27 Jun 2007 07:02
Thomas Cook Group PLC27 June 2007 27 June 2007 Thomas Cook Group plc Interim Results for the 6 months ended 30 April 2007 • Despite challenging conditions in a number of markets in which we operate, the combined Group successfully reduced the pro forma seasonal loss before tax in the 6 months to April 2007 by €25.4m, or 8%, to €293.0m (2006: loss before tax of €318.4m). • The pro forma seasonal operating loss* in the 6 months to April 2007 was reduced by €22.9m, or 7%, to €323.1m (2006: loss of €346.0m). • In the MyTravel business, the operating loss* was reduced by 12% to €102.3m (2006: loss of €115.8m). • In the Thomas Cook AG business, the operating loss* was reduced by 4% to €220.8m (2006: loss of €230.2m). • Strong cash flow and balance sheet. • Excellent progress being made towards integrating the two companies. • Mr Bo Lerenius and Mr Hemjo Klein to join Thomas Cook Group plc Board as independent Non-Executive Directors with effect from 1 July 2007. • 12 July 2007 presentation for investors and analysts on Continental Europe and Airlines Germany. • Strategy review underway; presentation for investors and analysts before the end of the year. * The (loss) / profit from operations is stated before exceptional items. The pro forma loss before tax for the six months ended 30 April 2007 after netexceptional costs of €15.8m, net income from associates of €49.4m, netinvestment income of €0.9m and net finance costs of €4.4m was €293.0m. Netexceptional items are shown in note 4 to Appendix 1 and 2. Current trading - Summer 07 • As we had anticipated, trading conditions in the UK remain challenging for summer 07. Consequently, we have taken actions throughout the year to reduce capacity year on year by 5%. Against this, cumulative bookings are 5% behind the prior year and we have sold 74% of our capacity, which is in line with the prior year. Average selling prices are flat year on year. • In Northern Europe, cumulative bookings for summer 07 are currently 2% behind the prior year on 1% more capacity. To date, we have sold 70% of our capacity, which is 2% behind the prior year, and average selling prices are 3% up. • In Continental Europe, bookings are currently 7% behind the prior year with average selling prices 2% ahead. Trading conditions in our largest market, Germany, remain challenging. However, we continue to align capacity to the reduction in bookings. • In North America, cumulative bookings for summer 07, being the low season, are currently 27% behind the prior year. Capacity, however, is also down 29% following the removal of one aircraft from the plan. To date, we have sold 58% of our capacity, which is 2% up on the prior year, and average selling prices are 10% up. • In Airlines Germany, cumulative bookings for summer 07 are currently 9% behind the prior year but on 11% less capacity. Seat only bookings, representing 31% of total Airlines bookings to date, have reduced year on year by 7%, reflecting significantly reduced City business offset by a strong performance in long haul. Outlook • While conditions for the summer remain challenging in a number of markets, the Board believes that in the absence of significant adverse events, such as were experienced last year, trading conditions in the UK for the remainder of the summer season should be significantly improved. On that basis, the Board believes that its financial performance for the full year 2007 will be in line with its expectations. Manny Fontenla Novoa, Joint Chief Executive, Thomas Cook Group plc said: "Thomas Cook Group plc is a robust business which is well placedstrategically to take advantage of the significant opportunities for growth. Themerger has created a very strong platform for us to compete in an increasinglydiverse, growing and international travel market, bringing togethercomplementary brands and increased geographic reach. "I would like to thank everyone who is involved in bringing these two businessestogether and for successfully delivering this merger. Management hasalready made significant progress in building the foundations of this newdynamic business. Delivering the planned synergies of at least €140m (£95m) fromthe merger remains an important focus of our efforts. "Despite the additional effort required by all those involved in the mergerprocess, our first pro forma results show a 7% improvement on the same periodlast year on the pre-exceptional operating profit line, demonstrating ouron-going focus on trading performance. A record performance and strong pricingenvironment in our Northern European operations are particularly encouraging." Enquiries:Thomas Cook Group plc Today 020 7404 5959 Thereafter 0870 010 2581Manny Fontenla Novoa Joint Chief ExecutiveLudger Heuberg Chief Financial OfficerSteven Olivant Investor Relations & Financial Communications Director Brunswick 020 7404 5959Fiona AntcliffeConor McClafferty Finsbury Group 020 7251 3801James LevitonVanessa Neil A presentation to analysts will take place today at 9.30am at the LincolnCentre, 18 Lincoln's Inn Fields, London WC2A 3ED. A copy of the slides and a recording of the presentation will be available onour website at www.thomascookgroup.com. BASIS OF PREPARATION The financial information contained in this report includes the underlyingresults for the 6 months to 30 April 2007 for each of MyTravel Group plc (MYT)and Thomas Cook AG (TCAG), prepared on the basis of the Thomas Cook Group plc(TCG) accounting policies, formats and reporting currency (euro). Details of theaccounting policies are included in Appendix 3 to this report. In addition to the financial information on each of MYT and TCAG, the reportalso includes pro forma primary statements for TCG, in which the two underlyingsets of financial information have been aggregated to illustrate the effect ofthe merger of MYT and TCAG as if the transaction had taken place prior to 1November 2005. In aggregating the two sets of financial information, no accounthas been taken of the impact of acquisition accounting, nor has any intra-Grouptrading between the two entities been eliminated. Further details on theassumptions applied in preparing the financial information are set out in note 1to the Pro forma Interim Financial Information. The financial statements for TCGfor the year ended 31 October 2007 will include the full impact of acquisitionaccounting. As noted in our Prospectus, the total transaction costs of the merger areestimated to be in the region of €82m. While the vast majority of these costsare expected to be charged to shareholders' equity or goodwill as part of theacquisition accounting, some costs will be included in the income statement forthe year ended 31 October 2007. These costs will be separately disclosed asexceptional items. The tour operator key performance indicators (KPI's) included in this reporthave, where possible, been aligned between the two entities. However, as theContinental Europe segment and the Airlines Germany segment do not operate thesame integrated business model as that used in the UK, Northern Europe and NorthAmerica, the KPI's included for those segments are necessarily different. OVERVIEW Pro forma Group results of TCGGeographic analysis of sales Six months to Six months to 30 April 30 April 2007 2006 •m •m UK 1,392.2 1,373.2Northern Europe 562.8 552.7Continental Europe 1,442.5 1,394.9North America 378.3 432.4Airlines Germany 300.8 286.6Corporate** 6.8 19.9 Group 4,083.4 4,059.7 Geographic analysis of (loss)/profit from operations* Six months to Six months to 30 April 30 April 2007 2006 •m •m UK (279.5) (297.6)Northern Europe 35.3 26.3Continental Europe (48.5) (48.9)North America 14.6 23.8Airlines Germany (31.8) (30.5)Corporate** (13.2) (19.1) Group (323.1) (346.0) * The (loss) / profit from operations is stated before exceptional items. Thepro forma loss before tax for the six months ended 30 April 2007 after netexceptional costs of €15.8m, net income from associates of €49.4m, netinvestment income of €0.9m and net finance costs of €4.4m was €293.0m. Netexceptional items are shown in note 4 to Appendix 1 and 2. ** Corporate comprises the central functions of TCAG and hotel and agencyparticipations. Despite challenging conditions in a number of markets in which we operate, thecombined Group successfully reduced the pro forma seasonal operating loss beforeexceptional items in the 6 months to April 2007 by €22.9m, or 7%, to €323.1m(2006: loss of €346.0m). Improvements were made in the UK, Northern European andContinental European businesses and in Corporate. Airlines Germany showedincreased losses as a result of fuel price increases. The North Americanbusiness showed a reduction in profitability year on year as a result of thechallenging market conditions. The improvement in the combined Group results comes despite increases in thecost of fuel, which is a material element of the variable cost base of theGroup. In winter 06/07, the weighted average price achieved for the Groupincreased by 17% compared with the price achieved in winter 05/06. In December 2006, the UK government doubled Air Passenger Duty (APD) at shortnotice. As a result of this change in the law, we expect to pay over to thegovernment approximately €60m of additional APD in relation to departures in thefinancial year 2007. As the tour operators are uniquely prevented by law fromcollecting this tax from customers who had already booked at the time of thechange, the combined Thomas Cook Group will suffer approximately €12m of thiscost (of which €4.1m relates to winter 06/07 departures and has been included inthese results as an exceptional operating item). Pro forma net funds for the combined Group at 30 April 2007 amounted to €303.7m,compared with €88.6m at 30 April 2006 and €160.1m at 31 October 2006. Theincrease year on year largely reflects the cash received from the disposals in2006 of loss-making and non-core TCAG businesses and investments. Current trading As we had anticipated, trading conditions in the UK remain challenging forsummer 07. Consequently, we have taken actions throughout the year to reducecapacity year on year by 5%. Against this, cumulative bookings are 5% behind theprior year and we have sold 74% of our capacity, which is in line with the prioryear. Average selling prices are flat year on year. In Northern Europe, cumulative bookings for summer 07 are currently 2% behindthe prior year on 1% more capacity. To date, we have sold 70% of our capacity,which is 2% behind the prior year, and average selling prices are 3% up year onyear. In Continental Europe, bookings are currently 7% behind the prior year withaverage selling prices 2% ahead. Trading conditions in our largest market,Germany, remain challenging. However, we continue to align capacity to thereduction in bookings. In North America, cumulative bookings for summer 07, being the low season, arecurrently 27% behind the prior year. Capacity, however, is also down 29%following the removal of one aircraft from the plan. To date, we have sold 58%of our capacity, which is 2% up on the prior year, and average selling pricesare 10% up year on year. In Airlines Germany, cumulative bookings for summer 07 are currently 9% behindthe prior year but on 11% less capacity. Seat only bookings, representing 31% oftotal Airlines bookings to date, have reduced year on year by 7%, reflectingsignificantly reduced City business offset by a strong performance in long haul. Integration update Having completed the merger of MyTravel Group plc and Thomas Cook AG in justover four months, we are making excellent progress towards integrating the twocompanies: •On 6 June 2007, we announced the Thomas Cook Group management structure, including the combined head office team and UK & Ireland management team, and work is in progress towards completing the process of filling the remaining senior management positions. •On 26 June 2007, we announced plans for the rationalisation of the UK retail estate, which involve a proposal to close approximately 150 shops. Most of our UK shops will now be branded Thomas Cook, although the Going Places brand will be retained in certain locations where it is advantageous to do so. •Following extensive analysis, we announced on 26 June 2007 our proposals to close six sites in the UK. The proposed closures include the current MyTravel UK headquarters in Rochdale, the TC UK Airline offices in Manchester and two call centre locations. The head office site of the new TC UK organisation is planned to be located at existing facilities in Peterborough. •We also announced the UK and Ireland brand strategy. Thomas Cook and Airtours will be our brands in the upper market and mass market segments respectively. Direct Holidays will continue to be the UK's number one brand for package holidays sold direct to the consumer. We have a number of strong brands in the specialist sector, including Thomas Cook Signature, Cresta, Tradewinds, Nielsen and Club 18-30, which we intend to retain and grow. •Work is well advanced towards creating a single UK airline, Thomas Cook Airlines, operating with a single flight plan. •In order to minimise operational risks and optimise synergies, the merged UK business will use the systems of Thomas Cook UK for tour operating and retail, while using MyTravel's airline systems. In this way, we will avoid extensive system integration, and instead undertake a significantly less complex data migration exercise. Appointment of Independent Directors to Thomas Cook Group plc Board The Board of Thomas Cook Group plc has today announced that Mr Bo Lerenius andMr Hemjo Klein have agreed to join the Board as Non-Executive Directors witheffect from 1 July 2007. Investor Day On 12 July 2007, the Group will be hosting a presentation in London on theContinental Europe and Airlines Germany operations for investors and analysts. Strategy Day The Group will carry out a strategic review of operations over the summer andhold a strategy presentation for investors and analysts before the end of theyear. Dividend policy It is expected that the Board of Thomas Cook Group plc will propose a finaldividend in respect of the year ending 31 October 2007, for payment after, andsubject to shareholder approval at, the annual general meeting expected to beheld in spring 2008. The dividend policy will take into account the level of peer group dividends,the profitability and cash flows of TCG, including the results of integrationsynergies actually realised, and the desirability of providing shareholders withdividend payments increasing progressively over time. Outlook While conditions for the summer remain challenging in a number of markets, theBoard believes that in the absence of significant adverse events, such as wereexperienced last year, trading conditions in the UK for the remainder of thesummer season should be significantly improved. On that basis, the Boardbelieves that its financial performance for the full year 2007 will be in linewith its expectations. OPERATING AND FINANCIAL REVIEW - MYTRAVEL MYT Group resultsGeographic analysis of sales (external only) Six months to Six months to 30 April 30 April 2007 2006 •m •m MYT UK 588.0 638.6MYT Northern Europe 562.8 552.7MYT North America 378.3 432.4 MYT Group 1,529.1 1,623.7 Geographic analysis of (loss)/profit from operations* Six months to Six months to 30 April 30 April 2007 2006 •m •m MYT UK (152.2) (165.9)MYT Northern Europe 35.3 26.3MYT North America 14.6 23.8 MYT Group (102.3) (115.8) * The (loss) / profit from operations is stated before exceptional items.Results in the period to 30 April 2007 have been translated from sterling toeuros at a rate of €1.485: £1. Results in the period to 30 April 2006 have beentranslated from sterling to euros at a rate of €1.459: £1. MYT Group% change W06/07 vs W05/06Capacity+ (9)%Brochure sales mix++ (2)%Average selling price+* 6% W06/07 W05/06Load factor+ 97.2% 97.6%Operating margin %+++ (6.7)% (7.1)% +Based on charter businesses only. ++Calculated as brochure sales divided by total passengers and expressed as amovement in % points. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. * Translated at constant exchange rates. Sales for the six months ended 30 April 2007 for the MYT Group were €1,529.1mcompared with €1,623.7m in the prior year period. Of the reduction of €94.6m,€50.6m occurred in the UK and €54.1m in North America. These were partly offsetby an increase of €10.1m in Northern Europe. In all three geographic markets,capacity was reduced and average selling prices were higher year on year. Thesegeographic variances are further analysed in the "Segmental review of results"later in this report. The losses from operations before exceptional items were reduced to €102.3mcompared with losses of €115.8m in the prior year period. The €13.5m improvementincludes an improvement of €13.7m in the UK and €9.0m in Northern Europe, offsetby an adverse variance in North America of €9.2m. Again, these geographicvariances are further analysed in the "Segmental review of results" below. Net exceptional costs in the period amounted to €15.1m compared with a netexceptional profit in the prior year period of €10.9m. The current year net costcomprises €8.8m of costs incurred in reorganising the Group's UK businesses,including the costs associated with the closure of a further 45 Going Placesstores; €4.4m of advisory fees incurred on the potential acquisition of theFirst Choice UK Mainstream business; €1.8m of irrecoverable Air Passenger Duty;and €0.1m of losses on the disposal of assets. Our share of the results of associates in the period was a loss of €1.6mcompared with a loss of €1.2m in the prior year period. Net finance costs were€1.7m compared with €3.2m in the prior year period. Segmental review of results - MYT MYT UK% change W06/07 vs W05/06Capacity+ (11)%Brochure sales mix++ (1)%Average selling price+ 3% W06/07 W05/06Load factor+ 96.1% 97.3%Mix of passengers - short haul 22% 25%Mix of passengers - medium haul 60% 58%Mix of passengers - long haul 18% 17%Internet distribution %* 21% 16%Controlled distribution %* 65% 61%Operating margin %+++ (25.9)% (26.0)% +Based on charter businesses only. ++Calculated as brochure sales divided by total passengers and expressed as amovement in % points. * Internet and controlled distribution are calculated on sales value of orderintake in the period. Controlled distribution is defined as the proportion ofsales generated through our in-house retail shops, call centres and websites. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. Sales in the six months to 30 April 2007 in the UK were €588.0m compared with€638.6m in the prior year period. The reduction of €50.6m largely reflects thereduced capacity on sale (down 11%). The losses from operations before exceptional items in the UK were reduced to€152.2m from €165.9m, an improvement of €13.7m, or 8%. Excluding the impact ofeuro translation, the underlying improvement was 10%. This improvement came despite market conditions remaining very challenging. Inorder to minimise the impact of the tough trading conditions, capacity wasreduced by 11% as noted above. However, although selling prices achieved were 3%higher than the prior year, this increase was not enough to cover the increasedprices of fuel, passenger taxes and other direct costs. As a result, the grossmargin in the UK was lower year on year. During the period, we have, however,continued our focus on reducing the fixed overhead cost base of the business. Asa result of these continued efforts, the trading performance was more thanoffset by €31.5m of year on year savings in S,G&A costs and personnel expenses. MYT Northern Europe% change W06/07 vs W05/06Capacity+ (8)%Brochure sales mix++ (3)%Average selling price+ 11% W06/07 W05/06Load factor+ 99.1% 98.1%Internet distribution %* 36% 29%Controlled distribution %* 79% 75%Operating margin %+++ 6.3% 4.8% +Based on charter businesses only. ++Calculated as brochure sales divided by total passengers and expressed as amovement in % points. * Internet and controlled distribution are calculated on sales value of orderintake in the period. Controlled distribution is defined as the proportion ofsales generated through our in-house retail shops, call centres and websites. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. In Northern Europe, sales in the six months to 30 April 2007 were €562.8mcompared with €552.7m in the prior year period, an increase of €10.1m. Wecontinue to focus on ensuring that supply and demand remain in balance, and as aresult, capacity in the Northern European businesses for the winter season wasreduced by 8%. However, selling prices achieved were 11% higher year on year.The opening of the new "Sunwing" franchised hotel in Phuket and the generalcontinuing expansion in the long haul Thai market contributed significantly tothis achievement. The profit from operations before exceptional items in the period was €35.3mcompared with €26.3m in the prior year. This record performance againdemonstrates the ability of the management team in Northern Europe to improveprofitability, through innovation, in a competitive market. The improvedfinancial performance was achieved despite increased advertising expenditure tosupport new brand launches in a number of countries. MYT North America% change W06/07 vs W05/06Capacity+ (4)%Brochure sales mix++ (1)%Average selling price+ 0.4% W06/07 W05/06Load factor+ 96.4% 97.3%Internet distribution %* 7% 6%Controlled distribution %* 17% 18%Operating margin %+++ 3.9% 5.5% +Based on charter businesses only. ++Calculated as brochure sales divided by total passengers and expressed as amovement in % points. * Internet and controlled distribution are calculated on sales value of orderintake in the period. Controlled distribution is defined as the proportion ofsales generated through our in-house retail shops, call centres and websites. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. In North America, the trading environment has remained very challenging withsignificant over-capacity in the market. Year on year, we estimate that thecapacity in the market increased by 8% overall, despite MyTravel North Americareducing its capacity year on year by 4%. Selling prices achieved in theMyTravel North America operation were slightly up year on year, by 0.4%.However, this increase was not sufficient to cover the increased costs and theadverse impact of currency translation, and consequently, the gross marginachieved declined significantly. While savings in S,G&A costs and personnelexpenses were achieved, these were not sufficient to offset the marginshortfall. As a result, the operating profit before exceptional items in our North Americanoperation was reduced to €14.6m compared with €23.8m in the prior year period. Balance sheet Net liabilities at 30 April 2007 were €420.2m compared with net liabilities of€418.9m at 30 April 2006 and €297.4m at 31 October 2006. The movement in the sixmonth period largely reflects the losses from operations incurred in the period. Net funds at 30 April 2007 amounted to €102.0m compared with €148.7m as at 30April 2006 and €104.2m as at 31 October 2006. Cash balance and cash flow Cash and cash equivalents at 30 April 2007 amounted to €279.0m compared with€361.5m at 30 April 2006 and €305.9m at 31 October 2006. The net cash generated by operations amounted to €50.6m compared with €41.8mgenerated in the prior year period. This includes a seasonal inflow on workingcapital of €143.6m (2006: €159.6m), offset by the reduced seasonal operatinglosses. Tax paid in the period amounted to €25.5m (2006: €23.3m). The net cash outflow from investing activities was €20.6m (2006: net cash inflowof €3.3m including a €28.7m inflow from the disposal of our hotel in Majorca andother assets). The outflow in 2007 largely comprised expenditure on property,plant and equipment and intangible assets of €21.2m (2006: €15.6m). Theincreased capital expenditure year on year of €5.6m largely comprises timingdifferences on aircraft maintenance and expenditure on hotel and shoprefurbishments in Northern Europe. The net cash outflow from financing activities was broadly flat year on year at€22.1m (2006: €19.5m), and largely comprised capital repayments and interestpayments on finance leases and similar borrowings. OPERATING AND FINANCIAL REVIEW - THOMAS COOK AG TCAG Group resultsGeographic analysis of sales (external only) Six months to Six months to 30 April 30 April 2007 2006 •m •m TCAG UK 804.2 734.6TCAG Continental Europe 1,442.5 1,394.9TCAG Airlines Germany 300.8 286.6TCAG Corporate 6.8 19.9 TCAG Group 2,554.3 2,436.0 Geographic analysis of (loss)/profit from operations* Six months to Six months to 30 April 30 April 2007 2006 •m •m TCAG UK (127.3) (131.7)TCAG Continental Europe (48.5) (48.9)TCAG Airlines Germany (31.8) (30.5)TCAG Corporate (13.2) (19.1) TCAG Group (220.8) (230.2) * The (loss) / profit from operations is stated before exceptional items. TCAG Group% change W06/07 vs W05/06Departed passengers - tour operators+ (1)%Average selling price - tour operators+* 6%Seats sold - Airlines Germany** (8)% W06/07 W05/06Load factor - Airlines Germany++ 91.8% 94.7%Operating margin %+++ (8.6)% (9.4)% +Based on total passengers for TCAG UK and Continental Europe segments. **All sold seats including fixed tour operator allotments and no-shows. ++Seats sold divided by available capacity. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. * Translated at constant exchange rates. Sales for the six months ended 30 April 2007 for TCAG Group were €2,554.3mcompared with €2,436.0m in the prior year period. Of the increase of €118.3m,€69.6m occurred in the UK, €47.6m in Continental Europe and €14.2m in AirlinesGermany. These were partly offset by a decrease of €13.1m in Corporate primarilyas a result of the disposal of Thomas Cook Canada and Thomas Cook Egypt in thelatter part of 2006. Average selling prices increased in all markets. Thesesegmental variances are further analysed in the "Segmental review of results"later in this report. The losses from operations before exceptional items for the TCAG Group werereduced to €220.8m compared with losses of €230.2m in the prior year period. The€9.4m improvement largely relates to the Corporate segment and largely reflectsa €15.4m reduction in S,G&A costs and personnel expenses in the current year.Again, the segmental variances are further analysed in the "Segmental review ofresults" below. The net exceptional costs in the period were €0.7m compared with a netexceptional profit of €27.7m in the prior year period. The current year netcosts include €7.0m of costs incurred in reorganising the Group's UK andCorporate businesses; €5.5m of advisory fees incurred on the potentialacquisition of the First Choice UK Mainstream business; €2.3m of irrecoverableAir Passenger Duty; and €0.5m of impairment losses. These costs were offset by€14.6m of gains on the disposal of property, plant and equipment. This largelyrelates to the disposal of two hotels, one in Morocco, the Aga Founty, and onein Spain, the Royal Beach. The prior year exceptional profit of €27.7m includes€21.2m gain on the disposal of the Thomas Cook India business. The profit on disposal of associates in the period of €53.3m (2006: €4.4m)largely reflects the sale, to KarstadtQuelle, on an arm's length basis, of our50% interest in SunExpress, an airline based in Turkey. The proceeds from thesale amounted to €54.0m and are largely receivable in cash in July 2007. Thisdisposal realised a profit of €50.1m. In addition, during the period, the Groupdisposed of its interests in Falstacen S.L., Thomas Cook Thailand and TrollTours Reisen GmbH, realising further profits of €3.2m. Our share of the results of associates in the period was a loss of €2.3mcompared with a profit of €5.6m in the prior year period. The reduction inprofitability of €7.9m relates largely to the disposal of SunExpress. Net investment income in the period was €0.9m (2006: €0.9m) and representsincome from minority interests. Net finance costs were €2.7m compared with€17.5m in the prior year period. The reduction in net finance costs in theperiod reflects the improved net funds position of the Group, largely as aresult of the business and asset disposals. Segmental review of results - TCAG Group TCAG UK% change W06/07 vs W05/06Capacity+ 10%Brochure sales mix++ (5)%Average selling price+ 2% W06/07 W05/06Load factor+ 96.4% 97.5%Mix of passengers - short haul 8% 10%Mix of passengers - medium haul 77% 78%Mix of passengers - long haul 15% 12%Internet distribution %* 22% 18%Controlled distribution %* 58% 56%Operating margin %+++ (15.8)% (17.9)% +Based on charter businesses only. ++Calculated as brochure sales divided by total passengers and expressed as amovement in % points. * Internet and controlled distribution are calculated on sales value of orderintake (charter only) in the period. Controlled distribution is defined as theproportion of sales generated through our in-house retail shops, call centresand websites. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. Sales in the six months to 30 April 2007 in the UK were €804.2m compared with€734.6m in the prior year period, an increase of €69.6m. This underlyingincrease reflects a higher number of passengers carried, driven by improvedfleet utilisation, and an increase in the average selling price achieved in thecharter business. The losses from operations before exceptional items were reduced to €127.3m from€131.7m, an improvement of €4.4m, or 3%. Excluding the impact of eurotranslation, the underlying improvement was 5%. This improvement came despite market conditions remaining very challenging.Although the selling prices achieved in the tour operator were 2% higher year onyear, this increase was not sufficient to cover the increased costs of flying.However, S,G&A costs and personnel expenses were reduced by €6.6m year on yearwhich more than offset the trading performance. TCAG Continental Europe% change W06/07 vs W05/06Departed passengers+ (2)%Average selling price+ 5% W06/07 W05/06Internet distribution %* 9% 8%Controlled distribution %* 32% 29%Operating margin %+++ (3.4)% (3.5)% +Based on total departed passengers. * Internet and controlled distribution are calculated on sales value of departedpassengers in the period. Controlled distribution is defined as the proportionof sales generated through our in-house retail shops, call centres and websites. +++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. In Continental Europe, sales in the six months to 30 April 2007 were €1,442.5mcompared with €1,394.9m in the prior year period, an increase of €47.6m. TheGerman market, which represents the largest market in the Continental Europesegment, remained challenging throughout the period. Consequently, the number ofdeparted passengers fell by 5% and selling prices remained broadly in line withthe prior year. However, sales in the Western markets (Belgium, France and TheNetherlands) were very strong. In Belgium, where we are the market leader, thenumber of passengers carried increased year on year by 6% and the averageselling prices achieved increased by 18%. The loss from operations before exceptional items in the period was broadly inline with the prior year at €48.5m (2006: €48.9m). This partly reflects thechallenging market conditions in Germany where we have seen a significantreduction in gross margin year on year. The performance in Germany has, however,been largely offset by strong performances in Belgium and France. In Belgium, wewere able to build on our market leading tour operator position whilst alsoimproving the efficiency of our in-house airline. In France, we haveconcentrated on successfully growing our market share to long haul,French-speaking destinations. In addition, S,G&A costs and personnel expenses inthe Continental Europe segment were reduced by €10.4m year on year. TCAG Airlines Germany% change W06/07 vs W05/06Capacity+ (5)%Seats sold++ (8)%Yield per passenger* 8% W06/07 W05/06Load factor+++ 91.8% 94.7%Operating margin %++++ (10.5)% (10.6)% +Total available seats offered for the full season. ++All sold seats including fixed tour operator allotments and no-shows. \* Total flight related revenues divided by seats sold. +++Seats sold divided by available capacity. ++++Based on Group reported figures excluding share of results of associates.(Loss)/profit from operations is stated before exceptional items. In Airlines Germany, sales in the six months to 30 April 2007 were €300.8mcompared with €286.6m in the prior year period. The increase of €14.2m reflectsan 8% increase in the yield per passenger, partly offset by a 5% reduction incapacity, following the removal of a B757 from the fleet in November 2006. The operating loss before exceptional items in our Airlines Germany operationwas €31.8m compared with €30.5m in the prior year period. The adverse varianceis largely a result of the increased costs of fuel (price achieved per metrictonne up 15%) which were not fully recovered through increases in selling pricesand lower depreciation costs. TCAG Corporate In the Corporate segment, sales in the six months to 30 April 2007 were €6.8mcompared with €19.9m in the prior year period. The decrease of €13.1m reflectsthe disposal of businesses in the prior year. The operating loss before exceptional items in the Corporate segment was €13.2mcompared with €19.1m in the prior year period. The improvement year on yearincludes a €15.4m reduction in S,G&A costs and personnel expenses in the currentyear offset by the reduced turnover, following the disposals noted above. Balance sheet Net assets at 30 April 2007 were €607.3m compared with €359.2m at 30 April 2006and €598.1m at 31 October 2006. The movement in the six month period includes areduction in the pension liabilities of €136.9m as a result of increaseddiscount rates applied in the updated actuarial valuations at 30 April 2007,offset by the seasonal losses from operations incurred in the period. Net funds at 30 April 2007 amounted to €201.7m compared with net debt of €60.1mas at 30 April 2006 and net funds of €55.9m as at 31 October 2006. The increaseyear on year of €261.8m is largely due to cash received from disposals ofbusinesses and assets in the latter part of the prior year. Cash balance and cash flow Cash and cash equivalents at 30 April 2007 amounted to €632.3m compared with€767.2m at 30 April 2006 and €736.0m at 31 October 2006. The net cash generated by operations amounted to €154.0m compared with €105.9mgenerated in the prior year period. This includes a seasonal inflow on workingcapital of €287.9m (2006: €314.2m), offset by the reduced seasonal operatinglosses. Tax paid in the period amounted to €3.2m (2006: €22.6m). The net cash outflow from investing activities was €205.1m (2006: net cashinflow of €94.6m, including €101.5m inflow from the disposal of businesses andassets), and largely comprised the purchase of short term securities of €227.3m.Expenditure on property, plant and equipment and intangible assets amounted to€36.6m (2006: €20.4m). The increased capital expenditure year on year of €16.2mrelates to ongoing expenditure incurred on the development of a TCAG Group-widebooking and pricing tool (Project GLOBE) which commenced in 2006. The net cash outflow from financing activities during the period was €52.2m(2006: €147.8m), and largely comprised capital repayments and interest paymentson finance leases and other borrowings. The reduction year on year relates tothe scheduled repayment of borrowings of €108.2m in the prior year periodcompared with €12.5m in the current year. Pro forma financial information The unaudited pro forma Income Statement, Statement of Net Assets and Cash FlowStatement included on pages 26 to 29, have been prepared to illustrate theeffect of the merger of Thomas Cook AG and MyTravel Group plc as if thetransaction had taken place prior to 1 November 2005. They have been prepared onthe basis of accounting policies set out in Appendix 3, except that: •the information has been prepared without making any adjustments for the impact of acquisition accounting. In particular, the assets and liabilities of MyTravel Group plc have not been restated to fair value and no goodwill has been recognised; and •the impact of intra-Group trading between MyTravel Group plc and Thomas Cook AG has not been taken into account. Pro forma Group Income Statement Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •mSales 4,083.4 4,059.7 11,870.6Cost of providing tourism services (3,268.1) (3,184.5) (9,172.2)Gross profit 815.3 875.2 2,698.4 Other operating income 29.3 20.8 48.5Personnel expenses (619.7) (640.7) (1,319.9)Depreciation and amortisation (100.5) (110.2) (218.3)Impairment of goodwill - - (13.5)Other operating expenses (477.8) (496.8) (980.7)Profit on disposal of businesses andproperty, plant & equipment 14.5 44.3 70.7 (Loss)/profit from operations (338.9) (307.4) 285.2 Analysed between:(Loss)/profit from operations beforeexceptional items (323.1) (346.0) 271.6Exceptional items* (15.8) 38.6 13.6 (338.9) (307.4) 285.2 Share of results of associates (3.9) 4.4 5.0Profit on disposal of associates 53.3 4.4 20.4Net investment income 0.9 0.9 0.9Finance income 54.4 39.9 91.0Finance costs (58.8) (60.6) (119.5) (Loss)/profit before tax (293.0) (318.4) 283.0Tax 115.8 58.0 (64.4) (Loss)/profit for the period (177.2) (260.4) 218.6 * Details of the exceptional items are given in note 4 to the MyTravel financialinformation and note 4 to the Thomas Cook AG financial information. Exceptionalitems are defined in note 10 to appendix 3. Pro forma Group Statement of Net Assets Unaudited Unaudited Unaudited as at as at as at 30/04/07 30/04/06 31/10/06 •m •m •mNon-current assetsGoodwill 1,382.0 1,354.6 1,342.4Other intangible assets 93.9 68.5 76.7Property, plant & equipment Aircraft and spare engines 880.1 1,016.5 959.0 Other 358.0 403.7 370.2Investment in associates 46.6 60.8 54.7Other investments 17.2 27.9 21.3Deferred tax assets 351.2 305.4 273.6Tax assets 0.1 - -Trade & other receivables 163.5 173.5 157.9Pension asset 0.4 0.4 0.4Derivative financial instruments 23.1 33.9 12.9 3,316.1 3,445.2 3,269.1Current assetsInventories 23.4 22.4 22.5Tax assets 20.3 40.3 13.7Trade & other receivables 1,381.5 1,198.1 852.2Trading securities 300.0 7.7 72.7Derivative financial instruments 34.0 128.5 46.3Cash & cash equivalents 911.3 1,128.7 1,041.9 2,670.5 2,525.7 2,049.3Non-current assets held for sale 41.4 41.3 47.2Total assets 6,028.0 6,012.2 5,365.6 Current liabilitiesRetirement benefit obligations (3.4) (4.3) (4.5)Trade & other payables (2,249.3) (2,070.6) (1,962.7)Borrowings (59.2) (100.3) (47.4)Obligations under finance leases (52.5) (70.5) (60.7)Tax liabilities (126.0) (157.3) (147.8)Revenue received in advance (1,660.4) (1,653.6) (915.8)Short-term provisions (182.4) (226.4) (218.5)Derivative financial instruments (133.0) (90.6) (122.4) (4,466.2) (4,373.6) (3,479.8)Non-current liabilitiesRetirement benefit obligations (285.4) (539.3) (421.1)Trade & other payables (107.5) (138.2) (122.8)Borrowings (210.1) (260.4) (243.7)Obligations under finance leases (546.9) (618.6) (602.9)Tax liabilities - (6.1) -Deferred tax liabilities (32.6) (20.7) (34.6)Revenue received in advance (0.9) (0.4) (0.4)Long-term provisions (126.6) (80.3) (133.0)Derivative financial instruments (21.8) (30.0) (21.8) (1,331.8) (1,694.0) (1,580.3)Liabilities relatedto assets held for sale (42.9) (4.3) (4.8)Total liabilities (5,840.9) (6,071.9) (5,064.9) Net assets/(liabilities) 187.1 (59.7) 300.7 Pro forma Group Cash Flow Statement Unaudited Unaudited Unaudited 6 months 6 months 12 months to to to 30/04/07 30/04/06 31/10/06 •m •m •m Cash flows from operating activitiesCash generated by operations 207.8 170.3 227.4Income taxes paid (28.7) (45.9) (70.2)Net cash from operating activities 179.1 124.4 157.2 Investing activitiesDividends received from associates - 0.2 6.0Proceeds on disposal of subsidiaryundertaking (net of cash balances disposed) 20.0 58.1 97.1Proceeds on disposal of joint ventures 1.8 18.6 54.4Proceeds on disposal of property, plant &equipment 37.6 53.5 96.1Purchase of shares from minority interests - (9.8) (11.8)Movements in short term securities (227.3) 13.3 (59.6)Purchase of property, plant & equipment (36.3) (28.8) (83.1)Purchase of intangible assets (21.5) (7.2) (33.6)Acquisition of subsidiary (netof cash acquired) - - 5.3 Net cash (used in)/from investing activities (225.7) 97.9 70.8 Financing activitiesInterest paid (31.6) (32.0) (66.6)Dividends paid to minority shareholders (0.1) (0.1) (1.9)Draw down of borrowings / newbank loans raised 44.6 - 1.8Repayment of borrowings (60.3) (114.8) (124.5)Repayment of obligations under finance leases (28.5) (29.0) (53.3)Issue of shares 1.6 8.6 13.9 Net cash used in financing activities (74.3) (167.3) (230.6) Net (decrease)/increase in net cash & cashequivalents (120.9) 55.0 (2.6) Net cash & cash equivalents atbeginning of period 1,039.6 1,038.9 1,038.9Effect of foreign exchange rate changes (21.3) (18.5) 3.3 Net cash & cash equivalents atend of period 897.4 1,075.4 1,039.6 Cash and cash equivalents 911.3 1,128.7 1,041.9Cash classified as held for sale - 2.0 0.2Bank overdrafts (13.9) (55.3) (2.5) Net cash & cash equivalents atend of period 897.4 1,075.4 1,039.6 Note to the Pro forma Interim Financial Information 1. Basis of preparation The information in this report relating to the six months ended 30 April 2007,the six months ended 30 April 2006 and the year ended 31 October 2006 isunaudited and does not constitute full statutory accounts within the meaning ofsection 240 of the Companies Act 1985. No interim financial information inrespect of Thomas Cook Group plc is required under the Listing Rules of theFinancial Services Authority. The unaudited pro forma combined financialinformation does not constitute the company's statutory accounts and nor does itcomprise the information which would be required in respect of interim financialinformation issued under the Listing Rules of the Financial Services Authority. On 19 June 2007, Thomas Cook AG merged with MyTravel Group plc to become ThomasCook Group plc. The unaudited pro forma combined financial information set out on pages 26 to 28has been prepared by the directors to illustrate the effect of the merger ofThomas Cook AG and MyTravel Group plc as if the transaction had taken placeprior to 1 November 2005 (the first day of the comparative accounting periodspresented). This is to provide information that the directors believe isrelevant to an understanding of the operations of the merged group. Theunaudited pro forma combined financial information has been prepared forillustrative purposes only. Because of its nature, it is not designed to anddoes not give a fair presentation of the profit and loss that would have beenreported in accordance with IFRS had the transaction occurred on 1 November2005, which would have required the assets of MyTravel Group plc to be fairvalued as at that date. The unaudited pro forma combined financial information has been prepared on thebasis of the accounting policies set out in Appendix 3 to this report, which areconsistent with the requirements of International Financial Reporting Standardsas adopted by the EU, except as described below. The information has beenderived by aggregating the MyTravel Group Interim Financial Information set outin Appendix 1 to this report and the Thomas Cook AG Interim FinancialInformation set out in Appendix 2 to this report. The information has been prepared without making any adjustments for the impactof acquisition accounting in accordance with IFRS 3. In particular, the assetsand liabilities of MyTravel Group plc have not been restated to fair value andno goodwill has been recognised. Moreover, the impact of intra-group tradingbetween the MyTravel Group plc group and the Thomas Cook AG Group has not beeneliminated as required by IAS 27. The transaction costs of the merger incurred to 30 April 2007 have been recordedwithin liabilities and current assets in the financial information for MyTravelGroup and Thomas Cook AG. Thomas Cook Group plc, the new parent company, did nottrade during the six months ended 30 April 2007 or the comparative periodspresented and, hence, has been excluded from this aggregation. No account has been taken for any restructuring costs or any potential costsavings or other synergies that may result from the combination. INDEPENDENT REVIEW REPORT TO THOMAS COOK GROUP PLC Introduction We have been instructed by the company to review the Thomas Cook Group plc proforma financial information for the six months ended 30 April 2007, whichcomprises the pro forma Group income statement, the pro forma Group statement ofnet assets, the pro forma Group cash flow statement and the related note 1 (the'Thomas Cook Group pro forma financial information'). We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the company in accordance with our engagementletter dated 25 June 2007. Our work has been undertaken so that we might stateto the company those matters we are required to state to them in an independentreview report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the company, forour review work, for this report, or for the conclusions we have formed. Directors' responsibilities The Thomas Cook Group pro forma financial information is the responsibility of,and has been approved by, the directors of Thomas Cook Group plc. The directorsare also responsible for ensuring that the Thomas Cook Group pro forma financialinformation is prepared in accordance with the basis set out in note 1 to theThomas Cook Group pro forma financial information. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies andpresentation have been applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the Thomas Cook Group proforma financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the Thomas Cook Group pro forma financial information for thesix months ended 30 April 2007 in order for it to have been properly compiled onthe basis set out in note 1. PricewaterhouseCoopers LLP Deloitte & Touche LLPChartered Accountants Chartered AccountantsLondon Manchester27 June 2007 27 June 2007 Appendix 1 - MyTravel Group Interim Financial Information MyTravel Group Consolidated Income Statement Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 Notes •m •m •mSales 3(a) 1,529.1 1,623.7 4,090.4Cost of providing tourism services (1,256.4) (1,324.9) (3,205.5)Gross profit 272.7 298.8 884.9 Personnel expenses (225.1) (237.5) (479.5)Depreciation and amortisation (31.0) (31.2) (61.6)Impairment of goodwill - - (13.5)Other operating expenses (133.9) (146.9) (280.6)(Loss)/profit on disposal of businessesand property, plant & equipment (0.1) 11.9 17.3 (Loss)/profit from operations (117.4) (104.9) 67.0 Analysed between:(Loss)/profit from operations beforeexceptional items 3(b) (102.3) (115.8) 90.7Exceptional items 3(b),4 (15.1) 10.9 (23.7) 3(b) (117.4) (104.9) 67.0 Share of results of associates (1.6) (1.2) 0.1Finance income 8.1 6.7 14.6Finance costs (9.8) (9.9) (17.7) (Loss)/profit before tax (120.7) (109.3) 64.0Tax (11.7) (15.8) (25.2) (Loss)/profit for the period (132.4) (125.1) 38.8 Attributable to:Equity holders of the parent (132.5) (126.9) 37.9Minority interests 0.1 1.8 0.9 (Loss)/earnings per share (•)Basic (0.29) (0.28) 0.08Diluted (0.29) (0.28) 0.08 All sales and results arose from continuing operations. MyTravel Group Consolidated Statement of Recognised Income and Expense Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m Losses on cash flow hedges (25.5) (13.5) (60.4)Exchange differences on translation offoreign operations 0.9 (3.6) (14.3)Actuarial losses on defined benefitpension schemes - - (2.0)Tax on items taken directly to equity - - 0.4 Net expense recognised directly in equity (24.6) (17.1) (76.3) TransfersTransferred to profit or loss oncash flow hedges 33.0 (2.1) 7.3Transfer of translation losses to profit orloss on disposals - - 0.6 33.0 (2.1) 7.9 (Loss)/profit for the period (132.4) (125.1) 38.8 Total recognised income & expense forthe period (124.0) (144.3) (29.6) Attributable to:Equity holders of the parent (124.1) (146.1) (30.5)Minority interests 0.1 1.8 0.9 (124.0) (144.3) (29.6) MyTravel Group Consolidated Balance Sheet Unaudited Unaudited Unaudited as at as at as at 30/04/07 30/04/06 31/10/06 Notes •m •m •mNon-current assetsGoodwill 190.8 209.1 197.7Other intangible assets 16.4 15.5 16.9Property, plant & equipment Aircraft and spare engines 301.6 335.5 324.7 Other 120.2 114.5 119.3Investment in associates 11.3 12.1 12.9Other investments 0.1 0.1 0.1Deferred tax assets 14.9 11.3 13.6Trade and other receivables 79.7 74.5 73.6Pension asset 0.4 0.4 0.4Derivative financial instruments 0.2 4.1 1.0 735.6 777.1 760.2Current assetsInventories 12.6 12.9 12.0Tax assets 3.6 14.7 4.8Trade and other receivables 445.2 379.3 324.3Derivative financial instruments 5.3 17.6 16.1Cash and cash equivalents 279.0 361.5 305.9 745.7 786.0 663.1Total assets 1,481.3 1,563.1 1,423.3 Current liabilitiesRetirement benefit obligations (0.1) - (0.1)Trade and other payables (887.9) (945.6) (764.0)Borrowings (13.8) (6.5) (10.6)Obligations under finance leases (17.8) (36.6) (25.4)Tax liabilities (62.5) (86.1) (74.9)Revenue received in advance (526.3) (508.5) (390.0)Short-term provisions (41.9) (38.8) (57.8)Derivative financial instruments (57.2) (36.6) (69.9) (1,607.5) (1,658.7) (1,392.7)Non-current liabilitiesRetirement benefit obligations (10.1) (8.3) (10.0)Trade and other payables (27.9) (38.6) (36.1)Borrowings (64.0) (82.5) (75.9)Obligations under finance leases (81.4) (87.2) (89.8)Tax liabilities - (6.1) -Deferred tax liabilities (32.6) (18.6) (34.5)Revenue received in advance (0.9) - -Long-term provisions (75.4) (75.8) (72.6)Derivative financial instruments (1.7) (6.2) (9.1) (294.0) (323.3) (328.0)Total liabilities (1,901.5) (1,982.0) (1,720.7) Net liabilities (420.2) (418.9) (297.4) MyTravel Group Consolidated Balance Sheet (continued) Unaudited Unaudited Unaudited as at as at as at 30/04/07 30/04/06 31/10/06 Notes •m •m •m EquityCalled up share capital 197.7 195.7 196.8Share premium account 275.0 1,049.6 275.0Other reserves and retained earnings (893.0) (1,664.3) (769.3) Equity attributable to equity holders ofthe parent 5 (420.3) (419.0) (297.5)Minority interests 0.1 0.1 0.1 Total deficit (420.2) (418.9) (297.4) MyTravel Group Consolidated Cash Flow Statement Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 Notes •m •m •m Cash flows from operating activitiesCash generated by operations 6 50.6 41.8 0.4Income taxes paid 6 (25.5) (23.3) (25.9)Net cash from/(used in) operating activities 25.1 18.5 (25.5) Investing activitiesProceeds on disposal of property,plant & equipment 0.6 28.7 41.2Purchase of shares from minorityinterests - (9.8) (11.8)Purchase of property, plant &equipment (18.2) (12.5) (34.8)Purchase of intangible assets (3.0) (3.1) (5.4)Acquisition of subsidiary (netof cash acquired) - - 5.3 Net cash (used in)/frominvesting activities (20.6) 3.3 (5.5) Financing activitiesInterest paid (10.1) (9.9) (16.9)Dividends paid to minorityshareholders (0.1) (0.1) (0.1)Draw down of borrowings / newbank loans raised 44.6 - 1.8Repayment of borrowings (47.8) (6.6) (9.8)Repayment of obligations underfinance leases (9.7) (11.5) (19.0)Issue of shares 1.0 8.6 13.9 Net cash used in financingactivities (22.1) (19.5) (30.1) Net (decrease)/increase in cash &cash equivalents (17.6) 2.3 (61.1) Cash & cash equivalents atbeginning of period 305.9 368.0 368.0Effect of foreign exchange ratechanges (9.3) (8.8) (1.0) Cash & cash equivalents at endof period 279.0 361.5 305.9 Notes to the MyTravel Group Interim Financial Information 1. General information The information in this report relating to the six months ended 30 April 2007,the six months ended 30 April 2006 and the year ended 31 October 2006 isunaudited and does not constitute full statutory accounts within the meaning ofsection 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 October 2006 has beendelivered to the Registrar of Companies. The auditors' report on those accountswas not qualified and did not contain a statement under Section 237(2) or (3) ofthe Companies Act 1985. 2. Basis of preparation The MyTravel interim financial information has been prepared using theaccounting policies to be applied by Thomas Cook Group plc as set out inAppendix 3. The comparative figures for the year ended 31 October 2006 arederived from the statutory accounts delivered to the Registrar of Companies andhave been restated for the adoption of the Thomas Cook Group plc accountingpolicies. The impact of these accounting policy changes is not material. Inaddition, the amounts presented have been retranslated into euros, thepresentational currency of Thomas Cook Group plc. Results have been translatedusing average exchange rates and the balance sheets have been retranslated atperiod end exchange rates. The resulting exchange differences have been dealtwith through a separate component of equity. As permitted, the Group has chosen not to apply IAS 34 'Interim FinancialReporting' and therefore the financial information in this respect is not infull compliance with International Financial Reporting Standards (IFRS). Theinformation has been prepared in accordance with the recognition and measurementrequirements of IFRS. 3. Business segments For management purposes, the Group was organised into three operating divisions- MyTravel UK, MyTravel Northern Europe and MyTravel North America. Thesedivisions are the basis on which the Group reported its primary segmentinformation. The principal activity of all divisions is the provision of leisuretravel services. Segment information about these divisions is presented below. (a) Sales Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m UK External sales 588.0 638.6 2,253.9 Inter-segment sales 1.9 0.7 3.7 Total revenue 589.9 639.3 2,257.6 Northern Europe External sales 562.8 552.7 1,151.9 Inter-segment sales 2.8 1.8 8.0 Total revenue 565.6 554.5 1,159.9 North America External sales 378.3 432.4 684.6 Total 1,533.8 1,626.2 4,102.1Eliminations (4.7) (2.5) (11.7)Group 1,529.1 1,623.7 4,090.4 Inter-segment sales are charged at prevailing market prices. 3. Business segments (continued) (b) Segment result Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m(Loss)/profit from operations beforeexceptional items:UK (152.2) (165.9) (18.6)Northern Europe 35.3 26.3 94.1North America 14.6 23.8 15.2 Group (102.3) (115.8) 90.7 Exceptional items:UK (15.0) 0.1 (28.5)Northern Europe (0.1) 11.8 13.3North America - (1.0) (8.5) Group (15.1) 10.9 (23.7) (Loss)/profit from operations:UK (167.2) (165.8) (47.1)Northern Europe 35.2 38.1 107.4North America 14.6 22.8 6.7 Group (117.4) (104.9) 67.0 Share of results of associates (1.6) (1.2) 0.1Finance income 8.1 6.7 14.6Finance costs (9.8) (9.9) (17.7) (Loss)/profit before tax (120.7) (109.3) 64.0Tax (11.7) (15.8) (25.2) (Loss)/profit after tax (132.4) (125.1) 38.8 4. Exceptional items Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m Property costs, redundancy & other costsincurred in reorganising the Group's UKbusinesses (8.8) - (24.9)Property costs, redundancy & other costsincurred in reorganising the Northern Europeretail estate - - (1.6)Property costs, redundancy & other costsincurred in reorganising the Canadian retail estate - (1.0) (1.0)Aborted transaction fees (4.4) - -Cost of irrecoverable air passenger duty (1.8) - -Adjustment to the carrying value of goodwillas part of a balance sheet review - - (13.5)Disposal of items of property,plant & equipment (0.1) 11.9 17.3 (15.1) 10.9 (23.7) Exceptional items have been included in theincome statement as follows:Cost of providing tourism services (1.8) - (0.7)Personnel expenses (0.3) (0.4) (9.1)Impairment of goodwill - - (13.5)Other operating expenses (12.9) (0.6) (17.7)(Loss)/profit on disposal of items ofproperty, plant & equipment (0.1) 11.9 17.3 (15.1) 10.9 (23.7) 5. Equity attributable to equity holders of the parent The movements in equity attributable to equity holders of the parent during theperiod were as follows: Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m Total recognised income & expensefor the period (124.1) (146.1) (30.5)Equity credit in respect of sharebased payments 0.3 0.6 1.2Issue of equity shares net ofexpenses 1.0 8.6 13.9 Net increase in equity holders'deficit (122.8) (136.9) (15.4)Equity holders' deficit atbeginning of period (297.5) (282.1) (282.1) Equity holders' deficit at end ofperiod (420.3) (419.0) (297.5) 6. Notes to the Cash Flow Statement Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m (Loss)/profit before tax (120.7) (109.3) 64.0Adjustments for: Finance income (8.1) (6.7) (14.6) Finance costs 9.8 9.9 17.7 Share of results of associates 1.6 1.2 (0.1) Depreciation of property, plant & equipment 27.9 26.5 55.3 Impairment of property, plant & equipment 1.0 - 1.3 Amortisation of intangible assets 3.1 4.7 6.3 Impairment of goodwill - - 13.5 Loss/(profit) on disposal of businesses and property, plant & equipment 0.1 (11.9) (17.3) Share based payments 0.3 0.6 1.2 Other non-cash items (9.6) (6.0) (12.5) Decrease in provisions (6.2) (34.1) (21.1) Interest received 7.8 7.3 14.9 Operating cash flows beforemovements in working capital (93.0) (117.8) 108.6 Increase in inventories (0.7) (2.0) (0.9)Increase in receivables (136.1) (77.8) (7.3)Increase/(decrease) in payables 280.4 239.4 (100.0) Cash generated by operations 50.6 41.8 0.4Income taxes paid (25.5) (23.3) (25.9) Net cash from/(used in)operating activities 25.1 18.5 (25.5) Cash and cash equivalents, which are presented as a single class of assets onthe face of the balance sheet, comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. 7. Net funds Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m Cash & cash equivalents 279.0 361.5 305.9 Current debtCurrent portion of long termborrowings (13.8) (6.5) (10.6)Obligations under finance leases (17.8) (36.6) (25.4) (31.6) (43.1) (36.0) Non-current debtLong term borrowings (64.0) (82.5) (75.9)Obligations under finance leases (81.4) (87.2) (89.8) (145.4) (169.7) (165.7) Total debt (177.0) (212.8) (201.7) Net funds 102.0 148.7 104.2 INDEPENDENT REVIEW REPORT TO MYTRAVEL GROUP PLC Introduction We have been instructed by the company to review the MyTravel financialinformation for the six months ended 30 April 2007, which comprises theconsolidated income statement, the consolidated statement of recognised incomeand expense, the consolidated balance sheet, the consolidated cash flowstatement and related notes 1 to 7 (the 'MyTravel financial information'). Wehave read the other information contained in Appendix One to the interim reportand considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The Thomas Cook Group plc interim report is the responsibility of, and has beenapproved by, the directors of Thomas Cook Group plc. The MyTravel financialinformation has been prepared by the directors of MyTravel Group plc. Thedirectors are also responsible for ensuring that the MyTravel financialinformation is prepared in accordance with the basis set out in note 2 to theMyTravel financial information. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies andpresentation have been applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the MyTravel financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the MyTravel financial information as presented for the sixmonths ended 30 April 2007. Deloitte & Touche LLPChartered AccountantsManchester27 June 2007 Appendix 2 - Thomas Cook AG Interim Financial Information Thomas Cook AG Consolidated Income Statement Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 Notes •m •m •mSales 3(a) 2,554.3 2,436.0 7,780.2Cost of providing tourismservices (2,011.7) (1,859.6) (5,966.7)Gross profit 542.6 576.4 1,813.5 Other operating income 29.3 20.8 48.5Personnel expenses (394.6) (403.2) (840.4)Depreciation and amortisation (69.5) (79.0) (156.7)Other operating expenses (343.9) (349.9) (700.1)Profit on disposal of businessesand property, plant & equipment 14.6 32.4 53.4 (Loss)/profit from operations (221.5) (202.5) 218.2 Analysed between:(Loss)/profit from operationsbefore exceptional items 3(b) (220.8) (230.2) 180.9Exceptional items 3(b),4 (0.7) 27.7 37.3 3(b) (221.5) (202.5) 218.2 Share of results of associates (2.3) 5.6 4.9Profit on disposal of associates 53.3 4.4 20.4Net investment income 0.9 0.9 0.9Finance income 46.3 33.2 76.4Finance costs (49.0) (50.7) (101.8) (Loss)/profit before tax (172.3) (209.1) 219.0Tax 127.5 73.8 (39.2) (Loss)/profit for the period (44.8) (135.3) 179.8 Attributable to:Equity holders of the parent (45.6) (137.0) 176.7Minority interests 0.8 1.7 3.1 (Loss)/earnings per share (•)Basic (0.75) (2.25) 2.91Diluted (0.75) (2.25) 2.91 All sales and results arose from continuing operations. Thomas Cook AG Consolidated Statement of Recognised Income and Expense Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m (Losses)/profits on cash flow hedges (51.9) 27.6 (60.4)Losses on available-for-sale investments (0.6) (0.6) (0.6)Exchange differences on translation offoreign operations (1.2) (2.9) 2.4Actuarial gains / (losses) on defined benefitpension schemes 127.5 3.7 (17.8)Tax on items taken directly to equity (21.0) (9.9) 26.9Net income/(expense) recognised directlyin equity 52.8 17.9 (49.5) TransfersTransferred to profit or loss oncash flow hedges 33.3 (44.0) (58.4)Transfer of translation losses to profit orloss on disposal - 2.6 5.6Transfer of losses on cash flow hedges toprofit or loss on disposal - 0.1 -Tax on items transferred from equity (12.0) 15.4 19.8 21.3 (25.9) (33.0) (Loss)/profit for the period (44.8) (135.3) 179.8 Total recognised income & expense forthe period 29.3 (143.3) 97.3 Attributable to:Equity holders of the parent 28.5 (145.0) 94.2Minority interests 0.8 1.7 3.1 29.3 (143.3) 97.3 Thomas Cook AG Consolidated Balance Sheet Unaudited Unaudited Unaudited as at as at as at 30/04/07 30/04/06 31/10/06 Notes •m •m •mNon-current assetsGoodwill 1,191.2 1,145.5 1,144.7Other intangible assets 77.5 53.0 59.8Property, plant & equipment Aircraft and spare engines 578.5 681.0 634.3 Other 237.8 289.2 250.9Investment in associates 35.3 48.7 41.8Other investments 17.1 27.8 21.2Deferred tax assets 336.3 294.1 260.0Tax assets 0.1 - -Trade & other receivables 83.8 99.0 84.3Derivative financialinstruments 22.9 29.8 11.9 2,580.5 2,668.1 2,508.9Current assetsInventories 10.8 9.5 10.5Tax assets 16.7 25.6 8.9 Trade & other receivables 936.3 818.8 527.9Trading securities 300.0 7.7 72.7Derivative financialinstruments 28.7 110.9 30.2Cash & cash equivalents 632.3 767.2 736.0 1,924.8 1,739.7 1,386.2Non-current assetsheld for sale 41.4 41.3 47.2Total assets 4,546.7 4,449.1 3,942.3 Current liabilitiesRetirement benefit obligations (3.3) (4.3) (4.4)Trade & other payables (1,361.4) (1,125.0) (1,198.7)Borrowings (45.4) (93.8) (36.8)Obligations under finance leases (34.7) (33.9) (35.3)Tax liabilities (63.5) (71.2) (72.9)Revenue received in advance (1,134.1) (1,145.1) (525.8)Short-term provisions (140.5) (187.6) (160.7)Derivative financialinstruments (75.8) (54.0) (52.5) (2,858.7) (2,714.9) (2,087.1)Non-current liabilitiesRetirement benefit obligations (275.3) (531.0) (411.1)Trade & other payables (79.6) (99.6) (86.7)Borrowings (146.1) (177.9) (167.8)Obligations under finance leases (465.5) (531.4) (513.1)Deferred tax liabilities - (2.1) (0.1)Revenue received in advance - (0.4) (0.4)Long-term provisions (51.2) (4.5) (60.4)Derivative financialinstruments (20.1) (23.8) (12.7) (1,037.8) (1,370.7) (1,252.3)Liabilities related toassets held for sale (42.9) (4.3) (4.8)Total liabilities (3,939.4) (4,089.9) (3,344.2) Net assets 607.3 359.2 598.1 Thomas Cook AG Consolidated Balance Sheet (continued) Unaudited Unaudited Unaudited as at as at as at 30/04/07 30/04/06 31/10/06 Notes •m •m •m EquityCalled up share capital 303.7 303.7 303.7Share premium account 540.3 539.7 539.7Other reserves and retained earnings (249.4) (517.1) (277.9) Equity attributable to equity holders ofthe parent 5 594.6 326.3 565.5Minority interests 12.7 32.9 32.6 Total equity 607.3 359.2 598.1 Thomas Cook AG Consolidated Cash Flow Statement Unaudited Unaudited Unaudited 6 months 6 months 12 months to to to 30/04/07 30/04/06 31/10/06 Notes •m •m •mCash flows from operating activitiesCash generated by operations 6 157.2 128.5 227.0Income taxes paid 6 (3.2) (22.6) (44.3)Net cash from operating activities 154.0 105.9 182.7 Investing activitiesDividends received from associates - 0.2 6.0Proceeds on disposal of subsidiaryundertaking (net of cash balances disposed) 20.0 58.1 97.1Proceeds on disposal of associates 1.8 18.6 54.4Proceeds on disposal of property, plantand equipment 37.0 24.8 54.9Movements in short-term securities (227.3) 13.3 (59.6)Purchase of property, plant andequipment (18.1) (16.3) (48.3)Purchase of intangible assets (18.5) (4.1) (28.2) Net cash (used in)/frominvesting activities (205.1) 94.6 76.3 Financing activitiesInterest paid (21.5) (22.1) (49.7)Dividends paid to minority shareholders - - (1.8)Repayment of borrowings (12.5) (108.2) (114.7)Repayment of obligations underfinance leases (18.8) (17.5) (34.3)Issue of shares 0.6 - - Net cash used in financing activities (52.2) (147.8) (200.5) Net (decrease)/increase in net cash andcash equivalents (103.3) 52.7 58.5 Net cash and cash equivalents atbeginning of period 733.7 670.9 670.9Effect of foreign exchange ratechanges (12.0) (9.7) 4.3 Net cash and cash equivalents atend of period 618.4 713.9 733.7 Cash and cash equivalents 632.3 767.2 736.0Cash classified as held for sale - 2.0 0.2Bank overdrafts (13.9) (55.3) (2.5) Net cash & cash equivalents atend of period 618.4 713.9 733.7 Notes to the Thomas Cook AG Interim Financial Information 1. General Information The information in this report relating to the six months ended 30 April 2007,the six months ended 30 April 2006 and the year ended 31 October 2006 isunaudited and does not constitute full statutory accounts within the meaning ofsection 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 October 2006 has beendelivered to the Handelsregister at Amtsgericht in Bad Homburg. The auditors'report on those accounts was unqualified. In addition, the accounts werepublished in the Bundesanzeiger (Federal Bulletin) as required by the GermanCommercial Code (Handelsgesetzbuch). 2. Basis of preparation The Thomas Cook AG interim financial information has been prepared using theaccounting policies to be applied by Thomas Cook Group plc as set out inAppendix 3. The comparative figures for the year ended 31 October 2006 arederived from the statutory accounts delivered to the Handelsregister atAmtsgericht in Bad Homburg and have been restated for the adoption of the ThomasCook Group plc accounting policies. With the exception of the full recognitionof the defined benefit pension obligation, the impact of these accounting policychanges is not material. As permitted, the Group has chosen not to apply IAS 34 'Interim FinancialReporting' and therefore the financial information in this respect is not infull compliance with International Financial Reporting Standards (IFRS). Theinformation has been prepared in accordance with the recognition and measurementrequirements of IFRS. 3. Business segments For management purposes, the Group was organised into four operating divisions -Thomas Cook UK, Thomas Cook Continental Europe, Airline Germany and Corporate.These divisions are the basis on which the Group reported its primary segmentinformation. The principal activity of all divisions is the provision of leisuretravel services. Segment information about these divisions is presented below. (a) Sales Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m UK External sales 804.2 734.6 2,482.7 Inter-segment sales 1.5 0.6 2.2 Total revenue 805.7 735.2 2,484.9 Continental Europe External sales 1,442.5 1,394.9 4,567.8 Inter-segment sales 1.9 3.1 6.8 Total revenue 1,444.4 1,398.0 4,574.6 Airline Germany External sales 300.8 286.6 694.4 Inter-segment sales 205.7 212.7 547.9 Total revenue 506.5 499.3 1,242.3 Corporate External sales 6.8 19.9 35.3 Inter-segment sales 5.3 4.9 19.3 Total revenue 12.1 24.8 54.6 Total 2,768.7 2,657.3 8,356.4Eliminations (214.4) (221.3) (576.2)Group 2,554.3 2,436.0 7,780.2 Inter-segment sales are charged at prevailing market prices. 3. Business segments (continued) (b) Segment result Unaudited Unaudited Unaudited 6 months 6 months 12 months to to to 30/04/07 30/04/06 31/10/06 •m •m •m(Loss)/profit from operations beforeexceptional items:UK (127.3) (131.7) 80.7Continental Europe (48.5) (48.9) 99.2Airline Germany (31.8) (30.5) 38.1Corporate (13.2) (19.1) (37.1) Group (220.8) (230.2) 180.9 Exceptional items:UK (5.6) (0.1) 39.1Continental Europe 0.1 10.4 (24.8)Airline Germany 0.4 - 4.4Corporate 4.4 17.4 18.6 Group (0.7) 27.7 37.3 (Loss)/profit from operations:UK (132.9) (131.8) 119.8Continental Europe (48.4) (38.5) 74.4Airline Germany (31.4) (30.5) 42.5Corporate (8.8) (1.7) (18.5) Group (221.5) (202.5) 218.2 Share of results of associates (2.3) 5.6 4.9Profit on disposal of associates 53.3 4.4 20.4Net investment income 0.9 0.9 0.9Finance income 46.3 33.2 76.4Finance costs (49.0) (50.7) (101.8) (Loss)/profit before tax (172.3) (209.1) 219.0Tax 127.5 73.8 (39.2) (Loss)/profit after tax (44.8) (135.3) 179.8 4. Exceptional items Unaudited Unaudited Unaudited 6 months 6 months 12 months to to to 30/04/07 30/04/06 31/10/06 •m •m •m Disposal of businesses - 21.2 32.4Disposal of items of property,plant and equipment 14.6 11.2 21.0Disposal of brand rights - - 10.8Exceptional past service cost inpension scheme - - 31.2Restructuring of businesses (7.0) (3.5) (46.5)Aborted transaction fees (5.5) - -Building impairment - - (8.4)Cost of irrecoverable air passenger duty (2.3) - -Loans written off and impairment of tradereceivables and other assets (0.5) (1.2) (3.2) (0.7) 27.7 37.3 Exceptional items have been included in theincome statement as follows:Sales - - 10.8Cost of providing tourism services (2.3) - -Personnel expenses (6.4) (4.4) (6.9)Depreciation and amortisation - - (8.4)Other operating expenses (6.6) (0.3) (11.6)Profit on disposal of items of property, plantand equipment 14.6 32.4 53.4 (0.7) 27.7 37.3 5. Equity attributable to equity holders of the parent The movements in equity attributable to equity holders of the parent during theperiod were as follows: Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m Total recognised income & expensefor the period 28.5 (145.0) 94.2Issue of shares 0.6 - - Net increase/(decrease) in equityholders' interest 29.1 (145.0) 94.2Equity holders' interest atbeginning of period 565.5 471.3 471.3 Equity holders' interest at end ofperiod 594.6 326.3 565.5 6. Notes to the Cash Flow Statement Unaudited Unaudited Unaudited 6 months to 6 months to 12 months to 30/04/07 30/04/06 31/10/06 •m •m •m (Loss)/profit before tax (172.3) (209.1) 219.0Adjustments for: Finance income (46.3) (33.2) (76.4) Finance costs 49.0 50.7 101.8 Share of results of associates 2.3 (5.6) (4.9) Depreciation of property, plant & 56.9 67.4 132.0 equipment Amortisation of intangible assets 12.6 11.6 24.7 Profit on disposal of businesses and property, plant & equipment (14.6) (32.4) (53.4) Profit on disposal of associates (53.3) (4.4) (20.4) Other non-cash items 19.1 (14.4) (30.6) Contribution to pension scheme - - (124.5) Decrease in provisions 3.1 (30.4) 25.0 Interest received 12.8 14.1 35.9 Operating cash flows beforemovements in working capital (130.7) (185.7) 228.2 Increase in inventories (0.4) (1.4) (2.1)(Increase)/decrease in receivables (388.2) (285.6) 1.4Increase/(decrease) in payables 676.5 601.2 (0.5) Cash generated by operations 157.2 128.5 227.0Income taxes paid (3.2) (22.6) (44.3) Net cash from operating activities 154.0 105.9 182.7 Cash and cash equivalents, which are presented as a single class of assets onthe face of the balance sheet, comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. 7. Net funds Unaudited Unaudited Unaudited 6 months 6 months 12 months to to to 30/04/07 30/04/06 31/10/06 •m •m •m LiquidityCash & cash equivalents (including cashclassified as held for sale) 632.3 769.2 736.2Trading securities 300.0 7.7 72.7 932.3 776.9 808.9 Current debtBank overdrafts (13.9) (55.3) (2.5)Short term borrowings (21.4) (26.5) (23.0)Current portion of long term borrowings (10.1) (12.0) (11.3)Obligations under finance leases (34.7) (33.9) (35.3) (80.1) (127.7) (72.1) Non-current debtLong term borrowings (146.1) (177.9) (167.8)Obligations under finance leases (465.5) (531.4) (513.1) (611.6) (709.3) (680.9) Debt related to non-current assets classifiedas held for sale (38.9) - - Total debt (730.6) (837.0) (753.0) Net funds/(debt) 201.7 (60.1) 55.9 8. Disposal of associated undertakings On 24 April 2007 the Group disposed of its 50% investment in Gunes EkspresHavacilik A.S. (Sun Express), an airline based in Turkey, to KarstadtQuelle AG.The proceeds on the disposal of Sun Express are receivable by 31 July 2007. During the period, the Group also disposed of its interests in Falstacen S.L.,Thai Asia Travel Co. Ltd and Troll Tours Reisen GmbH for total proceeds of€8.0m, of which €1.8m was received on completion. Details of the profit on disposal are set out in the table below: Sun Express Other Total •m •m •m Investment in associate 3.9 4.8 8.7 Disposal proceeds 54.0 8.0 62.0 Profit on disposal 50.1 3.2 53.3 INDEPENDENT REVIEW REPORT TO THOMAS COOK AG Introduction We have been instructed by the company to review the Thomas Cook AG financialinformation for the six months ended 30 April 2007, which comprises theconsolidated income statement, the consolidated statement of recognised incomeand expense, the consolidated balance sheet, the consolidated cash flowstatement and related notes 1 to 8 (the 'Thomas Cook AG financial information').We have read the other information contained in Appendix Two to the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The Thomas Cook Group plc interim report is the responsibility of, and has beenapproved by, the directors of Thomas Cook Group plc. The Thomas Cook AGfinancial information has been prepared by the directors of Thomas Cook AG. Thedirectors are also responsible for ensuring that the Thomas Cook AG financialinformation is prepared in accordance with the basis set out in note 2 to theThomas Cook AG financial information. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies andpresentation have been applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the Thomas Cook AG financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the Thomas Cook AG financial information as presented for thesix months ended 30 April 2007. PricewaterhouseCoopers LLPChartered AccountantsLondon27 June 2007 Appendix 3 - Accounting policies for TCG plc The principal accounting policies applied in the preparation of the financialinformation presented in this document are set out below. These are the accounting policies that are expected to apply in the first consolidated financial statements for Thomas Cook Group plc, subject to any changes arisingfrom new standards becoming effective for that financial year. 1 Basis of consolidation The interim financial information for each of MyTravel Group plc and Thomas CookAG consolidate those of the Company and its subsidiary undertakings. The resultsof subsidiaries acquired or disposed of are consolidated for the periods from orto the date on which control passed. Acquisitions are accounted for under thepurchase method. In this interim report, the combined pro forma information for Thomas Cook Groupplc has been aggregated from the results of MyTravel Group plc and Thomas CookAG on the basis set out in note 1 to the Thomas Cook Group financialinformation. Where audited financial accounts are not coterminous with those of the Group,the financial information has been derived from the last audited accountsavailable and unaudited management accounts for the period up to the Company'sbalance sheet date. 2 Associates and joint ventures Entities, other than subsidiaries, over which the Group exerts significantinfluence but not control or joint control are associates. Entities which the Group jointly controls with one or more other party under a contractual arrangement are joint ventures. The Group's share of the results of associates and joint ventures is included inthe Group income statement using the equity accounting method. Investments in associates and joint ventures are included in the Group balance sheet at cost asadjusted for post-acquisition changes in the Group's share of the net assets of the entity, after adjustment for goodwill. 3 Intangible assets - goodwill Goodwill arising on an acquisition represents any excess of the fair value ofthe consideration given over the fair value of the identifiable assets,liabilities and contingent liabilities acquired. Goodwill is recognised as anasset, and is reviewed for impairment at least annually. Any impairment isrecognised immediately in the Group's income statement and is not subsequentlyreversed. On disposal of a subsidiary, joint venture or associate, the attributable amountof goodwill is included in the determination of the profit or loss on disposal. 4 Intangible assets - other Intangible assets, other than goodwill, are carried on the Group's balance sheetat cost less accumulated amortisation. Internally generated intangible assets are capitalised at the directly attributable cost of production. Amortisation ischarged on a straight-line basis over the asset's useful life. Computer software, including internally generated software, is amortised overthree to five years. Other acquired intangible assets, are assessed separately and useful livesestablished according to the particular circumstances. 5 Property, plant and equipment Property, plant and equipment is stated at cost, net of straight linedepreciation and any provision for impairment. Depreciation on items of property, plant and equipment, other than freeholdland, upon which no depreciation is provided, is calculated on a straight-line basis to write down their cost to their estimated residual value over their expected useful lives. Typical useful lives are as follows: Freehold buildings 40 to 50 years Leasehold properties shorter of remaining lease period and 40 years New aircraft 12 to 20 years (or remaining lease period if shorter) Aircraft spares 12 to 15 years (or remaining lease period if shorter) Other fixed assets 3 to 15 years Estimated residual values and useful lives are reviewed annually. 6 Non-current assets held for sale The Group classifies non-current assets as held for sale if their carryingamount will be recovered principally through a sale transaction rather thanthrough continuing use. To be classified as held for sale, the assets must beavailable for immediate sale in their present condition subject only to termsthat are usual and customary for the sale of such assets and their sale must behighly probable. Sale is considered to be highly probable when management arecommitted to a plan to sell the assets and an active programme to locate a buyerand complete the plan has been initiated, at a price that is reasonable inrelation to their current fair value and there is an expectation that the salewill be completed within one year from the date of classification. Non-current assets classified as held for sale are carried on the Group'sbalance sheet at the lower of their carrying amount and fair value less costs tosell. 7 Aircraft overhaul and maintenance costs The cost of major overhauls of owned and finance leased engines, auxiliary powerunits and airframes is capitalised and then amortised over between two and ten years until the next scheduled major overhaul. Provision is made for the future costs of major overhauls of operating leasedengines, auxiliary power units and airframes by making appropriate charges to the income statement, calculated by reference to the number of hours flown during the period, as a consequence of legal obligations placed upon the Group under the terms of certain of the operating leases. 8 Inventories Inventories are stated at the lower of cost and net realisable value. Costrepresents purchase price. Net realisable value represents the estimated sellingprice less all costs to be incurred in marketing, selling and distribution. 9 Revenue recognition and associated costs Sales represents the aggregate amount of gross revenue receivable from inclusivetours, travel agency commissions receivable and other services supplied to customers in the ordinary course of business. Sales and direct expenses relatingto inclusive tours arranged by the Group's leisure travel providers, includingtravel agency commission, insurance and other incentives, are taken to theincome statement on holiday departure. Sales relating to travel agency commission on third party leisure travel products are recognised on holiday departure. Other sales and associated expenses are taken to the income statementas earned or incurred. Sales and expenses exclude intra-group transactions. 10 Income statement presentation Profit or loss from operations includes the results from operating activities ofthe Group, before its share of the results of associates and joint ventures. Gross profit represents the contribution from revenues less the cost of flights,accommodation and other direct costs of providing tourism services. Exceptional items are items that are unusual because of their size, nature orincidence and which the Group's management consider should be disclosedseparately to enable a full understanding of the Group's results. 11 Tax Tax represents the sum of tax currently payable and deferred tax. Tax isrecognised in the income statement unless it relates to an item recognised directly in equity, in which case the associated tax is also recognised directlyin equity. Tax currently payable is provided on taxable profits based on the tax rates andlaws that have been enacted or substantively enacted at the balance sheet date. Provision is made for deferred tax so as to recognise all temporary differenceswhich have originated but not reversed at the balance sheet date that result inan obligation to pay more tax, or a right to pay less tax, in the future, exceptas set out below. This is calculated on a non-discounted basis by reference to the average tax rates that are expected to apply in the relevant jurisdictions and for the periods in which the temporary differences are expected to reverse. Deferred tax assets are assessed at each balance sheet date and are onlyrecognised to the extent that their recovery against future taxable profits is probable. Deferred tax liabilities are recognised for the retained earnings of overseas subsidiaries, joint ventures and associates unless the Group is able tocontrol the timing of the distribution of those earnings and it is probable thatthey will not be distributed in the foreseeable future. 12 Pensions Pension costs charged against profits in respect of the Group's definedcontribution schemes represent the amount of the contributions payable to the schemes in respect of the accounting period. The Group also operates a number of defined benefit schemes. The pensionliabilities recognised on the balance sheet in respect of these schemes represent the difference between the present value of the Group's obligations under the schemes and the fair value of those schemes' assets. Actuarial gains or losses are recognised in the period in which they arise within the statementof recognised income and expense. Other movements in the pension liability are recognised in the income statement. 13 Foreign currency Average exchange rates are used to translate the results of all subsidiaries,associates and joint ventures that have a functional currency other than the euro. The balance sheets of such entities are translated at period end exchange rates. The resulting exchange differences are dealt with through a separate component of equity. Transactions in currencies other than the functional currency of an entity aretranslated at the exchange rate at the date of the transaction. Foreign currencymonetary assets and liabilities held at the period end are translated at period end exchange rates. The resulting exchange gain or loss is dealt with in the income statement. 14 Leases Leases under which substantially all of the risk and rewards of ownership aretransferred to the Group are finance leases; all other leases are operating leases. Assets held under finance leases are recognised within property, plant andequipment on the balance sheet and depreciated over the shorter of the lease term or their expected useful lives. The interest element of finance lease payments represents a constant proportion of the capital balance outstanding andis charged to the income statement over the period of the lease. Operating lease rentals are charged to the income statement on a straight-linebasis over the lease term. 15 Derivative financial instruments Derivatives are recognised at their fair value. When a derivative does notqualify for hedge accounting, changes in fair value are recognised immediately in the income statement. When a derivative qualifies for hedge accounting as a cash flow hedge, changes in fair value that are determined to be an effective hedge are recognised directly in the hedging reserve. Any ineffective portion ofthe change in fair value is recognised immediately in the income statement. If a hedged transaction subsequently results in the recognition of anon-financial asset or a non-financial liability, the associated cumulative gainor loss is removed from the hedging reserve and is included in the initial cost or carrying amount of the asset or liability. For all other cash flow hedges, the associated cumulative gain or loss is removed from the hedging reserve and recognised in the income statement in the same period or periods during which the hedged or forecast transaction affects profit or loss. When a derivative qualifies for hedge accounting as a fair value hedge, changesin fair value of the derivative are recognised in the income statement wherethey offset changes in the fair value of the hedged asset or liability,attributable to the hedged risk. 16 Share-based payments The Group issues share options to certain employees as part of their totalremuneration. The fair values of the share options are calculated at the date ofgrant, using an appropriate option pricing model. These fair values are charged to the income statement on a straight-line basis over the expected vesting period of the options, with a corresponding increase in equity reserves. 17 Insurance contracts and reinsurance contracts Premiums written relate to business incepted during the year, together with anydifferences between the booked premiums for prior years and those previously accrued, less cancellations. Premiums are recognised as revenue (earned premiums) proportionally over the period of coverage. Premiums are shown after the deduction of commission and premium taxes where relevant. Claims and loss adjustment expenses are charged to income as incurred based onthe estimated liability for compensation owed to policyholders or third parties damaged by policyholders. The Group does not discount its liabilities for unpaidclaims. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and statistical analysis for the claims incurred but not reported. Contracts entered into by the Group with reinsurers under which the Group iscompensated for losses on one or more contracts issued by the Group and thatmeet the classification requirements for insurance contracts are classified asreinsurance contracts held. The benefits to which the Group is entitled under its reinsurance contracts heldare recognised as receivables from reinsurers. The Group assesses itsreinsurance assets for impairment on an annual basis. Receivables and payables are recognised when due. These include amounts due toand from insurance policyholders. This information is provided by RNS The company news service from the London Stock Exchange
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