Joint CEO until 9 February 2016; Member of the Executive Board since 15
October 2012
2 Member of the Executive Board since 3 September 2007
3 Fixed remuneration includes EUR 63 k received for his seat on the
supervisory board of Hapag Lloyd AG that is not counted towards fixed
remuneration of TUI AG
4 Remuneration paid acc. to termination agreement, LTIP for financial year
2014 / 15 and 2015 / 16 (pro rated) corresponds to target amount and is
part
of severance payment.
5 For Mr Joussen, Mr Baier, Mr Ebel and Dr Eller service costs acc. to IAS
19; for Mr Long, Mr Burling and Mr Waggott payments for pension
contribution.
The remuneration paid for the last expired financial year shows the cash
payment for the performance reference period 'LTIP 2012 / 13 - 2015 / 16'
for Mr Baier and Mr Joussen, the early redemption of Mr Long's LTIP
entitlements contractually agreed between Mr Long and TUI AG as well as the
redemption of Mr Waggott's LTIP entitlements contained in the severance
payment.
In his service contract of 30 July 2012, a contractual advance payment of
EUR 1,280.0 thousand was agreed with Mr Joussen for the performance
reference period 'LTIP 2012 / 13 - 2015 / 16' and paid. The payment was
deducted from the entitlement for the entire performance reference period
'LTIP 2012 / 13 - 2015 / 16' that actually arose upon expiry of financial
year 2015 / 16. In this respect, only the remaining difference of EUR 820
thousand is shown in the aforementioned table as remuneration paid.
IX. Review of appropriateness of the remuneration of Executive Board
members
and of the pension
Following the end of financial year 2015 /16, the Supervisory Board carried
out the annual review of the remuneration of Executive Board members and
the
pensions for financial year 2015 / 16. It concluded that these are
appropriate in accordance with section 87(1) German Stock Corporation Act.
The Supervisory Board also regularly makes use of external advisors when
assessing the appropriateness of the remuneration of Executive Board
members
and of the pension. Firstly, from an outside perspective, the level and
structure of the remuneration of Executive Board members is assessed in
relation to the remuneration of senior management and the workforce as a
whole (vertical comparison). In addition to a status quo review, the
vertical comparison also takes into account how this relationship changes
over time. Secondly, the remuneration level and structure are assessed on
the basis of a positioning of TUI AG in a peer market made up of a
combination of DAX and MDAX companies that are similar to TUI AG in terms
of
size and complexity of business (horizontal comparison). In addition to the
fixed remuneration, the horizontal comparison also covers the short and
long-term remuneration components as well as the amount of the company
pension. For financial year 2015 / 16, the Supervisory Board commissioned a
consultancy company, hkp Group AG, to prepare an expert report on the
appropriateness of the remuneration level for Executive Board members. The
partner of hkp Group AG commissioned by the Supervisory Board and
responsible for carrying out the assessment is independent of the Executive
Board of TUI AG and the company. The finding of the external advisor
supported the judgment of the Supervisory Board that the level of
remuneration of Executive Board members complies with section 87 (1) German
Stock Corporation Act as well as the recommendations of the GCGC.
X. Remuneration of the Supervisory Board
On 9 February 2016 the Annual General Meeting of TUI AG passed a resolution
to change the remuneration of the Supervisory Board to fixed remuneration
only as well as to adjust the amount of the fixed remuneration components.
The new remuneration model applies retroactively as of 1 October 2015. As a
result, the variable remuneration that is granted in accordance with the
provisions of the Articles of Association applicable until 9 February 20016
and based on the long-term success of the company will no longer be paid.
The aforementioned provisions and remuneration of members of the
Supervisory
Board follow from section 18 of TUI AG's Articles of Association, which has
been made permanently accessible to the public on the internet [insert link
here]. The remuneration of the Supervisory Board is reviewed at appropriate
intervals. In this regard the expected time required for the performance of
their duties and the practice in companies of a similar size, industry and
complexity are taken into account.
Articles of Association online www.tuigroup.com/en-en/investors/
corporate-governance
Purpose and link to company strategy
Highly-qualified Supervisory Board members should be acquired and retained.
Procedure
The members of the Supervisory Board receive fixed remuneration of EUR 90.0
thousand per financial year, payable upon completion of the financial year,
besides reimbursement of their expenses. The Chairman of the Supervisory
Board receives three times, the deputy chairs twice the fixed remuneration
of an ordinary member.
An additional fixed remuneration of EUR 42.0 thousand is paid for
membership
in committees of the Supervisory Board (the Presiding Committee, Audit
Committee, Integration Committee and the Strategy Committee, which was
newly
formed in financial year 2015 / 16, with the exception of the Nomination
Committee). The chairman of the audit committee receives three times and
the
chairman of the strategy committee twice this remuneration. This
remuneration is also paid out upon completion of the respective financial
year.
In the course of the aforementioned change of the remuneration model, the
members of the Supervisory Board will still be entitled to the long-term
variable remuneration component granted in the past financial years 2012 /
13, 2013 / 14 and 2014 / 15. This is calculated according to the average
undiluted earnings per share for the respective last three financial years.
The entitlements from financial years 2013 / 14 and 2014 / 15 acquired
prior
to the change to fixed remuneration only were redeemed on the basis of
planned values for the earnings per share. Since reducing the remuneration
of the members of the Supervisory Board for past and current financial
years
is not permitted under stock corporation law, it is needs to be checked -
upon completion of financial years 2015 / 16 and 2016 / 17 - whether this
has taken place as a result of the change to the remuneration model. If
using the average earnings per share actually achieved were to lead to
higher long-term incentives than taking into account the planned values
would, the corresponding difference is to be paid to the relevant members
of
the Supervisory Board upon the close of the Annual General Meeting that
will
vote on the ratification of the acts of the Supervisory Board for the
respective financial year. Regarding the remuneration granted in financial
year 2015 / 16, it will be reviewed - upon completion of financial year
2017
/ 18 - whether applying the remuneration model valid until 9 February 2016
would have resulted in higher remuneration than applying the new model
would
have. If this is the case, the corresponding difference has to be paid to
the members of the Supervisory Board upon the close of the Annual General
Meeting 2019.
The members of the Supervisory Board do not receive any other remuneration
components or fringe benefits. In all cases the remuneration relates to a
full financial year. For parts of a financial year or short financial
years,
the remuneration is paid on a pro rata basis.
The members of the Supervisory Board and the committees receive an
attendance fee of EUR 1.0 thousand per meeting, regardless of the form of
the meeting.
The members of the Supervisory Board are included in a financial liability
insurance policy (D&O insurance) taken out in an appropriate amount by the
company and in its interest. The relevant insurance premiums are paid by
the
company. In line with the recommendation of the German Corporate Governance
Code, there is a deductible for which the Supervisory Board members can
take
out their own private insurance.
Cap
Due to the change to fixed remuneration only, it is no longer necessary to
determine a maximum total remuneration of the members of the Supervisory
Board.
XI. Remuneration of the Supervisory Board
as a whole
Total remuneration of Supervisory Board
EUR '000 2015 / 2014 /
16 15
Fixed remuneration 2,141.8 1,081.6
Long-term variable remuneration 1 1,108.7 628.3
Fixed remuneration for committee membership 1,166.6 797.6
Attendance fee 283.0 306.0
Remuneration for TUI AG Supervisory Board 4,700.0 2,813.5
mandate
Remuneration for Supervisory Board mandates in 20.5 15.5
the Group
Total 4,720.6 2,829.0
1 Due to a resolution passed in the Annual General Meeting 2016 the
variable
remuneration of the Supervisory Board was replaced in financial year 2015 /
16.
In addition, travel and other expenses totalling EUR 461.0 thousand
(previous year: EUR 421.0 thousand) were reimbursed. Total remuneration of
the Supervisory Board members thus amounted to EUR 5,181.6 thousand
(previous year: EUR 3,250.6 thousand).
XII. Remuneration of individual Supervisory Board members for the financial
year 2015/16
Remunerati-
on of
individual
Superviso-
ry Board
members
for
financial
year
2015/16
EUR '000 Fixed Long-te- Fixed Atten- Remuneration Total
remune- rm remunerati- dance for
ration varia- on for fee Supervisory
ble committee Board
remune- membership memberships
ration in the Group
Prof. Dr 270.0 207.6 153.0 29.0 659.6
Klaus
Mangold
(Chairman)
Frank 180.0 98.2 111.0 19.0 408.2
Jakobi
(Deputy
Chairman)
Sir 180.0 46.9 84.0 21.0 331.9
Michael
Hodgkinson
(Deputy
Chairman)
Andreas 90.0 69.2 57.1 18.0 5.0 239.3
Barczewski
Peter 90.0 51.7 27.0 11.0 179.7
Bremme
Prof. Dr 90.0 69.2 168.0 17.0 344.2
Edgar
Ernst
Wolfgang 26.8 0.0 0.0 2.0 28.8
Flinter-
mann
(since 13
June 2016)
Angelika 57.8 0.0 27.0 5.0 89.8
Gifford
(since 9
February
2016)
Valerie 90.0 31.9 53.9 9.0 184.8
Gooding
Dr Dierk 90.0 30.8 27.0 11.0 158.8
Hirschel
Janis Kong 90.0 31.9 27.0 10.0 158.9
Peter Long 57.8 0.0 53.9 6.0 117.7
(since 9
February
2016)
Coline 90.0 31.9 53.9 13.0 188.8
McConville
Alexey 57.8 0.0 53.9 8.0 119.7
Mordashov
(since 9
February
2016)
Michael 90.0 67.1 42.0 14.0 15.5 228.6
Pönipp
Timothy 32.3 0.0 30.1 7.0 69.4
Powell
(until 9
February
2016)*
Wilfried 45.0 32.1 0.0 4.0 81.1
Rau
(deceased
on 30
March
2016)
Carmen Riu 90.0 69.2 42.0 15.0 216.2
Güell
Carola 90.0 51.1 0.0 8.0 149.1
Schwirn
Maxim 32.3 28.0 15.1 10.0 85.4
Shemetov
(until 9
February
2016)
Anette 90.0 69.2 42.0 15.0 216.2
Strempel
Prof. 32.3 43.2 30.1 6.0 111.6
Christian
Strenger
(until 9
February
2016)
Ortwin 90.0 69.2 69.0 17.0 245.2
Strubelt
Stefan 57.8 0.0 0.0 5.0 62.8
Weinhofer
(since 9
February
2016)
Marcell 32.3 10.3 0.0 3.0 45.6
Witt
(until 9
February
2016)
Total 2,141.8 1,108.7 1,166.6 283.0 20.5
4,720.6
* Mr Powell declared to waive his long-term variable remuneration.
Apart from the work performed by the employees' representatives pursuant to
their contracts, none of the members of the Supervisory Board provided any
personal services such as consultation or agency services for TUI AG or its
subsidiaries in financial year 2015 / 16 and thus did not receive any
additional remuneration arising out of this.
CONSOLIDATED FINANCIAL STATEMENTS
Income Statement of the TUI Group for the
period from 1 Oct 2015 to 30 Sep 2016
EUR million No- 2015 / 2014 / 15
tes 16 restated
Turnover (1) 17,184.6 17,515.5
Cost of sales (2) 15,278.1 15,549.5
Gross profit 1,906.5 1,966.0
Administrative expenses (2) 1,216.9 1,352.6
Other income (3) 36.3 42.9
Other expenses (3) 7.4 5.7
Financial income (5) 58.5 35.8
Financial expenses (6) 345.9 364.5
Share of result of joint ventures and (7) 187.2 143.9
associates
Earnings before income taxes 618.3 465.8
Income taxes (8) 153.4 58.2
Result from continuing operations 464.9 407.6
Result from discontinued operations (9) 687.3 - 28.0
Group profit for the year 1,152.2 379.6
Group profit for the year attributable to (10) 1,037.4 340.4
shareholders of TUI AG
Group profit for the year attributable to (11) 114.8 39.2
non-controlling interest
Earnings per share
EUR No- 2015 2014 /
tes / 16 15
restated
Basic earnings per share (12) 1.78 0.64
from continuing operations 0.61 0.66
from discontinued operations 1.17 - 0.02
Diluted earnings per share (12) 1.77 0.63
from continuing operations 0.60 0.65
from discontinued operations 1.17 - 0.02
Statement of Comprehensive Income
of TUI Group for the period from 1
Oct 2015 to 30 Sep 2016
EUR million No- 2015 /
2014
tes 16
/ 15
Group profit 1,152.2
379.6
Remeasurements of pension - 593.3
82.2
provisions and related fund assets
Changes in the measurement of -
0.1
companies measured at equity
Income tax related to items that (13) 157.9
-
will not be reclassified
24.2
Items that will not be - 435.4
58.1
reclassified to profit or loss
Foreign exchange differences 52.4
-
221.7
Foreign exchange differences 32.7
-
220.2
Reclassification / adjustments 19.7
- 1.5
Financial instruments available 31.8
-
for sale
Changes in the fair value 31.8
7.1
Reclassification / adjustments -
- 7.1
Cash flow hedges 546.1
-
221.0
Changes in the fair value 505.7
360.1
Reclassification / adjustments 40.4
-
581.1
Changes in the measurement of - 32.0
22.0
companies measured at equity
Changes in the measurement outside - 32.0
21.6
profit or loss
Reclassification / adjustments -
0.4
Income tax related to items that (13) - 80.9
27.1
may be reclassified
Items that may be reclassified to 517.4
-
profit or loss
393.6
Other comprehensive income 82.0
-
335.5
Total comprehensive income 1,234.2
44.1
attributable to shareholders of 1,141.8
9.5
TUI AG
attributable to non-controlling 92.4
34.6
interest
Allocation of share of
shareholders of TUI AG of total
comprehensive income
Continuing operations 404.2
-
76.4
Discontinued operations 737.6
85.9
Financial Position of the TUI Group as at 30
Sep 2016
EUR million No- 30 Sep 30 Sep
tes 2016 2015
Assets
Goodwill (14) 2,853.5 3,220.4
Other intangible assets (15) 545.8 911.5
Property, plant and equipment (16) 3,714.5 3,636.8
Investments in joint ventures and associates (17) 1,180.8 1,077.8
Financial assets available for sale (18) 50.4 56.2
Trade receivables and other assets (19) 315.3 332.5
Derivative financial instruments (20) 126.8 48.1
Deferred tax assets (21) 344.7 330.7
Non-current assets 9,131.8 9,614.0
Inventories (22) 105.2 134.5
Financial assets available for sale (18) 265.8 334.9
Trade receivables and other assets (19) 1,320.1 1,948.7
Derivative financial instruments (20) 544.6 281.0
Income tax assets (21) 87.7 58.5
Cash and cash equivalents (23) 2,072.9 1,672.7
Assets held for sale (24) 929.8 42.2
Current assets 5,326.1 4,472.5
14,457.9 14,086.5
Financial Position of the TUI Group as at 30
Sep 2016
EUR million No- 30 Sep 30 Sep
tes 2016 2015
Equity and liabilities
Subscribed capital (25) 1,500.7 1,499.6
Capital reserves (26) 4,192.2 4,187.7
Revenue reserves (27) - 3,017.8 - 3,773.9
Equity before non-controlling interest 2,675.1 1,913.4
Non-controlling interest (30) 573.1 503.9
Equity 3,248.2 2,417.3
Pension provisions and similar obligations (31) 1,410.3 1,114.5
Other provisions (32) 803.0 746.3
Non-current provisions 2,213.3 1,860.8
Financial liabilities (33) 1,503.4 1,653.3
Derivative financial instruments (35) 27.5 78.5
Income tax liabilities (36) 22.2 115.7
Deferred tax liabilities (36) 62.9 125.7
Other liabilities (37) 160.1 136.2
Non-current liabilities 1,776.1 2,109.4
Non-current provisions and liabilities 3,989.4 3,970.2
Pension provisions and similar obligations (31) 40.6 32.4
Other provisions (32) 374.8 463.4
Current provisions 415.4 495.8
Financial liabilities (33) 537.7 233.1
Trade payables (34) 2,476.9 3,224.2
Derivative financial instruments (35) 249.6 388.2
Income tax liabilities (36) 196.0 78.9
Other liabilities (37) 2,872.4 3,247.3
Current liabilities 6,332.6 7,171.7
Liabilities related to assets held for sale (38) 472.3 31.5
Current provisions and liabilities 7,220.3 7,699.0
14,457.9 14,086.5
Sta-
te-
ment
of
Chan-
ges
in
Grou-
p
Equi-
ty
of
the
TUI
Grou-
p
for
the
peri-
od
from
1
Oct
2015
to
30
Sep
2016
EUR Subs- Capi- Ot- Fo- Finan- C- Reva- R- Hy- Equi- N-
Total
mil- cri- tal he- re- cial a- lua- e- brid ty o-
lion bed reser- r ig- in- s- tion v- capi- befo- n-
capi- ves re- n stru- h re- e- tal re --
tal (26) ve- ex- ments f- ser- n- (29) non-- c-
(25) nu- ch- avail- l- ve u- con- o-
e an- able o- e trol- n-
re- ge for w r- ling t-
se- di- sale h- e- inte- r-
rv- ff- e- s- rest o-
es er- d- e- l-
en- g- r- l-
ce- e- v- i-
s s e- n-
s g
(- i-
2- n-
7- t-
) e-
r-
e-
s-
t
(-
3-
0-
)
Bala- 732.- 1,056- 1,- - - 7- 20.5 3- 294.8 2,41- 1-
2,530.2
nce 6 .3 04- 74- .- 3- 9.8 1-
as 9.- 1.- 0 6- 0-
at 1 6 0 .- .-
Oct 1 4
2014
Divi- - - - - - - - - - - -
- 291.6
dend- 94- 9- 94.5 1-
s .5 4- 9-
.- 7-
5 .-
1
Hy- - - - - - - - - - - -
- 10.9
brid 10- 1- 10.9
capi- .9 0-
tal .-
divi- 9
dend
Sha- - - 24- - - - - 2- - 24.2 1-
26.1
re .2 4- .-
ba- .- 9
sed 2
pay-
ment
sche-
mes
Con- 146.- 453.4 - - - - - - - 599.- -
599.5
ver- 1 5
sion
of
con-
ver-
ti-
ble
bond-
s
Is- 0.3 1.2 - - - - - - - 1.5 -
1.5
sue
of
em-
ploy-
ee
sha-
res
Capi- 620.- 2,676- - - - - - - - 3,29- -
3,297.4
tal 6 .8 7.4
in-
crea-
se
De- - - - - - - - - - - -
- 9.5
con- 9-
soli- .-
dati- 5
on
Ef- - - - - - 3- 0.2 - - - 5-
-
fect- 3,- 26- .- 4- 4,03- 6-
3,469.5
s on 77- 0.- 2 ,- 3.1 3-
the 6.- 2 0- .-
ac- 3 3- 6
qui- 3-
siti- .-
on 1
of
non--
con-
trol-
ling
inte-
rest-
s
Red- - - - - - - - - - - -
- 300.0
emp- 5.- 5- 294.8 300.-
tion 2 .- 0
hy- 2
brid
capi-
tal
Grou- - - 34- - - - - 3- - 340.- 3-
379.6
p 0.- 4- 4 9-
pro- 4 0- .-
fit .- 2
for 4
the
year
For- - - - - - - - - - - -
- 221.7
eign 67- 12- 1- 0.9 2- 209.- 1-
ex- .7 8.- 2- 0- 4 2-
chan- 0 .- 9- .-
ge 8 .- 3
dif- 4
fe-
renc-
es
Cash - - - - - - - - - - 1-
- 221.0
flow 2- 2- 231.- 0-
hed- 3- 3- 0 .-
ges 1- 1- 0
.- .-
0 0
Re- - - 82- - - - - 8- - 82.1 0-
82.2
mea- .1 2- .-
sure- .- 1
ment- 1
s of
pen-
sion
pro-
visi-
ons
and
rela-
ted
fund
as-
sets
Chan- - - 22- - - - - 2- - 22.1 -
22.1
ges .1 2-
in .-
the 1
mea-
sure-
ment
of
com-
pa-
nies
mea-
su-
red
at
equi-
ty
Ta- - - - - - 2- - 5- - 5.3 -
2.9
xes 24- 9- .- 2-
at- .2 .- 3 .-
tri- 5 4
buta-
ble
to
othe-
r
com-
pre-
hen-
sive
inco-
me
Othe- - - 12- - - - - - - - -
- 335.5
r .3 12- 2- 0.9 3- 330.- 4-
com- 8.- 1- 3- 9 .-
pre- 0 4- 0- 6
hen- .- .-
sive 3 9
inco-
me
To- - - 35- - - - - 9- - 9.5 3-
44.1
tal 2.- 12- 2- 0.9 .- 4-
com- 7 8.- 1- 5 .-
pre- 0 4- 6
hen- .-
sive 3
inco-
me
Bala- 1,49- 4,187- - - - - 19.8 - - 1,91- 5-
2,417.3
nce 9.6 .7 2,- 1,- 2- 3- 3.4 0-
as 46- 12- 0- ,- 3-
at 0.- 9.- 4- 7- .-
30 4 2 .- 7- 9
Sep 1 3-
2015 .-
9
Divi- - - - - - - - - - - -
- 340.6
dend- 32- 3- 327.- 1-
s 7.- 2- 0 3-
0 7- .-
.- 6
0
Sha- - - 4.- - - - - 4- - 4.3 -
4.3
re 3 .-
ba- 3
sed
pay-
ment
sche-
mes
Is- 1.1 4.5 - - - - - - - 5.6 -
5.6
sue
of
em-
ploy-
ee
sha-
res
Ac- - - - - - - - - - - -
- 56.3
qui- 56- 5- 56.3
siti- .3 6-
on .-
of 3
own
sha-
res
De- - - - - - - 0.2 0- - 0.2 -
- 9.8
con- .- 1-
soli- 2 0-
dati- .-
on 0
Ef- - - - - - - - - - - 0-
- 6.5
fect- 6.- 6- 6.9 .-
s on 9 .- 4
the 9
ac-
qui-
siti-
on
of
non--
con-
trol-
ling
inte-
rest-
s
Grou- - - 1,- - - - - 1- - 1,03- 1-
1,152.2
p 03- ,- 7.4 1-
pro- 7.- 0- 4-
fit 4 3- .-
for 7- 8
the .-
year 4
For- - - 61- 34- - - - 7- - 75.0 -
52.4
eign .0 .0 1- 0.6 5- 2-
ex- 9- .- 2-
chan- .- 0 .-
ge 4 6
dif-
fe-
renc-
es
Fi- - - - - 31.8 - - 3- - 31.8 -
31.8
nan- 1-
cial .-
In- 8
stru-
ment-
s
avai-
la-
ble
for
sale
Cash - - - - - 5- - 5- - 545.- 0-
546.1
flow 4- 4- 8 .-
hed- 5- 5- 3
ges .- .-
8 8
Re- - - - - - - - - - - -
- 593.3
mea- 59- 5- 593.-
sure- 3.- 9- 3
ment- 3 3-
s of .-
pen- 3
sion
pro-
visi-
ons
and
rela-
ted
fund
as-
sets
Chan- - - - - - - - - - - -
- 32.0
ges 32- 3- 32.0
in .0 2-
the .-
mea- 0
sure-
ment
of
com-
pa-
nies
mea-
su-
red
at
equi-
ty
Ta- - - 15- - - - - 7- - 77.1 -
77.0
xes 7.- 8- 7- 0-
at- 9 0- .- .-
tri- .- 1 1
buta- 8
ble
to
othe-
r
com-
pre-
hen-
sive
inco-
me
Othe- - - - 34- 31.8 4- - 1- - 104.- -
82.0
r 40- .0 4- 0.6 0- 4 2-
com- 6.- 5- 4- 2-
pre- 4 .- .- .-
hen- 6 4 4
sive
inco-
me
To- - - 63- 34- 31.8 4- - 1- - 1,14- 9-
1,234.2
tal 1.- .0 4- 0.6 ,- 1.8 2-
com- 0 5- 1- .-
pre- .- 4- 4
hen- 6 1-
sive .-
inco- 8
me
Bala- 1,50- 4,192- - - 31.8 2- 19.4 - - 2,67- 5-
3,248.2
nce 0.7 .2 2,- 1,- 4- 3- 5.1 7-
as 21- 09- 1- ,- 3-
at 5.- 5.- .- 0- .-
30 3 2 5 1- 1
Sep 7-
2016 .-
8
Cash Flow Statement
EUR million No- 2015 / 2014 / Var.
tes 16 15
Group profit 1,152.2 379.6 + 772.6
Depreciation, amortisation and 578.5 700.5 - 122.0
impairments (+) / write-backs (-)
Other non-cash expenses (+) / income - 164.6 - 118.7 - 45.9
(-)
Interest expenses 202.3 207.7 - 5.4
Dividends from joint ventures and 82.2 81.3 + 0.9
associates
Profit (-) / loss (+) from disposals - 802.5 - 23.3 - 779.2
of non-current assets
Increase (-) / decrease (+) in - 9.5 - 6.1 - 3.4
inventories
Increase (-) / decrease (+) in 324.7 - 233.6 + 558.3
receivables and other assets
Increase (+) / decrease (-) in - 234.2 - 85.3 - 148.9
provisions
Increase (+) / decrease (-) in - 94.4 - 111.6 + 17.2
liabilities (excl. financial
liabilities)
Cash inflow from operating activities (45) 1,034.7 790.5 + 244.2
Payments received from disposals of 115.3 341.6 - 226.3
property, plant and equipment,
investment property and intangible
assets
Payments from disposals of 876.7 - 27.6 + 904.3
consolidated companies (excl.
disposals of cash and cash
equivalents due to divestments)
Payments received from the disposals 12.1 325.5 - 313.4
of other non-current assets
Payments made for investments in - 697.4 - 826.4 + 129.0
property, plant and equipment,
investment property and intangible
assets
Payments made for investments in - 10.5 - 5.1 - 5.4
consolidated companies (excl. cash
and cash equivalents received due to
acquisitions)
Payments made for investments in - 57.2 - 24.8 - 32.4
other non-current assets
Cash inflow / outflow from investing (46) 239.0 - 216.8 455.8
activities
Payments made for capital increases - 54.2 - 9.8 - 44.4
Payments made for interest increase - 8.0 - 128.2 + 120.2
in consolidated companies
Dividend payments
TUI AG - 327.0 - 109.3 - 217.7
subsidiaries to non-controlling - 14.1 - 197.0 + 182.9
interest
Payments received from the issue of 108.8 79.3 + 29.5
bonds and the raising of financial
liabilities
Payments made for redemption of - - 300.0 + 300.0
hybrid capital
Payments made for redemption of loans - 275.3 - 359.7 + 84.4
and financial liabilities
Interest paid - 92.3 - 92.0 - 0.3
Cash outflow from financing (47) - 662.1 - + 454.6
activities 1,116.7
Net change in cash and cash 611.6 - 543.0 +
equivalents 1,154.6
Development of cash and cash (48)
equivalents
Cash and cash equivalents at 1,682.2 2,258.0 - 575.8
beginning of period
Change in cash and cash equivalents 105.8 - 33.1 + 138.9
due to exchange rate fluctuations
Change in cash and cash equivalents 4.0 0.3 + 3.7
due to changes in the group of
consolidated companies
Change in cash and cash equivalents 611.6 - 543.0 +
with cash effects 1,154.6
Cash and cash equivalents at end of 2,403.6 1,682.2 + 721.4
period
of which included in the balance 330.7 9.5 + 321.2
sheet as assets held for sale
Notes
Principles and methods underlying the
consolidated financial statements
General
The TUI Group with its major subsidiaries and shareholdings operates in
tourism.
TUI AG, based in Karl-Wiechert-Allee 4, Hanover is the TUI Group's parent
company and a listed corporation under German law. The Company is
registered
in the commercial registers of the district courts of Berlin-Charlottenburg
(HRB 321) and Hanover (HRB 6580). The shares in the company are traded on
the London Stock Exchange and the Hanover and Frankfurt Stock Exchanges.
These consolidated financial statements of TUI AG were prepared for the
business year from 1 October 2015 to 30 September 2016. Where any of TUI's
subsidiaries have different financial years, financial statements were
prepared as at 30 September in order to include these subsidiaries in TUI
AG's consolidated financial statements.
The Executive Board and the Supervisory Board have submitted a Declaration
of Compliance with the German Corporate Governance Code required pursuant
to
section 161 of the German Stock Corporation Act (AktG) and made it
permanently available to the general public on the Company's website
(www.tuigroup.com).
The consolidated financial statements are prepared in euros. Unless stated
otherwise, all amounts are indicated in million euros (EUR m).
The consolidated financial statements were approved for publication by TUI
AG's Executive Board on 6 December 2016.
Accounting principles
Declaration of compliance
Pursuant to Regulation EEC No. 1606 / 2002 of the European Parliament and
Council, TUI AG's consolidated financial statements as at 30 September 2016
were prepared in accordance with the International Financial Reporting
Standards (IFRS) as applicable in the European Union. Moreover, the
commercial-law provisions listed in section 315a (1) of the German
Commercial Code (HGB) and the Disclosure and Transparency Rules of the UK
Financial Conduct Authority were also observed in preparing the
consolidated
financial statements.
The accounting and measurement methods and the explanatory information and
Notes to these annual financial statements for financial year 2015 / 16 are
consistent in every respect with those followed in preparing the previous
consolidated financial statements for financial year 2014 / 15.
Going concern reporting according to the UK Corporate Governance Code
The Executive Board remains satisfied with the Group's funding and
liquidity
position. At 30 September 2016 the main sources of debt funding included:
* An external revolving credit facility of EUR 1,535.0 m maturing in
December 2020, used to manage the seasonality of the Group's cash flows
and liquidity,
* a bond 2014 / 19 with a nominal value of EUR 300.0 m, issued by TUI AG
and originally maturing in October 2019,
* EUR 1,231.7 m of drawn finance lease obligations and
* Bank liabilities of EUR 410.8 m, being mainly loans used to acquire
property, plant and equipment.
The revolving credit facility requires compliance with certain financial
covenants and these covenants were all complied with at the balance sheet
date.
The bond 2014 / 19 with a nominal value of EUR 300.0 m was called on 19
October 2016 and redeemed in full on
18 November 2016. New senior notes with the same nominal amount were
successfully issued on 26 October 2016 with a more favourable interest
coupon. The notes will mature on 26 October 2021.
In accordance with provision C1.3 of the 2016 revision of the UK Corporate
Governance Code, the Executive Board confirms that it is considered
appropriate to prepare the financial statements on the going concern basis.
Restatement of prior reporting period
The following restatements were made for financial year 2014 / 15:
Restatement caused by Discontinued operations
Due to the planned sale of the Hotelbeds Group segment in financial year
2015 / 16, the segment was reported as a discontinued operation in Q2 2015
/
16 in line with IFRS 5. The Hotelbeds Group was sold on 12 September 2016.
Additionally, the Specialist Group segment is reported as a discontinued
operation as at 30 September 2016, due to its planned sale in the course of
financial year 2016 / 17.
In the consolidated income statement for financial year 2015 / 16, the
result generated by the Hotelbeds Group until its sale as well as the
result
of the Specialist Group is shown separately as result from discontinued
operations. The prior year consolidated income statement was restated as
follows. For further explanations please refer to the section 'Acquisitions
- Divestments - Discontinued operations'.
Restated items of the Income
statement of the TUI Group
for the period from 1 Oct
2014 to 30 Sep 2015
EUR million Before Restate- Restate- Restated
restate- ment ment
ment Specialist Hotelbeds
Group Group
Turnover 20,011.6 - 1,502.1 - 994.0 17,515.5
Cost of sales 17,616.3 - 1,305.4 - 761.4 15,549.5
Gross profit 2,395.3 - 196.7 - 232.6 1,966.0
Administrative expenses 1,715.4 - 170.2 - 192.6 1,352.6
Other income 51.2 - 8.3 - 42.9
Other expenses 8.0 - 2.1 - 0.2 5.7
Financial income 37.9 - 1.0 - 1.1 35.8
Financial expenses 370.1 - 2.1 - 3.5 364.5
Share of result of joint 144.5 - - 0.6 143.9
ventures and associates
Earnings before income taxes 535.4 - 31.6 - 38.0 465.8
from continuing operations
Income taxes 87.0 - 17.6 - 11.2 58.2
Result from continuing 448.4 - 14.0 - 26.8 407.6
operations
Result from discontinued - 68.8 14.0 26.8 - 28.0
operations
Group loss for the year 379.6 0.0 - 379.6
Principles and methods of consolidation
Principles
The consolidated financial statements include all significant subsidiaries
directly or indirectly controlled by TUI AG. Control exists where TUI AG
has
power over the relevant activities, is exposed to variable returns or has
rights to the returns, and has the ability to affect those variable returns
through its power over the investee.
As a rule, the control is exercised by means of a direct or indirect
majority of voting rights. If the TUI Group holds less than the majority of
voting rights in a shareholding, it may exercise control due to contractual
agreements or similar arrangements.
In assessing control, the existence and effect of potential voting rights
that are currently exercisable or convertible are taken into account.
Consolidation of subsidiaries starts from the date TUI gains control. When
TUI ceases to control the corresponding companies, they are removed from
the
group of consolidated companies.
The consolidated financial statements are prepared from the separate or
single-entity financial statements of TUI AG and its subsidiaries, drawn up
on the basis of uniform accounting, measurement and consolidation methods
and usually exclusively audited or reviewed by auditors.
Associates for which the TUI Group is able to exert significant influence
over the financial and operating policy decisions within these companies
are
accounted for using the equity method. As a rule, significant influence is
assumed if TUI AG directly or indirectly holds voting rights of 20 to less
than 50 per cent.
Stakes in joint ventures are also measured using the equity method. A joint
venture is a company managed jointly by the TUI Group with one or several
partners based on a contractual agreement, in which the parties that
jointly
exercise control have rights to the company's net assets. Joint ventures
also include companies in which the TUI Group holds a majority or minority
of voting rights but in which decisions about the relevant activities may
only be taken on an unanimous basis due to contractual agreements.
The dates as of which associates and joint ventures are included in or
removed from the group of companies measured at equity are determined in a
manner consistent with that applied to subsidiaries. At equity measurement
in each case is based on the last annual financial statements available or
the interim financial statements as at 30 September if the balance sheet
dates differ from TUI AG's balance sheet date. This affects 28 companies
with a financial year from 1 January to 31 December and two companies with
a
financial year from 1 April to 31 March of the following year.
Group of consolidated companies
In financial year 2015 / 16, the consolidated financial statements included
a total of 417 subsidiaries besides TUI AG.
62 subsidiaries were not included in the consolidated financial statements.
Even when taken together, these companies are not significant for the
presentation of a true and fair view of the net assets, financial position
and results of operations of the Group.
Development of the group of consolidated
companies* and the Group companies
measured at equity
Balance Ad- Dis- Balance
30 Sep di- po- 30 Sep
2015 ti- sal- 2016
ons s
Consolidated subsidiaries 532 19 134 417
Associates 19 4 10 13
Joint ventures 33 - 6 27
* excl. TUI AG
A total of 19 companies have been newly included as consolidated
subsidiaries since 1 October 2015, with 12 companies newly established,
three companies added due to the purchase of additional stakes and four
companies included in consolidation due to an expansion of their business
operations.
Since 1 October 2015, a total of 134 companies have been removed from
consolidation. 97 of the companies were removed from consolidation due to
divestment, 21 companies due to liquidation, and ten companies due to
mergers. In addition, three companies were removed from consolidation due
to
sales of stakes and the associated loss of control. Moreover, two companies
were removed from consolidation due to the discontinuation of their
business
operations, and one company due to a loss of control. The divestments
include 91 companies of the Hotelbeds Group. For more detailed information
about the sale of the Hotelbeds Group, please refer to the section
'Acquisitions - Divestments - Discontinued operations'.
13 associated companies and 27 joint ventures are measured at equity as at
the balance sheet date. The number of companies measured at equity has
declined by ten since 1 October 2015, with five disposals, one merger and
two companies transferred to the Sunwing Group. Moreover, one company is
now
consolidated due to the acquisition of further stakes, and one company is
no
longer measured at equity due to a loss of joint control. Parallel to these
removals, four associated companies were added in the current financial
year
due to further acquisitions of stakes, and in one case a newly established
operation, so that the number of associated companies declined by six
overall in financial year 2015 / 16. The number of joint ventures measured
at equity has declined by a total of six since 1 October 2015 due to the
merger of five companies and the divestment of one company.
The major direct and indirect subsidiaries, associates and joint ventures
of
TUI AG are listed under 'Other Notes - TUI Group Shareholdings'.
The effects of the changes in the group of consolidated companies in
financial year 2015 / 16 on financial years 2015 / 16 and 2014 / 15 are
outlined below. While the value of companies deconsolidated in financial
year 2015 / 16 posted in the statement of financial position is carried as
per the closing date for the previous period, items in the income statement
are also shown for a part year period of financial year 2015 / 16. Items
which are already presented in the result from discontinued operations, the
assets held for sale or liabilities related to assets held for sale are not
inculded in the tables below but in the section 'Discontinued operations'.
Impact of changes in the group of consolidated
companies on the statement of financial position
Additi- Dispo-
ons sals
EUR million 30 Sep 30 Sep
2016 2015
Non-current assets 23.5 430.9
Current assets 13.4 812.2
Non-current financial liabilities - 0.2
Current financial liabilities - 7.3
Non-current other liabilities - 54.9
Current other liabilities 10.2 774.6
Impact of changes in the group of consolidated
companies on the consolidated income statement
Addi- Dispo-
tions sals
EUR million 2015 2015 2014
/ 16 / 16 / 15
Turnover with third parties 32.4 0.2 3.0
Turnover with consolidated Group companies 19.6 0.1 0.7
Cost of sales and administrative expenses 50.7 0.4 6.1
Other income / other expenses - 0.6 -
Share of result of joint ventures and associates - 0.1 0.8
Financial expenses (+) / income (-) - 0.8 - 0.4
Earnings before income taxes 2.1 0.6 - 2.0
Income taxes 0.3 1.7 - 1.7
Group profit for the year 1.8 - 1.1 - 0.3
Acquisitions - divestments - discontinued operations
Acquisitions
In financial year 2015 / 16, 18 travel agencies were acquired in the form
of
asset deals. Moreover, further interests were acquired in the Aelos Group,
previously measured at equity. Following these acquisitions, the TUI Group
now holds 100 % of the shares in each of these companies. The consideration
for these acquisitions consisted of payments totalling EUR 7.9 m.
The acquisitions did not have a material effect on turnover or the Group
result for the reporting period.
The purchase price allocations of the following companies and businesses
acquired in financial year 2014 / 15 were finalised within the twelve-month
period provided under IFRS 3 in the present annual financial statements
without having a major impact on the consolidated statement of financial
position:
* 11 travel agencies in Germany
* aQi Hotel Schladming GmbH
* aQi Hotel Management GmbH
Acquisitions after the balance sheet date
On 31 October 2016 TUI AG acquired 99.99 % of the shares in Transat France
S. A., Ivry-sur-Seine, France. The aim of that acquisition is to increase
the market presence in France. This acquisition also included the purchase
of the majority stake in Transat Développement SAS, Ivry-sur-Seine, France
and Tourgreece Tourism Enterprise A.E., Athen, Greece.
The consideration transferred consisted of payments totalling EUR 64.9 m
subject to contractual purchase price amendments.
The table below provides an overview of the fair values of the Transat
Group
as at the date of first-time consolidation:
Statements of financial position of the
Transat Group as at the date of first-time
consolidation
EUR million Fair value at date of
first-time
consolidation
Other intangible assets 11.9
Property, plant and equipment 21.2
Investments 7.0
Fixed assets 40.1
Trade receivables 146.8
Other assets (including prepaid expenses) 31.6
Cash and cash equivalents 13.9
Liabilities and deferred income 211.9
Net assets 20.5
At the reporting date, accounting for the business combination, in
particular fair value measurement of assets and liabilities, was not yet
completed. The preliminary goodwill out of this acquisition is EUR 44.4 m.
Divestments
The disposal of LateRooms Ltd. and the Hotelbeds Group is explained in the
'Discontinued Operations' section. The effects of the other divestments on
the TUI Group's net assets, financial position and results of operations
were immaterial.
Discontinued operations
Specialist Group
TUI AG has decided to exit the Specialist Group as it is not closely
aligned
with TUI Group's remaining business and thus offers very little potential
for integration into the Group's operation. Specialist Group consists of
two
segments. The tour operators combined under the Travelopia brand offer
expedition travel, luxury tours, sporting events, student travels and
sailing trips. Travelopia is expected to be sold within the forthcoming
financial year. Specialist tour operators of Specialist Group not managed
under Travelopia comprise adventure tours and language schools already sold
by the end of the financial year under review.
The result from this discontinued operation is reported separately from the
income and expenses of continuing operations in the consolidated income
statement, shown in a separate line as 'Result from discontinued
operations'
together with the profit contributions of the other discontinued
operations.
The consolidated income statement of the prior year was restated
accordingly.
Income statement of the discontinued operation
Specialist Group for the period from 1 Oct 2015
to 30 Sep 2016
EUR million 2015 / 2014 /
16 15
Turnover 1,371.4 1,502.1
Cost of sales 1,217.1 1,305.4
Gross profit 154.3 196.7
Administrative expenses 177.0 170.2
Other income 7.0 8.3
Other expenses 20.7 2.1
Financial income 0.6 1.0
Financial expenses 1.1 2.1
Earnings before income taxes from the - 36.9 31.6
discontinued operation
Income taxes - 2.7 17.6
Result from the discontinued operation - 34.2 14.0
Specialist Group
Result from the discontinued operation - 34.1 28.2
Specialist Group attributable to shareholders of
TUI AG
Result from the discontinued operation - 0.1 - 14.2
Specialist Group attributable to non-controlling
interest
The income statement for the discontinued operation Specialist Group
reflects the sale of specialist tour operators not forming part of
Travelopia, which has already been effected. This has in particular driven
the decline in turnover and cost of sales. Moreover, administrative
expenses
and other expenses for the establishment of an independent organisation and
for the preparation for the sale of Travelopia were incurred in the current
financial year.
In the prior year, the result from discontinued operations attributable to
non-controlling shareholders also comprised shares in the result
attributable to TUI Travel PLC's non-controlling shareholders until
December
2014.
The assets and liabilities are shown separately in the consolidated
statement of financial position under 'Assets held for sale' and
'Liabilities related to assets held for sale'. The table below presents the
key asset and liability groups of the discontinued operation Specialist
Group.
Assets and liabilities of the discontinued operation
Specialist Group as at 30 Sep 2016
EUR million 30 Sep
2016
Assets
Goodwill 53.1
Other intangible assets 132.1
Property, plant and equipment 220.9
Trade receivables from third parties and other assets 0.8
Trade receivables from continuing operations 3.1
Derivative financial instruments 0.5
Deferred tax assets 7.6
Non-current assets 418.1
Inventories 37.6
Trade receivables from third parties and other assets 121.2
Trade receivables from continuing operations 80.6
Derivative financial instruments 6.8
Current tax assets 17.6
Cash and cash equivalents 330.7
Current assets 594.5
1,012.6
EUR million
Equity and liabilities
Revenue reserves 302.7
Equity before non-controlling interest 302.7
Non-controlling interest - 1.8
Equity 300.9
Other provisions 14.7
Non-current provisions 14.7
Financial liabilities against third parties 6.0
Financial liabilities against continuing operations 236.1
Derivative financial instruments 0.1
Deferred tax liabilities 33.5
Other liabilities 1.2
Non-current liabilities 276.9
Non-current provisions and liabilities 291.6
Other provisions 1.9
Current provisions 1.9
Financial liabilities against third parties 6.7
Trade payables to third-parties 93.9
Trade payables to continuing operations 3.3
Derivative financial instruments 0.7
Current tax liabilities 17.7
Other liabilities 295.9
Current liabilities 418.2
Current provisions and liabilities 420.1
1,012.6
Receivables from and payables to the Group's continuing operations are
eliminated in the consolidated statement of financial position and are
therefore not included in the items 'Assets held for sale' and 'Liabilities
related to assets held for sale'.
Reconciliation to assets held for sale in the financial
position of the TUI AG as at 30 Sep 2016
EUR million 30 Sep
2016
Current and non-current assets of the Specialist Group 1,012.6
Elimination of receivables from continuing operations - 83.7
Assets held for sale of the Specialist Group 928.9
Reconciliation to liabilities related to assets held for sale
in the financial position of the TUI AG as at 30 Sep 2016
EUR million 30
Sep
2016
Current and non-current liabilities of the Specialist Group 711.7
Elimination of liabilities against continuing operations -
239.4
Liabilities related to assets held for sale 472.3
The consolidated cash flow statement shows the cash flows of the overall
Group including the discontinued operations. The table below provides a
separate presentation of the cash flows of the discontinued operation
Specialist Group. Cash flows from intercompany relationships, in particular
financing schemes, dividends, business transfers and sales of companies,
are
not taken into account. In the financial year under review, the cash
outflow
from investing activities includes an inflow of EUR 29.1 m reflecting a
part
of the purchase price for Hotelbeds Group and an amount of EUR 80.4 m for
tax payments directly associated with the sale.
Condensed cash flow statement of the discontinued
operation Specialist Group
EUR million 2015 / 2014 /
16 15
Cash inflow from operating activities 42.1 53.1
Cash outflow from investing activities - 80.6 - 47.3
Cash outflow from financing activities - 3.9 - 3.1
Hotelbeds Group
In the second quarter of the completed financial year, TUI AG had decided
to
exit its Hotelbeds Group segment. Hotelbeds Group comprises B2B portals to
sell hotel bed capacity and destination services to wholesale customers
such
as travel agencies and tour operators worldwide. This segment also
comprises
incoming agencies whose services are not directly aligned with TUI Group's
tour operators and services for the cruise industry.
The sale of Hotelbeds Group to GNVA Acquisitions Ltd was completed on 12
September 2016. GNVA Acquisitions Ltd is a company owned by the fund
managed
and advised by Cinven Capital Management and Canada Pension Plan Investment
Board. The result from the sale is calculated as follows:
Result from the sale of the Hotelbeds Group
EUR million 2015 / 16
Cash received 1,233.1
Fair Value of investment retained 0.9
Total Consideration 1,234.0
Carrying amount of net assets sold - 355.4
Carrying amount of non-controlling interest 10.0
Reclassification of fx differences - 18.4
Reclassifications of hedging reserves 1.4
Costs of disposal, additional charges and guarantees - 95.8
Profit on sale before income taxes 775.8
Income taxes on disposal 94.9
Profit on sale after tax 680.9
The profit on sale includes contractual guarantees disclosed as other
liabilities.
TUI Group continues to hold an indirect stake in an incoming agency of
Hotelbeds Group after the sale. The agency is now included in TUI AG's
consolidated financial statements as a joint venture. Fair value
measurement
of the remaining stake resulted in a profit of EUR 0.5 m. Taxes on the gain
on disposal only reflect taxes directly associated with the sale. These
taxes have already been paid.
The result from this discontinued operation Hotelbeds Group generated until
the date of disposal is carried separately from the income from and
expenses
for continuing operations in the consolidated income statement. It is shown
in a separate line as 'Result from discontinued operations' together with
the profit contributions of other discontinued operations. The consolidated
income statement for the prior year was restated accordingly.
Income statement of the discontinued operation
Hotelbeds Group for the period from 1 Oct 2015 to 12
Sep 2016
EUR million 2015 2014
/ 16 / 15
Turnover 950.2 994.0
Cost of sales 735.4 761.4
Gross profit 214.8 232.6
Administrative expenses 156.9 192.6
Other income 0.4 -
Other expenses 4.9 0.2
Financial income 0.1 1.1
Financial expenses 1.7 3.5
Share of result of joint ventures and associates 0.3 0.6
Earnings before income taxes from the discontinued 52.1 38.0
operation
Income taxes 10.7 11.2
Operating result from the discontinued operation 41.4 26.8
Result from the disposal of the discontinued 775.8 -
operation before income taxes
Income taxes on the profit on disposal 94.9 -
Result from the disposal of the discontinued 680.9 -
operation Hotelbeds Group
Result from the discontinued operation Hotelbeds 722.3 26.8
Group
Result from discontinued operation Hotelbeds Group 718.9 28.1
attributable to shareholders of TUI AG
Result from discontinued operation Hotelbeds Group 3.4 - 1.3
attributable to non-controlling interest
The turnover with the continuing operations of EUR 108.9 m in financial
year
2015 / 16 (previous year EUR 64.8 m) was eliminated against the cost of
sales of the Hotelbeds Group.
The decline in turnover and cost of sales is driven by the sale of
Hotelbeds
Group as at 12 September 2016 as therefore the income statement does not
reflect the total year. Adjusted for that effect, the hotel bed portals, in
particular, posted an increase in turnover. Administrative expenses and
other expenses rose due to the costs incurred in connection with the
establishment of a separate organisation for Hotelbeds Group. This increase
in costs was offset by the sale prior to the close of the financial year.
In the prior year, the result from discontinued operation attributable to
non-controlling shareholders also comprised the share of results
attributable to the non-controlling shareholders of TUI Travel PLC until
the
end of December 2014.
The Group's consolidated Cash Flow Statement presents the cash flows for
the
overall Group including the discontinued operations. A separate
presentation
of the cash flows for the discontinued operation Hotelbeds Group is
provided
in the following table. Cash flows from intercompany financing schemes and
intercompany dividends, business transfers and company sales are not taken
into account. The cash flows from operating activities are negative, as the
second half of the month of September is not included in the cash flow
statement for the financial year. As the cash flows associated with the
sale
of Hotelbeds Group are shown in TUI Group's segments in which they have
been
incurred, the cash outflows from investing activities only comprise the
amount of the cash and cash equivalents transferred on the sale of the
Hotelbeds Group but do not include the selling prices paid.
Condensed cash flow statement of the discontinued
operation Hotelbeds Group
EUR million 2015 / 2014 /
16 15
Cash outflow / inflow from operating activities - 24.5 8.5
Cash outflow from investing activities - - 31.9
289.4
Cash inflow / outflow from financing activities 10.4 - 6.0
LateRooms Group
In the previous year, TUI AG had decided to exit its LateRooms Group
segment. While AsiaRooms and Malapronta were discontinued in the prior
year,
LateRooms Ltd. was sold on 6 October 2015.
The result of this discontinued operation is carried separately from the
income from and expenses for continuing operations in the consolidated
income statement. It is shown in a separate line as 'Result from
discontinued operations' together with the profit contributions of the
other
discontinued operations. As the LateRooms Group was already classified as
discontinued operation in the prior year, there is no restatement of the
prior year income statement for the LateRooms Group.
Income statement of the discontinued operation
LateRooms Group for the period from 1 Oct 2015 to 30
Sep 2016
EUR million 2015 2014
/ 16 / 15
Turnover - 69.7
Cost of sales - 51.4
Gross profit - 18.3
Administrative expenses - 43.2
Other income 0.1 -
Other expenses - 7.3
Financial expenses - 0.7
Earnings before income taxes from the discontinued 0.1 -
operation 32.9
Income taxes - -
1.3 0.1
Result from the discontinued operation 1.4 -
32.8
Result from the disposal / measurement of the - -
discontinued operation 2.2 36.0
Result from the discontinued operation LateRooms Group - -
0.8 68.8
Result from the discontinued operation LateRooms Group - -
attributable to shareholders of TUI AG 0.8 67.0
Result from the discontinued operation LateRooms Group - -
attributable to non-controlling interest 1.8
The loss on disposal of the LateRooms Group comprises the cumulative
foreign
exchange translation differences that were reclassified to profit and loss
upon removal from equity, and the ancillary divestment costs.
The Group's Cash Flow Statement presents the cash flows for the overall
Group including the discontinued operations. A separate presentation of the
cash flows for the discontinued operation LateRooms Group is provided in
the
following table. Cash flows from intra-Group financing schemes and
intra-Group dividends and business disposals are not taken into account.
Condensed cash flow statement of the discontinued
operation LateRooms Group
EUR million 2015 / 2014 /
16 15
Cash outflow from operating activities - - 13.6
Cash outflow from investing activities - - 8.3
Cash inflow from financing activities - 16.3
Foreign exchange translation
Transactions in foreign currencies are translated into the functional
currency at the foreign exchange rates at the date of the transaction. Any
gains and losses resulting from the execution of such transactions and the
translation of monetary assets and liabilities denominated in foreign
currencies at the foreign exchange rate at the date of the transaction are
shown in the income statement, with the exception of gains and losses to be
recognised in equity as qualifying cash flow hedges.
The annual financial statements of companies are prepared in the respective
functional currency. The functional currency of a company is the currency
of
the primary economic environment in which the company operates. With the
exception of a small number of companies, the functional currencies of all
subsidiaries correspond to the currency of the country of incorporation of
the respective subsidiary.
Where subsidiaries prepare their financial statements in functional
currencies other than the Euro, being the Group's reporting currency, the
assets, liabilities and notes to the statement of financial position are
translated at the rate of exchange applicable at the balance sheet date
(closing rate). Goodwill allocated to these companies and adjustments of
the
fair value arising on the acquisition of a foreign company are treated as
assets and liabilities of the foreign company and also translated at the
rate of exchange applicable at the balance sheet date. The items of the
income statement and hence the result for the year shown in the income
statement are translated at the average rate of the month in which the
respective transaction takes place.
Differences arising on the translation of the annual financial statements
of
foreign subsidiaries are reported outside profit and loss and separately
shown as foreign exchange differences in the consolidated statement of
changes in equity. When a foreign company or operation is sold, any foreign
exchange differences previously included in equity outside profit and loss
are recognised as a gain or loss from disposal in the income statement
through profit and loss.
Translation differences relating to non-monetary items with changes in
their
fair values eliminated through profit and loss (e. g. equity instruments
measured at their fair value through profit and loss) are included in the
income statement. In contrast, translation differences for non-monetary
items with changes in their fair values taken to equity (e. g. equity
instruments classified as available for sale) are included in revenue
reserves.
The TUI Group did not hold any subsidiaries operating in hyperinflationary
economies in the financial year under review, nor in the previous year.
The translation of the financial statements of foreign companies measured
at
equity follows the same principles for adjusting carrying amounts and
translating goodwill as those used for consolidated subsidiaries.
Net investment in a foreign operation
Monetary items receivable from or payable to a foreign operation, the
settlement of which is neither planned nor likely in the foreseeable
future,
essentially constitute part of a net investment in this foreign operation.
Foreign exchange differences from the translation of these monetary items
are recognised in other comprehensive income.
Exchange rates of currencies of
relevance to the TUI Group
Closing Annual
rate average
rate
1 EUR equivalent 30 Sep 30 Sep 2015 / 16 2014
2016 2015 / 15
Sterling 0.86 0.74 0.78 0.74
US dollar 1.12 1.12 1.11 1.15
Swiss franc 1.09 1.09 1.09 1.10
Swedish krona 9.62 9.41 9.35 9.35
Consolidation methods
The recognition of the net assets of acquired businesses is based on the
acquisition method. Accordingly all identifiable assets and all liabilities
assumed are measured at fair value as of the acquisition date.
Subsequently,
the consideration for the stake is measured at fair value and eliminated
against the acquiree's revalued equity attributable to the acquired share.
As in the prior year, the option to measure the non-controlling interests
at
their fair value (full goodwill method) was not used.
Any excess of acquisition costs over net assets acquired is capitalised as
goodwill and recognised as an asset for the acquired subsidiary in
accordance with the provisions of IFRS 3. Any negative goodwill is
recognised immediately in profit and loss and presented as other income.
When additional shares are purchased after obtaining control, the
difference
between the purchase price and the carrying amount of the stakes acquired
is
recognised directly in equity. The effects from sales of stakes not
entailing a loss of control are also recognised directly in equity. By
contrast, when control is obtained or lost, gains or losses are recognised
in profit and loss. In the case of business combination achieved in stages
(where the acquirer held an equity interest before he obtained control),
the
equity stake previously held in the acquired company is revalued at the
fair
value applicable at the acquisition date and the resulting gain or loss is
recognised in profit or loss. For transactions involving a loss of control,
the profit or loss does not only comprise the difference between the
carrying amounts of the disposed stakes and the consideration received but
also the result from the revaluation of the remaining shares.
On loss of control of a subsidiary the gain or loss on derecognition will
be
calculated as the difference of the fair value of the consideration plus
the
fair value of any investment retained in the former subsidiary less the
share of the book value of the net assets of the subsidiary. Any gains or
losses previously recognised in other comprehensive income from currency
translations or the valuation of financial assets and liabilities will be
reclassified to the profit or loss statement. When a subsidiary is sold,
any
goodwill allocated to the respective subsidiary is taken into account in
the
calculation of the profit or loss of disposal.
The Group's associates and joint ventures are measured at equity and
included at the cost to purchase as at the acquisition date. The Group's
stake in associates and joint ventures includes the goodwill arising from
the respective acquisition.
The Group's share in profits and losses of associates and joint ventures is
carried in the income statement as from the date of acquisition (Share of
result from joint ventures and associates), while the Group's share in
changes in reserves is shown in its revenue reserves. The accumulated
changes arising after the acquisition are shown in the carrying amount of
the participation. When the share in the loss of an associated company or
joint venture equals or exceeds the Group's original stake in this company,
including other unsecured receivables, no further losses are recognised.
Any
losses exceeding that stake are only recognised to the extent that
obligations have been assumed or payments have been made for the associated
company or joint venture.
Where the accounting and measurement methods applied by associates and
joint
ventures differ from the uniform accounting rules applied in the Group, the
differences are adjusted.
Intercompany receivables and payables or provisions are eliminated.
Intercompany turnover and other income as well as the corresponding
expenses
are eliminated. Intercompany results from intercompany deliveries and
services are reversed through profit and loss, taking account of deferred
taxes. However, intercompany losses are an indicator that an asset may be
impaired. Intercompany profits from transactions with companies measured at
equity are eliminated in relation to the Group's stake in the company.
Intercompany transactions are provided at arm's length.
Accounting and measurement methods
The consolidated financial statements were prepared according to the
historical cost principle, with the exception of certain financial
instruments such as financial assets and derivatives held for trading or
available for sale as well as plan assets from externally funded
defined-benefit obligations held at fair value at the balance sheet date.
The financial statements of the consolidated subsidiaries are prepared in
accordance with uniform accounting and measurement principles. The amounts
recognised in the consolidated financial statements are not determined by
tax regulations but solely by the commercial presentation of the net
assets,
financial position and results of operations as set out in the rules of the
IASB.
Turnover recognition
Turnover comprises the fair value of the consideration received or to be
received for the sale of products and services in the course of ordinary
business activities. Turnover is stated excluding value-added tax, returns,
discounts and price rebates and after elimination of intra-Group sales.
Turnover and other income is recognised upon delivery of the service or
assets and hence upon transfer of the risk.
The commission fees received by travel agencies for package tours are
recognised once the travel agencies have performed their contractual
obligations towards the tour operator. As a rule, this condition is met
upon
payment by the customers or, at the latest, at the date of departure. The
services of tour operators mainly consist in organising and coordinating
package tours. Turnover from the organisation of tours is therefore
recognised in full when the customer departs. Turnover from individual
travel modules booked by the customer directly with airlines, hotel
companies or incoming agencies is recognised when the customers use the
services concerned. Income from non-completed cruises is recognised
according to the proportion of contract performance at the balance sheet
date. The percentage of completion is determined as the ratio between
travel
days completed by the balance sheet date and overall travel days.
Interest income is reported on a prorated basis according to the effective
interest method. Dividends are recognised when the legal entitlement has
arisen.
Goodwill and other intangible assets
Acquired intangible assets are carried at cost. Self-generated intangible
assets, primarily software for use by the Group itself, are capitalised at
cost where an inflow of future economic benefits for the Group is probable
and can be reliably measured. The cost to produce comprises direct costs
and
directly allocable overheads. Intangible assets with a finite service life
are amortised over the expected useful life.
Intangible assets acquired as a result of business combinations, such as
order book, customer base or trademark rights, are included at their fair
value as at the date of acquisition and are amortised on a straight-line
basis.
Useful lives of intangible assets
Useful lives
Concessions, property rights and similar rights up to 20 years
Trademarks at acquisition date 15 to 20 years
Order book as at acquisition date until departure date
Software 3 to 10 years
Customer base as at acquisiton date up to 15 years
If there are any events or indications suggesting potential impairment, the
amortised carrying amount of the intangible asset is compared with the
recoverable amount. Any losses in value going beyond wear-and-tear
depreciation are taken into account through the recognition of impairments.
Depending on the functional area of the intangible asset, depreciation,
amortisation and impairments are included under cost of sales or
administrative expenses. If the original cause of a prior year impairment
no
longer applies, the impairment is written back to other income.
Intangible assets with indefinite useful lives are not amortised but are
tested for impairment at least annually. In addition, impairment tests are
conducted if there are any events or indications suggesting potential
impairment. The TUI Group's intangible assets with an indefinite useful
life
consist exclusively of goodwill.
Impairment tests for goodwill are conducted on the basis of cash generating
units. According to the IASB rules, cash generating units are the smallest
identifiable group of assets that generates cash inflows from continuing
use
that are largely independent of the cash inflows from other assets or
groups
of assets.
Impairments are recognised where the carrying amount of the tested units
plus the allocated goodwill exceeds the recoverable amount. The recoverable
amount is the higher of fair value less costs of disposal and the present
value of future cash flows based on continued use (value in use). The fair
value less costs of disposal corresponds to the amount that could be
generated between knowledgeable, willing, independent business partners
after deduction of the costs of disposal. Due to the restrictions
applicable
to the determination of cash flows when deriving the value in use, e. g.
the
requirement not to account for earnings effects from investments in
expansions or from restructuring activities for which no provision was
formed according to IAS 37, the fair value less costs of disposal usually
exceeds the value in use and therefore represents the recoverable amount.
Impairments of goodwill required are shown separately in the consolidated
income statement. In accordance with IAS 36, reversals of goodwill
impairment losses is prohibited.
Property, plant and equipment
Property, plant and equipment are measured at amortised cost. The costs to
purchase include costs to bring the asset to a working condition. The costs
to produce are determined on the basis of direct costs and directly
attributable indirect costs and depreciation.
Borrowing costs directly associated with the acquisition, construction or
production of qualifying assets are included in the costs to acquire or
produce these assets until the assets are ready for their intended use. The
capitalisation rate is 3.25 % for the current financial year and 4.00 % for
the previous year. In financial year 2015 / 16, borrowing costs of EUR 2.1
m
(previous year EUR 8.8 m) were capitalised as part of the costs to purchase
and costs to produce. Other borrowing costs are recognised as current
expenses.
To the extent that funds are borrowed specifically for the purpose of
obtaining a qualifying asset, the underlying capitalisation rate is
determined on the basis of the specific borrowing cost; in all other cases
the weighted average of the borrowing costs applicable to the borrowings
outstanding is applied.
Depreciation of property, plant and equipment is based on the straight-line
method, based on the customary useful lives. The useful economic lives are
as follows:
Useful lives of property, plant and equipment
Useful lives
Hotel buildings 30 to 40 years
Other buildings up to 50 years
Cruise ships 20 to 30 years
Yachts 5 to 15 years
Motorboats 15 to 24 years
Aircraft
Fuselages and engines up to 18 years
Engine overhaul depending on intervals,
up to 5 years
Major overhaul depending on intervals,
up to 5 years
Spare parts 12 years
Other machinery and fixtures up to 40 years
Operating and business equipment up to 10 years
Moreover, the level of depreciation is determined by the residual amounts
recoverable at the end of the useful life of an asset. The residual value
assumed in first-time recognition for cruise ships and hotel complexes is
30
% of the acquisition costs. The determination of the depreciation of
aircraft fuselages, aircraft engines and spare parts in first-time
recognition is based on a residual value of 20 % of the cost of
acquisition.
Both the useful lives and residual values are reviewed on an annual basis
when preparing the annual financial statements. The review of the residual
values is based on comparable assets at the end of their useful lives as at
the current point in time. Any adjustments required are recognised as a
correction of depreciation over the remaining useful life of the asset. The
adjustment of depreciation is recognised retrospectively for the entire
financial year in which the review has taken place. Where the review
results
in an increase in the residual value so that it exceeds the remaining net
carrying amount of the asset, depreciation is suspended. In this case, the
amounts are not written back.
Any losses in value going beyond wear-and-tear depreciation are taken into
account through the recognition of impairment losses. If there are any
events or indications suggesting impairment, the required impairment test
is
performed to compare the carrying amount of an asset with the recoverable
amount. The recoverable amount is the higher of an asset's fair value less
costs of disposal and the value of future cash flows attributable to the
asset (value in use).
Investment grants received are shown as reductions in the costs to purchase
or produce items of property, plant or equipment where these grants are
directly allocable to individual items. Where a direct allocation of grants
is not possible, the grants and subsidies received are included as deferred
income under other liabilities and reversed in accordance with the use of
the investment project.
Leases
Finance leases
In accordance with IAS 17, leased property, plant and equipment in which
the
TUI Group assumes substantially all the risks and rewards of ownership is
capitalised. Capitalisation is based on the fair value of the asset or the
present value of the minimum lease payments, if lower. Depreciation is
charged over the useful life or the lease term, if shorter, on the basis of
the depreciation method applicable to comparable purchased or manufactured
assets. Payment obligations arising from future lease payments are
disclosed
as liabilities, excluding future interest expenses. Every lease payment is
broken down into an interest portion and a redemption portion so as to
produce a constant periodic rate of interest on the remaining balance of
the
liability. The interest portion is disclosed in the income statement
through
profit or loss.
Where companies of the TUI Group are lessors in finance leases, receivables
equivalent to the net investment value are included for the leases. The
periodic distribution of the income from finance leases results in constant
interest payments on the outstanding net investment volume of the leases
over the course of time.
Operating leases
Both expenses incurred and income received under operating leases are
recognised in the income statement on a straight-line basis over the term
of
the corresponding leases.
Sale-and-lease-back transactions
Gains from sale-and-lease-back transactions resulting in a finance lease
are
recognised in income over the term of the lease.
If a sale-and-lease-back transaction results in an operating lease, a gain
or loss is recognised immediately if the transaction has demonstrably been
carried out at fair value. If a loss is compensated for by future lease
payments at below-market price, this loss is deferred and amortised over
the
term of the lease agreement. If the agreed purchase price exceeds fair
value, the gain arising from the difference between these two values is
also
deferred and amortised.
Investment property
Property not occupied for use by subsidiaries and exclusively held to
generate rental income and capital gains is recognised at amortised cost.
This property is amortised over a period of up to 50 years.
Financial instruments
Financial instruments are contractual rights or obligations that will lead
to an inflow or outflow of financial assets or the issue of equity rights.
They also comprise derivative rights or obligations derived from primary
assets.
In accordance with IAS 39, financial instruments are broken down into
financial assets or liabilities to be measured at fair value through profit
and loss, loans and receivables, financial assets available for sale,
financial assets held to maturity and other liabilities.
In terms of financial instruments measured at fair value through profit and
loss, the TUI Group holds derivative financial instruments mainly to be
classified as held for trading as they do not meet the balance
sheet-related
criteria as hedges in the framework of a hedging relationship. The fair
value option is not exercised. Moreover, the TUI Group holds financial
assets in the loans and receivables and available for sale categories.
However, the present financial statements do not include any assets held to
maturity.
In financial year 2015 / 16 as well as in the prior year, no significant
reclassifications were made within the individual measurement categories.
Primary financial assets and financial liabilities
Primary financial assets are recognised at the value as at the trading date
on which the Group commits to buy the asset. Primary financial assets are
classified as loans and receivables or as financial assets available for
sale when recognised for the first time. Loans and receivables as well as
financial assets available for sale are initially recognised at fair value
plus transaction costs.
Loans and receivables are non-derivative financial assets with fixed or
fixable contractual payments not listed in an active market. They are shown
under trade accounts receivable and other assets in the statement of
financial position and classified as current receivables if they mature
within twelve months of the balance sheet date.
For subsequent measurement, loans and receivables are valued at amortised
cost based on the effective interest method. Value adjustments are made to
account for identifiable individual risks. Where objective information
indicates that impairments are required, e. g. substantial financial
difficulties of the counterparty, payment delays or adverse changes in
regional industry conditions expected to impact the Group's borrowers in
the
light of past experience, impairments are recognised at an amount
corresponding to the expected loss. Impairments and reversals of
impairments
are included under cost of sales, administrative expenses or financial
expenses, depending on the nature of the transaction.
Financial assets available for sale are non-derivative financial assets
either individually expressly allocated to this category or not allocable
to
any other category of financial assets. Within the TUI Group, they consist
of stakes in companies and securities. They are allocated to non-current
assets unless management intends to sell them within twelve months of the
balance sheet date.
Financial assets available for sale are measured at their fair value upon
initial recognition. Changes in the fair value are included in equity
outside profit or loss until the disposal of the assets. If there is
objective evidence of impairment, an impairment loss is taken through
profit
and loss. Objective evidence may, in particular, be substantial financial
difficulties of the counterparty and significant changes in the
technological, market, legal or economic environment. Moreover, for equity
instruments held, a significant or prolonged decline in the fair value
below
its cost is also objective evidence of impairment. The TUI Group concludes
that a significant decline exists if the fair value falls by more than 20 %
below cost. A decline is assessed as prolonged if the fair value remains
below cost for more than twelve months. In the event of subsequent reversal
of the impairment, the impairment included in profit or loss is not
reversed
for equity instruments but recognised in other comprehensive income. Where
a
listed market price in an active market is not available for shares held in
companies and other methods to determine an objective market value are not
applicable, these equity instruments are measured at cost.
A derecognition of assets is primarily recognised as at the date on which
the rights for payments from the asset expire or are transferred and
therefore as at the date essentially all risks and rewards of ownership are
transferred.
Primary financial liabilities are included in the consolidated statement of
financial position if an obligation exists to transfer cash and cash
equivalents or other financial assets to another party. First-time
recognition of a primary liability is recognised at its fair value. For
loans taken out, the nominal amount received is reduced by discounts
obtained and borrowing costs paid. In the framework of follow-up
measurement, primary financial liabilities are measured at amortised cost
based on the effective interest method.
Derivative financial instruments and hedging
At initial measurement, derivative financial instruments are measured at
the
fair value attributable to them on the date the contract is entered into.
Subsequent re-measurement is also recognised at the fair value applicable
at
the respective balance sheet date. Where derivative financial instruments
are not part of a hedge in connection with hedge accounting, they have to
be
classified as held for trading in accordance with IAS 39.
The method used to recognise profits and losses depends on whether the
derivative financial instrument has been classified as a hedge and on the
type of underlying hedged item. Changes in the fair values of derivative
financial instruments are recognised in profit and loss unless they are
classified as a hedge in accordance with IAS 39. If they are classified as
an effective hedge in accordance with IAS 39, the transaction is recognised
as a hedge.
The TUI Group applies the hedge accounting provisions relating to hedging
of
balance sheet items and future cash flows. Depending on the nature of the
underlying transaction, the Group classifies derivative financial
instruments either as fair value hedges against exposure to changes in the
fair value of assets or liabilities or as cash flow hedges against
variability in cash flows from highly probable future transactions.
Upon conclusion of the transaction, the Group documents the hedge
relationship between the hedge and the underlying item, the risk management
goal and the underlying strategy. In addition, a record is kept of the
assessment, both at the beginning of the hedge relationship and on a
continual basis, as to whether the derivatives used for the hedge are
highly
effective in compensating for the changes in the fair values or cash flows
of the underlying transactions.
Changes in the fair value of derivatives used as fair value hedges for the
recognised assets or liabilities are recognised through profit and loss.
Moreover, the carrying amounts of the underlying transactions are adjusted
through profit and loss for the gains or losses resulting from the hedged
risk.
The effective portion of changes in the fair value of derivatives forming
cash flow hedges is recognised in equity. Any ineffective portion of such
changes in the fair value, by contrast, is recognised immediately in the
income statement through profit and loss. Amounts taken to equity are
reclassified to the income statement and included as income or expenses in
the period in which the hedged item has an effect on results.
If a hedge expires, is sold or no longer meets the criteria for hedge
accounting, the cumulative gain or loss remains in equity and is only
recognised in the income statement through profit and loss when the
originally hedged future transaction occurs. If the future transaction is
no
longer expected to take place, the cumulative gains or losses recognised
directly in equity are recognised immediately through profit and loss.
Inventories
Inventories are measured at the lower of cost or net realisable value. Net
realisable value is the estimated selling price less the estimated cost
incurred until completion and the estimated variable costs required to
sell.
All inventories are written down individually where the net realisable
value
of inventories is lower than their carrying amounts. Where the original
causes of inventory write-downs no longer apply, the write-downs are
reversed. The measurement method applied to similar inventory items is the
weighted average cost formula.
Cash and cash equivalents
Cash and cash equivalents comprise cash, call deposits, other current
highly
liquid financial assets with an original term of a maximum of three months
and current accounts. Overdrawn current accounts are shown as liabilities
to
banks under current financial liabilities.
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if
the associated carrying amount will be recovered principally through sale
rather than through continued use.
The reclassification is made at the lower of carrying amount and fair value
less cost of disposal. Depreciation and at equity measurements are
suspended. Impairment charges are recognised in profit and loss, with any
gains on subsequent remeasurement resulting in the recognition of profits
of
up to the amount of the cumulative impairment cost.
Equity
Ordinary shares are classified as equity. Costs directly allocable to the
issue of new shares or conversion options are taken to equity on a net
after-tax basis as a deduction from the issuance proceeds.
Own shares
The group's holdings in its own equity instruments are shown as deductions
from shareholders' equity at cost, including directly attributable
transaction costs. Own equity instruments are held by an employee benefit
trust of TUI Travel Ltd. No gain or loss is recognised in the income
statement on the purchase or sale of shares by the employee benefit trust.
Any difference between the proceeds from sale and the original cost are
taken to reserves.
Provisions
Other provisions are formed when the Group has a current legal or
constructive obligation as a result of a past event and where in addition
it
is probable that assets will be impacted by the settlement of the
obligation
and the level of the provision can be reliably determined. Provisions for
restructuring comprise severance payments to employees and payments for the
early termination of rental agreements. Provisions for environmental
protection measures, in particular the disposal of legacy industry waste,
are recognised if future cash outflows are likely due to legal and public
obligations to implement safeguarding or restoration measures, if the cost
of these measures can be reliably estimated and the measures are not
expected to lead to a future inflow of benefits.
Provisions for onerous losses are formed if the unavoidable costs of
meeting
contractual obligations exceed the expected economic benefit. Any assets
concerned are impaired, if necessary, prior to forming the appropriate
provision. No provisions are recognised for future operating losses.
Where a large number of similar obligations exist, the probability of a
charge over assets is determined on the basis of this group of obligations.
A provision is also recognised if the probability of a charge over assets
is
low in relation to an individual obligation contained in this group.
Provisions are measured at the present value of the expected expenses,
taking account of a pre-tax interest rate, reflecting current market
assessments of the time value of money and the risks specific to the
liability. Risks already taken into account in estimating future cash flows
do not affect the discount rate. Increases in provisions due to accretion
of
interest are recognised as interest expenses through profit or loss.
The pension provision recognised for defined benefit plans corresponds to
the net present value of the defined benefit obligations (DBOs) as at the
balance sheet date less the fair value of the plan assets. If the value of
the plan assets exceeds the value of the DBO, the exceeding amount is shown
within other assets. Measurement of such an asset is limited to the net
present value of the value in use in the form of reimbursements from the
plan or reductions in future contribution payments. The DBOs are calculated
annually by independent actuaries using the projected unit credit method.
The net present value of the DBOs is calculated by discounting the expected
future outflows of cash at a rate based on the interest rate of top-rated
corporate bonds.
Past service cost is immediately recognised through profit or loss.
Remeasurements (in particular actuarial gains and losses) arising from the
regular adjustment of actuarial parameters are eliminated against equity
outside profit and loss in full when they occur.
For defined contribution plans, the Group pays contributions to public or
private pension insurance plans on the basis of a statutory or contractual
obligation or on a voluntary basis. The Group does not have any further
payment obligations on top of the payment of the contributions. The
contributions are recognised under staff costs when they fall due.
Liabilities
Liabilities are always recognised at the date on which they arise at fair
value less borrowing and transaction costs. Over the course of time,
liabilities are measured at amortised cost based on application of the
effective interest method.
As a matter of principle, the foreign exchange differences resulting from
the translation of trade accounts payable are reported as a correction of
the cost of sales. Foreign exchange differences from the translation of
liabilities not resulting from normal operating processes are reported
under
other income / other expenses, financial expenses / income or
administrative
expenses, depending on the nature of the underlying liability.
Deferred taxes
In accordance with IAS 12, deferred taxes are determined using the balance
sheet liability method. Accordingly, probable future tax assets and
liabilities are recognised for all temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Expected tax savings from the use of losses carried forward assessed as
recoverable in the future are recognised as deferred tax assets. Regardless
of the unlimited ability to carry German losses forward which continues to
exist, the annual utilisation is limited by the minimum taxation. Foreign
losses carried forward frequently have to be used within a given
country-specific time limit and are subject to restrictions concerning the
use of these losses carried forward for profits on ordinary activities,
which are taken into account accordingly in the measurement.
Income tax is directly charged or credited to equity if the tax relates to
items directly credited or charged to equity in the same period or some
other period.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which the temporary
difference or an unused tax loss can be utilised.
Deferred taxes are measured at the tax rates and tax provisions applicable
at the balance sheet date or adopted by law and expected to be applicable
at
the date of recognition of the deferred tax asset or the payment of the
deferred tax liability.
Current income taxes
The German companies of the TUI Group have to pay trade income tax of 15.7
%
(previous year 15.2 %). As in the prior year, the corporation tax rate is
15.0 %, plus a 5.5 % solidarity surcharge on corporation tax.
The calculation of foreign income taxes is based on the laws and provisions
applicable in the individual countries. The income tax rates applied to
foreign companies vary from 0.0 % to 40.0 %.
Deferred and current income tax liabilities are offset against the
corresponding tax assets if they exist in the same fiscal territory and
have
the same nature and maturity.
Share-based payments
All share-based payment schemes in the Group are payment schemes paid in
cash or via equity instruments.
For transactions with cash compensation, the resulting liability for the
Group is charged to expenses at its fair value as at the date of the
performance of the service by the beneficiary. Until payment of the
liability, the fair value of the liability is remeasured at every closing
date and all changes in the fair value are recognised through profit and
loss.
For equity settled transactions the fair value of the awards granted is
recognised under staff costs with a corresponding direct increase in
equity.
The fair value is determined at the point when the awards are granted and
spread over the vesting period during which the employees become entitled
to
the awards.
The fair value of the awards granted is measured using option valuation
models, taking into account the terms and conditions upon which the awards
were granted. The amount to be included under staff costs is adjusted to
reflect the actual number of share options that vest except where
forfeiture
is due only to market-based performance conditions not meeting the
thresholds for vesting.
Summary of selected accounting and measurement methods
The table below lists the key accounting and measurement methods used by
the
TUI Group.
Summary of selected
measurement bases
Item in the statement Measurement base
of financial position
Assets
Goodwill At cost (subsequent measurement: impairment
test)
Other intangible assets At cost (subsequent measurement: impairment
with indefinite useful test)
lives
Other intangible assets At amortised cost
with definite useful
lives
Property, plant & At amortised cost
equipment
Equity accounted At cost as adjusted for post-acquisition
investments changes in the Group's share of the
investment's net assets
Financial assets
Loans and receivables At amortised cost
Held to maturity Not applicable
Held for trading / At fair value
Derivatives
Available for sale Fair value (with gains or losses recognised
within other comprehensive income) or at
cost
Inventory Lower of cost and net realisable value
Trade and other At amortised cost
receivables
Cash and cash At cost
equivalents
Assets held for sale Lower of cost and fair value less cost of
disposal
Liabilities and
Provisions
Loans and borrowings At amortised cost
Provision for pensions Projected unit credit method
Other provisions Present value of the settlement amount
Financial liabilities
Non-derivative At amortised cost
financial liabilities
Derivative financial At fair value
liabilities
Payables, trade and At amortised cost
other liabilities
Key estimates and judgements
The presentation of the assets, liabilities, provisions and contingent
liabilities shown in the consolidated financial statements is based on
estimates and judgements. Any uncertainties are appropriately taken into
account in determining the values.
All estimates and judgements are based on the conditions and assessments as
at the balance sheet date. In evaluating the future development of
business,
reasonable assumptions were made regarding the expected future economic
environment in the business areas and regions in which the Group operates.
Estimates and judgements that may have a material impact on the amounts
reported for assets and liabilities in the TUI Group are mainly related to
the following balance sheet-related facts and circumstances:
* Establishment of assumptions for impairment tests, in particular for
goodwill,
* Determination of the fair values for acquisitions of companies and
determination of the useful lives of acquired intangible assets,
* Determination of useful lives and residual carrying amounts of
property,
plant and equipment,
* Determination of actuarial assumptions to measure pension obligations,
* Recognition and measurement of other provisions,
* Recoverability of future tax savings from tax losses carried forward
and
tax-deductible temporary differences
* Measurement of tax risks
* Recoverable amounts of touristic prepayments.
Other estimates and judgements relate to the determination of the
recoverable amount in relation to impairment tests for equity accounted
investments and the determination of the fair value of financial
instruments.
Despite careful preparation of the estimates, actual results may differ
from
the estimate. In such cases, the assumptions and the carrying amounts of
the
assets and liabilities concerned, if necessary, are adjusted accordingly.
As
a matter of principle, changes in estimates are taken into account in the
financial year in which the changes have occurred and in future periods.
Goodwill
The goodwill reported as at 30 September 2016 has a carrying amount of EUR
2,853.5 m (previous year EUR 3,220.4 m). The determination of the
recoverable amount of a CGU for the annual impairment test requires
estimates and judgement with regard to the methodology used and the
assumptions, which may have a considerable effect on the recoverable amount
and the level of a potential impairment. They relate, in particular, to the
weighted average cost of capital (WACC) after income taxes, used as the
discounting basis, the growth rate in perpetuity and the forecasts for
future cash flows including the underlying budget assumptions based on
corporate planning. Changes in these assumptions may have a substantial
impact on the recoverable amount and the level of a potential impairment.
Acquisition of companies and intangible assets
In accounting for business combinations, the identifiable assets,
liabilities and contingent liabilities acquired have to be measured at
their
fair values. In this context, cash flow-based methods are regularly used.
Depending on the assumptions underlying such methods, different results may
be produced. In particular, some judgement is required in estimating the
economic useful lives of intangible assets and determining the fair values
of contingent liabilities.
Detailed information on acquisitions of companies or useful lives of
intangible assets is provided in the section 'Acquisitions - divestments -
discontinued operation' in the chapter on 'Principles and methods of
consolidation' and in the section on 'Goodwill and other intangible assets'
of the chapter 'Accounting and measurement methods'.
Property, plant and equipment
The measurement of wear-and-tear to property, plant and equipment items
entails estimates. The carrying amount of property, plant and equipment as
at 30 September 2016 totals EUR 3,714.5 m (previous year EUR 3,636.8 m). In
order to review the amounts carried, an evaluation is carried out on an
annual basis to assess whether there are any indications of a potential
impairment. These indications relate to a number of areas and factors, e.
g.
the market-related or technical environment but also physical condition. If
any such indication exists, management must estimate the recoverable amount
on the basis of expected cashflows and appropriate interest rates.
Moreover,
essential estimates and judgements relate to the definition of economic
useful lives as well as the residual amounts of items of property, plant
and
equipment which may be recovered.
More detailed information on the useful lives and residual values of
property, plant and equipment items is provided in the section 'Property,
plant and equipment' in the chapter 'Accounting and measurement methods'.
Pension provisions
As at 30 September 2016, the carrying amount of provisions for pensions and
similar obligations totals EUR 1,450.9 m (previous year EUR 1,146.9 m). For
those pension plans where the plan assets exceed the obligation, other
assets amounting to EUR 36.2 m are shown as at 30 September 2016 (prior
year
EUR 15.2 m).
In order to determine the obligations under defined benefit pension
schemes,
actuarial calculations are used which rely on underlying assumptions
concerning life expectancy and the discount rate. In respect of the
estimation of the discount rate used for the UK pensions plans, there has
been a change as at 30 September 2016 in regard to the determination that
is
explained in the section 'Changes in estimates'.
At the balance sheet date, the fair value of the plan assets totals EUR
2,676.0 m (previous year EUR 2,302.1 m). As assets classified as plan
assets
are never available for short-term sale, the fair values of these plan
assets may change significantly up to the realisation date. The interest
rate used to discount the liability is also used to determine the expected
return on plan assets.
Detailed information on actuarial assumptions is provided in Note 31.
Other provisions
As at 30 September 2016, other provisions of EUR 1,177.8 m (previous year
EUR 1,209.7 m) are reported. When recognising and measuring provisions,
assumptions are required about probability of occurrence, maturity and
level
of risk. Provisions are recognised if a past event has resulted in a
current
legal or constructive obligation, if an outflow of assets is probable in
order to meet that obligation, and if a reliable estimate can be made of
the
amount of the liability.
Determining whether a current obligation exists is usually based on review
by internal or external experts. The amount of provision is based on
expected expenses, and is either calculated by assessing the specific case
in the light of empirical values, outcomes from comparable circumstances,
or
else estimated by experts. Due to the uncertainties associated with
assessment, actual expenses may deviate from estimates so that unexpected
charges may result.
More detailed information on other provisions is offered in the Notes to
the
statement of financial position in Note 32.
Deferred tax assets
As at 30 September 2016, deferred tax assets totalling EUR 344.7 m
(previous
year EUR 330.7 m restated) were recognised. Prior to offsetting against
deferred tax liabilities, deferred tax assets total EUR 727.5 m, included
an
amount of EUR 211.5 m (previous year EUR 239.4 m) for recognised losses
carried forward. The assessment of the recoverability of deferred tax
assets
is based on the ability of the respective Group company to generate
sufficient taxable income. TUI therefore assesses at every balance sheet
date whether the recoverability of expected future tax savings is
sufficiently probable in order to recognise deferred tax assets. The
assessment is based on various factors including internal forecasts
regarding the future tax asset situation of the Group company. If the
assessment of the recoverability of future deferred tax assets changes,
impairments may be recognised, if necessary, on the deferred tax assets.
More detailed information on deferred tax assets is available in the Notes
to the statement of financial position in Note 21.
Income taxes
The Group is liable to pay income taxes in various countries. Key estimates
are required when determining income tax liabilities, including the
probability, the timing and the size of any amounts that may become
payable.
For certain transactions and calculations the final tax charge cannot be
determined during the ordinary course of business. After taking appropriate
external advice, the Group makes provisions or discloses contingencies for
uncertain tax positions based on the probable or possible level of
additional taxes that might be incurred. The level of obligations for
expected tax audits is based on an estimation of whether and to what extent
additional income taxes will be due. Judgements are corrected, if
necessary,
in the period in which the final tax charge is determined.
Detailed information on the German trade tax liability is available in the
Notes to contingent liabilities in Note 39.
Recoverable Amounts of touristic prepayments
At 30 September 2016, trade receivables and other assets include touristic
prepayments of EUR 724.2 m (previous year EUR 966.6 m). The assessment of
the recoverable amounts of touristic prepayments made to hoteliers requires
judgement about the volume of future trading with hoteliers and the credit
worthiness of those hoteliers. To assess the recoverablity of touristic
prepayments, TUI considers the financial strength of those hoteliers, the
quality of the hotels as well as the demand for each hotel and the relevant
destination during the past and in coming seasons.
Changes in estimates
In financial year 2015 / 16, the basis for the determination of the
discount
rate for pension plans in the UK has changed. The discount rate used for
pension provisions is based on an index of first-class corporate bonds.
Previously, the yield structure resulting from that index has been
extrapolated on the basis of the yield curves for various almost risk-free
bonds, taking account of an appropriate risk mark-up reflecting the term of
the obligation. The bonds to be used have to reflect the maturity of the
obligation. Due to the small size of the market for long-term bonds, the
calculation has exclusively been based on market data for medium-term bonds
to date. In order to enhance the presentation of the maturities profile of
UK pension plans, the determination of the yield structure now also
includes
bonds with longer maturities. This change causes an increase in the scope
of
market data included in the determination.
The change in this estimate causes an increase in the discount rate of 15
basis points. As a result, provisions for pensions and similar obligations
declined by EUR 111.5 m, while deferred tax assets decreased by EUR 22.3 m
and equity rose by EUR 89.2 m without impact on profit and loss.
Due to the higher discount rate, the net interest on the defined benefit
pension plans will also increase in the next financial year. Applying the
same estimates as in the past, the net interest for the pension plans
concerned would be EUR 64.3 m for financial year 2016 / 17. Using the
changed estimates, the expected net interest for these plans now totals EUR
68.7 m for the next financial year.
Segment reporting
Notes on the segments
The identification of operating segments is based on the internal
organisational and reporting structure primarily built around the different
products and services as well as a geographical structure within the TUI
Group. Allocation of individual organisational entities to operating
segments is exclusively based on economic criteria, irrespective of the
participation structure under company law. The segments are independently
managed by those in charge, who regularly receive separate financial
information for each segment. They regularly report to the Group Executive
Committee, which consists of five Executive Board members and six other
executives. The legally binding decision regarding the use of resources is
taken by the Executive Board. The TUI Group Executive Board has therefore
been identified as the Chief Operating Decision Maker (CODM) in accordance
with IFRS 8.
The Northern Region segment comprises the tour operators and airlines as
well as the cruise business in the UK, Ireland and the Nordic countries.
This segment also comprises the strategic Canadian venture Sunwing and the
joint venture TUI Russia. Since Q3 2015 / 16, this segment has also
included
the tour operators Crystal Ski and Thomson Lakes & Mountains, previously
carried in the Specialist Group segment, which provide winter season
business for the UK airline. The prior year's numbers have been restated to
reflect the changes in the segments.
The Central Region segment comprises the tour operators and airlines in
Germany and tour operators in Austria, Poland and Switzerland.
The Western Region segment comprises the tour operators and airlines in
Belgium and the Netherlands and the tour operator in France.
The Hotels & Resorts segment comprises all Group-owned hotels and hotel
shareholdings of the TUI Group. The hotel activities of the former Travel
Sector have also been allocated to the Hotels & Resorts segment.
The Cruises segment consists of Hapag-Lloyd Cruises and the joint venture
TUI Cruises.
The Other Tourism segment comprises the French schedules airline Corsair
and
central tourism functions such as the flight control and information
technology. In addition, the incoming agencies previously carried in the
Hotelbeds Group segment have been integrated into the Tourism business and
are therefore also shown in the Other Tourism segment. The prior year's
numbers have been restated to reflect the changes in the segments.
In addition to the above segments forming the Tourism business, 'All other
segments' is recognised. It comprises all business operations not related
to
the Tourism business, and includes the central corporate functions and
interim holdings of TUI Group and the Group's real estate companies.
Due to the planned sale of Specialist Group in financial year 2016 / 17,
this segment is carried as a discontinued operation at the balance sheet
date. The prior year's numbers are restated accordingly. Specialist Group
comprises the specialist tour operators, offering expedition travel, luxury
tours, sports event packages, student travel and sailing holidays.
Hotelbeds
Group, classified as a discontinued operation in Q2 2015 / 16, which
comprises B2B hotel portals and incoming agencies, was sold on 12 September
2016. The turnover and profit until the divestment date are also shown in
the line 'Discontinued operations'. The prior year's segment reporting was
adjusted accordingly. Discontinued operations also include LateRooms Group
until it was sold on 6 October 2015. For more detailed explanations of
discontinued operations, refer to the section Discontinued operations in
the
section on Acquisitions - Divestments - Discontinued Operations.
Notes to the segment data
The selection of segment data presented is based on the regular internal
reporting of segmented financial indicators to the Executive Board. Segment
reporting discloses in particular the performance indicators EBITA and
underlying EBITA, since these indicators are used for value-oriented
corporate management and thus represent the consolidated performance
indicator within the meaning of IFRS 8.
The TUI Group defines EBITA as earnings before interest, income taxes and
goodwill impairments. EBITA includes amortisation of other intangible
assets. EBITA does not include measurement effects from interest hedges and
the proportionate result and measurement effects from container shipping,
as
the stake in Hapag-Lloyd AG is a financial investment rather than an
operative stake from TUI AG's perspective.
In contrast to EBITA, the underlying EBITA has been adjusted for gains on
disposal of financial investments, expenses in connection with
restructuring
measures according to IAS 37, all effects of purchase price allocations,
ancillary acquisition cost and conditional purchase price payments and
other
expenses for and income from one-off items. The one-off items carried as
adjustments are income and expense items impacting or distorting the
assessment of the operating profitability of the segments and the Group due
to their levels and frequency. These one-off items include major
restructuring and integration expenses not meeting the criteria of IAS 37,
major expenses for litigation, profit and loss from the sale of aircraft
and
other material business transactions of a one-off nature.
Alongside this indicator, segment reporting is extended to include EBITDA
and EBITDAR. In the TUI Group EBITDA is defined as earnings before
interest,
income taxes, goodwill impairments and amortisation and write-ups of other
intangible assets, depreciation and write-ups of property, plant and
equipment and investments. The amounts of amortisation and depreciation
represent the net balance including write-backs. For the reconciliation
from
EBITDA to the indicator EBITDAR, long-term leasing and rental expenses are
eliminated.
Internal and external turnover, depreciation and amortisation, impairments
on other intangible assets (excluding goodwill), property, plant and
equipment and investments as well as the share of result of joint ventures
and associates are likewise shown for each segment, as these amounts are
included when measuring EBITA. As a rule, inter-segment business
transactions are based on the arm's length principle, as applied in
transactions with third parties. No single external customer accounts for
10
% or more of turnover.
Assets and liabilities per segment are not included in the reporting to the
Executive Board and are therefore not shown in segment reporting. The only
asset-related segmental indicator reported to the Executive Board is
capital
expenditure, which therefore is also disclosed in the segment reporting.
The
amounts shown represent cash capital expenditure on intangible assets and
property, plant and equipment in line with the indicator reported
internally. Related financing loans and finance lease agreements are not
included in this indicator. Therefore the amount of the capital expenditure
does not coincide with the additions to intangible assets and property,
plant and equipment in the fixed assets and intangible assets movements. A
reconciliation of the investments is presented in a separate table.
Depreciation, amortisation and write-backs relate to non-current assets
that
are split geographically and do not include goodwill impairments.
The non-current assets, which are split geographically, contain other
intangible assets, investment property, property, plant and equipment and
other non-current assets that do not meet the definition of financial
instruments.
Segment indicators
Turnover
by
segment
2015 / 2014 /
16 15
EUR External Group Total External Group Total
million restated restated
Northern 7,001.5 50.9 7,052.4 7,348.4 71.4 7,419.8
Region
Central 5,566.6 54.8 5,621.4 5,600.9 57.9 5,658.8
Region
Western 2,869.9 18.9 2,888.8 2,847.0 9.6 2,856.6
Region
Hotels & 618.6 659.8 1,278.4 574.8 677.4 1,252.2
Resorts
Cruises 296.7 - 296.7 273.3 - 273.3
Other 665.5 258.0 923.5 704.8 160.2 865.0
Tourism
Consolida- - - - 972.7 - - 885.4 - 885.4
tion 972.7
Tourism 17,018.8 69.7 17,088.5 17,349.2 91.1 17,440.3
All other 165.8 44.1 209.9 166.3 40.6 206.9
segments
Consolida- - - - 113.8 - - 131.7 - 131.7
tion 113.8
Conti- 17,184.6 - 17,184.6 17,515.5 - 17,515.5
nuing
operati-
ons
Disconti- 2,321.6 108.9 2,430.5 2,565.8 64.8 2,630.6
nued
operati-
ons
Total 19,506.2 108.9 19,615.1 20,081.3 64.8 20,146.1
EBITA and underlying EBITA by
segment
EBITA Underlying
EBITA
EUR million 2015 / 2014 / 2015 / 16 2014 /
16 15 15
Northern Region 440.4 513.4 460.9 538.4
Central Region 67.3 72.9 88.5 103.5
Western Region 72.1 57.7 86.1 68.7
Hotels & Resorts 285.1 195.7 287.3 234.6
Cruises 129.6 80.5 129.6 80.5
Other Tourism - 6.2 - 4.1 4.6 8.4
Tourism 988.3 916.1 1,057.0 1,034.1
All other segments - 90.2 - 121.5 - 56.5 - 80.9
Continuing operations 898.1 794.6 1,000.5 953.3
Discontinued operations 14.7 2.6 92.9 107.3
Total 912.8 797.2 1,093.4 1,060.5
In order to enhance comparability, EBITA from the discontinued operations
does not include the gain from the sale of Hotelbeds Group.
Reconciliation to earnings before income taxes
of the continuing operations of the TUI Group
EUR million 2015 / 2014 / 15
16 restated
Underlying EBITA of continuing operations 1,000.5 953.3
Result on disposal* - 0.8 3.3
Restructuring expense* - 12.0 - 59.4
Expense from purchase price allocation* - 41.9 - 42.1
Expense from other one-off items* - 47.7 - 60.5
EBITA of continuing operations 898.1 794.6
Profit on Container Shipping measured at - 0.9
equity
Loss on measurement of financial investment in - 100.3 - 147.1
Container Shipping
Net interest expense and expense from - 179.5 - 182.6
measurement of interest hedges
Earnings before income taxes of continuing 618.3 465.8
operations
* For a description of the adjustments please refer to the management
report.
EBITDA and
EBITDAR by
segment
EBITDA Long-term EBITDAR
leasing and
rental
expenses
EUR million 2015 / 2014 / 2015 / 16 2014 2015 / 2014 /
16 15 / 15 16 15
Northern 534.6 619.3 372.8 374.9 907.4 994.2
Region
Central Region 90.0 101.1 148.8 206.1 238.8 307.2
Western Region 97.9 78.0 153.5 144.2 251.4 222.2
Hotels & 380.1 308.7 110.1 116.8 490.2 425.5
Resorts
Cruises 148.9 97.6 5.3 10.7 154.2 108.3
Other Tourism 54.5 60.6 39.3 36.1 93.8 96.7
Consolidation - - - 7.5 - 5.6 - 7.5 - 5.6
Tourism 1,306.0 1,265.3 822.3 883.2 2,128.3 2,148.5
All other - 0.9 - 50.6 376.8 373.8 375.9 323.2
segments
Consolidation - - - 454.7 - - 454.7 - 451.9
451.9
Continuing 1,305.1 1,214.7 744.4 805.1 2,049.5 2,019.8
operations
Discontinued 85.6 135.2 65.1 64.1 150.7 199.3
operations
Total 1,390.7 1,349.9 809.5 869.2 2,200.2 2,219.1
Othe-
r
seg-
men-
tal
in-
for-
mati-
on
Amortisation- Thereof Share Capi-
(+) / impair- of tal
write-backs ments re- expen-
(-) of (+) / sult di-
intangible write-- of ture
assets and backs joint
depreciation- (-) ventu-
(+) / res
write-backs and
(-) of asso-
property, cia-
plant and tes
equipment
and
investments
EUR 2015 / 16 2014 2015 / 2014 2015 2014 2015 2014
mil- / 15 16 / 15 / 16 / 15 / 16 / 15
lion re-
state-
d
Nor- 94.2 105.9 1.3 4.9 22.4 23.7 86.4 69.9
ther-
n
Regi-
on
Cen- 22.7 28.2 0.1 4.4 3.1 3.1 20.6 23.6
tral
Regi-
on
Wes- 25.8 20.3 6.6 0.4 0.6 - 21.6 23.5
tern
Regi-
on
Ho- 95.0 113.0 2.5 26.0 57.7 44.0 262.3 173.3
tels
&
Re-
sort-
s
Crui- 19.3 17.1 - - 100.1 68.1 10.7 88.5
ses
Othe- 60.7 64.7 7.8 23.2 3.3 4.1 101.0 102.2
r
Tou-
rism
Tou- 317.7 349.2 18.3 58.9 187.2 143.0 502.6 481.0
rism
All 89.3 71.0 0.9 0.6 - - 20.8 45.7
othe-
r
seg-
ment-
s
Con- 407.0 420.2 19.2 59.5 187.2 143.0 523.4 526.7
ti-
nuin-
g
ope-
rati-
ons
Dis- 70.9 132.5 16.9 50.1 0.3 0.6 82.2 75.3
con-
ti-
nued
ope-
rati-
ons
To- 477.9 552.7 36.1 109.6 187.5 143.6 605.6 602.0
tal
Reconciliation of capital expenditure
EUR million 2015 2014 / 15
/ 16 restated
Capital expenditure 605.6 602.0
Debt financed investments - 211.0
Finance leases 315.5 477.4
Advance payments 91.8 224.4
Additions to the group of consolidated 2.7 8.6
companies
Additions to discontinued operations - -
20.6
Additions to other intangible assets and 995.0 1,523.4
property, plant and equipment
Key
figu-
res by
region
Exter- Thereof Non-cur- The-
nal exter- rent reo-
turno- nal assets f
ver turno- non-
by ver -cu-
custo- from rre-
mer discon- nt
tinued as-
operati- set-
ons s
fro-
m
dis-
con-
ti-
nue-
d
ope-
ra-
ti-
ons
EUR 2015 2014 / 2015 / 2014 / 2015 / 2014 / 201-
2014
milli- / 16 15 16 15 16 15 5 / /
15
on 16
Germa- 5,125- 5,033.0 87.2 131.9 615.2 581.3 0.3 -
ny .4
Great 6,356- 6,824.3 641.8 785.1 2,000.3 2,054.7 178-
11.4
Bri- .6 .0
tain
Spain 232.3 483.4 112.6 369.1 470.0 604.4 - -
Other 6,276- 6,148.4 342.8 287.9 456.3 499.3 55.- -
Europe .1 7
North 1,038- 972.8 835.8 716.0 401.5 533.8 71.- -
and .6 5
South
Ameri-
ca
Rest 477.2 619.4 301.4 275.8 488.3 462.9 48.- -
of the 2
world
Total 19,50- 20,081.- 2,321.6 2,565.8 4,431.6 4,736.4 353-
11.4
6.2 3 .7
Notes to the consolidated income statement
The Group's earnings position showed strong growth in financial year 2015 /
16. Operating growth was primarily driven by the continued strong business
performance of Northern Region, Hotels & Resorts and Cruises. Additionally,
the improvement of the Group profit was driven by the profit on the sale of
the Hotelbeds Group.
(1) Turnover
Group turnover is mainly generated from tourism services. A breakdown of
turnover by segments is shown under segment reporting.
(2) Cost of sales and administrative expenses
Cost of sales relates to the expenses incurred in the provision of tourism
services. In addition to expenses for personnel, depreciation,
amortisation,
rental and leasing, it includes all costs incurred by the Group in
connection with the provision and delivery of airline services, hotel
accommodation, cruises and distribution costs.
Administrative expenses comprise all expenses incurred in connection with
activities by the administrative functions and break down as follows:
Administrative expenses
EUR million 2015 / 16 2014 / 15
restated
Staff cost 697.6 737.3
Lease, rental and leasing expenses 60.5 60.2
Depreciation, amortisation and impairments 64.3 79.9
Others 394.5 475.2
Total 1,216.9 1,352.6
In the prior year, administrative expenses were impacted by impairment of
VAT claims in an Italian subsidiary and a provision for litigation in
connection with the acquisition of a Turkish hotel. In financial year 2015
/
16, similar expenses did not recur so that administrative expenses declined
year-on-year. Moreover, the prior year reference period included higher
expenses for reorganisation and restructuring measures, in particular the
rationalisation of the corporate head office, changes in source market
organisation and the aggregation of the airlines. In addition, the merger
between TUI AG and TUI Travel PLC created synergies in the period under
review, which caused a decline in administrative expenses. Administrative
expenses also declined due to the development of exchange rates.
The cost of sales and administrative expenses include the following
expenses
for rent and leasing, personnel and depreciation / amortisation:
Lease, rental and leasing expenses
EUR million 2015 / 16 2014 / 15
restated
Lease, rental and leasing expenses 817.0 854.2
thereof cost of sales 756.5 794.0
thereof administrative expenses 60.5 60.2
Where rental and lease expenses for operating leases are directly related
to
the turnover generating activities, these expenses are shown under the cost
of sales. However, where rental and lease expenses are incurred in respect
of administrative buildings, they are shown under administrative expenses.
The year-on-year decline in lease, rental and leasing expenses is mainly
driven by exchange rate movements and primarily relates to leasing expenses
for aircraft. Moreover, lease payments for cruise ships declined
year-on-year due to the acquisition of Europa 2, which had still been
leased
in the first quarter of the previous year.
Staff costs
EUR million 2015 / 2014 / 15
16 restated
Wages and salaries 1,846.7 1,869.7
thereof cost of sales 1,268.8 1,265.9
thereof administrative expenses 577.9 603.8
Social security contributions, pension 425.3 435.7
costs and benefits
thereof cost of sales 305.6 302.2
thereof administrative expenses 119.7 133.5
Total 2,272.0 2,305.4
Pension costs include service cost for defined benefit obligations. The net
interest expense from the defined benefit obligations is included under
financial expenses due to its financing nature. A detailed presentation of
pension obligations is provided in Note 31.
The year-on-year decline in staff costs in financial year 2015 / 16 mainly
results from foreign exchange effects and higher expenses posted in the
prior year in connection with restructuring measures. Moreover, expenses
for
share-based payments, carried under administrative expenses, declined
year-on-year due to changes in the structure of the remuneration models and
the development of the share price. On the other hand, some staff costs
rose
year-on-year in operating areas, in particular in airlines and hotels,
causing a slight overall increase in the cost of sales.
The average annual headcount (excluding apprentices) developed as follows:
Average annual headcount in the financial
year (excl. apprentices)
2015 / 2014 / 15
16 restated
Average annual - Continuing operations 57,331 57,486
Average annual - Discontinued operations 11,887 13,856
Total 69,218 71,342
Depreciation/amortisation/impairment
EUR million 2015 2014 / 15
/ 16 restated
Depreciation and amortisation 390.7 360.6
thereof cost of sales 327.5 282.4
thereof administrative expenses 63.2 78.2
Impairment of other intangible assets and 17.3 58.3
property, plant and equipment
thereof cost of sales 16.2 56.6
thereof administrative expenses 1.1 1.7
Total 408.0 418.9
Depreciation and amortisation include the amortisation of other intangible
assets, depreciation of property, plant and equipment as well as
write-downs
of investment property. The uniform Group-wide useful lives underlying
depreciation and amortisation and the principles for impairment are
outlined
under Accounting and measurement in the Notes.
The addition of property, plant and equipment in the prior year, in
particular seven aircraft and the cruise ship Europa 2, caused an increase
in depreciation and amortisation, carried under cost of sales. This trend
was further reinforced by further additions in the financial year under
review, including an aircraft and the cruise ship TUI Discovery.
Depreciation and amortisation also rose due to investments in hotels and
software.
Impairments of property, plant and equipment mainly relate to impairments
of
trademarks of EUR 6.1 m and impairments of software of EUR 7.8 m.
In the prior year, impairments mainly comprised impairments of EUR 26.4 m
on
property, plant and equipment in Tenuta di Castelfalfi S.p.A. and an
impairment charge of EUR 24.9 m for software.
(3) Other income / other expenses
Other income/other expenses
EUR million 2015 / 16 2014 / 15
restated
Other income 36.3 42.9
Other expenses 7.4 5.7
Total 28.9 37.2
In financial year 2015 / 16, other income mainly results from the sale of a
Riu Group hotel, from the sale of a joint venture and from the sale of the
cruise ship Island Escape. Income was also generated from the sale of
commercial real estate owned by Preussag Immobilien GmbH, Salzgitter, and
the sale of vehicles owned by incoming agencies.
Other income recognised in the prior year mainly related to gains from the
sale of a Riu Group hotel and from the sale of two Greek hotel companies as
well as to the sale of companies in the PEAK Adventure Travel Group and the
sale of two Specialist Group hotels. Income was also generated from the
recycling of cumulative foreign exchange gains previously carried in equity
outside profit and loss resulting from a capital reduction in a subsidiary.
Other expenses recognised in financial year 2015 / 16 mainly relates to
disposals of aircraft spare parts and the recycling of foreign exchange
losses in connection with capital restructuring.
Other expenses recognised in the prior year mainly resulted from foreign
exchange losses in connection with capital reductions and liquidations of
subsidiaries and from book losses on the sale of aircraft assets.
(4) Goodwill impairment
In financial year 2015 / 16, as in the prior year, the impairment tests
conducted in accordance with IAS 36 did not result in any goodwill
impairments for TUI Group's cash generating units.
(5) Financial income
Financial income
EUR million 2015 2014 / 15
/ 16 restated
Income from non-consolidated Group companies 1.4 1.6
including income from profit transfer agreements
Income from other investments 1.0 1.5
Income from investments 2.4 3.1
Other interest and similar income 19.5 18.6
Income from the measurement of hedges 1.0 1.0
Interest income 20.5 19.6
Income from the measurement of other financial 4.1 3.9
instruments
Foreign exchange gains on financial items 31.5 9.2
Total 58.5 35.8
(6) Financial expenses
Financial expenses
EUR million 2015 2014 / 15
/ 16 restated
Net interest expenses from defined benefit 27.6 34.4
pension plans
Other interest and similar expenses 159.9 150.6
Expenses relating to the measurement of hedges 12.5 17.2
Interest expenses 200.0 202.2
Expenses relating to the measurement of the 100.3 147.1
investment in Hapag-Lloyd AG
Expenses relating to the measurement of other 4.0 6.2
financial instruments
Foreign exchange losses on financial items 41.6 9.0
Total 345.9 364.5
The year-on-year increase in other interest and similar expenses is
attributable to changes in the structure of financial liabilities. After
the
balance sheet date, TUI AG's bond with a nominal value of EUR 300.0 m was
redeemed ahead of its due date at a redemption price of 102.25 %. Interest
expenses therefore rose in the financial year under review. They also
increased due to the rise in liabilities from finance leases. An opposite
trend was driven by the conversion of all convertible bonds in financial
year 2014 / 15.
The other financial expenses primarily comprise the measurement of the
stake
in Hapag-Lloyd AG, shown in a separate line. The measurement of the stake
effected in the course of the year at the closing rate of the Hapag-Lloyd
share as at 31 March 2016 in the principal market Xetra at EUR 16.10 per
share with a fair value of EUR 234.0 m resulted in an impairment of EUR
100.3 m, carried in financial expenses (Level 1 measurement). The
subsequent
increase in the value driven by the rise in Hapag-Lloyd's share price to
EUR
18.29 as at 30 September 2016 and the resulting increase in fair value to
EUR 265.8 m was carried in equity outside profit and loss, in line with IAS
39. As a result, the impairment charge carried in financial expenses
remains
at EUR 100.3 m. For more detailed information, we refer to Note 18.
In the prior year, expenses for the measurement of other financial
instruments also resulted from the measurement of the stake in Hapag-Lloyd
AG at fair value (previous year Level 3 measurement).
(7) Share of results of joint ventures and associates
Share of result of joint ventures and
associates
EUR million 2015 / 2014 / 15
16 restated
Income from associated companies measured 25.3 35.3
at equity
Expenses for associated companies measured 0.1 7.0
at equity
Share of result of associates 25.2 28.3
Income from joint ventures measured at 163.0 124.1
equity
Expenses for joint ventures measured at 1.0 8.5
equity
Share of result of joint ventures 162.0 115.6
Total 187.2 143.9
The share of result of joint ventures and associates comprises the net
profit for the year attributable to the associated companies and joint
ventures.
The year-on-year decline in income from associated companies measured at
equity is attributable to the Canadian tour operator Sunwing. Due to the
fall of the Canadian dollar versus the US dollar, Sunwing recorded an
increase in direct costs and a resulting decline in its results versus the
prior year. Offsetting this, a Caribbean hotel company which had still
posted a negative profit contribution in the prior year reported a positive
contribution in the period under review.
The increase in income from joint ventures mainly results from the
improvement in the operating performance of Riu Hotels as well as the sound
performance of TUI Cruises and the first-time full-year operation of Mein
Schiff 4 and the launch of Mein Schiff 5 in July 2016.
Expenses for joint ventures declined year-on-year as the negative profit
contributions of two Greek hotel companies did not reoccur since these
companies were sold in Q3 2014 / 15.
In the financial year under review, the share of results of joint ventures
and associates did not include any impairments, consistent with the prior
year.
(8) Income taxes
Breakdown of income taxes
EUR million 2015 / 16 2014 / 15
restated
Current tax expense
in Germany 39.5 16.2
abroad 125.1 140.3
Deferred tax income - 11.2 - 98.3
Total 153.4 58.2
The increase in current income tax expenses in Germany is attributable to
the reassessment of the trade tax risk in hotel purchasing, which resulted
in tax expenses of EUR 35.1 m related to prior periods in the financial
year
under review. In terms of income taxes in the rest of the world, countries
outside Germany posted tax income related to prior periods, unlike in 2014
/
15. Overall, current tax expenses related to prior periods amount to EUR
9.9
m (previous year EUR 14.8.) in financial year 2014 / 15.
Deferred tax assets mainly arose abroad, outside of Germany. In the prior
year, deferred tax assets for losses carried forward were re-measured
following the merger between TUI AG and TUI Travel PLC, resulting in tax
assets of EUR 114.2 in the prior year reference period.
In financial year 2015 / 16, total income taxes of EUR 153.4 m (previous
year EUR 58.2 m) were derived from an 'expected' income tax expense that
would have arisen if the statutory income tax rate of TUI AG as the parent
company (aggregate income tax rate) had been applied to earnings before tax
as follows:
Reconciliation of expected to actual income
taxes
EUR million 2015 / 2014 / 15
16 restated
Earnings before income taxes 618.3 465.8
Expected income tax (current year 31.5 %, 194.8 144.4
previous year 31.0 %)
Variation from the difference between actual - 27.0 - 34.9
and expected tax rates
Changes in tax rates and tax law - 26.1 - 3.3
Income not taxable - - 125.3
114.6
Expenses not deductible 101.8 157.6
Effects from loss carryforwards 31.3 - 113.4
Temporary differences for which no deferred - 1.0 6.8
taxes were recognised
Deferred and current tax relating to other - 11.1 25.3
periods (net)
Other differences 5.3 1.0
Income taxes 153.4 58.2
In the prior year, the effects from losses carried forward included the
revaluation of German losses carried forward from the enlargement of the
fiscal unity in Germany. An offsetting effect arose from impairments of
deferred tax assets on losses carried forward in the UK.
(9) Result from discontinued operation
The result from discontinued operations includes the after-tax results of
Specialist Group, Hotelbeds Group and LateRooms Group, classified as
discontinued operations. For further information, please refer to the
section 'Discontinued operations' within 'Acquisitions - Divestments -
Discontinued operations'.
(10) Group profit for the year attributable to shareholders of TUI AG
The share of Group profit attributable to the TUI AG shareholders improved
from EUR 340.4 m in the prior year to EUR 1,037.4 m in financial year 2015
/
16. Apart from the general improvement in the Group's performance, the
increase is attributable to the disposal of Hotelbeds Group (for more
details, please refer to the section on Discontinued operations). The
year-on-year increase in the share in Group profit attributable to TUI AG
shareholders is also driven by the fact that non-controlling interests in
TUI Travel PLC were only held until the merger between TUI AG and TUI
Travel
PLC in December 2014.
(11) Group profit for the year attributable to non-controlling interest
Group profit for the year attributable to
non-controlling interest
EUR million 2015 / 2014 /
16 15
Central Region 0.3 2.3
Hotels & Resorts 111.2 88.8
Other Tourism 0.2 0.1
Tourism 111.7 91.2
Specialist Group - 0.1 - 3.1
Hotelbeds Group 3.4 2.0
All other segments - 0.2 - 0.3
Formerly Travel (TUI Travel PLC - Group) - - 50.6
Total 114.8 39.2
In Hotels & Resorts, Group profit for the year attributable to
non-controlling interests primarily relates to RIUSA II Group. In the prior
year, the segment structure was slightly changed. The non-controlling
interests carried in the line 'Formerly Travel' in the prior year comprise
the prorated losses of the former TUI Travel PLC sub-group until the
acquisition of the shares in TUI Travel PLC held by non-controlling
interests by TUI AG in December 2014. Since the merger between TUI AG and
TUI Travel PLC in December 2014, there have no longer been any
non-controlling interests in the former TUI Travel PLC sub-group.
(12) Earnings per share
In accordance with IAS 33, basic earnings per share are calculated by
dividing the Group profit for the year attributable to TUI AG shareholders
by the weighted average number of registered shares outstanding during the
financial year under review. The average number of shares is derived from
the total number of shares at the beginning of the financial year
(586,603,217 shares) and the employee shares issued on a pro rata temporis
basis (179,486 new shares). The prorated effect of the own shares held by
an
employee benefit trust of 2,664,194 shares was deducted.
In the prior year, the dividend on the hybrid capital was deducted from
Group profit for the year attributable to shareholders of TUI AG until the
call date on 24 March 2015 since the hybrid capital represented equity
until
the call date but did not constitute Group profit attributable to TUI AG
shareholders.
Earnings per share
2015 / 16 2014 / 15
restated
Group profit for the year attributable to 1,037.4 340.4
shareholders of TUI AGEUR million
Dividend effect on hybrid capitalEUR - - 10.9
million
= Adjusted Group profit for the year 1,037.4 329.5
attributable to shareholders of TUI AGEUR
million
Weighted average number of shares 584,118,509 513,114,716
Basic earnings per shareEUR 1.78 0.64
- Basic earnings per share from 0.61 0.66
continuing operationsEUR
- Basic earnings per share from 1.17 - 0.02
discontinued operationsEUR
Diluted Earnings per share
2015 / 16 2014 / 15
restated
Adjusted Group profit for the year 1,037.4 329.5
attributable to shareholders of TUI AGEUR
million
Weighted average number of shares 584,118,509 513,114,716
Diluting effect from assumed exercise of 1,522,934 6,384,006
share awards
Weighted average number of shares 585,641,443 519,498,722
(diluted)
Diluted earnings per shareEUR 1.77 0.63
- Diluted earnings per share from 0.60 0.65
continuing operationsEUR
- Diluted earnings per share from 1.17 - 0.02
discontinued operationsEUR
As a rule, a dilution of earnings per share occurs when the average number
of shares increases due to the issue of shares from conversion of share
options. In the financial year under review, these effects resulted from
share-based remuneration plans. The conversion rights existing in prior
years fully expired in financial year 2014 / 15.
(13) Taxes attributable to other results
Tax effects relating to other
comprehensive income
2015 2014
/ 16 / 15
EUR million Gross Tax Net Gross Tax Net
ef- ef-
fect fect
Foreign exchange differences 52.4 - 52.4 - - -
221.7 221.7
Available for sale financial 31.8 - 31.8 - - -
instruments
Cash flow hedges 546.1 - 465.2 - 27.1 -
80.9 221.0 193.9
Remeasurements of pension - 157.9 - 82.2 - 58.0
provisions and related fund 593.3 435.4 24.2
assets
Changes in the measurement of - - - 22.1 - 22.1
companies measured at equity 32.0 32.0
outside profit or loss
Other comprehensive income 5.0 77.0 82.0 - 2.9 -
338.4 335.5
In addition, income taxes worth EUR - 0.9 m (previous year EUR 17.7 m)
carried outside profit and loss were generated in the period under review
and recognised directly in equity.
Notes on the consolidated statement of financial position
(14) Goodwill
Goodwill
EUR million 2015 / 16 2014 / 15
Historical cost
Balance as at 1 Oct 3,678.8 3,590.6
Exchange differences - 234.3 95.6
Additions 9.2 1.6
Disposals* - -
Reclassification as assets held for sale - 167.0 - 9.0
Balance as at 30 Sep 3,286.7 3,678.8
Impairment
Balance as at 1 Oct 458.4 454.4
Exchange differences - 25.0 3.9
Disposals* - -
Reclassification as assets held for sale - 0.2 0.1
Balance as at 30 Sep 433.2 458.4
Carrying amounts as at 30 Sep 2,853.5 3,220.4
* Of which no disposals from changes in the group of consolidated companies
The decrease in the carrying amount is mainly attributable to the
translation of goodwill not carried in the TUI Group's functional currency
into euros and recognition of the Hotelbeds Group and Specialist Group
segments as discontinued operations. In Q1 2015 / 16, incoming agencies
(Destination Services) were carved out from the Hotelbeds Group segment and
transferred to Other Tourism. They are carried as a separate
cash-generating
unit.
In accordance with the rules of IAS 21, goodwill allocated to the
individual
segments and sectors was recognised in the functional currency of the
subsidiaries and subsequently translated when preparing the consolidated
financial statements. As with the treatment of other differences from the
translation of annual financial statements of foreign subsidiaries,
differences due to exchange rate movements between the exchange rate at the
date of acquisition of the subsidiary and the exchange rate at the balance
sheet date are taken directly to equity outside profit and loss and are
disclosed as a separate item. In financial year 2015 / 16, a decrease in
the
carrying amount of goodwill of EUR 209.3 m (previous year increase of EUR
91.7 m) resulted from foreign exchange differences.
The following table provides a breakdown of the carrying amounts of
goodwill
by cash generating unit (CGU):
Goodwill per cash generating unit
EUR million 30 Sep 2016 30 Sep 2015
Northern Region 1,545.1 1,736.1
Central Region 507.7 505.7
Western Region 338.8 338.4
Specialist Group - 70.5
Hotelbeds Group - 202.1
Destination Services 94.3 -
Riu 351.7 351.7
Robinson 9.7 9.7
TUI Blue 6.2 6.2
Total 2,853.5 3,220.4
Impairment charges are recognised if the carrying amount of the tested unit
plus the allocated goodwill exceeds the recoverable amount. In the
financial
year under review, goodwill was tested for impairment at the level of cash
generating units (CGUs) as at 30 June 2016.
For all cash generating units, the recoverable amount was determined on the
basis of fair value less costs of disposal. The fair value was determined
by
discounting expected future cash inflows. This was based on the budget for
Q4 of the financial year under review, the medium-term plan for the entity
under review, prepared as at 30 September 2016, after deduction of income
tax payments. Budgeted turnover and EBITA margins are based on observed
values from prior financial years and expectations with regard to the
future
development of the market. The cash inflows after the planning period are
extrapolated on the basis of individual growth rates based on long-term
business expectations.
The discount rates are calculated as the weighted average cost of capital,
taking account of the risks associated with the cash generating unit on the
basis of external capital market information. The cost of equity included
in
the calculation reflects the return expected by investors. The cost of
borrowing is derived from the long-term financing terms of comparable
companies in the peer group.
The table below provides an overview of the assumptions used for
determining
the fair values per CGU. It shows the timeframe for the cash flow forecast,
the growth rates used to extrapolate the cash flow forecast, and the
relevant valuation hierarchy according to IFRS 13. The table lists the main
cash generating units to which goodwill has been allocated.
Assumptions for
calculation of fair
value in financial
year 2015/16
Planning Growth EBITA- Growth rate WACC L-
period rate -Mar- after in % e-
in years revenues gin planning v-
in % in % period in % e-
l
Northern Region 3.25 8.3 7.2 0.5 6.75 3
Central Region 3.25 7.1 2.3 0.5 6.75 3
Western Region 3.25 7.8 3.4 0.5 6.75 3
Destination Services 3.25 8.2 7.3 0.5 6.75 3
Riu 3.25 3.7 31.2 0.5 5.75 3
Robinson 3.25 17.2 14.9 0.5 5.75 3
TUI Blue 3.25 93.1 12.8 0.5 5.75 3
Assumptions for
calculation of fair
value in financial
year 2014/15
Planning Growth EBITA- Growth rate WACC L-
period rate -Mar- after in % e-
in years revenues gin planning v-
in % in % period in % e-
l
Northern Region 3.25 4.3 6.8 0.5 7.25 3
Central Region 3.25 8.2 2.8 0.5 7.25 3
Western Region 3.25 9.3 3.1 0.5 7.25 3
Riu 3.25 2.4 24.1 0.5 6.75 3
Robinson 3.25 17.9 17.3 0.5 6.75 3
Iberotel 3.25 5.9 18.4 0.5 6.75 3
Specialist Group 3.25 2.3 2.8 0.5 7.25 3
Hotelbeds Group 3.25 11.3 6.0 0.5 7.25 3
Goodwill was tested for impairment as at 30 June 2016. The test did not
result in a requirement to recognise an impairment. Neither an increase in
WACC of 50 basis points nor a reduction in the growth rate in perpetuity of
50 basis points would have led to an impairment of goodwill. The same
applies to a decrease of revenue growth rates and EBITA-margin in
perpetuity
by 10 % each.
(15) Other intangible assets
Other
intangible
assets
EUR million Concessions, Selfge- Trans- Custo- Pay- Total
industrial nera- port and mer ments
property ted leasing base on
rights and softwa- con- ac-
similar re tracts count
rights and
values
Historical cost
Balance as at 1 1,276.0 142.1 107.1 252.5 0.4 1,778.1
Oct 2014
Exchange 48.8 4.8 6.4 6.4 - 66.4
differences
Additions due 0.8 - - 0.2 - 1.0 1
to changes in
the group of
consolidated
companies
Additions 165.7 23.9 - 1.6 0.3 191.5
Disposals 35.4 17.0 - 2.2 - 54.6 2
Reclassificati- - 73.1 - 44.7 - - 3.6 - - 121.4
on as assets
held for sale
Reclassificati- - 111.9 114.4 - 3.0 0.7 - 0.2 -
ons
Balance as at 1,270.9 223.5 110.5 255.6 0.5 1,861.0
30 Sep 2015
Exchange - 90.6 - 20.0 - 10.4 - 6.5 - - 127.5
differences
Additions due 0.7 - - 0.4 - 1.1
to changes in
the group of
consolidated
companies
Additions 146.7 6.1 - 0.3 2.5 155.6
Disposals 104.5 4.6 - 1.6 - 110.7
Reclassificati- - 408.5 - 33.6 - 7.1 - - - 648.2
on as assets 199.0
held for sale
Reclassificati- - 128.3 128.8 - - - 0.5 -
ons
Balance as at 686.4 300.2 93.0 49.2 2.5 1,131.3
30 Sep 2016
Amortisation
Balance as at 1 626.6 57.4 37.7 122.9 - 844.6
October 2014
Exchange 20.4 1.9 2.1 3.5 - 27.9
differences
Amortisation 96.5 27.9 0.5 18.2 - 143.1
for the current
year
Impairments for 7.2 29.2 - - - 36.4
the current
year
Disposals 29.0 17.0 - 2.2 - 48.2
Reclassificati- - 27.5 - 25.0 - - 1.8 - - 54.3
on as assets
held for sale
Reclassificati- - 35.8 31.6 4.2 - - -
ons
Balance as at 658.4 106.0 44.5 140.6 - 949.5
30 Sep 2015
Exchange - 43.6 - 6.6 - 5.4 - 4.0 - - 59.6
differences
Amortisation 74.1 31.4 4.7 11.1 - 121.3
for the current
year
Impairments for 22.9 8.0 - - - 30.9
the current
year
Disposals 100.0 4.3 - 1.6 - 105.9
Reclassificati- - 210.1 - 19.5 - 5.2 - - - 350.7
on as assets 115.9
held for sale
Reclassificati- - 11.0 6.3 4.7 - - -
ons
Balance as at 390.7 121.3 43.3 30.2 - 585.5
30 Sep 2016
Carrying 612.5 117.5 66.0 115.0 0.5 911.5
amounts as at
30 Sep 2015
Carrying 295.7 178.9 49.7 19.0 2.5 545.8
amounts as at
30 Sep 2016
1 Of which additions due to first-time consolidation of non-consolidated
companies EUR 0.2 m
2 Of which disposals due to changes in the group of consolidated companies
of EUR 1.5 m (historical costs) and EUR 0.8 m (amortisation)
Other intangible assets, consisting in particular of trademarks and
customer
relationships, are amortised over their useful lives.
Self-generated software consists of computer programs for tourism
applications exclusively used internally by the Group.
The decrease in the carrying amount of the intangible assets compared to
the
prior year is mainly attributable to the reclassification of the segments
Hotelbeds Group and Specialist Group to assets held for sale.
The increase in disposals is driven by the implementation of new software
in
the Northern Region segment. The software previously used and fully
amortised was therefore derecognised.
Impairments include an amount of EUR 9.7 m in respect of the Specialist
Group brands, required due to the sale of businesses in the course of the
year. In addition, brands in the Western Region segment worth EUR 6.1 m
were
impaired as they are no longer in use due to the adoption of the Group's
new
brand strategy. Impairments also included software worth EUR 6.3 m in
Specialist Group and a module of an Internet platform worth EUR 7.8 m in
Other Tourism, as they are no longer used.
The prior year's impairments of EUR 21.8 m relate to various modules of an
Internet platform for joint use in Northern, Western and Central Regions.
At the balance sheet date, the carrying amount of intangible assets subject
to restraints on ownership or pledged as security amounts to EURnil
(previous year EUR 109.1 m).
(16) Property, plant and equipment
Pro-
per-
ty,
plan-
t
and
equi-
pmen-
t
EUR Real Other A- Ships, Machi- Oth- As- Pay-
Total
mil- estate real i- yachts nery er sets ments
lion with estate- r- and and pla- under on
hotels , land c- boats fixtu- nt- con- ac-
rights r- res s, struc- count
and a- ope- tion
buil- f- ra-
dings t tin-
incl. g
buil- and
dings of-
on fi-
third-- ce
party equ-
proper- ip-
ties men-
t
re-
vi-
sed
His-
tori-
cal
cost
Bala- 1,333.1 255.4 1- 788.4 254.9 985- 65.2 221.7
5,064.8
nce ,- .8
as 1-
at 1 6-
Oct 0-
2014 .-
3
Ex- - 11.7 - 1.5 7- 29.3 - 1.1 1.0 1.1 16.5
110.6
chan- 7-
ge .-
dif- 0
fe-
renc-
es
Addi- 6.5 - - - - 1.1 - - 7.6
1
ti-
ons
due
to
chan-
ges
in
the
grou-
p of
con-
soli-
da-
ted
com-
pa-
nies
Addi- 41.9 42.0 5- 314.9 23.7 83.- 59.7 232.2
1,323.3
ti- 2- 0
ons 5-
.-
9
Dis- 1.5 8.9 4- 24.6 4.7 65.- 4.0 236.4
388.1 2
po- 2- 8
sals .-
2
Re- 6.9 - 0.7 - - - - - 6.5 - 7.6 -
67.4
clas- 4- 14.-
sifi- 5- 5
cati- .-
on 0
as
as-
sets
held
for
sale
Re- 26.3 - 4.8 5- 2.1 4.2 16.- - - -
8.7
clas- 8- 2 60.5 50.6
sifi- .-
cati- 4
ons
Bala- 1,401.5 281.5 1- 1,110.1 277.0 1,0- 55.0 175.8
6,042.1
nce ,- 06.-
as 7- 8
at 3-
30 4-
Sep .-
2015 4
Ex- - 32.5 - 17.6 - - 61.5 - 1.9 - - 2.8 - 9.2 -
177.0
chan- 2- 27.-
ge 4- 4
dif- .-
fe- 1
renc-
es
Addi- - - - - - 1.6 - - 1.6
ti-
ons
due
to
chan-
ges
in
the
grou-
p of
con-
soli-
da-
ted
com-
pa-
nies
Addi- 48.1 55.8 1- 228.0 26.6 77.- 157.7 98.1
836.7
ti- 4- 0
ons 5-
.-
4
Dis- 5.6 25.7 4- 156.2 6.2 107- 1.7 43.1
389.0
po- 3- .1
sals .-
4
Re- - - 67.3 - - 246.0 - - - 2.0 - -
411.8
clas- 5- 90.-
sifi- .- 8
cati- 7
on
as
as-
sets
held
for
sale
Re- 25.4 4.7 2- 20.1 9.1 - - - 2.3
clas- 8- 25.- 48.1 11.5
sifi- .- 9
cati- 5
ons
Bala- 1,436.9 231.4 1- 894.5 304.6 834- 158.1 210.1
5,904.9
nce ,- .2
as 8-
at 3-
30 5-
Sep .-
2016 1
De-
pre-
cia-
tion
Bala- 383.4 95.3 5- 355.6 180.8 681- - -
2,221.1
nce 2- .4
as 4-
at 1 .-
Oct 6
2014
Ex- - 3.6 3.7 1- 13.7 - 0.6 1.0 - - 28.0
chan- 3-
ge .-
dif- 8
fe-
renc-
es
De- 38.8 6.6 1- 52.8 15.1 85.- - -
300.1
pre- 0- 8
cia- 1-
tion .-
for 0
the
cur-
rent
year
Im- 0.2 19.8 0- 2.9 4.8 0.4 2.2 - 30.9
pair- .-
ment- 6
s
for
the
cur-
rent
year
Dis- 1.1 6.4 3- 19.2 4.4 56.- 1.7 -
125.3
po- 5- 9
sals .-
6
Re- 1.4 - 0.1 - - - - - 0.5 - -
45.7
clas- 3- 10.-
sifi- 6- 5
cati- .-
on 0
as
as-
sets
held
for
sale
Re- 11.2 - 7.6 - - 2.4 - 1.5 - - - -
3.8
clas- 3.5
sifi-
cati-
ons
Bala- 430.3 111.3 5- 403.4 194.2 697- 0.0 -
2,405.3
nce 6- .7
as 8-
at .-
30 4
Sep
2015
Ex- - 10.4 0.9 - - 14.1 - 1.1 - - - -
64.4
chan- 2- 18.-
ge 1- 7
dif- .-
fe- 0
renc-
es
De- 37.7 5.7 1- 58.7 19.3 78.- - -
323.6
pre- 2- 8
cia- 3-
tion .-
for 4
the
cur-
rent
year
Im- - 1.3 - - 0.7 0.7 - - 2.7
pair-
ment-
s
for
the
cur-
rent
year
Dis- 4.4 17.4 3- 144.8 6.1 101- - -
311.5
po- 7- .1
sals .-
7
Re- - - 28.4 - - 82.7 - - - - -
167.7
clas- 0- 56.-
sifi- .- 0
cati- 6
on
as
as-
sets
held
for
sale
Re- 4.8 2.6 0- - 0.3 13.1 - - 0.2 - 2.4
clas- .- 18.-
sifi- 6 2
cati-
ons
Bala- 458.0 76.0 6- 220.2 220.1 583- - 0.2 -
2,190.4
nce 3- .2
as 3-
at .-
30 1
Sep
2016
Car- 971.2 170.2 1- 706.7 82.8 309- 55.0 175.8
3,636.8
ry- ,- .1
ing 1-
amou- 6-
nts 6-
as .-
at 0
30
Sep
2015
Car- 978.9 155.4 1- 674.3 84.5 251- 158.3 210.1
3,714.5
ry- ,- .0
ing 2-
amou- 0-
nts 2-
as .-
at 0
30
Sep
2016
1 Of which additions due to first-time consolidation of non-consolidated
companies of EUR 0.2 m
2 Of which disposals due to changes in the group of consolidated companies
of EUR 0.8 m (historical cost) and EUR 0.7 m (depreciation), respectively
The decrease in the carrying amount of property, plant and equipment
compared to the prior year is mainly attributable to the reclassification
of
the segments Hotelbeds Group and Specialist Group to assets held for sale.
In the reporting period, additions included the cruise ship TUI Discovery
with a carrying amount of EUR 182.9 m held as a finance lease. The ship is
operated in the Northern Region segment. In the prior year, additions of
ships included Europa 2 in the Cruise segment worth EUR 278.2 m.
Moreover, one aircraft, operated under a finance lease, was capitalised in
the amount of EUR 120.2 m in the period under review. In addition, advance
payments for aircraft ordered amounting to EUR 91.8 m were capitalised.
Additions to assets under construction included investments in hotel
facilities in Hotels & Resorts worth EUR 100.9 m.
In the prior year, impairment charges mainly related to buildings and
technical systems at Tenuta di Castelfalfi S.p.A. in Hotels & Resorts.
All investment property was sold in the course of the financial year. For
materiality reasons, the development of these assets is therefore shown
under Other real estate, land rights and buildings incl. buildings on
third-party properties. In the prior year, these assets had a carrying
amount of EUR 7.2 m and a fair value of EUR 10.1 m.
As at the balance sheet date, the carrying amount of tangible assets
subject
to ownership restrictions or pledged as security totals EUR 613.1 m
(previous year EUR 700.4 m).
Property, plant and equipment also comprise leased assets in which Group
subsidiaries have assumed substantially all the risks and rewards of
ownership of the assets.
Composition of finance leased assets
Net
carrying
amounts
EUR million 30 Sep 30 Sep
2016 2015
Other real estate, land rights and buildings 14.8 24.2
incl. buildings on third-party properties
Aircraft 955.0 871.0
Ships, yachts and boats 232.5 96.3
Machinery and fixtures - 0.1
Other plant, operating and office equipment 27.7 18.4
Total 1,230.0 1,010.0
The payment obligations resulting from future lease payments are carried as
liabilities, with future interest expenses not reflected in the carrying
amount of the financial liabilities. Total payments due under finance
leases
amount to EUR 1,450.1 m (previous year EUR 1,216.6 m). Group companies have
not accepted any guarantees for the residual values of the leased assets,
as
in the prior year.
Reconci-
liation
of future
lease
payments
to
liabili-
ties from
finance
leases
30 30
Sep Sep
2016 2015
Remai- Remai-
ning ning
term term
EUR up to 1- 5 more Total up to 1- 5 more Total
million 1 years than 1 years than
year 5 year 5
years years
Total 125.7 462.4 862.0 1,450.1 103.3 396.4 716.9 1,216.6
future
lease
payments
Interest 33.5 113.4 71.5 218.4 34.4 115.8 84.4 234.6
portion
Liabili- 92.2 349.0 790.5 1,231.7 68.9 280.6 632.5 982.0
ties from
finance
leases
(17) Investments in joint ventures and associates
The table below presents the TUI Group's significant joint arrangements and
associates. All joint arrangements and associates are shown in the list of
TUI Group Shareholdings in Note 55. All joint arrangements are joint
ventures. There are no joint operations within the definition of IFRS 12.
Significant associates and
joint ventures
Capital Voting
share in rights
% share in %
Name and headquarter of Nature 30 Sep 30 30 Sep 30
company of 2016 Sep 2016 Sep
business 2015 2015
Associates
Sunwing Travel Group Inc., Tour 49.0 49.0 25.0 25.0
Toronto, Canada operator
Blue Diamond Hotels and Hotel -* 49.0 -* 49.0
Resorts Inc., St. Michael, operator
Barbados
Joint ventures
Riu Hotels S. A., Palma de Hotel 49.0 49.0 49.0 49.0
Mallorca, Spain operator
TUI Cruises GmbH, Hamburg, Cruise 50.0 50.0 50.0 50.0
Germany ship
operator
Togebi Holdings Limited, Tour 25.0 49.0 25.0 49.0
Nicosia, Cyprus operator
* Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,
Canada.
All companies shown in the table are accounted for using the equity method.
The financial years of Sunwing Travel Group Inc. and Blue Diamond Hotels
and
Resorts Inc. correspond to the TUI Group's financial year. The financial
years of the other associates and joint ventures end on 31 December of each
year. In order to update at equity measurement as at the TUI Group's
balance
sheet date, interim financial statements for the period ending 30 September
are prepared for these companies.
Significant associates
In 2009, the Sunwing Travel Group entered into a partnership with TUI
Group.
Sunwing Travel Group Inc. is a vertically integrated travel company that
encompasses tour operators, an airline and retail travel agencies. The
company has different classes of shares. TUI Group holds 25 % of the voting
shares.
Blue Diamond Hotels & Resorts Inc., a hotel operation and development
company operating a chain of luxury beach holiday resorts and hotels in the
Caribbean and Mexico, was carried as an associate and measured at equity in
the prior year. In September 2016, the company was transferred to Sunwing
Travel Group and therefore no longer constituted a direct associate as at
the balance sheet date.
Significant joint ventures
Riu Hotels S. A. is a hotel company established in 1976, which owns and
operates 4- to 5-star hotels, mainly located in Spain and Central America.
TUI Cruises was established in 2008, and is a joint venture with the US
shipping line Royal Caribbean Cruises Ltd. The Hamburg-based company offers
German-speaking cruises for the premium market. Since the commissioning of
Mein Schiff 5 in July 2016, TUI Cruises has operated five cruise ships.
Togebi Holdings Limited (TUI Russia) is a joint venture with Oscrivia
Limited, a subsidiary of the Russian ZAO Sever Group (ZSG). ZSG is owned by
a large shareholder and member of the supervisory board of TUI AG. The
business purpose of this joint venture, established in 2009, is to develop
the tour operation business, in particular in Russia and Ukraine. The
company owns tour operator subsidiaries and retail chains in these
countries.
Changes in the Group's interest in significant joint ventures
In the prior year, the TUI Group held a stake of 49.0 % in TUI Russia. In
October 2015, contractual agreements on the reorganisation of the equity of
TUI Russia were concluded with Oscrivia Limited. The parties agreed a
capital increase in which TUI Group participated by paying a net amount of
$
3 m, while Oscrivia Limited paid a net amount of $ 17 m. TUI Group's share
in TUI Russia declined from 49 % to 25 % and Oscrivia Limited increased its
share to 75 %. Existing loans and guarantees of the shareholders were
adjusted to reflect the new stakes. Furthermore, the joint venture
agreement
was amended to reflect the new voting rights proportions. The relevant
activities of TUI Russia continue to be jointly determined by TUI Group and
Oscrivia Limited, so that TUI Russia remains classified as a joint venture.
Financial information on associates and joint ventures
The following tables provide summarised financial information for the
significant associates and joint ventures of the TUI Group. The information
disclosed reflects the full amounts presented in the consolidated financial
statements of the relevant associates and joint ventures (100 per cent) and
not TUI Group's share of those amounts.
Combined
financial
information of
material
associates
Sunwing Travel Blue Diamond Hotels
Group Inc., and Resorts Inc.,
Toronto, St. Michael,
Canada3 Barbados2
EUR million 30 Sep 2016 / 30 Sep 30 Sep 2016 / 2015 30 Sep
2015 / 16 2015 / / 16 2015 /
2014 / 2014 /
15 15
Non-current 736.5 163.1 - 314.7
assets
Current assets 491.5 368.9 - 84.1
Non-current 386.3 44.9 - 114.9
provisions and
liabilities
Current 421.9 285.7 - 170.8
provisions and
liabilities
Revenues 1,432.6 1,557.3 264.8 201.9
Profit / loss 1 11.6 45.2 48.3 17.5
Other 4.5 - - - 1.6
comprehensive
income
Total 16.1 45.2 48.3 15.9
comprehensive
income
1 Solely from continuing operations
2 Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,
Canada
3 The balance sheet at 30 Sep 2016 also contains the balances of the Blue
Diamonds Hotels and Resorts Inc., St. Michael, Barbados, as well as other
entities, which were transferred to the Sunwing Travel Group at the balance
sheet date.
Combined
financial
information of
material joint
ventures
Riu Hotels TUI Togebi
S. A., Cruises Holdings
Palma de GmbH, Limited,
Mallorca, Hamburg, Nicosia,
Spain Germany Cypres
EUR million 30 Sep 30 30 Sep 30 Sep 30 Sep 30
2016 / Sep 2016 / 2015 / 2016 / Sep
2015 / 16 2015 2015 / 2014 / 2015 / 16 2015
/ 16 15 /
2014 2014
/ 15 / 15
Non-current 739.8 829.7 2,049.0 1,569.4 3.9 5.2
assets
Current assets 79.5 72.1 379.5 195.7 27.1 19.0
thereof cash 26.8 27.4 105.5 109.0 3.4 3.4
and cash
equivalents
Non-current 13.3 101.7 1,234.8 860.4 117.3 157.0
provisions and
liabilities
thereof 9.0 73.2 1,234.8 860.4 114.6 146.1
financial
liabilities
Current 148.3 160.6 614.1 367.9 27.2 35.5
provisions and
liabilities
thereof 82.2 104.6 - - 18.6 27.3
financial
liabilities
Turnover 305.7 276.9 807.3 614.1 129.5 200.9
Depreciation 21.1 24.9 58.1 42.0 1.3 4.7
of intangible
assets and
property,
plant and
equipment
Interest 0.2 0.1 - 5.8 - -
income
Interest 1.7 2.6 16.2 11.4 4.7 5.0
expenses
Income taxes 36.7 26.1 0.3 - 0.1 -
Profit / loss 92.5 70.9 200.2 136.2 9.2 -
* 44.1
Other - 36.4 69.1 - 37.8 - 22.6 - -
comprehensive
income
Total 56.1 140.0 162.4 113.6 9.2 -
comprehensive 44.1
income
* Solely from continuing operations
In financial year 2015 / 16, TUI Group received dividends of EUR 60.0 m
from
TUI Cruises and EUR 12.2 m from Riu Hotels. In total, dividends of EUR 79.4
m were paid by all joint ventures to TUI Group (previous year EUR 76.4 m,
including EUR 34.3 m from Riu Hotels and EUR 35.0 m from TUI Cruises). In
financial year 2015 / 16 as well as in the prior year, TUI Group did not
receive any dividends from its major associates; in total, TUI Group
received dividends of EUR 1.1 m from its associates (previous year EUR 2.6
m).
In addition to the material associates and joint ventures, TUI Group has
interests in a number of equity accounted associates and joint ventures
that
are individually not considered significant. The tables below provide
information on TUI Group's share of the profit / loss, other income and
other comprehensive income of the material associates and joint ventures as
well as the aggregated amount of the share of these earnings figures for
the
immaterial associates and joint ventures.
Share of
financial
information
of material
and other
associates
Sunwing Blue Othe- Asso-
Travel Diamond r cia-
Group Hotels and asso- tes
Inc., Resorts cia- To-
Toronto, Inc., St. tes tal
Canada Michael,
Barbados
EUR million 2015 / 16 2014 2015 / 16 2014 2015 2014 2015
2014
/ 15 / 15 / 16 / 15 / 16 /
15
re- re-
stat-
stat-
ed ed
TUI's share
of
Profit / 5.7 22.1 23.7 8.6 - - 25.2
28.3
loss 4.2 2.4
Other 4.5 - - - - 0.7 4.5 -
comprehensi- 0.8 0.1
ve income /
loss
Total 10.2 22.1 23.7 7.8 - - 29.7
28.2
comprehensi- 4.2 1.7
ve income /
loss
SHARE
OF
FINAN-
CIAL
INFOR-
MATIO-
N OF
MATER-
IAL
AND
OTHER
VENTU-
RES
Riu TUI Toge- Othe- Joint
Ho- Cru- bi r ventu-
tels ise- Hol- join- res
S. s dings t Total
A., Gm- Limi- ven-
Palma bH, ted, tu-
de Ham- Nico- res
Mal- bur- sia,
lor- g, Cy-
ca, Ger- pres
Spain ma-
ny
EUR 2015 2014 201- 2014 2015 2014 2015 2014 2015 2014
milli- / 16 / 15 5 / / 15 / 16 / 15 / 16 / 15 / 16 / 15
on 16
TUI's
share
of
Pro- 45.3 34.7 100- 68.1 - - 16.6 12.8 162.0 115.6
fit / .1
loss
Other - 33.6 - - - - - - - 21.5
com- 18.1 18.- 11.3 0.8 36.8
pre- 7
hensi-
ve
inco-
me /
loss
Total 27.2 68.3 81.- 56.8 - - 16.6 12.0 125.2 137.1
com- 4
pre-
hensi-
ve
inco-
me /
loss
Net assets of
the material
associates
EUR million Sunwing Travel Blue Diamond Hotels and
Group Inc., Resorts Inc., St. Michael,
Toronto, Canada2 Barbados1
Net assets as at 170.4 87.0
1 Oct 2014
Profit / loss 45.2 17.5
Other - - 1.6
comprehensive
income
Dividends - -
Capital increase - -
Foreign exchange - 14.2 10.2
effects
Net assets as at 201.4 113.1
30 Sep 2015
Net assets as at 201.4 113.1
1 Oct 2015
Profit / loss 11.6 48.3
Other 9.2 -
comprehensive
income
Dividends - -
payable
Capital increase - 60.4
Foreign exchange 0.9 -
effects
Consolidation 196.7 - 221.8
effects
Net assets as at 419.8 -
30 Sep 2016
1 Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,
Canada.
2 The net assets at 30 Sep 2016 also contain the balances of the Blue
Diamonds Hotels and Resorts Inc., St. Michael, Barbados, which was
transferred to the Sunwing Travel Group at the balance sheet date, as well
as other transferred entities.
Reconciliation to the
carrying amount of the
associates in the Group
balance sheet
EUR million Sunwing Blue Diamond Othe- Associa-
Travel Group Hotels and r tes
Inc., Resorts Inc., St. asso- total
Toronto, Michael, cia- re-
Canada2 Barbados1 tes stated
Share of TUI in % as at 49.0 49.0 - -
30 Sep 2015
TUI's share of the net 98.7 55.4 25.5 179.6
assets as at 30 Sep
2015
Goodwill as at 30 Sep 50.1 - 4.0 54.1
2015
Carrying value as at 30 148.8 55.4 29.5 233.7
Sep 2015
Share of TUI in % as at 49.0 - - -
30 Sep 2016
TUI's share of the net 205.7 - 50.9 256.6
assets as at 30 Sep
2016
Goodwill as at 30 Sep 51.3 - 4.0 55.3
2016
Carrying value as at 30 257.0 - 54.9 311.9
Sep 2016
1 Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,
Canada.
2 The balance sheet at 30 Sep 2016 also contains the balances of the Blue
Diamonds Hotels and Resorts Inc., St. Michael, Barbados, which was
transferred to the Sunwing Travel Group at the balance sheet date.
Net assets of the
material joint
ventures
EUR million Riu Hotels S. A., TUI Cruises Togebi Holdings
Palma de Mallorca, GmbH, Hamburg, Limited, Nicosia,
Spain Germany Cyprus
Net assets as at 564.5 493.2 - 107.7
1 Oct 2014
Profit / loss 70.9 136.2 - 44.1
Other 69.1 - 22.6 -
comprehensive
income
Dividends - 70.0 - 70.0 -
Capital increase - - -
Foreign exchange 3.2 - - 16.7
effects
Net assets as at 637.7 536.8 - 168.5
30 Sep 2015
Net assets as at 637.7 536.8 - 168.5
1 Oct 2015
Profit / loss 92.5 200.2 9.2
Other - 36.4 - 37.8 - 0.2
comprehensive
income
Dividends payable - 25.0 - 120.0 -
Capital increase - - 48.3
Foreign exchange - 12.5 - - 2.3
effects
Net assets as at 656.3 579.2 - 113.5
30 Sep 2016
Reconciliation to the
carrying amount of the
joint ventures in the
Group balance sheet
EUR million Riu Hotels TUI Togebi Other Joint
S. A., Cruises Holdings joint ventu-
Palma de GmbH, Limited, ventu- res
Mallorca, Hamburg, Nicosia, res total
Spain Germany Cyprus
Share of TUI in % as 49.0 50.0 49.0 - -
at 30 Sep 2015
TUI's share of the net 312.7 268.4 - 82.6 228.1 726.6
assets as at 30 Sep
2015
unrecognised share of - - 39.9 - 39.9
losses
Goodwill as at 30 Sep 1.7 - 42.7 33.2 77.6
2015
Carrying value as at 314.4 268.4 - 261.3 844.1
30 Sep 2015
Share of TUI in % as 49.0 50.0 25.0 - -
at 30 Sep 2016
TUI's share of the net 321.6 289.6 - 28.4 228.4 811.2
assets as at 30 Sep
2016
unrecognised share of - - 6.5 - 6.5
losses
Goodwill as at 30 Sep 1.7 - 21.9 27.6 51.2
2016
Carrying value as at 323.3 289.6 - 256.0 868.9
30 Sep 2016
Unrecognised losses by joint ventures
Unrecognised accumulated losses of EUR 6.5 m (previous year EUR 39.9 m)
relate to the joint venture TUI Russia, operating in the source markets of
Russia and Ukraine. Due to the recognition of the share of losses in the
previous years the carrying amount of the joint venture was already fully
written off in financial year 2013 / 14. Further losses of EUR 39.9 m have
not been recognised in the previous years as the TUI Group has no
obligation
to cover the losses. Recognition of these losses would have reduced the
carrying amount of the joint venture to below zero. The decline of the
unrecognised proportional losses of EUR 33.4 m in the reporting period are
mainly due to the reduction of the interest and the capital increase in TUI
Russia.
Risks associated with the stakes in associates and joint ventures
No contingent liabilities existed in respect of associates as at 30
September 2016 and 30 September 2015.
Contingent liabilities of EUR 106.2 m (previous year EUR 125.4 m) exist in
respect of joint ventures. In addition, financial liabilities from
investments of EUR 613.2 m (previous year EUR 877.2 m) and from lease,
charter and rental agreements worth EUR 8.4 m (previous year EUR 9.3 m) are
in place in respect of joint ventures.
(18) Financial assets available for sale
Financial assets available for sale consist of stakes in non-consolidated
Group companies, interests and other securities.
Financial assets
available for sale
30 Sep 2016 30 Sep 2015
EUR million Remaining term Total Remaining term Total
more than 1 year more than 1 year
Shares in 2.1 2.1 5.9 5.9
non-consolidated
Group companies
Investments 36.3 302.1 38.5 373.4
Other securities 12.0 12.0 11.8 11.8
Total 50.4 316.2 56.2 391.1
Investments comprise the remaining interests in Hapag-Lloyd AG totalling
EUR
265.8 m. An IPO of Hapag-Lloyd AG took place on 6 November 2015. TUI's
interest in Hapag-Lloyd AG declined from 13.9 % to 12.3 % due to
non-participation in the associated cash capital increase and the sale of
27,079 Hapag-Lloyd AG shares as part of the IPO.
The shares in Hapag-Lloyd AG are traded in the Regulated Market (Prime
Standard) of the Frankfurt Stock Exchange. The investment is measured at
the
closing rate of the Hapag-Lloyd share in the principal market Xetra at the
respective balance sheet date (Level 1 measurement). The measurement of the
stake effected in the course of the year at the closing rate of the
Hapag-Lloyd share as at 31 March 2016 in the principal market Xetra at EUR
16.10 per share with a fair value of EUR 234.0 m resulted in an impairment
of EUR 100.3 m, carried in financial expenses. Since then, Hapag-Lloyd's
share price has risen to EUR 18.29 as at 30 September 2016 so that the fair
value has again risen to EUR 265.8 m. This increase of EUR 31.8 m in the
value was carried in equity outside profit and loss, in line with IAS 39.
As
a result, the impairment charge carried in financial expenses remains at
EUR
100.3 m.
On 30 September 2016, TUI AG entered into an agreement to close the gap
between the obligations and the fund assets of defined benefit pension
plans
in the UK in the long run. All shares in Hapag-Lloyd AG were assigned as
collateral at the balance sheet date. In October 2016, a securities account
has been opened and the number of shares assigned as collateral has
declined. In future, every quarter end it will be determined as a quotient
of £ 126 m to the share price translated into pounds sterling and reduced
by
a safety margin of 10 %. The agreement does not prevent TUI from selling
the
shares.
The impairment of financial assets held for sale, carried in the
consolidated income statement for the period under review, totalled EUR
101.0 m (previous year EUR 155.6 m).
Where a listed market price in an active market is not available and other
methods to determine an objective market value do not produce any reliable
results, the shares are measured at cost.
(19) Trade receivables and other assets
Trade receivables
and other assets
30 Sep 2016 30 Sep 2015
EUR million Remaining term Total Remaining term Total
more than 1 year more than 1
year
Trade receivables - 429.5 - 740.1
Advances and 220.5 831.9 243.2 1,086.5
loans
Other receivables 94.8 374.0 89.3 454.6
and assets
Total 315.3 1,635.4 332.5 2,281.2
The decrease in trade receivables and other assets results primarily from
the sale of Hotelbeds Group.
Ageing structure
of the financial
instruments
included in trade
receivables and
other assets
of which not
impaired and
overdue in
the
following
periods
EUR million Carrying of less than 30 bet- bet- more
amount which days ween ween than
of not 30 91 180
financi- impai- and and days
al red but 90 180
instru- overdue days days
ments
Balance as at 30
Sep 2016
Trade receivables 429.5 176.0 119.3 24.3 15.7 16.7
Advances and loans 75.5 18.5 17.4 0.1 - 1.0
Other receivables 184.7 21.2 11.4 2.7 1.1 6.0
and assets
Total 689.7 215.7 148.1 27.1 16.8 23.7
Balance as at 30
Sep 2015
Trade receivables 740.1 190.0 94.1 66.0 15.1 14.8
Advances and loans 118.5 17.7 - 0.7 0.3 16.7
Other receivables 206.1 18.2 12.2 3.9 0.4 1.7
and assets
Total 1,064.7 225.9 106.3 70.6 15.8 33.2
For financial assets which are neither overdue nor impaired, the TUI Group
assumes that the borrower concerned has a good credit standing.
As at 30 September 2016, trade receivables and other assets worth EUR 62.7
m
(previous year EUR 99.7 m) were impaired. The table below provides a
maturity analysis of the impairments.
Ageing structure of
impairment of financial
instruments included in
trade receivables and other
assets
30 30 Sep
Sep 2015
2016
EUR million Gross Im- Net Gross Im- Net
value pair- value value pair- value
ment ment
Trade receivables and other
assets
Not overdue 478.8 4.8 474.0 859.7 20.9 838.8
Overdue up to 30 days 149.9 1.8 148.1 107.1 0.8 106.3
Overdue 30 - 90 days 30.1 3.0 27.1 75.9 5.3 70.6
Overdue 91 - 180 days 18.8 2.0 16.8 22.3 6.5 15.8
Overdue more than 180 days 74.8 51.1 23.7 99.4 66.2 33.2
Total 752.4 62.7 689.7 1,164.4 99.7 1,064.7
Impairments of trade receivables and other assets developed as follows:
Impairment on assets of the trade receivables and
other assets category according to IFRS 7
EUR million 2015 2014
/ 16 / 15
Balance at the beginning of period 99.7 100.3
Additions 10.5 16.1
Disposals 23.1 5.9
Other changes - -
24.4 10.8
Balance at the end of period 62.7 99.7
In financial year 2015 / 16 as well as in the prior year no cash inflow was
recorded from impaired interest-bearing trade receivables and other assets.
Trade receivables, advances and loans as well as other receivables and
assets comprise the following items:
Trade receivables
EUR million 30 Sep 2016 30 Sep 2015
From third parties 415.4 712.4
From non-consolidated Group companies 1.7 1.5
From affiliates 12.4 26.2
Total 429.5 740.1
Advances and
loans
30 Sep 2016 30 Sep 2015
EUR million Remaining term Total Remaining term Total
more than 1 year more than 1 year
Advances to 0.4 17.8 0.4 17.4
non-consolidated
Group companies
Advances to 6.2 6.4 0.1 0.9
affiliates
Loans to 9.6 9.6 39.6 40.7
affiliates
Advances to third 11.0 35.9 1.4 24.5
parties
Loans to third 34.6 38.1 34.9 36.4
parties
Payments on 5.4 10.9 3.0 11.7
account to
affiliates
Payments on 153.3 713.2 163.8 954.9
account to third
parties
Total 220.5 831.9 243.2 1,086.5
Payments on account mainly relate to advance payments for future tourism
services, in particular future hotel services payable by tour operators,
which is customary in the industry.
Other receivables and
assets
30 Sep 2016 30 Sep 2015
EUR million Remaining term Total Remaining term Total
more than 1 year more than 1 year
Other receivables from 1.5 1.6 1.5 1.7
non-consolidated Group
companies
Other receivables from - 6.6 6.2 18.0
affiliates
Interest deferral - 1.2 - 1.9
Other tax refund 15.4 81.6 9.9 90.4
claims
Defined benefit asset 36.2 36.2 15.2 15.2
Other assets 41.7 246.8 56.5 327.4
Total 94.8 374.0 89.3 454.6
(20) Derivative financial instruments
Derivative financial
instruments
30 Sep 2016 30 Sep 2015
EUR million Remaining term Total Remaining term Total
more than 1 more than 1
year year
Third party receivables 126.8 671.4 48.1 329.1
from derivative
financial instruments
Derivative financial instruments are included at their fair value (market
value). They are mainly used to hedge our future operating business and
their nature is detailed in the explanatory information on financial
instruments.
(21) Deferred and income tax assets
The measurement of deferred and income taxes is detailed in the section
'Accounting and measurement methods'.
Income tax assets
EUR million 30 Sep 2016 30 Sep 2015
Deferred tax assets 344.7 330.7
Income tax assets 87.7 58.5
Total 432.4 389.2
Deferred income tax assets include EUR 328.7 m (previous year EUR 287.6 m)
that is expected to be realised after more than twelve months.
Individual items of deferred tax assets and
liabilities recognised in the financial
position
30 30
Sep Sep
2016 2015
EUR million Asset Liabi- Asset Liabi-
lity lity
Finance lease transactions 2.2 - - 2.2
Recognition and measurement differences for 67.6 231.9 110.7 317.7
property, plant and equipment and other
non-current assets
Recognition differences for receivables and 23.1 62.4 4.4 40.0
other assets
Measurement of financial instruments 21.4 64.5 53.5 22.1
Measurement of pension provisions 253.5 0.1 143.2 0.8
Recognition and measurement differences for 63.1 32.0 67.4 14.1
other provisions
Other transactions 85.1 54.8 64.1 80.8
Capitalised tax savings from recoverable 211.5 - 239.4 -
losses carried forward
Netting of deferred tax assets and - - - -
liabilities 382.8 382.8 352.0 352.0
Balance sheet amount 344.7 62.9 330.7 125.7
No deferred tax assets are recognised for deductible temporary differences
of EUR 157.3 m (previous year EUR 128.2 m).
No deferred tax liabilities are recognised for temporary differences of EUR
58.6 m (previous year EUR 49.5 m) between the net assets and the respective
taxable carrying amounts of subsidiaries since these temporary differences
are not expected to be reversed in the near future.
Recognised losses carried forward and time limits
for non-recognised losses carried forward
EUR million 30 Sep 30 Sep
2016 2015
Recognised losses carried forward 1,041.0 1,184.4
Non-recognised losses carried forward 4,654.5 4,449.8
of which losses carried forward forfeitable 4.4 2.7
within one year
of which losses carried forward forfeitable 83.0 62.3
within 2 to 5 years
of which losses carried forward forfeitable 1.8 6.0
within more than 5 years (excluding
non-forfeitable loss carryforwards)
Non-forfeitable losses carried forward 4,565.3 4,378.8
Total unused losses carried forward 5,695.5 5,634.2
Losses carried forward for German companies comprise the cumulative amount
of trade tax and corporation tax as well as interest carried forward in
relation to the German interest barrier. Potential tax savings totalling
EUR
981.7 m (previous year EUR 907.2 m) were not capitalised since the use of
the underlying losses carried forward is unlikely to be utilised within the
planning period.
In the financial year 2015 / 16, the use of losses carried forward
previously assessed as non-recoverable and for which no deferred tax asset
had been recognised as at 30 September 2015 led to tax reductions of EUR
10.7 m (previous year EUR 24.0 m). As in the prior year, no tax reductions
were realised by means of losses carried back.
Development of deferred tax assets from losses
carried forward
EUR million 2015 / 2014 /
16 15
Capitalised tax savings at the beginning of the 239.4 135.0
year
Use of losses carried forward - 15.3 - 14.4
Capitalisation of tax savings from tax losses 6.7 150.1
carried forward
Write-down of capitalised tax savings from tax - 13.7 - 36.1
losses carried forward
Reclassification to discontinued operation - 4.8 - 0.3
Exchange adjustments and other items - 0.8 5.1
Capitalised tax savings at financial year-end 211.5 239.4
Capitalised deferred tax assets from temporary differences and losses
carried forward that are assessed as recoverable of EUR 4.9 m (previous
year
EUR 203.3 m) are covered by expected future taxable income even for
companies that generated losses in the period under review or the prior
year.
(22) Inventories
Inventories
EUR million 30 Sep 2016 30 Sep 2015
Marine inventory - 33.2
Airline spares and operating equipment 24.9 28.6
Real estate for sale 39.0 32.8
Other inventories 41.3 39.9
Total 105.2 134.5
Other inventories included an amount of EUR 16.1 m for consumables used in
hotels (previous year EUR 16.6 m).
No major reversals of inventory provisions were recognised in the financial
year 2015 / 16, nor in the prior year.
The decline in the amount of inventories is mainly driven by the
reclassification of the inventories related to Specialist Group to Assets
held for sale.
(23) Cash and cash equivalents
Cash and cash equivalents
EUR million 30 Sep 2016 30 Sep 2015
Bank deposits 2,037.6 1,641.8
Cash in hand and cheques 35.3 30.9
Total 2,072.9 1,672.7
At 30 September 2016, cash and cash equivalents of EUR 128.6 m (previous
year EUR 198.5 m) was subject to restriction on disposal. This included an
amount of EUR 116.4 m for cash collateral received, which was deposited in
a
Belgian subsidiary by the Belgian tax authorities in the financial year
2012
/ 13 relating to long-standing litigation over VAT refunds for the years
2001 to 2011. Without prejudice to the outcome, the purpose was to suspend
the accrual of interest for both parties. In order to collateralise a
potential repayment, the Belgian government was granted a bank guarantee.
Due to the bank guarantee, TUI Group's ability to dispose of the cash and
cash equivalents has been restricted.
(24) Assets held for sale
Assets held for sale
EUR million 30 Sep 2016 30 Sep 2015
Discontinued Operation Specialist Group 928.9 -
Discontinued Operation LateRooms Group - 38.8
Property and hotel facilities - 0.4
Other assets 0.9 3.0
Total 929.8 42.2
In the reporting period, the Specialist Group segment was reclassified to
Assets held for sale as a discontinued operation. Assets worth EUR 928.9 m
exist in connection with this discontinued operation as at 30 September
2016. The LateRooms Group was sold at the beginning of the financial year.
For further information, refer to the section on Discontinued operations.
The Hotelbeds Group segment was classified to Assets held for sale during
the reporting period and sold on 12 September 2016.
(25) Subscribed capital
The subscribed capital of TUI AG consists of no-par value shares, each
representing an identical share in the capital stock. The proportionate
share in the capital stock per no-par value share is around EUR 2.56. Since
July 2005, the shares have been registered shares, whose owners have been
listed by name in the share register.
The subscribed capital of TUI AG has been registered in the commercial
registers of the district courts of Berlin-Charlottenburg and Hanover. In
the financial year under review, it rose due to the issue of 434,970 shares
resulting from the issue of employee shares. Subscribed capital thus
consisted of 587,038,187 shares at the end of the financial year. It
increased by EUR 1.1 m to EUR 1,500.7 m. The increase recorded in the prior
year was driven by a capital increase against non-cash contribution in
connection with the merger between TUI AG and TUI Travel PLCand the
conversion of bonds of TUI AG and TUI Travel PLC.
As at 30 September 2016, 2,664,194 shares in TUI AG were held by an
employee
benefit trust of TUI Travel Limited.
The Annual General Meeting on 9 February 2016 authorised the Executive
Board
of TUI AG to acquire own shares of up to 5 % of the capital stock. The
authorisation will expire on 8 August 2017. The authorisation to acquire
own
shares has not been used to date.
Conditional capital
The Annual General Meeting of 9 February 2016 created conditional capital
for the issue of bonds of EUR 150.0 m. The authorisation to issue bonds
with
conversion options and warrants as well as profit-sharing rights and income
bonds (with and without fixed terms) has been limited to a total nominal
amount of EUR 2.0 bn and will expire on 8 February 2021.
Overall, TUI AG had total conditional capital of around EUR 150.0 m
(previous year EUR 120.0 m) as at 30 September 2016.
Authorised capital
The Annual General Meeting of 13 February 2013 resolved new authorised
capital for the issue of employee shares worth EUR 10.0 m. The Executive
Board of TUI AG has been authorised to use this capital in one or several
transactions to issue employee shares against cash contribution by 12
February 2018. 434,970 new employee shares were issued in the completed
financial year so that authorised capital totals around EUR 8.3 m at the
balance sheet date.
The General Meeting of 28 October 2014 resolved to create authorised
capital
to issue new shares against non-cash contribution of EUR 18.0 m in order to
be able to service TUI Travel share awards granted by TUI Travel to its
employees with new shares in TUI AG. The authorisation for this capital
will
expire on 27 October 2019.
The Annual General Meeting on 9 February 2016 resolved to create an
authorisation for the issue of new registered shares against cash
contribution of up to a maximum of EUR 150.0 m. The authorisation will
expire on 8 February 2021.
The Annual General Meeting on 9 February 2016 also created authorised
capital for the issue of new shares against cash or non-cash contribution
of
EUR 570.0 m. The issue of new shares against non-cash contribution has been
limited to EUR 300.0 m. The authorisation for this approved capital will
expire on 8 February 2021.
Unused authorised capital thus totals EUR 746.3 m at 30 September 2016
(previous year EUR 337.9 m).
(26) Capital reserves
The capital reserves comprise transfers of premiums. They also contain
amounts entitling the holders to acquire shares in TUI AG in respect of
bonds issued for conversion options and warrants. Premiums from the issue
of
shares due to the exercise of conversion options and warrants were also
transferred to the capital reserves.
In the period under review, capital reserves rose by EUR 4.5 m (previous
year EUR 1.2 m) due to the issue of employee shares. In the previous year,
TUI AG's capital reserves rose by EUR 453.4 m due to the conversion of
convertible bonds and by EUR 2,676.8 m due to the capital increase against
non-cash contribution in connection with the merger between TUI AG and TUI
Travel PLC.
(27) Revenue reserves
In the completed financial year, TUI AG paid a dividend of EUR 0.56 per
no-par value share to its shareholders; the total amount paid was EUR 327.0
m (previous year EUR 94.5 m). In financial year 2015 / 16, non-controlling
interest declined by EUR 13.6 m due to the payment of dividends. The
year-on-year change is mainly driven by the payment of dividends to
non-Group shareholders in TUI Travel PLC of EUR 183.0 m made before the
merger between TUI AG and TUI Travel PLC. Moreover, the interest paid on
the
hybrid bond issued by TUI AG had to be carried as a dividend in accordance
with IFRS rules until it was called on 24 March 2015.
Existing equity-settled share-based payment transactions resulted in an
increase in equity of EUR 4.3 m. Disclosures on these long-term incentive
programmes are outlined in Note 42 in the section on 'Share-based payments'
in accordance with IFRS 2.
Moreover, an employee share trust of TUI Travel Ltd acquired shares in TUI
AG in financial year 2015 / 16 in order to use them for stock option plans.
The amounts used for this purpose were offset against revenue reserves as
an
acquisition of non-controlling interest. Equity therefore declined by EUR
56.3 m. Due to the issue of shares through the stock option plans, own
shares remained largely unchanged overall. The employee benefit trust now
holds 2,664,194 shares in TUI AG.
Deconsolidation effects mainly resulted from the sale of Hotelbeds Group in
financial year 2015 / 16. For more detailed information, refer to the
section 'Discontinued operations'.
In financial year 2015 / 16, non-controlling interest were acquired for a
consideration of EUR 6.5 m. The carrying amount of these interest was EUR
0.4 m. Acquisitions of non-controlling interest primarily included
non-controlling interest in Atraveo GmbH, Düsseldorf.
In the prior year, the effects of the acquisition of non-controlling
interest primarily reflected the merger between TUI AG and TUI Travel PLC.
The consideration including ancillary acquisition costs for the purchase of
the non-controlling interest totalled EUR 3,359.7 m, while the carrying
amount of the acquired interest accounted for EUR- 606.2 m. Peak Adventure
Travel Group Ltd, Australia, which was split up in the prior year, was
partly carried as an acquisition of non-controlling interest. The
consideration paid for the acquisition totalled EUR 23.4 m, while the
non-controlling interest acquired totalled EUR 42.0 m.
Foreign exchange differences comprise differences from the translation of
the financial statements of foreign subsidiaries as well as differences
from
the translation of goodwill denominated in foreign currencies.
Changes in financial instruments available for sale of EUR 31.8 m reflect
the value increase from the rise in Hapag-Lloyd share prices in financial
year 2015 / 16. More detailed information on the increase in fair values is
provided in the section 'Financial assets available for sale' in Note 18.
The proportion of gains and losses from hedges used as effective hedges of
future cash flows is carried in equity in other comprehensive income
outside
profit and loss in an amount of EUR 546.1 m (before tax). A reversal of
this
provision through profit and loss takes place in the same period in which
the hedged item has an effect on profit and loss or is no longer assessed
as
probable. The considerable increase recorded in financial year 2015 / 16 is
mainly driven by changes in exchange rates and in fuel prices.
The re-measurement of pension obligations (in particular from actuarial
gains and losses) is also included in other income in equity outside profit
and loss.
The revaluation reserve formed in accordance with IAS 27 (old version) in
the framework of step acquisitions of companies is retained until the date
of deconsolidation of the company concerned.
(28) Use of Group profit available for distribution
In accordance with the German Stock Corporation Act, the Annual General
Meeting decides on the distribution of the profit reported in TUI AG's
annual financial statements. TUI AG's net profit for the year totals EUR
139.9 m, which combined with retained profits brought forward of EUR 682.4
m, gives profit available for distribution of EUR 822.3 m. A proposal will
be submitted to the Annual General Meeting to use the profit available for
distribution for the financial year to pay a dividend of EUR 0.63 per
no-par
value share, estimated to be worth EUR 369.8 m, and carry the amount of EUR
452.5 m remaining after deduction of the dividend forward on new account.
The final dividend total will depend on the number of dividend-bearing
no-par value shares in issue at the date on which the resolution is adopted
by the Annual General Meeting.
(29) Hybrid capital
The subordinated hybrid capital issued by TUI AG in December 2005 with a
nominal value of EUR 300.0 m was redeemed in the prior year. The borrowing
costs incurred for the issue of the hybrid capital were offset against
revenue reserves upon redemption.
(30) Non-controlling interest
Non-controlling interest mainly relate to RIUSA II S. A. based in Palma de
Mallorca, Spain. TUI's share in this hotel company remains at 50.0 %, as in
the prior year.
The financial year of RIUSA II S. A. ends on 31 December and thus differs
from TUI Group's financial year. This reporting date was determined at the
creation of the company. For the preparation of the consolidated financial
statements of TUI Group as at 30 September, consolidated financial
statements of RIUSA II Group are prepared as at TUI Group's balance sheet
date, 30 September.
RIUSA II Group, recognised within the Hotels & Resorts segment, operates
owned and leased hotels and hotels operated under management contracts in
tourism destinations of TUI Group. Due to the contractual agreements
between
the shareholders and the framework agreements with TUI Group and the
importance of TUI tour operation to the economic success of RIUSA II Group,
TUI Group is able to direct decisions on the most relevant activities.
RIUSA
II Group is therefore fully consolidated although TUI Group only holds a 50
% equity stake.
The table below provides summarised financial information for RIUSA II S.
A., Palma de Mallorca, Spain, the subsidiary with material non-controlling
interest. The information disclosed reflects the amounts presented in the
consolidated financial statements of the sub-group.
Summarised financial information on
RIUSA II S. A., Palma de Mallorca,
Spain*
EUR million 30 Sep 2016 30 Sep 2015
/ 2015 / 16 / 2014 / 15
Current assets 336.3 294.5
Non-current assets 1,296.5 1,242.1
Current liabilities 113.9 110.3
Non-current liabilities 22.1 86.4
Revenues 796.1 715.9
Profit / loss 221.4 177.2
Other comprehensive income - 42.4 - 8.4
Cash inflow / outflow from operating 292.4 232.6
activities
Cash inflow / outflow from investing - 166.8 - 99.0
activities
Cash inflow / outflow from financing - 85.6 - 64.9
activities
Accumulated non-controlling interest 572.6 494.1
Profit / loss attributable to 110.7 88.6
non-controlling interest
Dividends attributable to 11.0 10.0
non-controlling interest
* Consolidated sub-group
(31) Pension provisions and similar obligations
A number of defined contribution plans and defined benefit pension plans
are
operated for Group employees. Pension obligations vary, reflecting the
different legal, fiscal and economic conditions in each country of
operation, and usually depend on employees' length of service and pay
levels.
All defined contribution plans are funded by the payment of contributions
to
external insurance companies or funds. German employees enjoy benefits from
a statutory defined contribution plan paying pensions as a function of
employees' income and the contributions paid in. Several additional
industry
pension organisations exist for companies of the TUI Group. Once the
contributions to the state-run pension plans and private pension insurance
organisations have been paid, the Company has no further payment
obligations. One major private pension fund is Aegon Levensverzekering N.
V.
operating the defined contribution pension plans for the main Dutch
subsidiaries of the TUI Group. Contributions paid are expensed for the
respective period. In the period under review, the expenses for all defined
contribution plans totalled EUR 81.9 m (previous year EUR 85.8 m).
Apart from these defined contribution pension plans, the TUI Group operates
defined benefit plans, which usually entail the formation of provisions
within the Company or investments in funds outside the Company.
Within this group, MER-Pensionskasse VVaG, a private pension fund in which
German companies of the tourism industry are organised, represents a
multi-employer plan classified as a defined benefit plan. In accordance
with
the statues of the plan, the plan participants and the employers pay
salary-based contributions into the plan. There are no further obligations
pursuant to the statutes of the plan; an additional funding obligation of
the participating companies is explicitly excluded. The paid-in
contributions are invested in accordance with the policies of the pension
plan unless they are used in the short term to deliver benefits. As the
investments are pooled and are not kept separately for each participating
employer, an allocation of plan assets to individual participating
employers
is not possible. The investment risk and the mortality risk are jointly
shared by all plan participants. Moreover, the pension fund does not
provide
any information to participating companies that would allow the allocation
of any over- or underfunding or TUI's participation in the plan. For this
reason, accounting for the plan in accordance with the requirements of IAS
19 is not possible, and the plan is therefore classed as a defined
contribution plan. In the period under review, contributions to
MER-Pensionskasse WAG totalled EUR 5.9 m (previous year EUR 5.5 m). For the
next financial year, contributions are expected to remain at that level.
TUI Group's major pension plans recognised as defined benefit plans exist
in
Germany and the UK. By far the largest pension plans are operated by the
Group's tour operators in the UK. They accounted for 74.6 % (previous year
75.3 %) of TUI Group's total obligations at the balance sheet date. German
plans account for a further 21.3 % (previous year 20.2 %).
In the UK, the following major pension plans linking pension payments to
final salary and length of service are operated. The final remuneration to
be taken into account is capped.
Material defined benefit plans in Great Britain
Scheme name Status
BAL Scheme closed
TUI UK Scheme closed
TAPS Scheme closed
Almost all defined benefit plans in the UK are funded externally. Under UK
law, the employer is obliged to ensure sufficient funding so that plan
assets cover the pension payments to be made and the administrative costs
of
the funds. The pension funds are managed by independent trustees. The
trustees comprise independent members but also beneficiaries of the plan
and
employer representatives. The trustees are responsible for the investment
of
fund assets, taking account of the interests of plan members, but they also
negotiate the level of the contributions to the fund to be paid by the
employers, which constitute minimum contributions to the funds. To that
end,
actuarial valuations are made every three years by actuaries commissioned
by
the trustees. The annual contributions to be paid to the funds in order to
cover any shortfalls were last defined in September 2016. On top of a fixed
annual contribution, a certain percentage of the pensionable remuneration
of
plan members has to be paid into the plan. In order to account for the
increase in underfunding, in particular driven by the drop in interest
rates, one-off payments linked to the occurrence of certain events were
agreed. As a result, an additional £ 150 m (previous year EUR 174.2 m) were
payable to the funds upon the sale of Hotelbeds Group in the period under
review.
By contrast, defined benefit plans in Germany are unfunded. The company
assumes the obligation for payments of company pensions when the
beneficiaries reach the legal retirement age. The amount of the pension
paid
usually depends on the remuneration received by the staff members at the
retirement date. Pension obligations usually include surviving dependants'
benefits and invalidity benefits.
Material defined benefit plans in Germany
Scheme name Status
Versorgungsordnung TUI AG closed
Versorgungsordnung Hapag-Lloyd Fluggesellschaft GmbH open
Versorgungsordnung TUI Deutschland GmbH closed
Versorgungsordnung TUI Beteiligungs GmbH closed
Versorgungsordnung Preussag Immobilien GmbH closed
In the period under review, defined benefit pension obligations created
total expenses of EUR 83.0 m. Overall, expenses declined by EUR 7.9 m
year-on-year largely due to lower net interest expenses.
Pension costs for defined benefit obligations
EUR million 2015 / 2014 /
16 15
Current service cost for employee service in the 57.1 59.1
period
Curtailment gains - 1.7
Net interest on the net defined benefit 27.6 34.4
liability
Past service cost - 1.7 - 0.9
Total 83.0 90.9
Provisions for pension obligations are established for benefits payable in
the form of retirement, invalidity and surviving dependants' benefits.
Provisions are exclusively formed for defined benefit schemes under which
the Company guarantees employees a specific pension level, including
arrangements for early retirement and temporary assistance benefits.
Defined benefit obligation recognised on
the balance sheet
EUR million 30 Sep 2016 30 Sep 2015
Total Total
Present value of funded obligations 3,185.9 2,711.0
Fair value of external plan assets 2,676.0 2,302.1
Deficit of funded plans 509.9 408.9
Present value of unfunded pension 904.8 722.8
obligations
Defined benefit obligation recognised on 1,414.7 1,131.7
the balance sheet
of which
Overfunded plans in other assets 36.2 15.2
Provisions for pensions and similar 1,450.9 1,146.9
obligations
of which current 40.6 32.4
of which non-current 1,410.3 1,114.5
Re-measurements (in particular actuarial gains and losses) are immediately
offset against equity in the year in which they arise. TUI Group's total
pension obligations are therefore fully recognised in the statement of
financial position net of fund assets.
Where the defined benefit pension obligations are not unfunded, they are
funded externally. This type of funding of pension obligations is common in
the UK. For funded pension plans, the provision carried only covers the
shortfall in coverage between plan assets and the present value of benefit
obligations.
Where plan assets exceed funded pension obligations, taking account of a
difference due to past service cost, and where at the same time there is an
entitlement to reimbursement or reduction of future contributions to the
fund, the excess is recognised in conformity with the cap defined by IAS
19.
At 30 September 2016, defined benefit assets of EUR 36.2 m (previous year
EUR 15.2 m) were shown in other assets.
Development of defined benefit
obligations
EUR million Present value Fair value of Total
of obligation plan assets
Balance as at 1 Oct 2015 3,433.8 - 2,302.1 1,131.7
Current service cost 57.1 - 57.1
Past service cost - 1.7 - - 1.7
Curtailments and settlements - - -
Interest expense (+) / interest 108.2 - 80.6 27.6
income (-)
Pensions paid - 160.5 125.2 - 35.3
Contributions paid by employer - - 300.2 - 300.2
Contributions paid by employees 1.5 - 1.5 -
Remeasurements 1,076.7 - 483.4 593.3
due to changes in financial 1,083.3 - 1,083.3
assumptions
due to changes in demographic - 1.1 - - 1.1
assumptions
due to experience adjustments - 5.5 - - 5.5
due to return on plan assets not - - 483.4 - 483.4
included in group profit for the
year
Exchange differences - 420.8 363.8 - 57.0
Other changes - 3.6 2.8 - 0.8
Balance as at 30 Sep 2016 4,090.7 - 2,676.0 1,414.7
Development of defined benefit
obligations
EUR million Present value Fair value of Total
of obligation plan assets
Balance as at 1 Oct 2014 3,254.5 - 1,980.0 1,274.5
Current service cost 59.1 - 59.1
Past service cost - 0.9 - - 0.9
Curtailments and settlements - 2.1 0.4 - 1.7
Interest expense (+) / interest 114.4 - 80.0 34.4
income (-)
Pensions paid - 132.7 99.6 - 33.1
Contributions paid by employer - - 149.8 - 149.8
Contributions paid by employees 1.2 - 1.2 -
Remeasurements - 6.6 - 75.6 - 82.2
due to changes in financial 20.5 - 20.5
assumptions
due to changes in demographic - 30.2 - - 30.2
assumptions
due to experience adjustments 3.1 - 3.1
due to return on plan assets not - - 75.6 - 75.6
included in group profit for the
year
Exchange differences 146.9 - 115.5 31.4
Other changes - - -
Balance as at 30 Sep 2015 3,433.8 - 2,302.1 1,131.7
In the period under review, the present value of the pension obligation
rose
by EUR 656.9 m to EUR 4,090.7 m, primarily due to the significant fall in
interest rates in the Eurozone and the UK.
TUI Group's fund assets rose significantly by EUR 373.9 m in the period
under review. Apart from contributions made by UK subsidiaries in order to
reduce the existing funding gap, the increase was driven by higher asset
prices, in particular, of fixed-interest bonds linked to the lower interest
rate.
Composition of
pension assets at
the balance sheet
date
30 Sep 2016 30 Sep 2015
Quoted market Quoted market
price in an price in an
active market active market
EUR million yes no yes no
Fair value of fund 1,633.9 1,042.1 1,560.2 741.9
assets at end of
period
of which equities 727.5 - 692.0 -
of which 104.9 - 292.0 -
government bonds
of which corporate 301.8 - 274.8 -
bonds
of which liability 489.2 - 250.0 -
driven investments
of which property - 108.2 - 138.0
of which growth - 83.3 - 89.3
funds
of which insurance - 73.2 - 63.7
policies
of which - 65.6 - 63.0
catastrophe bonds
of which cash - 585.2 - 246.4
of which other 10.5 126.6 51.4 141.5
At the balance sheet date, as in the prior year, fund assets did not
comprise any direct investments in financial instruments issued by TUI AG
or
its consolidated subsidiaries or any property owned by the Group. For
funded
plans, investment in passive index tracker funds may entail a proportionate
investment in Group-owned financial instruments.
Pension obligations are measured on the basis of actuarial calculations
based on country-specific parameters and assumptions. The obligations under
defined benefit plans are calculated on the basis of the internationally
accepted projected unit credit method, taking account of expected future
increases in salaries and pensions.
Actuarial assumptions
30 Sep
2016
Percentage p. a. Germany Great Other
Britain countries
Discount rate 1.0 2.3 1.4
Projected future salary 2.5 2.7 1.4
increases
Projected future pension 1.8 3.6 1.3
increases
30 Sep
2015
Percentage p. a. Germany Great Other
Britain countries
Discount rate 2.25 3.8 1.9
Projected future salary 2.5 2.7 1.9
increases
Projected future pension 1.75 3.6 1.4
increases
The interest rate applicable in discounting the provision for pensions is
based on an index for corporate bonds adjusted for securities already
downgraded and under observation by rating agencies as well as subordinate
bonds in order to meet the criterion for high quality bonds (ratedAA or
higher) required under IAS 19. In order to cover a correspondingly broad
market, an index partly based on shorter-term bonds is used (e. g. iBoxx
EUR
Corporates AA 7-10 for the Eurozone). The resulting yield structure is
extrapolated on the basis of the yield curves for almost risk-free bonds,
taking account of an appropriate risk mark-up reflecting the term of the
obligation.
Apart from the parameters described above, a further key assumption relates
to life expectancy. In Germany, the Heubeck reference tables 2005 G are
used
to determine life expectancy, as in the prior year. In the UK, the S1NxA
base tables are used, adjusted to future expected increases on the basis of
the Continuous Mortality Investigation (CMI) 2015. The pension in payment
escalation formulae depend primarily on the pension plan concerned. Apart
from fixed rates of increase, there are also a number of inflation-linked
pension adjustment mechanisms in different countries.
Changes in the key actuarial assumptions mentioned above would lead to the
changes in defined benefit obligations presented below. The methodology
used
to determine sensitivity corresponds to the method used to calculate the
defined benefit obligation. The assumptions were amended in isolation each
time; actual interdependencies between the assumptions were not taken into
account. The effect of the increase in life expectancy by one year is
calculated by means of a reduction in mortality due to the use of the
Heubeck tables 2005 G for pension plans in Germany. In the UK, an extra
year
is added to the life expectancy determined on the basis of the mortality
tables.
Sensitivity of the defined benefit
obligation due to changed actuarial
assumptions
30 Sep 30 Sep
2016 2015
EUR million + 50 - 50 + 50 - 50
Basis Basis Basis Basis
points points points points
Discount rate - 415.5 + 484.7 - 292.5 + 330.5
Salary increase + 32.2 - 30.7 + 23.8 - 23.0
Pension increase + 144.8 - 137.3 + 110.3 - 103.5
+ 1 + 1
year year
Life expectancy + 172.9 - + 114.6 -
The weighted average duration of the defined benefit obligations totalled
21.7 years (previous year 18.5 years) for the overall Group. In the UK, the
weighted duration was 23.5 years (previous year 19.7 years), while it stood
at 16.6 years (previous year 15.1 years) in Germany.
Fund assets are determined on the basis of the fair values of the funds
invested as at 30 September 2016. The interest rate used to determine the
interest income from the assets of external funds is identical with the
discount rate used for the defined benefit obligation.
For the forthcoming financial year, the companies of TUI Group are expected
to contribute around EUR 109.6 m (previous year EUR 128.5 m) to pension
funds and pay pensions worth EUR 40.6 m (previous year EUR 32.4 m) for
unfunded plans. For funded plans, payments to the recipients are fully made
from fund assets so that TUI Group does not record a cash outflow as a
result.
TUI Group's defined benefit plans entail various risks, some of which may
have a substantial effect on the Company.
Investment risk
The investment risk plays a major role, in particular for the large funded
plans in the UK. Although shares usually outperform bonds in terms of
producing higher returns, they also entail stronger volatility of balance
sheet items and the risk of short-term shortfalls in coverage. In order to
limit this risk, the trustees have built a balanced investment portfolio to
limit the concentration of risks.
Interest rate risk
The interest rate influences in particular unfunded schemes in Germany as a
decline in interest rates leads to an increase in the defined benefit
obligations. Accordingly, an increase in the interest rate leads to a
reduction in the defined benefit obligations. Funded plans are less
strongly
affected by this development as the performance of the interest-bearing
assets included in plan assets regularly dampens the effects.
Inflation risk
An increase in the inflation rate normally increases the obligation in
pension schemes linked to the final salary of beneficiaries as inflation
causes an increase in the projected salary increases. At the same time,
inflation-based pension increases included in the plan also rise. The
inflation risk is reduced through the use of caps and collars. Moreover,
the
large pension funds in the UK hold inflation-linked assets, which also
partly reduce the risk from a significant rise in inflation.
Longevity risk
An increasing life expectancy increases the expected benefit duration of
the
pension obligation. This risk is countered by using regularly updated
mortality data in calculating the present values of the obligation.
Currency risk
For the TUI Group, the pension schemes entail a currency risk as most
pension schemes are operated in the UK and therefore denominated in
sterling. The risk is limited as the currency effects on the obligation and
the assets partly offset each other. The currency risk only relates to the
excess of pension obligations over scheme assets.
(32) Other provisions
Development of
provisions in
the financial
year 2015/16
EUR million Balance Changes with Usage Re- Addi- Balance
as at 30 no effect on ver- tions as at 30
Sep 2015 profit and sal Sep 2016
loss*
Maintenance 563.7 - 50.0 91.9 21.2 213.0 613.6
provisions
Risks from 48.1 - 5.0 12.8 5.2 5.9 31.0
onerous
contracts
Restructuring 41.9 - 3.7 17.4 1.7 4.9 24.0
provisions
Provisions for 38.1 0.3 9.9 3.3 10.4 35.6
other
personnel
costs
Provisions for 27.4 5.1 1.8 4.2 6.0 32.5
other taxes
Provisions for 40.5 - 3.0 1.1 5.3 41.7
environmental
protection
Provisions for 109.1 - 18.3 13.6 12.9 15.0 79.3
Litigation
Miscellaneous 340.9 - 40.4 62.4 32.4 114.4 320.1
provisions
Other 1,209.7 - 112.0 212.8 82.0 374.9 1,177.8
provisions
* Reclassifications, transfers, exchange differences and changes in the
group of consolidated companies.
Provisions for external maintenance primarily relate to contractual
maintenance, overhaul and repair requirements for aircraft, engines and
other specific components arising from aircraft operating lease contracts.
Measurement of these provisions is based on the expected cost of the next
maintenance event, estimated on the basis of current prices, expected price
increases and manufacturers' data sheets. In line with the arrangements of
the individual contracts and the aircraft model concerned, additions are
recognised on a prorated basis in relation to flight hours, the number of
flights or the length of the complete maintenance cycle.
Provisions for onerous contracts principally relate to unfavourable lease
contracts. The decrease in the financial year under review is mainly driven
by the utilisation of these provisions.
Restructuring provisions primarily relate to restructuring projects in
Germany and the UK, for which detailed, formal restructuring plans have
been
drawn up and communicated to the parties concerned. The restructuring
provisions included at the balance sheet date of EUR 24.0 m (previous year
EUR 41.9 m) largely relate to benefits for employees in connection with the
termination of employment contracts.
Provisions for personnel costs comprise provisions for jubilee benefits and
provisions for share-based payment schemes with cash compensation in
accordance with IFRS 2. Information on these long-term incentive programmes
is presented in Note 42 in the section on Share-based payments in
accordance
with IFRS 2.
Provisions for environmental protection measures primarily relate to
statutory obligations to remediate sites contaminated with legacy waste
from
former mining and metallurgical activities. Estimating the future cost of
remediating contaminated sites entails many uncertainties, which may also
impact the value of provisions. The measurement is based on assumptions
about future costs derived from empirical values, conclusions from
environmental expert reports and the legal assessment of the Group as well
as the expected duration of the remediation measures. Unwinding these
obligations under environmental law takes a long time and constitutes a
technically complex process. Accordingly, there are considerable
uncertainties about the actual timeframe and the specific amount of
expenses
required, so that actual costs may exceed the provisions carried.
Provisions for litigation are established in relation to existing lawsuits.
Most provisions relate to demands for compensation from the container
terminal at Zeebrugge and various other individual lawsuits. Taken
individually, none of the lawsuits has a significant influence on
TUIGroup's
economic position.
Changes in other provisions outside profit and loss primarily relate to
changes in the group of consolidated companies, foreign exchange
differences
and reclassifications within other provisions.
Where the difference between the present value and the settlement value of
a
provision is material for the measurement of a non-current provision as at
the balance sheet date, the provision is recognised at its present value in
accordance with IAS 37. The discount rate to be applied should take account
of the specific risks of the provision and of future price increases. This
criterion applies to some items contained in TUI Group's other provisions.
Additions to other provisions comprise an interest portion of EUR 6.7 m
(previous year EUR 4.6 m), recognised as an interest expense.
Terms to
maturity of
other provisions
30 Sep 2016 30 Sep 2015
EUR million Remaining term Total Remaining term Total
more than 1 year more than 1 year
Maintenance 534.8 613.6 455.8 563.7
provisions
Risks from 18.2 31.0 23.3 48.1
onerous
contracts
Restructuring - 24.0 0.2 41.9
provisions
Provisions for 24.3 35.6 23.6 38.1
other personnel
costs
Provisions for 24.3 32.5 22.3 27.4
other taxes
Provisions for 37.6 41.7 38.4 40.5
environmental
protection
Provisions for 51.1 79.3 50.5 109.1
litigation
Miscellaneous 112.7 320.1 132.2 340.9
provisions
Other provisions 803.0 1,177.8 746.3 1,209.7
(33) Financial liabilities
Financi-
al
liabili-
ties
30 30
Sep Sep
2016 2015
Remai- Remai-
ning ning
term term
EUR up to 1- 5 more Total up to 1- 5 more Total
million 1 years than 5 1 years than 5
year years year years
Bonds 306.5 - - 306.5 - 293.7 - 293.7
Liabili- 47.0 169.4 194.4 410.8 61.0 207.3 225.8 494.1
ties to
banks
Liabili- 92.2 349.0 790.5 1,231.7 68.9 280.6 632.5 982.0
ties
from
finance
leases
Financi- 6.6 - - 6.6 5.2 - - 5.2
al
liabili-
ties due
to
non-con-
solida-
ted
Group
compa-
nies
Financi- 8.0 - - 8.0 8.0 - - 8.0
al
liabili-
ties due
to
affilia-
tes
Other 77.4 0.1 - 77.5 90.0 13.4 - 103.4
financi-
al
liabili-
ties
Total 537.7 518.5 984.9 2,041.1 233.1 795.0 858.3 1,886.4
Non-current financial liabilities decreased year-on-year by EUR 149.9 m to
EUR 1,503.4 m as at the balance sheet date. The reduction resulted from the
expected refinancing of bonds issued in September 2014. The carrying amount
of the bond of EUR 306.5 m was therefore reclassified to current financial
liabilities. In addition the liabilities to banks reduced by EUR 69.3 m.
The
decline is partly offset by an increase in liabilities from finance leases
of EUR 226.4 m. The increase is mainly driven by the finance lease for
cruise ship Discovery and an aircraft in Q3 2015 / 16.
Current liabilities rose by EUR 304.6 m to EUR 537.7 m year-on-year as at
30
September 2016.
Fair values
and carrying
amounts of
the bonds
issued at 30
Sep 2016
30 30
Sep Sep
2016 2015
EUR million Issu- Nomi- Nomi- Inte- Stock Carry- Stock Carry-
er nal nal rest mar- ing mar- ing
value value rate ket amoun- ket amoun-
initi- out- % p. value t value t
al stan- a.
ding
2014 / 19 TUI 300.0 300.0 4.500 308.3 306.5 314.4 293.7
bond AG
Total 308.3 306.5 314.4 293.7
On 26 September 2014, TUI AG issued a fixed-interest bond with a coupon of
4.5 % p.a. with a nominal value of EUR 300.0 m. The bond was originally to
mature on 1 October 2019. It can be redeemed ahead of maturity date from 1
October 2016. At the balance sheet date, it was expected that TUI was going
to use its redemption right and redeem the bond at short notice at a
redemption price of 102.25 % per bond as part of a refinancing scheme.
(34) Trade accounts payable
Trade payables
EUR million 30 Sep 2016 30 Sep 2015
To third parties 2,450.6 3,181.2
To non-consolidated Group companies 1.0 5.8
To affiliates 25.3 37.2
Total 2,476.9 3,224.2
The decrease in trade payables results primarily from the sale of Hotelbeds
Group.
(35) Derivative financial instruments
Derivative
financial
instruments
30 30
Sep Sep
2016 2015
Remai- Remai-
ning ning
term term
EUR million up to 1- 5 more Total up to 1- 5 more
Total
1 year- than 5 1 year- than 5
year s years year s years
Liabilities 249.6 27.5 - 277.1 388.2 78.5 -
466.7
from
derivative
financial
instruments to
third parties
Derivative financial instruments are included at their fair values (market
values). They mainly serve to hedge future business operations and are
detailed in the explanatory information on financial instruments.
(36) Deferred and current tax liabilities
Deferred and current tax liablities
EUR million 30 Sep 2016 30 Sep 2015
Deferred tax liabilities 62.9 125.7
Current tax liabilities 218.2 194.6
Total 281.1 320.3
Deferred tax liabilities include an amount of EUR 49.2 m (previous year EUR
105.5 m) to be realised after more than twelve months.
(37) Other liabilities
Other liabilities
30 Sep 30 Sep
2016 2015
Remai- Remai-
ning ning
term term
EUR million up to 1 1- 5 Total up to 1 1- 5 Total
year years year years
Other liabilities due 7.5 - 7.5 3.6 - 3.6
to non-consolidated
Group companies
Other liabilities due 13.3 5.8 19.1 29.1 8.0 37.1
to affiliates
Other liabilities 27.8 - 27.8 41.9 - 41.9
relating to other
taxes
Other liabilities 45.7 - 45.7 47.2 - 47.2
relating to social
security
Other liabilities 237.8 17.1 254.9 273.4 13.8 287.2
relating to employees
Other liabilities 8.5 - 8.5 4.2 - 4.2
relating to members
of the Boards
Advance payments 2,301.3 - 2,301.3 2,568.3 13.5 2,581.8
received
Other miscellaneous 192.4 64.1 256.5 205.0 25.7 230.7
liabilities
Other liabilities 2,834.3 87.0 2,921.3 3,172.7 61.0 3,233.7
Deferred income 38.1 73.1 111.2 74.6 75.2 149.8
Total 2,872.4 160.1 3,032.5 3,247.3 136.2 3,383.5
The decrease in other liabilities results primarily from the sale of
Hotelbeds Group and the classification of Specialist Group as discontinued
operation.
(38) Liabilities related to assets held for sale
Liabilities related to assets held for
sale
EUR million 30 Sep 30 Sep
2016 2015
Discontinued Operation Specialist Group 472.3 -
Discontinued Operation LateRooms Group - 31.5
Total 472.3 31.5
For more detailed information, reference is made to the section on
'Discontinued operations'.
(39) Contingent liabilities
As at 30 September 2016, contingent liabilities amount to EUR 326.1 m
(previous year EUR 364.4 m). Contingent liabilities are reported at an
amount representing the best estimate of the potential expenditure that
would be required to meet the potential obligation as at the balance sheet
date. Contingent liabilities as at 30 September 2016 are principally
attributable to the granting of guarantees for the benefit of Hapag-Lloyd
AG
and TUI Cruises GmbH for collateralised ship financing schemes. The
year-on-year decline versus 30 September 2015 mainly results from the
return
of guarantees and from redemption payments, which more than offset the
increase resulting from contingent liabilities newly entered into.
During financial year 2011 / 12, the German tax administration issued a
decree on the interpretation of the trade tax act, amended with effect from
financial year 2008. This decree, only binding for the tax administration,
is interpreted by the German tax administration as indicating that expenses
of German tour operators for the purchase of hotel beds are not fully
deductible in determining the basis for the assessment of trade tax. TUI
does not share that view, in particular as hotel purchasing contracts are
mixed contracts also covering catering, cleaning, entertaining guests and
other services characterising the purchase service.
On 4 February 2016 the Münster fiscal court agreed with the interpretation
of the German tax administration in the case of a third party tour
operator.
To recognise the increased risk compared to 30 September 2015 income tax
liabilities amounting to EUR 44.4 m were recognised at 30 September 2016.
(40) Litigation
Neither TUI AG nor any of its subsidiaries are involved in pending or
foreseeable court or arbitration proceedings which might have a significant
impact on their economic position as at 30 September 2016 or future
periods.
This also applies to actions claiming warranty, repayment or any other
compensation in connection with the divestment of subsidiaries and business
units over the past few years. As in previous years, the respective Group
companies recognised adequate provisions, partly covered by expected
insurance benefits, to cover all potential financial charges from court or
arbitration proceedings.
In 1999, the operator of the container terminal in Zeebrugge Belgium filed
an action for damages against CP Ships Ltd., part of TUI Group, and some of
its subsidiaries for an alleged breach of contract in connection with
switching the Belgian port of call from Zeebrugge to Antwerp. Following
first oral proceedings in September 2013, the court ruled against two
subsidiaries of CP Ships Ltd. in October 2013 and dismissed the action
against all other defendants (including CP Ships Ltd.). Both parties have
appealed so that the action is now only pending against the two
subsidiaries
of CP Ships Ltd. and CP Ships Ltd. itself. Moreover, the CP Ships companies
would have rights of recourse against solvent third parties in the event of
an adverse final judgment.
(41) Other financial commitments
Nomi-
nal
and
fair
va-
lues
of
other
finan-
cial
com-
mit-
ments
30 30
Sep Sep
2016 2015
Remai- Remai-
ning ning
term term
EUR up to 1- 5 more Total up to 1- more Total
milli- 1 years than 5 1 5 than 5
on year years year ye- years
ar-
s
Order 657.1 2,929.7 1,199.9 4,786.7 275.1 1,- 1,682.8 3,927.7
com- 96-
mit- 9.-
ments 8
in
re-
spect
of
capi-
tal
expen-
di-
ture
Other 68.1 45.9 - 114.0 39.2 75- - 114.4
finan- .2
cial
com-
mit-
ments
Total 725.2 2,975.6 1,199.9 4,900.7 314.3 2,- 1,682.8 4,042.1
04-
5.-
0
Fair 718.0 2,888.1 1,105.1 4,711.2 307.5 1,- 1,399.5 3,619.9
value 91-
2.-
9
The fair value of other financial commitments was determined by means of
discounting future expenses using a customary market interest rate of 1.00
%
p. a. (previous year 2.25 % p. a.). If the previous year's interest rate of
2.25 % had been applied, the fair value would have been EUR 220.3 m lower.
Order commitments in respect of capital expenditure relate almost
exclusively to Tourism and increased by EUR 859.0 m year-on-year as at 30
September 2016. This was primarily due to new order commitments for
aircrafts and aircraft equipment. Other significant increases include new
orders for cruise ships and higher levels of hotel construction projects.
The increase was partly offset by foreign exchange effects for liabilities
denominated in non-functional currencies.
F-
i-
n-
a-
n-
c-
i-
a-
l
c-
o-
m-
m-
i-
t-
m-
e-
n-
t-
s
f-
r-
o-
m
o-
p-
e-
r-
a-
t-
i-
n-
g
l-
e-
a-
s-
e-
,
r-
e-
n-
t-
a-
l
a-
n-
d
c-
h-
a-
r-
t-
e-
r
c-
o-
n-
t-
r-
a-
c-
t-
s
30 30
Sep Sep
2016 2015
Remai- Remai-
ning ning
term term
E- up to 1- 5 5- 10 more Total up to 1- 5 5- 10 more
T-
U- 1 years years than 1 years years than
o-
R year 10 year 10
t-
m- years years
a-
i-
l
l-
l-
i-
o-
n
A- 391.7 1,125- 368.9 - 1,886.3 401.4 1,219- 508.6 15.2
2-
i- .7 .5
,-
r-
1-
c-
4-
r-
4-
a-
.-
f-
7
t
H- 242.3 411.9 67.7 10.0 731.9 231.9 462.4 90.9 8.4
7-
o-
9-
t-
3-
e-
.-
l
6
c-
o-
m-
p-
l-
e-
x-
e-
s
T- 67.9 124.8 30.4 6.0 229.1 74.1 143.1 38.7 7.8
2-
r-
6-
a-
3-
v-
.-
e-
7
l
a-
g-
e-
n-
c-
i-
e-
s
A- 43.4 108.7 64.7 54.4 271.2 54.6 129.7 76.1 67.1
3-
d-
2-
m-
7-
i-
.-
n-
5
i-
s-
t-
r-
a-
t-
i-
v-
e
b-
u-
i-
l-
d-
i-
n-
g-
s
S- 99.6 104.7 0.3 - 204.6 96.9 97.6 0.5 -
1-
h-
9-
i-
5-
p-
.-
s-
0
,
y-
a-
c-
h-
t-
s
a-
n-
d
m-
o-
t-
o-
r
b-
o-
a-
t-
s
O- 22.5 26.1 8.9 56.8 114.3 26.8 26.9 8.8 56.3
1-
t-
1-
h-
8-
e-
.-
r
8
T- 867.4 1,901- 540.9 127.2 3,437.4 885.7 2,079- 723.6 154.8
3-
o- .9 .2
,-
t-
8-
a-
4-
l
3-
.-
3
F- 858.7 1,846- 499.6 115.2 3,319.6 866.1 1,944- 605.7 123.9
3-
a- .1 .9
,-
i-
5-
r
4-
v-
0-
a-
.-
l-
6
u-
e
The fair value of financial commitments from lease, rental and charter
agreements was determined by means of discounting future expenses using a
standard market interest rate of 1.00 % p. a. (previous year 2.25 % p. a.).
If the previous year's interest rate of 2.25 % p. a. had been applied, the
fair value would have been EUR 137.6 m lower.
The commitments from lease, rental and charter agreements exclusively
relate
to leases that do not transfer all the risks and rewards of ownership of
the
assets to the companies of the TUI Group in accordance with IFRS rules
(operating leases).
Operating leases for aircraft generally do not include a purchase option.
Current lease payments usually do not include any maintenance costs. The
basic lease term is usually around 8 years on average.
The decrease in commitments compared to 30 September 2015 can largely be
explained by a reduction of lease obligations for aircraft. Increases
resulting from the commission of several aircraft were off-set
significantly
by decreases caused by low levels of lease extensions. Commitments for
hotel
leases reduced as several contracts were re-negotiated during the year and
obligations for administrative buildings decreased as commitments for the
prior year included amounts from Hotelbeds Group, which are no longer
included in the current year. A further decline was caused by foreign
exchange effects for liabilities denominated in non-functional currencies.
(42) Share-based payments in accordance with IFRS 2
Multi-Annual bonus payment
The long-term incentive programme for Board members is based on phantom
shares. In each financial year, a new period of performance measurements
commences, spanning the current plus the following three financial years.
As
a result, each performance measurement period has a general term of four
years. All Board members have their individual target amount defined in
their service contract. This is translated at the beginning of each
performance measurement period into phantom shares based on the average
price of TUI AG shares ('preliminary number of phantom shares'). The
average
share price is calculated based on the share prices during the 20 days
prior
to the beginning of any financial year. The entitlement under the long-term
incentive programme arises upon completion of the four-year performance
period.
Upon the completion of the four-year performance period, the preliminary
number of phantom shares is multiplied by the degree of target achievement.
This degree is determined by the rank achieved by TUI AG when comparing the
total shareholder return (TSR) of companies listed in the 'Dow Jones Stoxx
600 Travel & Leisure' index. The rank is subsequently translated into a
percentage, which is the degree of target achievement. If the degree of
target achievement is less than 25 %, no preliminary phantom shares are
remunerated. If the degree of target achievement exceeds 25 %, it is
multiplied by the number of preliminary phantom shares granted, subject to
a
cap of 175 %. At the end of the four-year performance period, the number of
phantom shares determined in this way is multiplied by the average price
(20
trading days) of TUI AG shares, and the resulting amount is automatically
paid out in cash. The maximum amount payable under the long-term incentive
programme has been capped for each individual.
If the condition mentioned above is met, upon expiry of the performance
period, the awards are automatically exercised. If the conditions are not
met, the awards are forfeited. The service period will be restricted to the
end of the employment period if plan participants leave the Company, as
long
as employment is not terminated due to a significant reason within the
sphere of responsibility of the participant or by the participant without
cause.
Stock option plan
The stock option plan was closed during financial year 2015 / 16. The last
tranche was granted in February 2016. Stock options already granted under
the plan are exercisable in accordance with the plan rules described below.
Bonuses were granted to Group executives entitled to receive a bonus; the
bonuses were translated into phantom shares in TUI AG on the basis of an
average share price. The phantom shares were calculated on the basis of
Group earnings before interest, taxes and amortisation of goodwill (EBITA).
The translation into phantom shares was based on the average share price of
the TUI share on the 20 trading days following the Supervisory Board
meeting
at which the annual financial statements were approved. The number of
phantom shares granted in a financial year was therefore only determined in
the subsequent year. Following a lock-up period of two years, the
individual
beneficiaries are free to exercise their right to cash payment from this
bonus within three years. Following significant corporate news, the
entitlements have to be exercised within defined timeframes. The lock-up
period is not applicable if a beneficiary leaves the Company; in that case,
the entitlements have to be exercised in the next time window. The level of
the cash payment depends on the average share price of the TUI share over a
period of 20 trading days after the exercise date. There are no absolute or
relative return or share price targets. A cap has been agreed for
exceptional, unforeseen developments. Since the strike price is EUR 0.00
and
the incentive programme does not entail a vesting period, the fair value
corresponds to the intrinsic value and hence the market price at the
balance
sheet date. Accordingly, the fair value of the obligation is determined by
multiplying the number of phantom shares with the share price at the
respective reporting date.
Performance Share Plan (PSP)
After the termination of the Stock option plan, a new scheme was introduced
for applicable Group executives. The scheme conditions are harmonised with
the multi-annual bonus plan of the Board Members with the notable exception
of a three year performance period instead of four years.
The multi-annual bonus, stock option plan and PSP schemes are recognised as
payments with cash compensation and are granted with an exercise price of
EUR 0.00. The personnel expense is recognized upon actual delivery of
service according to IFRS 2 and is therefore split over a period of time.
According to IFRS 2, all contractually granted entitlements from the PSP
have to be accounted for, irrespective of whether and when they are
actually
awarded. The phantom shares granted during financial year 2015 / 16 are
awarded pro rata upon actual delivery of service. Phantom shares developed
as follows for the above remuneration schemes.
Development of phantom
shares
Number of Present value EUR
shares million
Balance as at 30 Sep 2014 1,181,042 14.0
Phantom shares granted 779,616 9.7
Phantom shares exercised 497,970 8.3
Phantom shares forfeited 69,116 0.8
Measurement results - 8.2
Balance as at 30 Sep 2015 1,393,572 22.8
Phantom shares granted 4,301,851 59.1
Phantom shares exercised 451,455 5.9
Phantom shares forfeited - -
Measurement results - - 9.4
Balance as at 30 Sep 2016 5,243,968 66.6
From all granted phantom shares, during financial year 2015 / 16 394,363
phantom shares have been awarded.
In financial year 2015 / 16, personnel expenses due to share-based payment
schemes with cash compensation of EUR 4.5 m (2014 / 15: EUR 8.0 m) were
recognised through profit and loss.
As at 30 September 2016 provisions relating to entitlements under these
long-term incentive programmes totaled EUR 13.4 m and further EUR 1.9 m
were
included as liabilities (previous year provisions of EUR 15.2 m and EUR 1.5
m liabilities). Within the stock option plan 216,698 phantom shares (value
equivalent to EUR 2.8 m) vested as at 30 September 2016.
The fair value of services received in return for phantom shares granted
was
measured by reference to the fair value of the underlying equity
instruments. The fair value at the date the share awards were granted is
usually estimated using a binominal methodology, except where there is a
market-based performance condition attached to vesting. In that case a
Monte
Carlo simulation is used for the estimate.
Information relating to fair values of phantom
shares granted
2015 /
16
Fair values at measurement date (scaled to EUR 0.75 to 1.73
1)EUR
Share priceEUR 12.69
Expected volatility% 31.11 46.40
to
Award lifeyears 1 to 16.75
Risk free interest rate% - 0.72 -
to 0.69
Employee shares
TUI AG offers shares at preferential conditions for purchase by eligible
employees in Germany and some European countries. The purchase entails a
lock-up period of two years. In financial year 2015 / 16, a total of
181,280
employee shares that employees had subscribed to in the prior year were
issued. The subscription period for employee shares in financial year 2015
/
16 expired on 30 June 2016. Employees subscribed to 253,690 employee shares
which were issued in September 2016. Personnel costs recognised through
profit and loss, i.e. the difference between the current share price as at
the balance sheet date and the reduced purchase price, amount to EUR 0.8 m.
Share-based payment schemes in TUI AG subsidiaries
The three principal schemes below are all closed to new participants.
Eligible participants are now included in the TUI AG phantom schemes,
details of which are provided above.
Certain beneficiaries (except for the Executive Board members) were
eligible
to receive awards under the three remuneration schemes described below.
Prior to the merger between TUI Travel PLC and TUI AG, the schemes operated
by TUI Travel PLC businesses were equity-settled and all outstanding awards
remain equity-settled. All awards granted under the schemes after the
merger
will be settled in cash.
The three principal share-based payment schemes linked executive
remuneration to the future performance of the company are: a Performance
Share Plan (PSP), a Deferred Annual Bonus Scheme (DABS) and a Deferred
Annual Bonus Long-Term Incentive Scheme (DABLIS). These incentive schemes
were offered to participants free of charge and entail both lock-up periods
and performance conditions.
The share awards of all remuneration schemes will only vest if the average
annual return on invested capital (ROIC) is at least equal to the average
weighted average cost of capital (WACC) over a period of three years. If
this condition is fulfilled, the number of vesting awards are determined as
a function of the fulfilment of the following performance conditions.
Performance share plan (PSP)
Up to 50 % of these awards granted will vest based on growth in the Group's
reported earnings per share (EPS) in excess of growth in the UK Retail
Price
Index. Up to 25 % of the awards will vest based on the Group's total
shareholder return (TSR) performance relative to an average of the TSR
performance of an index of other capital market-orientated travel and
tourism companies. Likewise, up to 25 % of the awards vest if the Group's
average return on invested capital (ROIC) meets predefined targets.
Deferred annual bonus scheme (DABS)
The awards granted under this scheme vest upon completion of a three-year
period at the earliest.
Up to 50 % of the granted awards will vest based on growth in earnings per
share (EPS) relative to the UK Retail Price Index (RPI). 25 % of the awards
will vest based on total shareholder return (TSR) performance relative to
the TSR performance of other capital market-oriented travel and tourism
companies. Likewise, up to 25 % of the awards will vest if the average
return on invested capital (ROIC) meets certain targets.
Deferred annual bonus long-term incentive scheme (DABLIS)
The Deferred Annual Bonus Long-Term Incentive Scheme (DABLIS), for
executive
staff (except for the Executive Board) required a 25 % conversion of any
annual variable compensation into shares. Some eligible staff have been
awarded further (matching) share awards as additional bonuses. Matching
shares are limited to four times the converted amount. The earliest point
for the shares to be eligible for release is similarly at the end of a
three-year period.
Up to 50 % of the awards will vest based on achievement of certain EBITA
targets. Up to 25 % of awards will vest based on the earnings per share
(EPS) performance relative to the UK Retail Price Index and up to 25 %
based
on the total shareholder return (TSR) performance in relation to the TSR
performance of other capital market-oriented travel and tourism companies.
The following schedules relate to the outstanding awards under the TUI
Travel equity-settled schemes and show the number of TUI Travel Limited
shares which remain outstanding following conversion into TUI AG shares at
the conversion rate of 0.399 new TUI AG shares for each TUI Travel share as
agreed in the merger documentation.
The vesting schedule for the awards was as follows as at 30 September 2016:
Share award schemes and
ordinary shares outstanding
30 Sep 2016 30 Sep 2015 Date due to
Number of Number of vest / date
shares shares vested
Performance Share Plan - 732,594 6 December
(PSP) 2015
227,129 486,203 12 December
2016
- -
Deferred Annual Bonus - 1,393,129 6 December
Scheme (DABS) 2015
343,215 925,025 12 December
2016
- -
Deferred Annual Bonus - 808,039 6 December
Long-Term Incentive Scheme 2015
(DABLIS)
570,732 681,508 12 December
2016
Total 1,141,076 5,026,498
The development of awards already granted is as follows:
Development of the number of share options
Number
Outstanding at 1 Oct 2015 5,026,498
Forfeited during the year - 677,243
Exercised during the financial year - 3,208,179
Granted during the financial year -
Balance as at 30 Sep 2016 1,141,076
The weighted average TUI AG share price was EUR 14.76 at exercise date
(previous year EUR 14.56). The weighted average remaining contractual life
of options not exercised is 0.19 years at 30 September 2016 (previous year
0.61 years).
In addition to the above shares, the deferral of variable compensation into
share awards means that 75,462 shares (previous year 558,154 shares) are
still outstanding under DABS and 306,396 (previous year 799,354) under
DABLIS. The awards will vest on 12 December 2016.
Participants are not entitled to dividends prior to vesting. Expected
volatility is based on historic volatility adjusted for changes to future
volatility indicated by publicly available information.
In financial year 2015 / 16, personnel costs of EUR 6.2 m (previous year
EUR
20.1 m) relating to share-based payment schemes involving compensation by
equity instruments were carried through profit and loss.
After the merger, eligible beneficiaries were included in a cash-settled
(Phantom) scheme. Calculation of the cash settlement is based on the same
criteria as those used for settlement by equity instruments. In the
financial year 2015 / 16, this gave rise to staff costs of EUR 9.6 m
(previous year EUR 10.9 m). As at 30 September 2016 provisions relating to
entitlements under these long-term incentive programmes totalled EUR 12.5 m
(previous year EUR 11.2 m) and were classified as accruals.
The schedule below shows the development of outstanding cash-settled
phantom
shares as at 30 September 2016:
Development of phantom shares
granted at sub-group level
Number of Present value
shares EUR million
Balance as at 30 Sep 2015 1,604,386 26.7
Phantom shares granted 829,786 13.5
Phantom shares exercised - 402,039 - 6.5
Phantom shares forfeited - 292,200 - 4.8
Measurement results - - 6.7
Balance as at 30 Sep 2016 1,739,933 22.2
(43) Financial instruments
Risks and risk management
Risk management principles
Due to the nature of its business operations, the TUI Group is exposed to
various financial risks, including market risks (consisting of currency
risks, interest rate risks and market price risks), credit risks and
liquidity risks.
In accordance with the Group's financial goals, financial risks have to be
mitigated. In order to achieve this, policies and procedures have been
developed to manage risk associated with financial transactions undertaken.
The rules, responsibilities and processes as well as limits for
transactions
and risk positions have been defined in policies. The trading, processing
and control have been segregated in functional and organisational terms.
Compliance with the policies and limits is continually monitored. All
hedges
by the TUI Group are consistently based on recognised or forecasted
underlying transactions. Standard software is used for assessing,
monitoring, reporting, documenting and reviewing the effectiveness of the
hedging relationships for the hedges entered into. In this context, the
fair
values of all derivative financial instruments determined on the basis of
the Group's own systems are regularly compared with the fair value
confirmations from the external counterparties. The processes, the methods
applied and the organisation of risk management are reviewed for compliance
with the relevant regulations on at least an annual basis by the internal
audit department and external auditors.
Within the TUI Group, financial risks primarily arise from cash flows in
foreign currencies, fuel requirements (jet fuel and bunker oil) and
financing via the money and capital markets. In order to limit the risks
from changes in exchange rates, market prices and interest rates for
underlying transactions, the TUI Group uses over-the-counter derivative
financial instruments. These are primarily fixed-price transactions. In
addition, the TUI Group also uses options and structured products. Use of
derivative financial instruments is confined to internally fixed limits and
other policies. The transactions are concluded on an arm's length basis
with
counterparties operating in the financial sector, whose counterparty risk
is
regularly monitored. Foreign exchange translation risks from the
consolidation of Group companies not preparing their accounts in euros are
not hedged.
Accounting and measurement of financial instruments is in line with IAS 39.
Market risk
Market risks result in fluctuations in earnings, equity and cash flows. In
order to limit or eliminate these risks, the TUI Group has developed
various
hedging strategies, including the use of derivative financial instruments.
IFRS 7 requires the presentation of a sensitivity analysis showing the
effects of hypothetical changes in relevant market risk variables on profit
or loss and equity. The effects for the period are determined by relating
the hypothetical changes in risk variables to the portfolio of primary and
derivative financial instruments as at the balance sheet date. It is
ensured
that the portfolio of financial instruments as at the balance sheet date is
representative for the entire financial year.
The analyses of the TUI Group's risk reduction activities outlined below
and
the amounts determined using sensitivity analyses represent hypothetical
and
thus uncertain risks. Due to unforeseeable developments in the global
financial markets, actual results may deviate substantially from the
disclosures provided. The risk analysis methods used must not be considered
a projection of future events or losses, since the TUI Group is also
exposed
to risks of a non-financial or non-quantifiable nature. These risks
primarily include sovereign, business and legal risks not covered by the
following presentation of risks.
Currency risk
The business operations of the TUI Group's companies generate payments or
receipts denominated in foreign currencies, which are not always matched by
payments or receipts with equivalent terms in the same currency. Using
potential netting effects (netting of payments made and received in the
same
currency with identical or similar terms), the TUI Group enters into
appropriate hedges with external counterparties in order to protect its
profit margin from exchange rate-related fluctuations.
Within the TUI Group, risks from exchange rate fluctuations are hedged,
with
the largest hedging volumes relating to US dollars, euros and pound
sterling. The Eurozone limits the currency risk from transactions in the
key
tourist destinations to Group companies whose functional currency is not
the
euro. The tourism business operations are mainly affected by changes in the
value of the US dollar and the euro, the latter predominantly affecting the
TUI tour operators in the UK and the Nordic countries. In tourism
operations, payments in US dollars primarily relate to the procurement of
services in non-European destinations, purchases of jet and ship fuel and
aircraft and cruise ship purchases or charter.
The tourism companies use financial derivatives to hedge their planned
foreign exchange requirements. They aim to cover 80 % to 100 % of the
planned currency requirements at the beginning of the tourism season. In
this regard, account is taken of the different risk profiles of the TUI
Group companies. The hedged currency volumes are adjusted in line with
changes in planned requirements based on reporting by business units.
Currency risks within the meaning of IFRS 7 arise from primary and
derivative monetary financial instruments issued in a currency other than
the functional currency of a company. Exchange rate-related differences
from
the translation of financial statements into the Group's presentation
currency are not taken into account. Taking account of the different
functional currencies within the TUI Group, the sensitivity analyses of the
currencies identified as relevant risk variables are presented below. A 10
%
strengthening or weakening of the respective functional currencies,
primarily euro and pound sterling, against the other currencies would cause
the following effects on the revaluation reserve and earnings after tax:
Sensitivity analysis - currency
risk
EUR million 30 Sep 30 Sep
2016 2015
Variable: Foreign exchange rate + 10 % - 10 % + 10 % - 10 %
Exchange rates of key currencies
EUR / US dollar
Revaluation reserve - 123.4 + - 102.3 +
124.0 102.4
Earnings after income taxes - 6.5 + 6.7 - 8.0 + 9.8
EUR / Pound sterling
Revaluation reserve - 176.0 + - 203.8 +
176.0 203.8
Earnings after income taxes + 17.3 - 22.2 - 150.5 +
152.4
Pound sterling / US dollar
Revaluation reserve - 114.3 + - 97.9 + 97.9
114.3
Earnings after income taxes + 10.0 - 10.0 - 13.5 + 13.5
EUR / Swedish krona
Revaluation reserve - 0.7 + 0.7 + 21.0 - 21.0
Earnings after income taxes - - - -
Interest rate risk
The TUI Group is exposed to interest rate risks from floating-rate primary
and derivative financial instruments. Where interest-driven cash flows of
floating-rate primary financial instruments are converted into fixed cash
flows using derivative hedges, they are not exposed to an interest rate
risk. No interest rate risk exists for fixed-interest financial instruments
carried at amortised cost.
Changes in market interest rates mainly impact floating-rate primary
financial instruments and derivative financial instruments entered into in
order to reduce interest-induced cashflow fluctuations.
The table below presents the equity and earnings effects of an assumed
increase or decrease in the market interest rate of 50 base points as at
the
balance sheet date.
Sensitivity analysis - interest
rate risk
EUR million 30 Sep 30 Sep
2016 2015
Variable: Interest rate level + 50 - 50 + 50 - 50
for floating interest-bearing basis basis basis basis
debt points points points points
Revaluation reserve - - - -
Earnings after income taxes + 2.6 - 2.6 + 0.3 -
Fuel price risk
Due to the nature of its business operations, the TUI Group is exposed to
market price risks from the purchase of fuel, both for the aircraft fleet
and the cruise ships.
The tourism companies use financial derivatives to hedge their exposure to
market price risks for the planned consumption of fuel. At the beginning of
the touristic season the target hedging ratio is at least 80 %. The
different risk profiles of the Group companies operating in different
source
markets are taken into account, including the possibility of levying fuel
surcharges. The hedging volumes are adjusted for changes in planned
consumption as identified by the Group companies.
If the commodity prices, which underlie the fuel price hedges, increase or
decrease by 10 % on the balance sheet date, the impact on equity and on
earnings after income taxes would be as shown in the table below.
Sensitivity analysis - fuel price
risk
EUR million 30 Sep 30 Sep
2016 2015
Variable: Fuel prices for aircraft + 10 % - 10 + 10 % - 10
and ships % %
Revaluation reserve + 81.2 - + 62.4 -
80.8 61.6
Earnings after income taxes - 0.3 - - 0.1 - 0.3
Other price risks
Apart from the financial risks that may result from changes in exchange
rates, commodity prices and interest rates, the TUI Group is not exposed to
significant price risks at the balance sheet date, except for the share
price risk related to Hapag-Lloyd AG.
A hypothetical change of + 10 % / - 10 % in the Hapag-Lloyd AG share price
would result in a EUR 26.6 m increase or -EUR 26.6 m decrease in the fair
value of the shares held by the Group and would be recognised in other
comprehensive income. In the prior year the sensitivity analysis relating
to
the stake in Hapag-Lloyd was based on the effect of changes to
non-observable input factors on the fair value (level 3 measurement). An
assumed increase or decrease in the non-observable input factors of 0.25 %
would have resulted in the following favourable or unfavourable impacts on
profit or loss: (Forecasted) EBITA-margin EUR 71.5 m / EUR - 71.4 m, WACC
EUR - 43.0 m / EUR 47.2 m, terminal growth rate EUR 40.4 m / EUR - 36.8 m.
Credit risk
The credit risk in non-derivative financial instruments results from the
risk of counterparties defaulting on their contractual payment obligations.
Maximum credit risk exposure corresponds to the total of the recognised
carrying amounts of the financial assets (including derivative financial
instruments with positive market values). It also relates to the granting
of
financial guarantees for the discharge of liabilities. Details concerning
the guarantees at the balance sheet date are presented in Note 39. Where
legally enforceable, financial assets and liabilities are netted. Credit
risks are reviewed closely on conclusion of the contract and continually
monitored thereafter in order to swiftly respond to potential impairments
in
a counterparty's solvency. Responsibility for handling the credit risk is
held by the Group company holding the receivable.
Since the TUI Group operates in many different business areas and regions,
significant credit risk concentrations of receivables from and loans to
specific debtors or groups of debtors are not to be expected. A significant
concentration of credit risks related to specific countries is not to be
expected either. As of the balance sheet date, there is no collateral held,
or other credit enhancements that reduce the maximum credit risk (previous
year EUR 1.1 m). Collateral held in the prior period relates exclusively to
financial assets of the category 'Trade receivable and other assets'. The
collateral mainly comprises collateral for financial receivables granted
and
maturing in more than one year and / or with a volume of more than EUR 1 m.
Rights in rem, directly enforceable guarantees, bank guarantees and comfort
letters are used as collateral.
Identifiable credit risks of individual receivables are subject to
provisions for bad debts. In addition, portfolios are impaired based on
observed values. An analysis of the aging structure of the category Trade
receivables and other assets is presented in Note 19.
At the balance sheet date, there were no financial assets that would be
overdue or impaired unless the terms and conditions of the contract had
been
renegotiated, neither in financial year 2015 / 16 nor in 2014 / 15.
Credit management also covers the TUI Group's derivative financial
instruments. The maximum credit risk for derivative financial instruments
entered into is limited to the total of all positive market values of these
instruments since in the event of counterparty default asset losses would
only be incurred up to that amount. Since derivative financial instruments
are concluded with different debtors, credit risk exposure is reduced. The
specific credit risks of individual counterparties are taken into account
in
determining the fair values of derivative financial instruments. In
addition, the counterparty risk is continually monitored and controlled
using internal bank limits.
Liquidity risk
The liquidity risks arises from the TUI Group being unable to meet its
short
term financial obligations and the resulting increases in funding costs.
For
this reason, the key objectives of TUI's internal liquidity management
system are to secure the TUI Group's liquidity at all times and
consistently
comply with contractual payment obligations. Assets of EUR 0.5 m (previous
year EUR 0.3 m) were deposited as collateral for liabilities. The
participating Group companies are also jointly and severally liable for
financial liabilities from cash pooling agreements.
The tables provided below list the contractually agreed (undiscounted) cash
flows of all primary financial liabilities and derivative financial
instruments as at the balance sheet date. Planned payments for future new
liabilities were not taken into account. Where financial liabilities have a
floating interest rate, the forward interest rates fixed at the balance
sheet date were used to determine future interest payments. Financial
liabilities cancellable at any time are allocated to the earliest maturity
band.
Cash flow of
financial
instruments -
financial
liabilities
(30 Sep 2016)
Cash
outflow
until 30
Sep
up to 1 1 - 2 - 5 more
year 2 years than
year- 5
s years
EUR million repay- inte- re- inte- repay- inte- repay-
inte-
ment rest pay- rest ment rest ment
rest
ment
Financial
liabilities
Bonds* - - - - - - - -
13.5 13.5 300.0 20.3
Liabilities - 47.0 - - - - - - -
to banks 12.0 47.6 12.4 121.8 32.2 194.4
31.6
Liabilities - 92.2 - - - - - - -
from finance 33.5 91.2 31.6 257.8 81.8 790.5
71.5
leases
Financial - 6.6 - - - - - - -
liabilities
due to
non-consolida-
ted Group
companies
Financial - 8.0 - - - - - - -
liabilities 0.1
due to
affiliates
Other - 77.4 - - - - - - -
financial 0.1
liabilities
Trade - - - - - - - -
payables 2,476.9
Other - 175.7 - - - - - - -
liabilities 19.8 8.4
* The bond was early redeemed in November 2016. For further details please
refer to the section 49 'Significant transactions after the balance sheet
date'.
Cash flow of
financial
instruments -
financial
liabilities
(30 Sep 2015)
Cash
outflow
until 30
Sep
up to 1 1 - 2 - 5 more
year 2 years than
year- 5
s years
EUR million repay- inte- re- inte- repay- inte- repay-
inte-
ment rest pay- rest ment rest ment
rest
ment
Financial
liabilities
Bonds - - - - - - - -
13.5 13.5 300.0 33.8
Liabilities - 61.0 - - - - - - -
to banks 4.3 55.6 3.5 151.7 8.6 225.8 7.3
Liabilities - 68.8 - - - - - - -
from finance 34.4 68.2 32.2 212.5 83.6 632.5
84.4
leases
Financial - 5.2 - - - - - - -
liabilities
due to
non-consolida-
ted Group
companies
Financial - 8.0 - - - - - - -
liabilities
due to
affiliates
Other - 90.0 - - - - - - -
financial 13.4
liabilities
Trade - - - - - - - -
payables 3,224.2
Other - 66.2 - - - - 2.7 - - -
liabilities 12.2 7.5
Cash flow of derivative
financial instruments (30
Sep 2016)
Cash in/
outflow until
30 Sep
EUR million up to 1 year 1 - 2 2 - 5 more
years years than 5
years
Derivative financial
instruments
Hedging transactions - + 7,362.3 + + -
inflows 1,587.1 345.3
Hedging transactions - - 7,062.0 - - -
outflows 1,531.3 316.0
Other derivative financial + 1,688.0 + 44.4 + 0.7 -
instruments - inflows
Other derivative financial - 1,714.5 - 43.0 - 0.8 -
instruments - outflows
Cash flow of derivative
financial instruments (30
Sep 2015)
Cash in/
outflow until
30 Sep
EUR million up to 1 year 1 - 2 2 - 5 more
years years than 5
years
Derivative financial
instruments
Hedging transactions - + 6,865.3 + + + 0.7
inflows 1,620.3 412.1
Hedging transactions - - 7,016.7 - - - 0.7
outflows 1,660.1 423.0
Other derivative financial + 4,090.9 + 153.1 + -
instruments - inflows 23.2
Other derivative financial - 3,576.0 - 150.1 - -
instruments - outflows 22.4
Derivative financial instruments and hedges
Strategy and goals
In accordance with the TUI Group's policy, derivatives are allowed to be
used if they are based on underlying recognised assets or liabilities, firm
commitments or forecasted transactions. Hedge accounting based on the rules
of IAS 39 is applied to forecasted transactions. In the financial year
under
review, hedges primarily consisted of cash flow hedges.
Derivative financial instruments in the form of fixed-price transactions
and
options as well as structured products are used to limit currency, interest
rate and fuel risks.
Cash Flow Hedges
As at 30 September 2016, hedges existed to manage cash flows in foreign
currencies with maturities of up to five years (2015: up to six years). The
fuel price hedges had terms of up to four years (2015: up to four years).
There were no longer any hedges of TUI AG's floating-rate interest payment
obligations.
In accounting for cash flow hedges, the effective portion of the cumulative
change in market value is carried in the revaluation reserve outside profit
and loss until the hedged item occurs. It is carried in the income
statement
through profit and loss when the hedged item is executed. In the financial
year under review, income of EUR 40.4 m (previous year expenses of EUR
580.8
m) for currency hedges and derivative financial instruments used as price
hedges were carried in the cost of sales. There was no result from interest
hedges (previous year expenses of EUR 0.3 m). Income of EUR 1.6 m (previous
year income of EUR 0.7 m) was carried for the ineffective portion of the
cash flow hedges.
Nominal
amounts of
derivative
financial
instruments
used
30 Sep 30 Sep
2016 2015
Remai- Remai-
ning ning
term term
EUR million up to 1 more Total up to 1 more Total
year than 1 year than 1
year year
Interest rate
hedges
Caps - 150.0 150.0 67.7 160.4 228.1
Swaps - 25.2 25.2 - 25.2 25.2
Currency
hedges
Forwards 8,924.1 2,006.3 10,930.4 10,261.1 2,109.5 12,370.6
Options - - - 2.1 - 2.1
Structured 63.0 10.9 73.9 114.5 113.6 228.1
instruments
Commodity
hedges
Swaps 779.9 476.6 1,256.5 977.2 313.5 1,290.7
Options 20.7 - 20.7 37.4 - 37.4
The nominal amounts correspond to the total of all purchase or sale amounts
or the contract values of the transactions.
Fair values of derivative financial instruments
The fair values of derivative financial instruments correspond to the
market
values. The market price determined for all derivative financial
instruments
is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. A description of the determination of the fair values of
derivative financial instruments is provided with the classification of
financial instruments measured at fair value.
Positive and negative fair values of
derivative financial instruments shown as
receivables or liabilities
30 30
Sep Sep
2016 2015
EUR million Recei- Liabi- Recei- Liabi-
va- li- va- li-
bles ties bles ties
Cash flow hedges for
currency risks 480.7 104.0 257.5 96.7
other market price risks 59.0 115.0 4.9 347.1
interest rate risks - - - -
Fair value hedges for
currency risks - - - -
Hedging 539.7 219.0 262.4 443.8
Other derivative financial instruments 131.7 58.1 66.7 22.9
Total 671.4 277.1 329.1 466.7
Financial instruments which are entered into in order to hedge a risk
position according to operational criteria but do not meet the strict
criteria of IAS 39 to qualify for hedge accounting are shown as other
derivative financial instruments. They include foreign currency
transactions
entered into in order to hedge against foreign exchange-exposure to changes
in the value of balance sheet items and foreign exchange fluctuations from
future expenses in Tourism.
Financial instruments - Additional disclosures
Carrying amounts and fair values
Where financial instruments are listed in an active market, e. g. shares
held and bonds issued, the fair value or market value is the respective
quotation in this market at the balance sheet date. For over-the-counter
bonds, liabilities to banks, promissory notes and other non-current
financial liabilities, the fair value is determined as the present value of
future cash flows, taking account of yield curves and the respective credit
spread, which depends on the credit rating.
Due to the short remaining terms of cash and cash equivalents, current
trade
receivables and other assets, current trade payables and other payables,
the
carrying amounts are taken as realistic estimates of the fair value.
The fair values of non-current trade receivables and other assets
correspond
to the present values of the cash flows associated with the assets, taking
account of current interest parameters which reflect market- and
counterparty-related changes in terms and expectations. There are no
financial investments held to maturity.
Car-
ry-
ing
amou-
nts
and
fair
va-
lues
ac-
cor-
ding
to
clas-
ses
and
mea-
sure-
ment
cate-
go-
ries
as
at
30
Sep
2016
Catego-
ry
under
IAS 39
EUR Carry- At At Fair Fair Values Carry- Fair
mil- ing amorti- cost value value accor- ing value
lion amount sed with no throu- ding amount of
cost effect gh to IAS of
financi-
on pro- 17 financi- al
profit fit (lease- al
instru-
and and s) instru- ments
loss loss ments
As-
sets
Avai- 316.2 - 44.4 271.8 - - 316.2 316.2
la-
ble
for
sale
fi-
nan-
cial
as-
sets
Tra- 1,635.4 689.7 - - - - 689.7 689.7
de
re-
cei-
va-
bles
and
othe-
r
as-
sets
Deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Hed- 539.7 - - 539.7 - - 539.7 539.7
ging
Othe- 131.7 - - - 131.7 - 131.7 131.7
r
deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Cash 2,072.9 2,072.9 - - - - 2,072.9
2,072.9
and
cash
equi-
val-
ents
Lia-
bili-
ties
Fi- 2,041.1 809.4 - - - 1,231.- 809.4 818.0
nan- 8
cial
lia-
bili-
ties
Tra- 2,476.9 2,476.4 - - - - 2,476.4
2,476.4
de
paya-
bles
Deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Hed- 219.0 - - 219.0 - - 219.0 219.0
ging
Othe- 58.1 - - - 58.1 - 58.1 58.1
r
deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Othe- 3,032.5 134.2 - - - - 134.2 134.2
r
lia-
bili-
ties
Car-
ry-
ing
amou-
nts
and
fair
va-
lues
ac-
cor-
ding
to
clas-
ses
and
mea-
sure-
ment
cate-
go-
ries
as
at
30
Sep
2015
Catego-
ry
under
IAS 39
EUR Carry- At At Fair Fair Values Carry- Fair
mil- ing amorti- cost value value accor- ing value
lion amount sed with no throu- ding amount of
cost effect gh to IAS of
financi-
on pro- 17 financi- al
profit fit (lease- al
instru-
and and s) instru- ments
loss loss ments
As-
sets
Avai- 391.1 - 50.4 340.7 - - 391.1 391.1
la-
ble
for
sale
fi-
nan-
cial
as-
sets
Tra- 2,281.2 1,064.7 - - - - 1,064.7
1,064.7
de
re-
cei-
va-
bles
and
othe-
r
as-
sets
Deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Hed- 262.4 - - 262.4 - - 262.4 262.4
ging
Othe- 66.7 - - - 66.7 - 66.7 66.7
r
deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Cash 1,672.7 1,672.7 - - - - 1,672.7
1,672.7
and
cash
equi-
val-
ents
Lia-
bili-
ties
Fi- 1,886.4 904.5 - - - 982.0 904.5 925.1
nan-
cial
lia-
bili-
ties
Tra- 3,224.2 3,224.0 - - - - 3,224.0
3,224.0
de
paya-
bles
Deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Hed- 443.8 - - 443.8 - - 443.8 443.8
ging
Othe- 22.9 - - - 22.9 - 22.9 22.9
r
deri-
vati-
ve
fi-
nan-
cial
in-
stru-
ment-
s
Othe- 3,383.5 152.9 - - - - 152.9 152.9
r
lia-
bili-
ties
The financial investments classified as financial assets available for sale
include an amount of EUR 44.4 m (previous year EUR 50.4 m) for stakes in
partnerships and corporations for which an active market does not exist.
The
fair value of these non-listed stakes is not determined using a measurement
model since the future cash flows cannot be reliably determined. The stakes
are carried at acquisition cost. In the period under review and in the
previous year, there were no major disposals of stakes in partnerships and
corporations measured at acquisition cost. The TUIGroup does not intend to
sell or derecognise the stakes in these partnerships and corporations in
the
near future.
Aggregation
according to
measurement
categories under
IAS 39 as at 30
Sep 2016
Fair value
EUR million At At with no through Carry- Fair
amorti- cost effect on profit ing value
sed profit and and amount
cost loss loss Total
Loans and 2,762.6 - - - 2,762.6 2,762.6
receivables
Financial assets
available for - 44.4 271.8 - 316.2 316.2
sale
held for trading - - - 131.7 131.7 131.7
Financial
liabilities
at amortised 3,420.0 - - - 3 420.0 3,428.6
cost
held for trading - - - 58.1 58.1 58.1
Aggregation
according to
measurement
categories under
IAS 39 as at 30
Sep 2015
Fair value
EUR million At At with no through Carry- Fair
amorti- cost effect on profit ing value
sed profit and and amount
cost loss loss Total
Loans and 2,737.4 - - - 2,737.4 2,737.4
receivables
Financial assets
available for - 50.4 340.7 - 391.1 391.1
sale
held for trading - - - 66.7 66.7 66.7
Financial
liabilities
at amortised 4,281.4 - - - 4,281.4 4,302.0
cost
held for trading - - - 22.9 22.9 22.9
Fair value measurement
The table below presents the fair values of recurring, non-recurring and
other financial instruments measured at fair value in line with the
underlying measurement level. The individual measurement levels have been
defined as follows in line with the inputs:
* Level 1: (unadjusted) quoted prices in active markets for identical
assets or liabilities.
* Level 2: inputs for the measurement other than quoted market prices
included within Level 1 that are observable in the market for the asset
or liability, either directly (as quoted prices) or indirectly
(derivable from quoted prices).
* Level 3: inputs for the measurement of the asset or liability not based
on observable market data.
Classification of fair value measurement
of financial instruments as of 30
September 2016
Fair value
hierarchy
EUR million Total Level 1 Level Le-
2 vel
3
Assets
Available for sale financial assets 271.8 265.8 - 6.0
Derivative financial instruments
Hedging transactions 539.7 - 539.7 -
Other derivative financial instruments 131.7 - 131.7 -
Liabilities
Derivative financial instruments
Hedging transactions 219.0 - 219.0 -
Other derivative financial instruments 58.1 - 58.1 -
At amortised cost
Financial liabilities 818.0 308.3 509.7 -
Classification of fair value
measurement of financial instruments
as of 30 September 2015
Fair value
hierarchy
EUR million Total Level 1 Level Level
2 3
Assets
Available for sale financial assets 340.7 - - 340.7
Derivative financial instruments
Hedging transactions 262.4 - 262.4 -
Other derivative financial instruments 66.7 - 66.7 -
Liabilities
Derivative financial instruments
Hedging transactions 443.8 - 443.8 -
Other derivative financial instruments 22.9 - 22.9 -
At amortised cost
Financial liabilities 925.1 314.4 610.7 -
At the end of every reporting period, TUI Group checks whether there are
any
reasons for reclassification to or from one of the measurement levels.
Financial assets and financial liabilities are generally transferred out of
Level 1 into Level 2 if the liquidity and trading activity no longer
indicate an active market. The opposite situation applies to potential
transfers out of Level 2 into Level 1. In the period under review, there
were no transfers between Level 1 and Level 2.
Reclassifications from Level 3 to Level 2 or Level 1 are effected if
observable market price quotations become available for the asset or
liability concerned. TUI Group records transfers to and out of Level 3 as
at
the date of the obligating event or occasion triggering the transfer. The
review as at 31 December 2015 due to the initial public offering of
Hapag-Lloyd AG resulted in the transfer of the valuation of the stake in
Hapag-Lloyd AG from Level 3 into Level 1. Other than that, there were no
transfers into or out of Level 3.
Level 1 Financial instruments:
The fair value of financial instruments for which an active market exists
is
based on quoted prices at the reporting date. An active market exists if
quoted prices are readily and regularly available from an exchange, dealer,
broker, pricing service or regulatory agency and these prices represent
actual and regularly occurring market transactions on an arm's length
basis.
These financial instruments are classified as Level 1. The fair values
correspond to the nominal amounts multiplied by the quoted prices at the
reporting date. Level 1 financial instruments primarily comprise shares in
listed companies classified as available for sale and bonds issued
classified as financial liabilities at amortised cost.
Level 2 Financial instruments:
The fair values of financial instruments not traded in an active market, e.
g. over-the-counter (OTC) derivatives, are determined by means of valuation
techniques. These valuation techniques make maximum use of observable
market
data and minimise the use of Group-specific assumptions. If all essential
inputs for the determination of the fair value of an instrument are
observable, the instrument is classified as Level 2.
If one or several key inputs are not based on observable market data, the
instrument is classified as Level 3.
The following specific valuation techniques are used to measure financial
instruments:
* For over-the-counter bonds, liabilities to banks, promissory notes and
other non-current financial liabilities, the fair value is determined
as
the present value of future cash flows, taking account of yield curves
and the respective credit spread, which depends on the credit rating.
* The fair value of over-the-counter derivatives is determined by means
of
appropriate calculation methods, e. g. by discounting the expected
future cash flows. The forward prices of forward transactions are based
on the spot or cash prices, taking account of forward premiums and
discounts. The calculation of the fair values of options concluded for
currency options is based on the Black & Scholes model and the Turnbull
& Wakeman model for optional fuel hedges. The fair values determined on
the basis of the Group's own systems are periodically compared with
fair
value confirmations of the external counterparties.
* Other valuation techniques, e. g. discounting future cash flows, are
used to determine the fair values of other financial instruments.
Level 3 Financial instruments:
The table below presents the fair values of the financial instruments
measured at fair value on a recurring basis, classified as Level 3:
Financial assets measured at fair value in level 3
EUR million Available for
sale financial
assets
Balance as at 1 October 2014 5.5
Additions (incl. Transfers) 481.9
Total gains or losses for the period - 146.7
recognised throug profit or loss - 147.1
recognised in other comprehensive income 0.4
Balance as at 30 September 2015 340.7
Change in unrealised gains or losses for the - 147.1
period for financial assets held at the balance
sheet date
Balance as at 1 October 2015 340.7
Additions (incl. Transfers) -
Disposals -
repayment / sale -
conversion / rebooking 334.9
Total gains or losses for the period 0.2
recognised throug profit or loss 0.2
recognised in other comprehensive income -
Balance as at 30 September 2016 6.0
Change in unrealised gains or losses for the -
period for financial assets held at the balance
sheet date
The disposals caused by reclassification into Level 1 of the measurement
hierarchy relate to the investment in Hapag-Lloyd AG, for which observable
input parameters have existed since the IPO on 6 November 2015. Detailed
information is provided in Note 18 'Financial assets available for sale'.
Effects on results
The effects of the measurement of financial assets available for sale
outside profit and loss and the effective portions of changes in fair
values
of derivatives designated as cash flow hedges are listed in the statement
of
changes in equity.
The net results of the financial instruments by measurement category
according to IAS 39 are as follows:
Net results of
financial instruments
2015 / 2014 /
16 15
EUR million from other net from other net
inte- net re- inte- net re-
rest results sult rest results sult
Loans and receivables - 6.4 263.1 256.7 - 13.0 80.1 67.1
Available for sale - - 99.2 - - - 141.3 -
financial assets 99.2 141.3
Financial assets and - 0.6 - 9.2 - 9.8 - 98.6 -
liabilities held for 142.0 43.4
trading
Financial liabilities - 44.2 - 25.5 - - 49.5 - 82.6 -
at amortised cost 69.7 132.1
Total - 51.2 129.2 78.0 - - 45.2 -
204.5 249.7
Other net result of available for sale financial assets comprises the
impairment of the stake in Hapag-Lloyd AG of EUR 100.3 m.
In addition, it includes results from participations, gains and losses on
disposal, effects of fair value measurements and impairments as well as
interest income and interest expenses.
Financial instruments measured at fair value outside profit and loss did
not
give rise to any commission expenses in financial year 2015 / 16, just as
in
the previous year.
Netting
The following financial assets and liabilities are subject to contractual
netting arrangements:
Offset-
ting -
financi-
al
assets
Related
amounts not
set off in
the balance
sheet
EUR Gross Gross amounts Net Financial Cash Net
million Amounts of recognised amounts liabilities Colla- Amount
of financial of teral
financi- liabilities financial recei-
al set off assets ved
assets presented
in the
balance
sheet
Financi-
al
assets
as at
30 Sep
16
Deriva- 671.4 - 671.4 277.1 - 394.3
tive
financi-
al
assets
Cash 4,917.8 2,844.9 2,072.9 - -
2,072.9
and
cash
equival-
ents
Financi-
al
assets
as at
30 Sep
15
Deriva- 329.1 - 329.1 56.5 - 272.6
tive
financi-
al
assets
Cash 5,556.3 3,883.6 1,672.7 - -
1,672.7
and
cash
equival-
ents
Offset-
ting -
financi-
al
liabili-
ties
Related
amounts
not set
off in the
balance
sheet
EUR Gross Gross Net Financial Cash Net
million Amounts amounts of amounts of assets Colla- Amount
of recognised financial teral
financi- financial liabili- gran-
al assets set ties ted
liabili- off presented
ties in the
balance
sheet
Financi-
al
liabili-
ties as
at 30
Sep 16
Derivati- 277.1 - 277.1 277.1 - -
ve
financi-
al
liabili-
ties
Financi- 4 886.0 2,844.9 2,041.1 - - 2,041.1
al
liabili-
ties
Financi-
al
liabili-
ties as
at 30
Sep 15
Derivati- 466.7 - 466.7 56.5 - 410.2
ve
financi-
al
liabili-
ties
Financi- 5,770.0 3,883.6 1,886.4 - - 1,886.4
al
liabili-
ties
Financial assets and financial liabilities are only netted in the balance
sheet if a legally enforceable right to netting exists and the company
intends to settle on a net basis.
The contracts for financial instruments are based on standardised master
agreements for financial derivatives (including ISDA Master Agreement,
German master agreement for financial derivatives), creating a conditional
right to netting contingent on defined future events. Under the contractual
agreements all derivatives contracted with the corresponding counterparty
with positive or negative fair values are netted in that case, resulting in
a net receivable or payable in the amount of the balance. As this
conditional right to netting is not enforceable in the course of ordinary
business transactions, the derivative financial assets and liabilities are
carried at their gross amounts in the balance sheet date at the reporting
date.
Financial assets and liabilities in the framework of the cash pooling
scheme
are shown on a net basis if there is a right to netting in ordinary
business
transactions and the Group intends to settle on a net basis.
(44) Capital risk management
One of the key performance indicators in the framework of capital risk
management is the IFRS-based gearing, i. e. the relationship between the
Group's net debt and Group equity. From a risk perspective, a balanced
relation between net debt and equity is sought. TUI Group therefore strives
for an appropriate ratio between net debt and equity.
In order to exert active control over the capital structure, the TUI
Group's
management may change dividend payments to the shareholders, repay capital
to the shareholders, issue new shares or issue hybrid capital. The
management may also sell assets in order to reduce Group debt.
Gearing calculation
EUR million 2015 / 16 2014 / 15
Average financial debt 2,396.3 2,308.5
Average cash and cash equivalent 1,425.8 1,346.7
Average Group net debt 970.5 961.8
Average Group equity 2,314.8 1,976.0
Gearing% 41.9 48.7
Notes on the cash flow statement
The cash flow statement shows the flow of cash and cash equivalents
separately for cash inflows and outflows from operating, investing and
financing activities. The effects of changes in the group of consolidated
companies are eliminated. The cash flows are shown for the continuing
operations and the discontinued operation.
In the reporting period, cash and cash equivalents rose by EUR 721.4 m to
EUR 2,403.6 m, including an amount of EUR 330.7 m carried as assets held
for
sale.
(45) Cash inflow / outflow from operating activities
Based on the Group result after tax, the cash flow from operating
activities
is derived using the indirect method. In the financial year under review,
the cash inflow from operating activities amounted to EUR 1,034.7 m
(previous year EUR 790.5 m).
In the period under review, the cash inflow included interest of EUR 21.1 m
and dividends of EUR 84.7 m. Income tax payments resulted in a cash outflow
of EUR 186.4 m. In contrast, tax payments of EUR 94.9 relating to the sale
of Hotelbeds Group, were carried under cash outflows from investing
activities.
(46) Cash inflow / outflow from investing activities
In financial year 2015 / 16, the cash inflow from investing activities
totalled EUR 239.0 m (previous year outflow of EUR 216.8 m).
The cash flow from investing activities includes a cash outflow for capital
expenditure related to property, plant and equipment and intangible assets
of EUR 605.6 m, including EUR 243.1 m for tour operators and airlines and
EUR 262.3 m for Hotels & Resorts. The Group also recorded a cash inflow of
EUR 72.2 m from the sale of property, plant and equipment, primarily a
British cruise ship, a hotel in Majorca, several properties in Germany and
a
French tour operator brand. The cash outflow for investments in property,
plant and equipment and intangible assets and the cash inflow from
corresponding divestments do not match the additions and disposals shown in
the development of fixed assets, which also include non-cash investments
and
disposals.
In the financial year under review, the sale of Hotelbeds Group generated a
cash inflow of EUR 867.9 m after deduction of income tax and consultancy
costs and cash and cash equivalents of the consolidated companies sold (EUR
254.1 m).
A further EUR 19.3 m for consultancy services were only payable after the
balance sheet date and will therefore be shown in the cash outflow from
investing activities for the next financial year.
A net cash inflow of EUR 20.3 m after deducting cash and cash equivalents
of
the sold companies of EUR 0.8 m resulted from the sale of other
subsidiaries
and joint ventures. In the prior year, the sale of shares in the money
market fund had caused an inflow of EUR 300.0 m.
In financial year 2015 / 16, a cash outflow of EUR 8.2 m resulted from
acquisitions of consolidated companies. This amount includes payments of
EUR
4.0 for acquisitions made in prior years. Cash and cash equivalents
acquired
through the acquisitions total EUR 1.2 m so that the total cash outflow
amounted to EUR 7.0 m.
The cash outflow for other assets includes an amount of EUR 56.2 m for
capital increases in joint ventures.
(47) Cash inflow / outflow from financing activities
The cash outflow from financing activities totals EUR 662.1 m (previous
year
EUR 1,116.7 m).
The segment Hotels & Resorts has taken out financial liabilities worth EUR
47.8 m, while other tourism companies have taken out EUR 11.0 m. A further
EUR 43.7 m have been taken out to refinance an aircraft. The Group repaid
finance lease liabilities worth EUR 78.1 m and other financial liabilities
worth EUR 197.3 m. Interest payments were a cash outflow of EUR 92.3 m.
Further outflows relate to the dividends for TUI AG shareholders (EUR 327.0
m) and minority shareholders (EUR 14.1 m). The employee benefit trust of
TUI
Travel Ltd. has purchased shares in TUI AGworth EUR 56.3 m in order to use
them for stock option plans. A cash outflow of EUR 8.0 m resulted from the
increase in stakes in consolidated companies.
The amounts drawn from the external revolving credit facility to manage the
seasonality of the Group's cash flows and liquidity in the financial year
under review have meanwhile been fully repaid. The significantly higher
cash
outflow shown for the previous year primarily resulted from the redemption
of TUI AG's perpetual subordinated bond of EUR 300.0 m and the repayment of
a bank liability of EUR 195.3 m in connection with the merger between TUI
AG
and TUI Travel PLC.
(48) Development of cash and cash equivalents
Cash and cash equivalents comprise all liquid funds, i.e. cash in hand,
bank
balances and cheques.
The change in cash and cash equivalents driven by changes in the group of
consolidated companies shows the increase in the Group's cash and cash
equivalents caused by the merger of a previously non-consolidated company
with a consolidated company.
At 30 September 2016, cash and cash equivalents of EUR 128.6 m were subject
to restrictions. They included an amount of EUR 116.3 m for cash collateral
received, which was deposited in a Belgian subsidiary by Belgian tax
authorities in financial year 2012 / 13 in the framework of long-standing
litigation over VAT refunds for the years 2001 to 2011 without admission of
guilt, the purpose being to suspend the accrual of interest for both
parties. In order to collateralise a potential repayment, the Belgian
government was granted a bank guarantee. Due to the bank guarantee, TUI's
ability to dispose of the cash and cash equivalents has been restricted.
The
remaining restrictions relate to cash and cash equivalents deposited to
meet
legal or regulatory requirements.
Other notes
(49) Significant transactions after the balance sheet date
On 26 October 2016, TUI AG issued a fixed-interest bond with a coupon of
2.125 % p.a. and a nominal volume of EUR 300.0 m. The bond was issued at a
price of 99.415 % in denominations with nominal values of EUR 100,000. It
will mature on 26 October 2021.
On 18 November 2016, TUI AG redeemed the fixed-interest bond with a nominal
volume of EUR 300.0 m issued on 26 September 2014, originally maturing on 1
October 2019, ahead of maturity. The bond was redeemed at a price of 102.25
% plus accrued interest. The cash inflow of EUR 298.2 m received by TUI AG
from issuing the bond on 26 October 2016 was used to redeem the bond.
On 21 June 2016, TUI had concluded an agreement with Transat A. T. Inc. to
acquire the tour operator Transat France S. A., France, and its
subsidiaries
for a purchase price of EUR 64.9 m. Following regulatory approvals, the
acquisition was completed on 31 October 2016. For further details on the
acquisition, please refer to the section 'Acquisitions - Divestments -
Discontinued Operations'.
On 23 November 2016, the supervisory board of TUI AG approved the agreement
of a term sheet with Etihad Aviation Group. This agreement is the basis for
the acquisition of a minority share in a company through the contribution
of
the shares in TUIfly GmbH. The Etihad Aviation Group will also invest in
this company. It is assumed that the minority share will be accounted for
at
equity. It is expected that the contractual negotiations will be finalised
within the next few weeks. The transaction is subject to approval by the
relevant aviation and competition authorities.
(50) Services of the auditors of the consolidated financial statements
TUI AG's consolidated financial statements are audited by
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft.
Since 30 September 2013 they have been signed by Thomas Stieve, the auditor
in charge. Total expenses for the services provided by the auditors of the
consolidated financial statements in financial year 2015 / 16 break down as
follows:
Services of the auditors of the consolidated
financial statements
EUR million 2015 / 2014 /
16 15
Audit fees for TUI AG and subsidiaries in Germany 3.0 2.9
Audit fees 3.0 2.9
Review of interim financial statements 1.1 1.0
Other audit related services 0.1 0.3
Other certification and measurement services 1.2 1.3
Consulting fees 0.7 2.3
Tax advisor services 0.2 0.1
Other services 0.9 2.4
Total 5.1 6.6
(51) Remuneration of Executive and Supervisory Board members
In the financial year under review, the remuneration paid to Executive
Board
members totalled EUR 4,720.6 thousand (previous year EUR 2,829.0 thousand).
Remuneration for former Executive Board members or their surviving
dependants totalled EUR 4,933.2 thousand (previous year EUR 4,891.1
thousand) in the financial year under review. Pension obligations for
former
Executive Board members and their surviving dependants amounted to EUR
84,294.2 thousand (previous year EUR 79,754.3 thousand) at the balance
sheet
date.
Disclosures of the relevant amounts for individual Board members and
further
details on the remuneration system are provided in the Remuneration Report
included in the Management Report.
(52) Exemption from disclosure and preparation of a management report in
accordance
with section 264 (3) of the German Commercial Code (HGB)
The following German subsidiaries fully included in consolidation have met
the condition required under section 264 (3) of the German Commercial Code
and were therefore exempted from the requirement to disclose their annual
financial statements and prepare a management report:
* Atraveo GmbH, Düsseldorf
* Berge & Meer Touristik GmbH, Rengsdorf
* DEFAG Beteiligungsverwaltungs GmbH I, Hanover
* DEFAG Beteiligungsverwaltungs GmbH III, Hanover
* FOX-TOURS Reisen GmbH, Rengsdorf
* Hapag-Lloyd Executive GmbH, Langenhagen
* Hapag-Lloyd Cruises GmbH, Hamburg
* Last-Minute-Restplatzreisen GmbH, Baden-Baden
* Leibniz Service GmbH, Hanover
* L'tur tourismus Aktiengesellschaft, Baden-Baden
* Master-Yachting GmbH, Eibelstadt
* MEDICO Flugreisen GmbH, Baden-Baden
* MSN 1359 GmbH, Hanover
* Preussag Beteiligungsverwaltungs GmbH IX, Hanover
* Preussag Immobilien GmbH, Salzgitter
* ProTel Gesellschaft für Kommunikation mbH, Rengsdorf
* Robinson Club GmbH, Hanover
* TCV Touristik-Computerverwaltungs GmbH, Baden-Baden
* TICS GmbH Touristische Internet und Call Center Services, Baden-Baden
* TUI 4 U GmbH, Bremen
* TUI aqtiv GmbH, Hanover
* TUI Aviation GmbH, Hanover
* TUI Beteiligungs GmbH, Hanover
* TUI Business Services GmbH, Hanover
* TUI Connect GmbH, Hanover
* TUI Customer Operations GmbH, Hanover
* TUI Group Services GmbH, Hanover
* TUI-Hapag Beteiligungs GmbH, Hanover
* TUI Hotel Betriebsgesellschaft mbH, Hanover
* TUI InfoTec GmbH, Hanover
* TUI Leisure Travel Service GmbH, Neuss
* TUI Magic Life GmbH, Hanover
* TUIfly Vermarktungs GmbH, Hanover
* Wolters Reisen GmbH, Stuhr
(53) Related parties
Apart from the subsidiaries included in the consolidated financial
statements, TUI AG, in carrying out its ordinary business activities,
maintains indirect or direct relationships with related parties. Related
parties controlled by the TUI Group or over which the TUI Group is able to
exercise a significant influence are listed in the list of shareholdings
published in the electronic Federal Gazette (www.ebanz.de). Apart from pure
equity investments, related parties also include companies that supply
goods
or provide services for TUI Group companies.
Financial obligations from order commitments vis-à-vis related parties
primarily relate to the purchasing of hotel services. TUI Group also has
obligations of EUR 613.2 m (previous year EUR 877.2 m) from order
commitments vis-à-vis the related company TUI Cruises, resulting from
finance leases for cruise ships.
In addition, there are obligations of EUR 8.4 m (previous year EUR 15.1 m)
from rental and lease agreements.
Transactions with related parties
EUR million 2015 / 2014 / 15
16 restated
Services provided by the Group
Management and consultancy services 93.2 84.6
Sales of tourism services 62.2 92.7
Other services 1.3 0.6
Total 156.7 177.9
Services received by the Group
In the framework of lease, rental and 33.2 31.6
leasing agreements
Purchase of hotel services 224.8 254.0
Distribution services 8.8 8.7
Other services 9.0 20.8
Total 275.8 315.1
Transactions with related parties
EUR million 2015 / 16 2014 / 15
restated
Services provided by the Group to
non-consolidated Group companies 0.5 1.5
joint ventures 72.9 96.9
associates 29.7 34.6
other related parties 53.6 44.9
Total 156.7 177.9
Services received by the Group from
non-consolidated Group companies 6.1 7.0
joint ventures 224.1 249.9
associates 34.3 46.4
other related parties 11.3 11.8
Total 275.8 315.1
Transactions with joint ventures and associates are recognised in the
tourism business. They relate mainly to the tourism services of the hotel
companies used by the Group's tour operators.
All transactions with related parties are executed on an arm's length
basis,
based on international comparable uncontrolled price methods in accordance
with IAS 24.
Receivables against related parties
EUR million 30 Sep 2016 30 Sep 2015
Trade receivables from
non-consolidated Group companies 1.7 1.5
joint ventures 10.4 20.6
associates 3.9 4.7
other related parties 0.5 0.9
Total 16.5 27.7
Advances and loans to
non-consolidated Group companies 17.8 17.4
joint ventures 3.2 34.0
associates 5.6 7.6
Total 26.6 59.0
Payments on account to
joint ventures 0.4 11.7
Total 0.4 11.7
Other receivables from
non-consolidated Group companies 1.6 1.7
joint ventures 3.3 10.7
associates 2.9 7.3
Total 7.8 19.7
Payables due to related parties
EUR million 30 Sep 2016 30 Sep 2015
Trade payables due to
non-consolidated Group companies 1.0 5.8
joint ventures 23.0 32.3
associates 2.5 4.9
other related parties 0.1 -
Total 26.6 43.0
Financial liabilities due to
non-consolidated Group companies 6.6 5.2
joint ventures 192.1 8.0
Total 198.7 13.2
Other liabilities due to
non-consolidated Group companies 7.5 3.6
joint ventures 13.5 28.8
associates 5.6 8.3
other related parties 8.5 4.2
Total 35.1 44.9
Liabilities to related parties included liabilities from finance leases of
EUR 184.1 m (previous year none).
The share of result of associates and joint ventures is shown separately by
segment in segment reporting.
The Russian entrepreneur Alexey Mordashov, chief operating officer of ZAO
Sever Group, member of the supervisory board of TUI AG since February 2016,
holds 19.3 % of the shares in TUI AG at the balance sheet date.
For details on the change of TUI's interest in TUI Russia please refer to
Note 17.
The joint venture Riu Hotels S. A. holds 3.4 % of the shares in TUI AG at
the balance sheet date. Luis Riu Güell and Carmen Riu Güell (member of the
Supervisory Board of TUI AG) hold a stake of 51 % in Riu Hotels S. A.
A family member of a member of the supervisory board is employed by TUI.
The
remuneration corresponds to the remuneration of other employees in a
similar
position and is based on the internal remuneration guidelines of the TUI
Group.
In accordance with IAS 24, key management functions within the Group, the
Executive Board and the Supervisory Board are related parties whose
remuneration has to be listed separately.
Remuneration of Executive and Supervisory
Board
EUR million 2015 / 2014 /
16 15
Short-term benefits 14.4 13.8
Post-employment benefits 3.0 3.9
Other long-term benefits (share-based 7.9 8.3
payments)
Termination benefits 6.6 2.3
Total 31.9 28.3
Post-employment benefits are transfers to or reversals of pension
provisions
for Executive Board members active in the period under review. The expenses
mentioned do not meet the definition of remuneration for Executive and
Supervisory Board members under German accounting rules.
Pension provisions for active Executive Board members total EUR 13.7 m
(previous year EUR 10.7 m) as at the balance sheet date.
In addition, accruals and liabilities of EUR 8.6 m (previous year EUR 6.9
m)
are recognised relating to the long-term incentive programme.
(54) International Financial Reporting Standards (IFRS) not yet applied
New
stan-
dards
endor-
sed by
the
EU,
but
appli-
cable
after
30 Sep
2016
Stan- App- Expected amendments Expected
dard lica- impact on
ble financial
from statements
IFRS 1 The amendments specify how to account for Not material
11 Jan the acquisition of an interest in a Joint
Accoun- 2016 Operation that constitutes a 'business'
ting (as defined in IFRS 3). Accordingly, the
for acquirer has to measure identifiable
Acqui- assets and liabilities at fair value,
siti- recognise acquisition-related costs as
ons of expenses, recognise deferred tax assets
Inte- and liabilities and capitalise any
rests residual amounts as goodwill. Furthermore,
in the disclosure requirements of IFRS 3
Joint apply. The amendments are to be applied
Opera- prospectively.
tions
IAS 16 1 The amendment clarifies when a method of None
& IAS Jan depreciation or amortisation based on
38 2016 revenue may be appropriate. According to
Clari- it, depreciation of an item of property,
ficati- plant and equipment based on revenue
on of generated by using the asset is not
Accep- appropriate, amortisation based on revenue
table for intangible assets only in exceptional
Method- cases. The amendments are to be applied
s of prospectively.
Depre-
ciati-
on and
Amorti-
sation
IAS 16 1 Bearer plants that bear biological assets None
& IAS Jan for more than one period without being an
41 2016 agricultural product themselves, such as
Agri- grape vines or olive trees, have this far
cultu- been measured at fair value. In future,
re: bearer plants will be treated as property,
Bearer plant and equipment in scope of IAS 16 and
Plants are to be measured at amortised cost. By
contrast, the produce growing on bearer
plants will continue to be measured at
fair value in accordance with IAS 41.
IAS 27 1 Application of the equity method in Not relevant
Equity Jan separate financial statements to account to TUI AG as
Method 2016 for investments in subsidiaries, joint no separate
in ventures and associates is permitted IFRS
financial
separa- again. The option to account for such statements
are
te interests in accordance with IAS 39 or at prepared.
Finan- cost remains intact.
cial
State-
ments
Va- 1 The amendments from the Annual Not material
rious Jan Improvements Project comprise changes to
Impro- 2016 four standards: IAS 19, IAS 34, IFRS 5 and
ve- IFRS 7. The amendments introduce minor
ments changes to the content as well as
to clarifications regarding recognition,
IFRS presentation and measurement.
(2012
-
2014)
IAS 1 1 The amendments address the application of Not material
Disclo- Jan materiality when presenting the components
sure 2016 of financial statements. The standard no
Initia- longer prescribes a particular order of
tive the notes so that the order of the notes
may reflect the individual relevance for
the company. The amendments clarify that
immaterial disclosures are not required.
This also applies if disclosure is
required by another standard. Furthermore,
the presentation of an entity's share of
other comprehensive income of
equity-accounted associates and joint
ventures in the statement of comprehensive
income is clarified.
IAS 1 The amendments clarify which subsidiaries Not relevant
28, Jan of investment entities have to be
IFRS 2016 consolidated and which subsidiaries are to
10 be carried at fair value. The amendments
&IFRS are to be applied prospectively.
12
Invest-
ment
enti-
ties:
Apply-
ing
the
Conso-
lidati-
on
Excep-
tion
IFRS 1 IFRS 15 combines and supersedes the TUI has not
15 Jan guidance on revenue recognition comprised yet completed
Reve- 2018 in various standards and interpretations the analysis
nue so far. It establishes a single, and
from comprehensive framework for revenue
implementation
Con- recognition, to be applied across of IFRS 15.
tracts industries and for all categories of IFRS 15can
with revenue transactions, specifying which have a
Custo- amount of revenue and at which point in material
mers time or over which time period revenue is effect on the
to be recognised. IFRS 15 replaces, Group's
amongst others, IAS 18 Revenue and IAS 11 financial
Construction Contracts. statements.
The possible
effects are
explained
below.
IFRS 9 1 The new standard replaces current the IAS TUI is
Finan- Jan 39 guidance on classification and currently
cial 2018 measurement of financial assets and assessing the
Instru- introduces new rules for hedge accounting. effects on
the
ments The existing impairment rules are being Group's
superseded by a new model based on financial
expected credit losses. statements.
The likely
effects are
explained
below.
Management is currently assessing the effects of IFRS 15 Revenue from
Contracts with Customers in a Group-wide project to implement the new
requirements. The areas likely to be principally affected by the new rules
are:
* Multiple element arrangements: Depending on whether various performance
obligations towards a customer represent distinct separate performance
obligations or a single performance obligation in the context of the
contract, there is the possibility that the revenue recognition pattern
for some business models in the tour operating business (package
holiday, modular travel offerings, dynamic packaging) may be required
to
change. Currently a sizeable part of revenues in the tour operating
business is being recognised at tour start date. For some business
models the new requirements may lead to revenues being recognised at
different points in time or for different amounts.
* Travel agency commissions: The point at which travel agencies in the
tour operator business are to recognise the agency commission
receivable
from the arrangement of touristic service contracts is to be
re-evaluated.
* Principal versus agent: In the evaluation whether TUI renders some
services acting as a principal (gross revenue) or as an agent (net
revenue), there is the possibility that more business models in the
tour
operating business will result in a net revenue presentation in the
future.
* Disclosures: The new requirements demand a significant extension of
qualitative and quantitative information to be disclosed in the notes.
At this stage, a reliable estimate of the effects of the new rules is not
yet possible. TUI intends to make a more detailed assessment of the effects
over the next 12 months. The Group will not adopt the new standard before 1
October 2018.
New
stan-
dards
not
yet
endor-
sed
by
the
EU
and
appli-
cable
after
30
Sep
2016
Stan- App- Expected amendments Expected
dard lica- impact
on
ble
financial
from
statements
Amend- 1 The amendments will enable users of financial TUI
ments Jan statements to better evaluate changes in expects
to 2017 liabilities arising from financing activities. the
IAS 7 An entity is required to disclose additional
amendments
Discl- information about cash flows and non-cash to
result
osure changes in liabilities, for which cashflows are in
Ini- classified as financing activities in the
additional
tiati- statement of cashflows. disclos-
ve ures.
Amend- 1 The amendments address the recognition of Not
ments Jan deferred tax assets for unrealised losses on material
to 2017 available for sale financial instruments. The
IAS amendments clarify that an entity recognises
12Re- deferred tax assets for deductible temporary
cogni- differences resulting from unrealised losses on
tion debt instruments measured at fair value if it
of has the ability and the intent to hold these
Defer- instruments to maturity. Furthermore, it is
red clarified, that when assessing the
Tax recoverability of deferred tax assets, the tax
As- deduction from the reversal of those deferred
sets tax assets is excluded from estimated future
for taxable profit used in that evaluation, unless
Unrea- there are sufficient adequate deferred tax
lised liabilities available.
Los-
ses
Amend- 1 The amendments clarify that the measurement of Not
ments Jan cash-settled, share-based payments which include material
to 2018 vesting and non-vesting conditions should follow
IFRS an approach consistent with that used for the
2Clas- measurement for equity-settled share-based
sifi- payments. In addition, they set out guidance how
cati- to account for modifications that change the
on transaction from a cash-settled to an
and equity-settled share-based payment. The
Measu- amendments also introduce an exception to the
re- principles in IFRS 2 that will require an award
ment to be treated as if it was wholly
of equity-settled, where a company is obliged to
Sha- withhold an amount for the employee's tax
re-Ba- obligation associated with a share-based payment
sed and pay that amount to the tax authority.
Pay-
ments
Clari- 1 The amendments comprise clarifications of the IFRS 15
fica- Jan guidance on identifying performance obligations, and the
tions 2018 the principal versus agent assessment (i.e.,
clarifica-
to gross vs. net revenue presentation) as well as tions to
IFRS the accounting for revenue from licences at a IFRS 15
15 'point in time' or 'over time'. In addition, it may
Reve- introduces practical expedients to simplify signifi-
nue first-time adoption. cantly
from affect
the
Con- Group's
tract-
financial
s
statement-
with s. The
Custo- possible
mers effects
are
explained
above.
IFRS 1 The amendments to IFRS 4 affect the first time The
4 Jan adoption of IFRS 9 for insurance companies.
amendments
Apply- 2019 are not
ing relevant
IFRS for TUI.
9
joint-
ly
with
IFRS
4
IFRS 1 IFRS 16 replaces the current IAS 17 and its The new
16 Jan interpretations. For lessees, there is no longer standard
Lea- 2019 the requirement to classify into finance and will
have
ses operating leases. Instead all leases are signifi-
accounted for according to the so-called 'Rights cant
of Use' approach. In the statement of financial effects
on
position a lessee is to recognise an asset for the
the right to use the leased item and a liability Group's
for the future lease payments. There is a
financial
optional exemption for short-term leases (< 12
statement-
months) and small-ticket leases. For lessors, s. The
the accounting stays largely unchanged. Lessors likely
will continue to classify leases in accordance effects
with the criteria transfered from IAS 17. Early are
application is permitted, but only in
explained
conjunction with IFRS 15. below.
TUI is currently assessing the effects of applying IFRS 9 Financial
Instruments on the Group's financial statements. In principle, TUI expects
the following effects:
* There will be no significant impact resulting from the reclassification
of financial assets based on the business model for managing those
financial assets and the related contractual cash flows. The financial
assets currently carried at amortised cost satisfy the conditions for
classification at amortised cost under IFRS 9. For the instruments
currently classified as available for sale an election to classify as
at
fair value through other comprehensive income (FVOCI) is available.
* The transition of impairments from the Incurred-loss model to the new
Expected-loss model is expected to result in an impact of first-time
application. For the majority of financial assets TUI will be able to
make use of a simplification offered by the standard, the so-called
Full-Lifetime-Expected-Loss Model, in which all expected impairment
losses are considered at first recognition. For touristic loans the
Expected-Loss model will be applicable.
* There will be no impact on the accounting of financial liabilities. The
new requirements only affect the accounting for such financial
liabilities which were designated at fair value through profit or loss.
The Group does not currently make use of this so-called fair value
option.
* The new hedge accounting requirements will give TUI the opportunity to
align the accounting for hedge relationships more closely with the
Group's economic risk management. While the Group is yet to undertake a
detailed evaluation of the hedge relationships, it appears as if the
current hedge relationship would qualify as continuing hedge
relationships upon the first-time application of IFRS 9. Therefore, TUI
does not currently expect an impact on the accounting for its hedge
relationships.
A reliable estimate of the quantitative impact is not yet possible at this
stage. TUI intends to complete the detailed evaluation of the effects over
the next twelve months. The Group does not expect to adopt IFRS 9 early at
this point in time.
IFRS 16 Leases will have a significant impact on the Group's financial
statement as well as the presentation of the net assets, financial position
and earnings of the Group:
* Statement of financial position: Obligations from operating leases
currently require disclosure in the notes to the financial statements.
In future the rights and obligations will be recognised as right-of-use
assets and lease liabilities in the statement of financial position. In
view of the existing obligations from operating leases shown in section
41 TUI expects a significant increase in lease liabilities and in items
of property, plant and equipment when it adopts the new standard. Due
to
this increase in total assets the equity ratio will decline. Due to the
increase in lease liabilities the net financial liabilities will
increase correspondingly.
* Income statement: For operating leases a lessee will recognise
depreciation or amortisation and interest expenses instead of lease
rental expenses in the future. This change will result in a significant
improvement of the key financial measures EBITDA and EBITA as well as
an
improvement of the key financial measure EBIT.
* Statement of cash flows: The change in presentation of the lease
expenses from operating leases will result in an improvement of the
cash
flows from operating activities and a decrease of the cash flows from
financing activities.
TUI has set up a Group-wide project to evaluate the impact of applying the
new requirements. Before completion of this project a reliable estimate of
the quantitative effects is not possible. TUI does not intend to apply the
new standard before 1 October 2019.
(55) TUI Group Shareholdings
Disclosure of the TUI Group's shareholdings ist required under section 313
of the German Commercial Trading Act. Comparative information for the
prior-year reference period is therefore not provided.
Company Country Capital
Share in %
Consolidated companies
Tourism
'MAGIC LIFE' Assets AG, Vienna Austria 100
Abbey International Insurance PCC Malta 100
Limited, Qormi
Absolut Holding Limited, Luqa Malta 99.9
Adehy Limited, Dublin Ireland 100
Aeolos Malta Ltd., Pieta Malta 100
Aeolos Travel LLP, Nicosia Cyprus 100
AMP Management Ltd., Crawley United 100
Kingdom
Anse Marcel Riusa II SNC, Paris France 100
Apart Hotel Zarevo EOOD, Varna Bulgaria 100
aQi Hotel Schladming GmbH, Bad Erlach Austria 100
Arccac Eurl, Bourg St. Maurice France 100
atraveo GmbH, Düsseldorf Germany 100
Berge & Meer Touristik GmbH, Rengsdorf Germany 100
Boomerang-Reisen GmbH, Trier Germany 100
Boomerang-Reisen Vermögensverwaltungs Germany 75
GmbH, Trier
Brunalp SARL, Venosc France 100
BU RIUSA II EOOD, Sofia Bulgaria 100
Cabotel-Hoteleria e Turismo Lda., Cape Verde 100
Santiago
Callers-Pegasus Pension Trustee Ltd., United 100
Crawley Kingdom
Club Hôtel Management Tunisia SARL, Tunisia 100
Djerba
Corsair S. A., Rungis France 100
Crystal Holidays Ltd., Crawley United 100
Kingdom
Crystal Holidays, Inc, Wilmington United States 100
(Delaware) of America
Crystal International Travel Group United 100
Ltd., Crawley Kingdom
Daidalos Hotelund Touristikunternehmen Greece 89.8
A.E., Athens
Dominicanotel S. A., Puerto Plata Dominican 100
Republic
Egyptian Germany Co. for Hotels Egypt 66.6
(L.T.D), Cairo
Elena SL, Palma de Mallorca Spain 100
Entreprises Hotelières et Touristiques Greece 100
PALADIEN Lena Mary S. A., Argolis
Europa 2 Ltd, Valletta Malta 100
Explorers Travel Club Limited, Crawley United 100
Kingdom
Falcon Leisure Group (Overseas) United 100
Limited, Crawley Kingdom
First Choice (Turkey) Limited, Crawley United 100
Kingdom
First Choice Airways Limited, Crawley United 100
Kingdom
First Choice Holiday Hypermarkets United 100
Limited, Crawley Kingdom
First Choice Holidays & Flights United 100
Limited, Crawley Kingdom
First Choice Land (Ireland) Limited, Ireland 100
Dublin
First Choice Travel Shops (SW) United 100
Limited, Crawley Kingdom
First Choice Travel Shops Limited, United 100
Crawley Kingdom
Follow Coordinate Hotels Portugal Portugal 100
Unipessoal Lda, Albufeira Freguesia
FOX-TOURS Reisen GmbH, Rengsdorf Germany 100
Fritidsresor AB, Stockholm Sweden 100
Fritidsresor Tours & Travels India Pvt India 100
Ltd, Bardez, Goa
GEAFOND Número Dos Fuerteventura S. Spain 100
A., Las Palmas, Gran Canaria
GEAFOND Número Uno Lanzarote S. A., Spain 100
Las Palmas, Gran Canaria
Groupement Touristique International France 100
S. A. S., Lille
Hannibal Tour SA, Tunis Tunisia 100
Hapag-Lloyd (Bahamas) Ltd., Nassau Bahamas 100
Hapag-Lloyd Cruises GmbH, Hamburg Germany 100
Hellenic EFS Hotel Management E.P.E., Greece 100
Athens
Holiday Center S. A., Cala Serena / Spain 100
Cala d'Or
Holidays Services S. A., Agadir Morocco 100
Horizon Holidays Ltd., Crawley United 100
Kingdom
Horizon Midlands (Properties) Ltd., United 100
Crawley Kingdom
Iberotel International A. S., Antalya Turkey 100
Iberotel Otelcilik A. S., Istanbul Turkey 100
Imperial Cruising Company SARL, Egypt 90
Heliopolis-Cairo
Inter Hotel SARL, Tunis Tunisia 100
Itaria Limited, Nicosia Cyprus 100
Jandia Playa S. A. U., Morro Jable / Spain 100
Fuerteventura
Jetair Real Estate N. V., Brussels Belgium 100
Jetair Travel Distribution N. V., Belgium 100
Oostende
Jetaircenter N. V., Mechelen Belgium 100
JNB (Bristol) Limited, Crawley United 100
Kingdom
Kras B.V., Ammerzoden Netherlands 100
Label Tour EURL, Montreuil France 100
Lapter Eurl, Macot La Plagne France 100
Last-Minute-Restplatzreisen GmbH, Germany 100
Baden-Baden
Lodges & Mountain Hotels SARL, Notre France 100
Dame de Bellecombe, Savoie
L'TUR Suisse AG, Dübendorf / ZH Switzerland 99.5
l'tur tourismus Aktiengesellschaft, Germany 80
Baden-Baden
Lunn Poly (Jersey) Ltd., St. Helier Jersey 100
Lunn Poly Ltd., Crawley United 100
Kingdom
Magic Hotels SA, Tunis Tunisia 100
Magic Life Egypt for Hotels LLC, Sharm Egypt 100
el Sheikh
Magic Life GmbH & Co KG, Vienna Austria 100
Magic Life Greece S. A., Athens Greece 100
Magic Tourism International S. A., Tunisia 100
Tunis
Mainstream DS Dominicana S. A. S., Dominican 100
Higuey Republic
Medico Flugreisen GmbH, Baden-Baden Germany 100
Morvik EURL, Bourg Saint Maurice France 100
MX RIUSA II S. A. de C. V., Cabo San Mexico 100
Lucas
Nazar Nordic AB, Malmö Sweden 100
Nordotel S. A. U., San Bartolomé de Spain 100
Tirajana
Nouvelles Frontières Senegal S.R.L., Senegal 100
Dakar
Ocean College LLC, Sharm el Sheikh Egypt 100
Ocean Ventures for Hotels and Tourism Egypt 98
Services SAE, Sharm el Sheikh
Orion Airways Ltd., Crawley United 100
Kingdom
Oy Finnmatkat AB, Helsinki Finland 100
PATS N. V., Oostende Belgium 100
Petit Palais Srl, Valtournenche Italy 100
Preussag Beteiligungsverwaltungs GmbH Germany 100
IX, Hanover
Professor Kohts Vei 108 AS, Stabekk Norway 100
Promociones y Edificaciones Chiclana Spain 100
S. A., Palma de Mallorca
ProTel Gesellschaft für Kommunikation Germany 100
mbH, Rengsdorf
Puerto Plata Caribe Beach S. A., Dominican 100
Puerto Plata Republic
RC Clubhotel Cyprus Limited, Limassol Cyprus 100
RCHM S. A. S., Agadir Morocco 100
Rideway Investment Ltd., London United 100
Kingdom
Riu Jamaicotel Ltd., Negril Jamaica 100
Riu Le Morne Ltd, Port Louis Mauritius 100
RIUSA II S. A., Palma de Mallorca Spain 50* *
Controlling
influence
RIUSA NED B. V., Amsterdam Netherlands 100
ROBINSON AUSTRIA Clubhotel GmbH, Austria 100
Villach-Landskron
Robinson Club GmbH, Hanover Germany 100
Robinson Club Italia S.p.A., Marina di Italy 100
Ugento
Robinson Club Maldives Private Maldives 100
Limited, Malé
Robinson Clubhotel Turizm Ltd. Sti., Turkey 100
Istanbul
Robinson Hoteles España S. A., Cala Spain 100
d'Or
Robinson Hotels Portugal S. A., Vila Portugal 67
Nova de Cacela
Robinson Otelcilik A. S., Istanbul Turkey 100
Saint Martin RIUSA II SAS, Basse Terre France 100
SERAC Travel GmbH, Zermatt Switzerland 100
Simply Travel Holdings Ltd., Crawley United 100
Kingdom
Skymead Leasing Ltd., Crawley United 100
Kingdom
Société d'Exploitation du Paladien Morocco 100
Marrakech SA, Marrakech
Société d'Investissement Aérien S. A., Morocco 100
Casablanca
Société d'Investissement et France 100
d'Exploration du Paladien de
Calcatoggio (SIEPAC), Montreuil
Société d'investissement hotelier Morocco 100
Almoravides S. A., Marrakech
Société Marocaine pour le Morocco 100
Developpement des Transports
Touristiques S. A., Agadir
Sons of South Sinai for Tourism Egypt 84.1
Services and Supplies SAE, Sharm el
Sheikh
Specialist Holidays Group Ltd., United 100
Crawley Kingdom
Specialist Holidays, Inc., Canada 100
Mississauga, Ontario
Star Tour A/S, Copenhagen Denmark 100
Star Tour Holding A/S, Copenhagen Denmark 100
Startour-Stjernereiser AS, Stabekk Norway 100
STIVA RII Ltd., Dublin Ireland 100
Sunshine Cruises Limited, Crawley United 100
Kingdom
Tantur Turizm Seyahat A. S., Istanbul Turkey 100
TCV Touristik-Computerverwaltungs Germany 100
GmbH, Baden-Baden
TdC Agricoltura Società agricola a Italy 100
r.l., Florence
TdC Amministrazione S.r.l., Florence Italy 100
Tec4Jets B.V., Rijswijk ZH Netherlands 100
Tec4Jets NV, Oostende Belgium 100
Tenuta di Castelfalfi S.p.A., Florence Italy 100
Thomson Airways Limited, Crawley United 100
Kingdom
Thomson Reisen GmbH, St. Johann Austria 100
Thomson Services Ltd., St. Peter Port Guernsey 100
Thomson Travel Group (Holdings) Ltd., United 100
Crawley Kingdom
TICS GmbH Touristische Internet und Germany 100
Call Center Services, Baden-Baden
Tigdiv Eurl, Tignes France 100
TLT Reisebüro GmbH, Hanover Germany 100
Transfar - Agencia de Viagens e Portugal 100
Turismo Lda., Faro
Travel Choice Limited, Crawley United 100
Kingdom
travel-Ba.Sys GmbH & Co KG, Mülheim an Germany 83.5
der Ruhr
Tropical Places Ltd., Crawley United 100
Kingdom
TT Hotels Italia S.R.L., Rome Italy 100
TT Hotels Turkey Otel Hizmetleri Turkey 100
Turizm ve ticaret AS, Antalya
TUI (Cyprus) Limited, Nicosia Cyprus 100
TUI (Suisse) AG, Zurich Switzerland 100
TUI (Suisse) Holding AG, Zurich Switzerland 100
TUI 4 U GmbH, Bremen Germany 100
TUI Airlines Belgium N. V., Oostende Belgium 100
TUI Airlines Nederland B. V., Rijswijk Netherlands 100
TUI aqtiv GmbH, Hanover Germany 100
TUI Austria Holding GmbH, Vienna Austria 100
TUI Belgium NV, Oostende Belgium 100
TUI Bulgaria EOOD, Varna Bulgaria 100
TUI Curaçao N. V., Curaçao Country 100
Curacao
TUI Customer Operations GmbH, Hanover Germany 100
TUI Denmark Holding A/S, Copenhagen Denmark 100
TUI Deutschland GmbH, Hanover Germany 100
TUI DS USA, Inc, Wilmington (Delaware) United States 100
of America
TUI España Turismo S. A., Barcelona Spain 100
TUI France SAS, Nanterre France 100
TUI Hellas Travel Tourism and Airline Greece 100
SA, Athens
TUI Holding Spain S.L., Barcelona Spain 100
TUI Hotel Betriebsgesellschaft mbH, Germany 100
Hanover
TUI InfoTec GmbH, Hanover Germany 100
TUI Leisure Travel Special Tours GmbH, Germany 100
Hanover
TUI Magic Life GmbH, Hanover Germany 100
TUI Mexicana SA de CV, Mexico Mexico 100
TUI Nederland Holding N. V., Rijswijk Netherlands 100
TUI Nederland N. V., Rijswijk Netherlands 100
TUI Nordic Holding AB, Stockholm Sweden 100
TUI Northern Europe Ltd., Crawley United 100
Kingdom
TUI Norway Holding AS, Stabekk Norway 100
TUI Österreich GmbH, Vienna Austria 100
TUI Pension Scheme (UK) Ltd., Crawley United 100
Kingdom
TUI Poland Dystrybucja Sp. z o.o., Poland 100
Warsaw
TUI Poland Sp. z o.o., Warsaw Poland 100
TUI PORTUGAL - Agencia de Viagens e Portugal 100
Turismo S. A., Faro
TUI Reisecenter Austria Business Austria 74.9
Travel GmbH, Vienna
TUI Service AG, Altendorf Switzerland 100
TUI Suisse Retail AG, Zurich Switzerland 100
TUI Travel (Ireland) Limited, Dublin Ireland 100
TUI Travel Group Solutions Limited, United 100
Crawley Kingdom
TUI Travel Holdings Sweden AB, Sweden 100
Stockholm
TUI UK Italia S.r.L., Turin Italy 100
TUI UK Ltd., Crawley United 100
Kingdom
TUI UK Retail Limited, Crawley United 100
Kingdom
TUI UK Transport Ltd., Crawley United 100
Kingdom
TUIfly GmbH, Langenhagen Germany 100
TUIfly Nordic AB, Stockholm Sweden 100
TUIfly Vermarktungs GmbH, Hanover Germany 100
Tunisie Investment Services Holding S. Tunisia 100
A., Tunis
Tunisie Voyages S. A., Tunis Tunisia 100
Tunisotel S. A. R. L., Tunis Tunisia 100
Turcotel Turizm A. S., Istanbul Turkey 100
Turkuaz Insaat Turizm A. S., Ankara Turkey 100
Ultramar Express Transport S. A., Spain 100
Palma de Mallorca
Voukouvalides Tours Tourism S. A., Kos Greece 100
Wolters Reisen GmbH, Stuhr Germany 100
WonderCruises AB, Stockholm Sweden 100
WonderHolding AB, Stockholm Sweden 100
Xidias Coaches Limited, Larnaca Cyprus 51
Specialist Travel
Adventure Transport Limited, Crawley United 100
Kingdom
Adventure Travels USA, Inc., United States 100
Wilmington (Delaware) of America
Alcor Yachting SA, Geneva Switzerland 100
Alkor Yat Turizm Isletmacileri A. S., Turkey 100
Izmir
American Adventures Travel, Inc, United States 100
Wilmington (Delaware) of America
Antigua Charter Services, St. John's Antigua and 100
Barbuda
Brightspark Travel Inc, State of United States 100
Delaware of America
CBQ No. 2 (UK) Limited, Crawley United 100
Kingdom
CBQ No. 2 (US) Limited, State of United States 100
Delaware of America
CBQ No. 2 International Projects United 100
Limited, Crawley Kingdom
CBQ No. 2 (Australia) Pty Ltd, Sydney Australia 100
CHS Tour Services Ltd, Crawley United 100
Kingdom
Connoisseur Belgium BVBA, Nieuwpoort Belgium 100
Crown Blue Line France SA, France 100
Castelnaudary
Crown Blue Line GmbH, Kleinzerlang Germany 100
Crown Blue Line Limited, Crawley United 100
Kingdom
Crown Holidays Limited, Crawley United 100
Kingdom
Crown Travel Limited, Crawley United 100
Kingdom
Educatours Limited, Mississauga, Canada 100
Ontario
EEFC, Inc., State of Delaware United States 100
of America
Emerald Star Limited, Dublin Ireland 100
Events International (Sports Travel) United 100
Limited, Crawley Kingdom
Events International Limited, Crawley United 100
Kingdom
Exodus Travels Australia Pty Ltd, Australia 100
Melbourne
Exodus Travels Canada Inc, Toronto Canada 100
Exodus Travels Limited, Crawley United 100
Kingdom
Exodus Travels USA, Inc., Emeryville, United States 100
CA of America
Fanatics Sports & Party Tours UK United 100
Limited, Crawley Kingdom
Fanatics Sports and Party Tours PTY Australia 100
Limited, Banksia
FanFirm Pty Ltd, Banksia Australia 100
Fantravel.com, Inc., Wilmington United States 100
(Delaware) of America
FCM (BVI) Ltd, British Virgin Islands British 100
Virgin
Islands
First Choice Expeditions, Inc., State United States 100
of Delaware of America
First Choice Marine (Malaysia) Snd Malaysia 100
Bhd, Malaysia
First Choice Marine Limited, Crawley United 100
Kingdom
First Choice Sailing, Inc. (USA) (also United States 100
known as Sunsail, Inc.), State of of America
Delaware
Francotel Limited, Crawley United 100
Kingdom
GEI-Moorings, LLC, State of Delaware United States 100
of America
Gullivers Group Limited, Crawley United 100
Kingdom
Gullivers Sports Travel Limited, United 100
Crawley Kingdom
Hayes & Jarvis (Travel) Limited, United 100
Crawley Kingdom
Headwater Holidays Limited, Crawley United 100
Kingdom
Hellenic Sailing Holidays SA, Athens Greece 100
Hellenic Sailing SA, Athens Greece 100
International Expeditions, Inc., State United States 100
of Delaware of America
Intrav, Inc., State of Delaware United States 100
of America
Le Boat Netherlands B.V., Rotterdam Netherlands 100
Le Piolet SCI, St Martin de France 100
Belleville, Savoie
Les Tours Jumpstreet Tours, Inc., Canada 100
Montreal
Mariner International Asia Limited, Hong Kong 100
Hongkong
Mariner International Travel (UK) United 100
Limited, Crawley Kingdom
Mariner International Travel, Inc., United States 100
State of Delaware of America
Mariner Operations USA Inc, State of United States 100
Delaware of America
Mariner Travel GmbH, Bad Vilbel Germany 100
Mariner Travel SARL, Paris France 100
Mariner Yacht Services SA, Le Marin France 100
(Martinique)
Mariner Yachts (Proprietary) Limited, South Africa 100
Illovo
Master-Yachting GmbH, Eibelstadt Germany 100
Maxi Yen SL, Palma de Mallorca Spain 100
Molay Travel SARL, Molay-Littry, France 100
Calvados
Molay Travel SCI, Molay-Littry, France 100
Calvados
Mont Charvin Ski SARL, Paris France 100
Moorings Grenadines Ltd., St. Vincent St. Vincent 100
and Grenadines and the
Grenadines
Moorings Yachting SAS, Paris France 100
Moorings Yat Isletmecilgi Turizm Ve Turkey 100
Tic Ltd, Mugla
MyPlanet Holding A/S, Holstebro Denmark 100
MyPlanet International A/S, Aarhus Denmark 100
MyPlanet Sweden AB, Göteborg Sweden 100
Platinum Event Travel Limited, Crawley United 100
Kingdom
Porter and Haylett Limited, Crawley United 100
Kingdom
Premier Holidays Afloat Limited, Ireland 100
Dublin
Premiere International Corp, Gardena United States 100
of America
Prestige Boating Holidays Limited, Ireland 100
Dublin
Quark Expeditions, Inc., State of United States 100
Delaware of America
Real Travel Ltd, Crawley United 100
Kingdom
Sawadee Amsterdam BV, Amsterdam Netherlands 100
Ski Bound Limited, Crawley United 100
Kingdom
Skibound France SARL, Notre Dame de France 100
Bellecombe
Specialist Holiday Group Ireland Ltd., Ireland 100
Dublin
Specialist Holidays (Travel) Limited, United 100
Crawley Kingdom
Specialist Holidays Contracting Ltd., United 100
Crawley Kingdom
Specialist Holidays Ltd., Crawley United 100
Kingdom
Sports Executive Travel Limited, United 100
Crawley Kingdom
Sportsworld (Beijing) Sports China 100
Management Consulting Limited Company,
Peking
Sportsworld Eventos Ltda, São Paulo Brazil 100
Sportsworld Group Limited, Crawley United 100
Kingdom
Sportsworld Holdings Limited, Crawley United 100
Kingdom
Student City S.a.r.l., Paris France 100
Student City Travel Limited, Crawley United 100
Kingdom
Student Skiing Limited, Crawley United 100
Kingdom
Studentcity.com, Inc., State of United States 100
Delaware of America
Sunsail (Antigua) Limited, Antigua Antigua and 100
Barbuda
Sunsail (Australia) Pty Ltd, Hamilton Australia 100
Island, Queensland
Sunsail (Seychelles) Limited, Mahé Seychelles 100
Sunsail (Thailand) Company Ltd, Phuket Thailand 30* *
Controlling
influence
Sunsail Adriatic d.o.o., Split Croatia 100
Sunsail Hellas MEPE, Athens Greece 100
Sunsail International B.V., Rotterdam Netherlands 100
Sunsail SAS, Castelnaudary France 100
Sunsail Worldwide Sailing Limited, United 100
Crawley Kingdom
Sunsail Worldwide Sailing St. Vincent St. Vincent 100
Limited, St. Vincent and Grenadines and the
Grenadines
TCS & Starquest Expeditions, Inc., United States 100
Seattle of America
TCS Expeditions, Inc., State of United States 100
Delaware of America
Teamlink Travel Limited, Crawley United 100
Kingdom
The Moorings (Bahamas) Ltd, Nassau Bahamas 100
The Moorings (Seychelles) Limited, Seychelles 100
Mahé
The Moorings (St. Lucia) LTD, St. Saint Lucia 100
Lucia
The Moorings Belize Limited, Belize Belize 100
City
The Moorings d.o.o., Split Croatia 100
The Moorings Limited, British Virgin British 100
Islands Virgin
Islands
The Moorings Sailing Holidays Limited, United 100
Crawley Kingdom
The Moorings SARL, Utoroa, Raiatea French 100
Polynesia
Thomson Sport (UK) Limited, Crawley United 100
Kingdom
TRAVCOA Corporation, State of Delaware United States 100
of America
Travel Class Limited, Crawley United 100
Kingdom
Travel Services Europe Spain SL, Spain 100
Barcelona
Travel Turf, Inc., Allentown United States 100
of America
Travelbound European Tours Limited, United 100
Crawley Kingdom
Travelmood Limited, Crawley United 100
Kingdom
Travelopia Contract Services Limited, United 100
Crawley Kingdom
Travelopia Holdings Limited, Crawley United 100
Kingdom
Travelopia USA, Inc., State of United States 100
Delaware of America
Trek America Travel Limited, Crawley United 100
Kingdom
Trek Investco Limited, Crawley United 100
Kingdom
TTSS Limited, Crawley United 100
Kingdom
TTSS Transportation Limited, Crawley United 100
Kingdom
TUI Holdings (Australia) PTY Limited, Australia 100
Queensland
TUI Marine Grenada Limited, St. Grenada 100
George's
TUI Travel SAS Adventure Limited, United 100
Crawley Kingdom
Versun Yachts NSA, Athens Greece 100
We Love Rugby Pty Ltd, Banksia Australia 100
Williment Travel Group Limited, New Zealand 100
Wellington
World Challenge Expeditions Limited, United 100
Crawley Kingdom
World Challenge Expeditions Pty Ltd, Australia 100
Victoria
World Challenge Expeditions, Inc., United States 100
Cambridge, MA of America
World Challenge NZ Limited, Wellington New Zealand 100
Yachts International Limited, British British 100
Virgin Islands Virgin
Islands
YIL, LLC, State of Delaware United States 100
of America
Your Man Tours, Inc., El Segundo, CA United States 100
of America
Zegrahm Expeditions, Inc., Seattle United States 100
of America
All other segments
Absolut Insurance Limited, St. Peter Guernsey 100
Port
Amber Nominee GP Limited, Crawley United 100
Kingdom
Asiarooms Pte Ltd, Singapur Singapur 100
B.D.S Destination Services Tours, Egypt 100
Cairo
Canada Maritime Services Limited, United 100
Crawley Kingdom
Canadian Pacific (UK) Limited, Crawley United 100
Kingdom
Cast Agencies Europe Limited, Crawley United 100
Kingdom
Cast Group Services Limited, United 100
Southamton Kingdom
Cheqqer B.V., Rijswijk Netherlands 100
Contship Holdings Limited, Southampton United 100
Kingdom
CP Ships (Bermuda) Ltd., Hamilton Bermuda 100
CP Ships (UK) Limited, Crawley United 100
Kingdom
CP Ships Ltd., Saint John Canada 100
CPS Holdings (No. 2) Limited, United 100
Southampton Kingdom
CPS Number 4 Limited, Southampton United 100
Kingdom
DEFAG Beteiligungsverwaltungs GmbH I, Germany 100
Hanover
DEFAG Beteiligungsverwaltungs GmbH Germany 100
III, Hanover
First Choice Holidays Finance Limited, United 100
Crawley Kingdom
First Choice Holidays Limited, Crawley United 100
Kingdom
First Choice Leisure Limited, Crawley United 100
Kingdom
First Choice Olympic Limited, Crawley United 100
Kingdom
First Choice Overseas Holdings United 100
Limited, Crawley Kingdom
First Choice USA Limited, Crawley United 100
Kingdom
Hapag-Lloyd Executive GmbH, Germany 100
Langenhagen
I Viaggi del Turchese S.r.l., Fidenza Italy 100
Jetset Group Holding (Brazil) Limited, United 100
Crawley Kingdom
Jetset Group Holding (UK) Limited, United 100
Crawley Kingdom
Jetset Group Holding Limited, Crawley United 100
Kingdom
Leibniz-Service GmbH, Hanover Germany 100
Mala Pronta Viagens e Turismo Ltda., Brazil 100
Curitiba
Manufacturer's Serialnumber 852 Ireland 100
Limited, Dublin
MSN 1359 GmbH, Hanover Germany 100
Paradise Hotels Management Company Egypt 100
LLC, Cairo
PM Peiner Maschinen GmbH, Hanover Germany 100
Preussag Immobilien GmbH, Salzgitter Germany 100
Preussag UK Ltd., Crawley United 100
Kingdom
Sovereign Tour Operations Limited, United 100
Crawley Kingdom
Thomson Airways Trustee Limited, United 100
Crawley Kingdom
TTG (Jersey) Limited, Jersey Jersey 100
TUI Ambassador Tours Unipessoal Lda, Portugal 100
Lissabon
TUI Aviation GmbH, Hanover Germany 100
TUI Beteiligungs GmbH, Hanover Germany 100
TUI Brasil Operadora e Agencia de Brazil 100
Viagens LTDA, Curitiba
TUI Business Services GmbH, Hanover Germany 100
TUI Canada Holdings, Inc, Toronto Canada 100
TUI Chile Operador y Agencia de Viajes Chile 100
SpA, Santiago
TUI China Travel CO. Ltd., Peking China 75
TUI Colombia Operadora y Agencia de Colombia 100
Viajes SAS, Bogota
TUI Connect GmbH, Hanover Germany 100
TUI Group Services GmbH, Hanover Germany 100
TUI Group UK Trustee Limited, Crawley United 100
Kingdom
TUI India Private Limited, New Delhi India 100
TUI Leisure Travel Service GmbH, Neuss Germany 100
TUI LTE Viajes S.A de C.V, Mexico City Mexico 100
TUI Spain, SLU, Madrid Spain 100
TUI Travel Amber E&W LLP, Crawley United 100
Kingdom
TUI Travel Amber Limited, Edinburgh United 100
Kingdom
TUI Travel Amber Scot LP, Edinburgh United 100
Kingdom
TUI Travel Aviation Finance Limited, United 100
Crawley Kingdom
TUI Travel Common Investment Fund United 100
Trustee Limited, Crawley Kingdom
TUI Travel Group Management Services United 100
Limited, Crawley Kingdom
TUI Travel Healthcare Limited, Crawley United 100
Kingdom
TUI Travel Holdings Limited, Crawley United 100
Kingdom
TUI Travel Limited, Crawley United 100
Kingdom
TUI Travel Nominee Limited, Crawley United 100
Kingdom
TUI Travel Overseas Holdings Limited, United 100
Crawley Kingdom
TUI-Hapag Beteiligungs GmbH, Hanover Germany 100
Joint Ventures and associated
companies
Tourism
.BOSYS SOFTWARE GMBH, Hamburg Germany 25.2
Ahungalla Resorts Limited, Colombo Sri Lanka 40
Aitken Spence Travels Ltd, Colombo Sri Lanka 50
alps & cities 4ever GmbH, Vienna Austria 50
Atlantica Hellas S. A., Rhodos Greece 50
Atlantica Hotels and Resorts Limited, Cyprus 49.9
Lemesos
Bartu Turizm Yatirimlari Anonim Turkey 50
Sirketi, Istanbul
Bonitos GmbH & Co KG, Frankfurt am Germany 50
Main
Daktari Travel & Tours Ltd., Limassol Cyprus 33.3
DER Reisecenter TUI GmbH, Berlin Germany 50
ENC for touristic Projects Company S. Egypt 50
A. E., Sharm el Sheikh
Etapex, S. A., Agadir Morocco 35
Fanara Residence for Hotels S. A. E., Egypt 50
Sharm el Sheikh
GBH Turizm Sanayi Isletmecilik ve Turkey 50
Ticaret A. S., Istanbul
Gebeco Gesellschaft für internationale Germany 50.1
Begegnung und Cooperation mbH & Co.
KG, Kiel
GRUPOTEL DOS S. A., Can Picafort Spain 50
Holiday Travel (Israel) Limited, Israel 50
Airport City
Hydrant Refuelling System NV, Brussels Belgium 25
InteRes Gesellschaft für Germany 25.2
Informationstechnologie mbH, Darmstadt
Interyachting Limited, Limassol Cyprus 45
Jaz Hotels & Resorts S. A. E., Cairo Egypt 51
Kamarayat Nabq Company for Hotels S. Egypt 50
A. E., Sharm el Sheikh
Karisma Hotels Adriatic d.o.o., Zagreb Croatia 33.3
Karisma Hotels Caribbean S. A., Panama Panama 50
Nakheel Riu Deira Islands Hotel FZ CO, United Arab 40
Dubai Emirates
Raiffeisen-Tours RT-Reisen GmbH, Germany 25.1
Burghausen
Riu Hotels S. A., Palma de Mallorca Spain 49
Sharm El Maya Touristic Hotels Co. S. Egypt 50
A. E., Cairo
Sun Oasis for Hotels Company S. A. E., Egypt 50
Hurghada
Sunwing Travel Group, Inc, Toronto Canada 49
Teckcenter Reisebüro GmbH, Kirchheim Germany 50
unter Teck
Tikida Bay S. A., Agadir Morocco 34
TIKIDA DUNES S. A., Agadir Morocco 30
Tikida Palmeraie S. A., Marrakech Morocco 33.3
Togebi Holdings Limited, Nicosia Cyprus 25
Travco Group Holding S. A. E., Cairo Egypt 50
TRAVELStar GmbH, Hanover Germany 50
TUI Cruises GmbH, Hamburg Germany 50
UK Hotel Holdings FZC L. L. C., United Arab 50
Fujairah Emirates
All other segments
ACCON-RVS Accounting & Consulting Germany 50
GmbH, Berlin
Responsibility statement
by management
To the best of our knowledge, and in accordance with the applicable
reporting principles, the consolidated financial statements give a true and
fair view of the net assets, financial position and results of operations
of
the Group, and the Group Management Report includes a fair review of the
development and performance of the business and the position of the Group,
together with a description of the principal opportunities and risks
associated with the expected development of the Group.
Hanover, 6 December 2016
The Executive Board
Friedrich Joussen Horst Baier David Burling
Sebastian Ebel Dr Elke Eller
Independent
Auditor's Report
To TUI AG, Berlin and Hanover
Report on the Audit of the Consolidated Financial Statements
Audit Opinion on the Consolidated Financial Statements
We have audited the consolidated financial statements of TUI AG, Berlin and
Hanover, and its subsidiaries (the Group), which comprise the consolidated
statement of financial position as at September 30, 2016, and the
consolidated income statement, the consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated
statement of cash flows for the financial year from October 1, 2015, to
September 30, 2016, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
According to § (Article) 322 Abs. (paragraph) 3 Satz (sentence) 1 zweiter
Halbsatz (second half sentence) HGB ('Handelsgesetzbuch': German Commercial
Code), we state that, in our opinion, based on the findings of our audit,
the accompanying consolidated financial statements comply, in all material
respects, with IFRS, as adopted by the EU, and the additional German legal
requirements applicable under § 315a Abs. 1 HGB and give a true and fair
view of the net assets and financial position of the Group as at September
30, 2016, as well as the results of operations for the financial year from
October 1, 2015, to September 30, 2016, in accordance with these
requirements.
According to § 322 Abs. 3 Satz 1 erster Halbsatz (first half sentence) HGB,
we state that our audit has not lead to any reservations with respect to
the
propriety of the consolidated financial statements.
Basis for Audit Opinion on the Consolidated Financial Statements
We conducted our audit in accordance with § 317 HGB and German generally
accepted standards for the audit of financial statements promulgated by the
Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany;
IDW), and additionally considered of the International Standards on
Auditing
(ISA). Our responsibilities under those provisions and standards, as well
as
supplementary standards, are further described in the 'Auditor's
Responsibilities for the Audit of the Consolidated Financial Statements'
section of our report. We are independent of the Group in accordance with
the provisions under German commercial law and professional standards, and
we have fulfilled our other German ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have
obtained
is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment,
were
of most significance in our audit of the consolidated financial statements
for the financial year from October 1, 2015, to September 30, 2016. These
matters were addressed in the context of our audit of the consolidated
financial statements as a whole, and in forming our audit opinion thereon;
we do not provide a separate audit opinion on these matters.
In our view, the key audit matters were as follows:
Recoverability of goodwill
Disposal of shares in Hotelbeds Group companies and planned sale of shares
in Specialist Group companies
Provisions and other areas requiring judgment
Deferred taxes on loss carryforwards and trade tax risks
EBITA adjustments
Our presentation of these key audit matters has been structured as follows:
Matter and issue
Audit approach and findings
Reference to further information
Recoverability of goodwill
Goodwill amounting to EUR 2,854 million in total has been reported under
the
goodwill line item in the statement of financial position in the
consolidated financial statements of TUI AG. Goodwill is tested by the
Company for impairment as of June 30 in the financial year (impairment
test). It is measured using a discounted cash flow valuation technique. The
result of this measurement depends to a large extent on Management's
assessment of future cash inflows and the discount rate used, and is
therefore subject to considerable uncertainty, particularly as a result of
the United Kingdom's announcement to leave the European Union (so-called
'Brexit') and the assumptions on the development of tourism in Turkey which
are relevant to the determination of cash inflows. Against this background
this matter was in our view of particular importance during our audit,
With respect to the appropriateness of the future cash inflows used in the
calculation we satisfied ourselves, amongst other procedures, by agreeing
this information with the current budgets in the three-year plan adopted by
Management and approved by the supervisory board, as well as by comparison
with general and sector-specific market expectations. With the knowledge
that even relatively small changes in the discount rate applied can have
material effects on the value of goodwill calculated in this way, we also
focused our testing on the parameters used to determine the discount rate
applied, including the weighted average cost of capital, and reperformed
the
calculations. Due to the materiality of goodwill (representing
approximately
20 % of consolidated total assets) and the fact that its measurement also
depends on economic conditions which are outside of the company's sphere of
influence, we also assessed the sensitivity analyses prepared by the
Company
for cash-generating units with little headroom (Net book value compared to
present value) and found that the respective goodwill was sufficiently
covered by discounted future cash surpluses. Overall we considered, the
measurement inputs and assumptions used by Management to be in line with
our
expectations.
The Company's goodwill disclosures are contained in section 14 of the notes
to the consolidated financial statements.
Disposal of shares in Hotelbeds Group companies and planned sale of shares
in
Specialist Group companies
During the financial year shares in the companies belonging to the
Hotelbeds
Group were sold as part of the focusing on the core tourism business. For
this reason, the Hotelbeds Group was designated as a disposal group (IFRS
5)
as of March 31, 2016, and classified as a discontinued operation. Effective
September 12, 2016 the Hotelbeds Group was sold and deconsolidated.
Overall,
the gain on disposal at group level was EUR 681 million. Furthermore, the
TUI Group is planning to sell its shares in the Specialist Group. In this
context the Specialist Group segment was designated as a disposal group
(IFRS 5) as of September 30, 2016, and classified as a discontinued
operation. From our point of view, these matters were of particular
importance due to the complexity of the underlying contractual agreements
and the materialeffects on the Group.
To test whether the accounting treatment of the disposal of the shares in
the companies belonging to the Hotelbeds Group was appropriate we examined,
inter alia, as part of our audit, the company law principles as well as the
terms of the underlying sale agreement. In this regard, we examined whether
the conditions for the designation during the financial year as a disposal
group (IFRS 5) had been met; we examined the resulting effects on the
measurement of assets and liabilities and the conditions for the
classification as a discontinued operation, as well as the deconsolidation
of the Hotelbeds Group (IFRS 10). Regarding the designation as a
discontinued operation of the Specialist Group, we also examined whether
the
conditions for a disposal group (IFRS 5) had been met; we examined the
resulting effects on the measurement of assets and liabilities and the
conditions for the classification as a discontinued operation. We were able
to satisfy ourselves that the accounting for the sale of the shares in the
companies belonging to the Hotelbeds Group and the associated measurement
were suitable and that the total gain on disposal recognized had been
determined appropriately. There are no reservations concerning the
designation of the Specialist Group as a disposal group or the
classification and measurement as a discontinued operation.
The Company's disclosures on the disposal of the shares in the Hotelbeds
Group and the planned disposal of the Specialist Group are contained in
section 'discontinued operations' of the notes to the consolidated
financial
statements.
Provisions and other areas of judgment
In TUI AG's consolidated financial statements, tourism prepayments in the
amount of EUR 724 million have been reported under the balance sheet item
'Trade receivables and other assets'; provisions for aircraft maintenance
in
the amount of EUR 614 million and provisions for risks from executory
contracts in the amount of EUR 31 million have been reported under the
balance sheet line item 'Other provisions' . In addition, provisions for
pensions and similar obligations of EUR 1,451 million have been reported.
From our point of view, this matter was of particular importance, as
recognition and measurement of these material items are based on
Management's estimates and assumptions.
With the knowledge that estimated values result in an increased risk of
material misstatements within the consolidated financial statements and
that
Management's measurement decisions have a direct and significant effect on
consolidated profit, we assessed the appropriateness of the carrying
amounts
inter alia by comparing these amounts with historical data and by referring
to the underlying contracts provided to us. Amongst other tests, we
* assessed the recoverability of tourism prepayments in the hotel
industry, particularly against the background of current political
developments in Turkey, based on the repayment plans agreed with the
respective hoteliers, the possibilities for offset payments with future
overnight accommodation services and the framework agreements entered
into with them;
* evaluated the measurement of the provision for onerous contracts from
hotel leases, particularly for hotels in Turkey, based on the leases
entered into and the Company's earnings projections for the individual
hotels;
* reperformed the calculation of the costs expected for maintenance
expenses for aircraft maintenance based on group-wide maintenance
agreements, the price increases expected based on external market
forecasts and the discount rates applied and
* assessed the appropriateness of the inputs used to calculate pension
provisions by involving the expertise of our internal pension valuation
specialists.
In doing so, we were able to satisfy ourselves that the estimates applied
and the assumptions made by Management were sufficiently documented and
supported to justify the recognition and measurement of the material
provisions and other areas where judgment was involved.
The Company's disclosures about trade receivables and other assets as well
as provisions are contained in sections 19 as well as 31 and 32 of the
notes
to the consolidated financial statements.
Deferred taxes on loss carryforwards and German trade tax risks
Deferred tax assets of EUR 345 million (of which EUR 212 million for loss
carryforwards) have been reported in the consolidated statement of
financial
position in the consolidated financial statements of TUI AG. The
recoverability of capitalized deferred tax assets on loss carryforwards is
measured using future earnings position forecasts. Furthermore, there are
tax risks, as any possibly estimated proportion of rentals from hotel
expenses is not fully deductible when determining the tax base for German
trade tax. In the financial year, the finance court issued a judgment
(which
is not yet final) on a similar case involving another tour operator that
add
backs must be applied for certain structures. Against the background of
this
finance court judgment, the Company changed its estimate of the probability
of this risk to over 50 % and set up a provision for trade tax risks
including interest in the total amount of EUR 44 million. From our point of
view, these matters were of particular importance as they depend to a large
extent on estimates and assumptions made by Management and are subject to
uncertainties.
Within our audit of these tax matters, we included internal tax accounting
specialists in our audit team. With their support, we assessed the internal
processes and controls implemented for the recording of tax matters. We
assessed the recoverability of deferred tax assets relating to loss
carryforwards and deductible temporary differences based on the Company's
internal forecasts for the future taxable income position of TUI AG and its
material controlled entities for income tax purposes using Management's
planning, and evaluated the appropriateness of the basis used for the
planning. Working together with our internal tax accounting specialists, we
evaluated Management's assessment and gained an understanding about taking
the tax risks from the German trade tax add-backs of certain hotel expenses
into account, and evaluated the appropriateness of the recognition in the
accounting. We were able to retrace the assumptions made by Management
concerning the recognition and measurement of deferred taxes and the trade
tax risks, and agree with the assessments taken by Management.
The Company's disclosures about deferred taxes are contained in the notes
to
the consolidated financial statements in the section 'Accounting policies'
as well as in sections 8, 21 and 36 and, for tax disputes, in section 39.
EBITA adjustments
For the TUI Group's management and analysis purposes, operating profit
(earnings before interest, taxes and amortization - EBITA) is used and
adjusted for extraordinary effects and non-operating effects on profit.
Adjustments to EBITA in the amount of EUR 181 million have been reported in
the consolidated financial statements of TUI AG. Underlying EBITA is used
for capital market communication as a core financial performance indicator.
The adjustments to EBITA were of particular importance during our audit,
because the applied adjustments are based on TUI AG's applicable internal
accounting provisions and there is a risk of bias in Management's judgment.
We reperformed the calculation of underlying EBITA and assessed the
identification of one off effects on profit and non-operating effects on
profit. Based on the knowledge obtained during the audit and the
information
provided to us by Management, we examined whether the adjustments made are
in accordance with the definition and the procedural method stated in the
segment reporting disclosures. We were able to satisfy ourselves that the
adjustments applied to EBITA by Management were consistent with the segment
reporting disclosures and had been applied consistently.
The Company's disclosures about the adjustments to EBITA as well as their
determination are presented under 'Segment data disclosures' in the segment
reporting of the notes to the consolidated financial statements.
Other Information
Management is responsible for the other information. The other information
comprises
* the Corporate Governance Report under no. 3.10 of the German Corporate
Governance Code,
* the Corporate Governance Statement pursuant to § 289a HGB,
* the report concerning the UK Corporate Governance Code according to no.
9.8.6 R (5) of the listing rules in the United Kingdom and
* the report to the shareholders according to no. 9.8.8 R of the listing
rules in the United Kingdom, as well as
* other parts of the annual report of TUI AG, Berlin and Hanover, for the
financial year ended on September 30, 2016, which did not require to be
audited.
Our audit opinion on the consolidated financial statements does not cover
the other information and we do not express any form of assurance
conclusion
thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information, and, in doing so, consider
whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report
in this regard.
Responsibilities of Management and Those Charged with Governance for the
Consolidated Financial Statements
Management is responsible for the preparation of the consolidated financial
statements, which comply with IFRS, as adopted by the EU, and the
additional
German legal requirements applicable under § 315a Abs. 1 HGB, and give a
true and fair view of the net assets, financial position and results of
operations of the Group in accordance with these requirements. Furthermore,
Management is responsible for such internal control as Management
determines
is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, Management is
responsible for assessing the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless Management either
intends
to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
The Supervisory Board is responsible for overseeing the Group's financial
reporting process for the preparation of the consolidated financial
statements.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements
Our objective is to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's
report that includes our audit opinion on the consolidated financial
statements. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with § 317 HGB and German
generally accepted standards for the audit of financial statements
promulgated by the Institut der Wirtschaftsprüfer (Institute of Public
Auditors in Germany; IDW), with additional consideration of the ISAs, will
always detect a material misstatement. Misstatements can arise from fraud
or
error and are considered material if, individually or in the aggregate,
they
could reasonably be expected to influence economic decisions of users taken
on the basis of these consolidated financial statements.
As part of an audit in accordance with § 317 HGB and German generally
accepted standards for the audit of financial statements promulgated by the
Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany;
IDW), with additional consideration of the ISA, we exercise professional
judgment and maintain professional skepticism throughout the audit. We
also:
* Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design
and perform audit procedures responsive to those risks, and obtain
audit
evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
* Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group's internal control.
* Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
Management.
* Conclude on the appropriateness of Management's use of the going
concern
basis of accounting and, based on the audit evidence obtained, whether
a
material uncertainty exists related to events or conditions that may
cast significant doubt on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the related
disclosures in the consolidated financial statements or the Group
management report or, if such disclosures are inadequate, to modify our
audit opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
* Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying
transactions and events in a manner that the consolidated financial
statements give a true and fair view of the net assets and financial
position as well as the results of operations of the Group in
accordance
with IFRS, as adopted by the EU, and the additional German legal
requirements applicable under § 315a Abs. 1 HGB.
* Obtain sufficient and appropriate audit evidence regarding the
financial
information of the entities or business activities within the Group to
express an audit opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance, among other matters, the
planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and related safeguards.
From the matters communicated with those charged with governance, we
determine those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are therefore
the key audit matters. We describe these matters in our report on the audit
of the consolidated financial statements unless law or regulation precludes
public disclosure about the matter.
Other legal and regulatory Requirements
Report on the Audit of the Group Management Report
Audit Opinion on the Group Management Report
We have audited the group management report of TUI AG, Berlin and Hanover,
which is combined with the Company's management report, for the financial
year from October 1, 2015, to September 30, 2016.
In our opinion, based on the findings of our audit, the accompanying group
management report as a whole provides a suitable view of the Group's
position. In all material respects, the group management report is
consistent with the consolidated financial statements and suitably presents
the opportunities and risks of future development.
Our audit has not led to any reservations with respect to the propriety of
the group management report.
Basis for Audit Opinion on the Group Management Report
We conducted our audit of the group management report in accordance with §
317 Abs. 2 HGB and German generally accepted standards for the audit of
management reports promulgated by the Institut der Wirtschaftsprüfer
(Institute of Public Auditors in Germany; IDW). We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Responsibilities of Management and Those Charged with Governance for the
Group Management Report
Management is responsible for the preparation of the group management
report, which as a whole provides a suitable view of the Group's position,
is consistent with the consolidated financial statements and suitably
presents the opportunities and risks of future development. Furthermore,
Management is responsible for such arrangements and measures (systems) as
Management determines as necessary to enable the preparation of a group
management report in accordance with the German legal requirements
applicable under § 315 Abs. 1 HGB and to provide sufficient and appropriate
evidence for the assertions in the group management report.
The Supervisory Board is responsible for overseeing the Group's financial
reporting process for the preparation of the group management report.
Auditor's Responsibilities for the Audit of the Group Management Report
Our objective is to obtain reasonable assurance about whether the group
management report as a whole provides a suitable view of the Group's
position as well as, in all material respects, is consistent with the
consolidated financial statements, and suitably presents the opportunities
and risks of future development, and to issue an auditor's report that
includes our audit opinion on the group management report.
As part of an audit, we examine the group management report in accordance
with § 317 Abs. 2 HGB and German generally accepted standards for the audit
of management reports promulgated by the IDW. In this connection, we draw
attention to the following:
* The audit of the group management report is integrated into the audit
of
the consolidated financial statements.
* We obtain an understanding of the arrangements and measures (systems)
relevant to the audit of the group management report in order to design
audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an audit opinion on the effectiveness of
these
arrangements and measures (systems).
* We perform audit procedures on the prospective information presented by
Management in the group management report. Based on appropriate and
sufficient audit evidence, we hereby, in particular, retrace the
material assumptions used by Management as a basis for the prospective
information and assess the reasonableness of these assumptions as well
as the appropriate derivation of the prospective information from these
assumptions. We are not issuing a separate audit opinion on the
prospective information or the underlying assumptions. There is a
significant, unavoidable risk that future events will deviate
significantly from the prospective information.
* We are also not issuing a separate audit opinion on individual
disclosures in the group management report; our audit opinion covers
the
group management report as a whole.
Review of Management's Statement regarding the UK Corporate Governance Code
Under no. 9.8.10 R (2) of the Listing Rules in the United Kingdom, we are
required to review Management's statement pursuant to 9.8.6 R (6) of the
Listing Rules in the United Kingdom contained in the report on the UK
Corporate Governance Code, on compliance with the provisions in C.1.1,
C.2.1
and C.2.3 as well as C.3.1 to C.3.8 of the UK Corporate Governance Code in
the financial year or respectively Company's explanation in case of
discrepancies. We have nothing to report having performed our review.
Engagement Partner
The engagement partner on the audit resulting in this independent auditor's
report is Thomas Stieve.
Hanover, 6 December 2016
PricewaterhouseCoopers
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
sgd. Thomas Stieve sgd. Prof. Dr Mathias Schellhorn
Wirtschaftsprüfer Wirtschaftsprüfer
(German Public Auditor) (German Public Auditor)
Forward-looking Statements
The annual report, in particular the report on expected developments
included in the management report, includes various forecasts and
expectations as well as statements relating to the future development of
the
TUI Group and TUI AG. These statements are based on assumptions and
estimates and may entail known and unknown risks and uncertainties. Actual
development and results as well as the financial and asset situation may
therefore differ substantially from the expectations and assumptions made.
This may be due to market fluctuations, the development of world market
prices for commodities, of financial markets and exchange rates, amendments
to national and international legislation and provision or fundamental
changes in the economic and political environment. TUI does not intend to
and does not undertake an obligation to update or revise any
forward-looking
statements to adapt them to events or developments after the publication of
this annual report.
Financial calender
8 December 2016
Annual Report 2015 / 16
14 February 2017
Annual General Meeting 2017
14 February 2017
Q1 2016 / 17
29 March 2017
Pre-Close Trading Update
May 2017
H1 2016 / 17
August 2017
9M 2016 / 17
December 2017
Annual Report 2016 / 17
Contact:
ANALYST & INVESTOR ENQUIRIES
Andy Long, Director of Investor Relations, Tel: +44 (0)1293 645 831
Contacts for Analysts and Investors in UK, Ireland and Americas
Sarah Coomes, Head of Investor Relations, Tel: +44 (0)1293 645 827
Hazel Newell, Investor Relations Manager, Tel: +44 (0)1293 645 823
Jacqui Smith, PA to Andy Long, Tel: +44 (0)1293 645 831
Contacts for Analysts and Investors in Continental Europe, Middle East and
Asia
Nicola Gehrt, Head of Investor Relations, Tel: +49 (0)511 566 1435
Ina Klose, Investor Relations Manager, Tel: +49 (0)511 566 1318
Jessica Blinne, Team Assistant, Tel: +49 (0)511 566 1425
---------------------------------------------------------------------------
The EQS Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.dgap.de/ukreg
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Language: English
Company: TUI AG
Karl-Wiechert-Allee 4
30625 Hannover
Germany
Phone: +49 (0)511 566-00
Fax: +49 (0)511 566-1901
E-mail: [email protected]
Internet: www.tuigroup.com
ISIN: DE000TUAG000, DE000TUAG273, DE000TUAG281
WKN: TUAG00 , TUA G27, TUA G28
Listed: Regulated Market in Hanover; Regulated Unofficial
Market in Berlin, Dusseldorf, Hamburg, Munich,
Stuttgart, Tradegate Exchange; Open Market in
Frankfurt ; London
Category Code: ACS
LSE Ticker: TUI
Sequence Number: 3663
Time of Receipt: 08-Dec-2016 / 07:25 CET/CEST
End of Announcement EQS News Service
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527897 08-Dec-2016
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