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| TUI AG (TUI) TUI AG: INTERIM REPORT Q1 2023 1 OCTOBER 2022 – 31 DECEMBER 2022 14-Feb-2023 / 07:00 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. TUI GROUP Interim report Q1 2023 1 October 2022 – 31 DECEMBER 2022 Content Report on changes in expected development Financial position and net assets Comments on the consolidated income statement Alternative performance measures Unaudited condensed consolidated Interim Financial Statements Group of consolidated companies Notes to the unaudited condensed consolidated Income Statement Notes to the unaudited condensed consolidated Statement of Financial Position Cautionary statement regarding forward-looking statements
This Interim Financial Report of the TUI Group was prepared for the reporting period from 1 October 2022 to 31 December 2022. Interim Management Report Summary Q1 2023 underlying EBIT of €-153.0m delivering a strong improvement year-on-year (Q1 2022: €-273.6m) with an encouraging booking momentum across both Winter and Summer seasons.
1 Excluding businesses sold and discontinued since 2019 2 Based on constant currency. In view of the effects from the war in Ukraine, the assumption for underlying EBIT is subject to considerable uncertainty. Amongst others, the greatest area of uncertainty will be the impact on consumer confidence, should there be further cost inflation volatility and/or an escalation of the war in Ukraine. 3 Bookings up to 5 February 2023 relate to all customers whether risk or non-risk and includes amendments and voucher re-bookings.
Sustainability as opportunity
1 Baseline 2019. Level of ambition well below 2Oc. CO2e = CO2 equivalents. Apart from carbon dioxide (CO2), they include the other five 2 Baseline 2019. Level of ambition 1.5Oc
Differences may occur due to rounding. 1 We define the EBIT in underlying EBIT as earnings before interest, income taxes and result of the measurement of the Group’s interest hedges. For further details please see page 17. 2 EBITDA is defined as earnings before interest, income taxes, goodwill impairment and amortisation and write-ups of other intangible assets, depreciation and write-ups of property, plant and equipment, investments and current assets. 3 Equity divided by balance sheet total in %, variance is given in percentage points. All change figures refer to the same period of the previous year, unless otherwise stated. The present Interim Report for Q1 2023 is based on TUI Group’s reporting structure set out in the Consolidated Financial Statements of TUI AG as at 30 September 2022. See TUI Group Annual Report 2022 from page 27.
Trading update - Encouraging booking momentum across both Winter 2022/23 and Summer 2023
Markets & Airlines
Winter 2022/23
Summer 2023
Holiday Experiences
1 Bookings up to 5 February 2023 relate to all customers whether risk or non-risk and includes amendments and voucher re-bookings. 2 2023 trading data as of 5 February 2023 excluding Blue Diamond 3 2023 trading data as of 5 February 2023
Net debt 31 December 2022 net debt position of €-5.3bn was broadly in line with prior year (31 December 2021: €-5.1bn).
Strategic priorities The TUI Group's strategy outlined in the Annual Report 20221 will be continued in the current financial year.
TUI’s strategy aims to deliver growth in both Holiday Experiences and Markets & Airlines, embedded in one central customer ecosystem, underpinned by our sustainability agenda and our people. Our Holiday Experiences business strategy focuses on asset-right growth in differentiated content and expanding the customer base with multi-channel distribution. Having accelerated our strategic transformation of Markets & Airlines during the pandemic, and fully implemented our Global Realignment Programme, our business strategy is now focused on profitable growth. This will be achieved by offering more product choice, growing our customer ecosystem into untapped segments, and increasing customer value. This includes increasing the volume and proportion of dynamically sourced packages, as well as significantly increasing our component offer in accommodation only and flight only.
We also aim to further improve our cash position focusing on optimising working capital and cash from operations and maintaining disciplined capital expenditure supported by asset right growth. Besides this, we will continue reducing our debt and German government exposure with the aim to return to a solid and healthy balance sheet and improve our credit rating. On 13 December 2022, TUI has concluded an agreement with the German Economic Stabilization Fund (“WSF”) on the repayment of stabilisation measures2.
FY23 Assumptions3 – Based on the encouraging booking momentum across both seasons with Summer at an early stage, we confirm our expectations for FY23 that underlying EBIT will increase significantly.
Mid-term ambitions - We have a clear strategy to accelerate profitable market growth. Our mid-term 2025/26 ambitions are for underlying EBIT to significantly build on €1.2bn4 and also have a target to return to a gross leverage ratio5 of well below 3.0x.
1 Details on our strategy see TUI Group Annual Report 2022 from page 23. 2 Details on our repayment agreement see page in this Report. 3 Based on constant currency. In view of the effects from the war in Ukraine, the assumption for underlying EBIT is subject to considerable uncertainty. Amongst others, the greatest area of uncertainty will be the impact on consumer confidence, should there be further cost inflation volatility and/or an escalation of the war in Ukraine. 4 FY19 underlying EBIT of €893m including €293m Boeing Max cost impact. 5 Defined as as gross debt (Financial liabilities incl. lease liabilities and net pension obligation) divided by Reported EBITDA; pre impact of potential capital increase.
Report on changes in expected development We re-confirm our expectation set out in the Annual Report 2022 for a significant improvement in TUI Group's underlying EBIT in financial year 20231 compared with 2022.
We continue to consider the remaining assumptions for the financial year 2023 made in the Annual Report 2022 also to be valid2. See also TUI Group Annual Report 2022 from page 52 onwards.
1 Based on constant currency 2 Pre impact of a potential capital increase
Consolidated earnings
Segmental performance
Q1 2023 total revenue grew to €384.7m, an improvement of €101.9m year-on-year (Q1 2022: €282.8m) reflecting the restriction free travel environment across our multiple destinations, versus the prior year. The segment reported a Q1 underlying EBIT profit of €71.9m as a result, improving by €10.8m year-on-year (Q1 2022: €61.1m). Results were supported by good operational performances across the hotels businesses with higher occupancies and rates in a stronger trading environment leading to higher results especially in the Caribbean, Cape Verde and Turkey.
Our hotel portfolio is well-diversified in terms of product offer, destination mix and ownership models, and has benefits from multi-channel and multi-source market distribution via Markets & Airlines, direct to the customer, and third parties such as Online Travel Agents (OTAs).
We operated 8.5m available bednights (capacity) in the quarter, slightly down on 1% in Q1 2022 due to a number of hotel renovations.
The overall occupancy rate for the segment increased 11%pts year-on-year to 75%, driven in particular by the Caribbean and Spanish destinations. Our hotels across the Caribbean delivered average occupancy rates of 87%, with Mexico being our most popular destination achieving 94% average occupancy in the first quarter. Our hotels in the Canaries also saw high demand during this winter period, achieving average occupancy of 82%. Other popular destinations in the quarter were Turkey, Egypt and Cape Verde.
Q1 2023 average daily rate in Hotels & Resorts increased overall by 20% year-on-year to €86 with rates in particular in the Caribbean higher. Riu’s average daily rate increased 18% to €77 (Q1 2022: €66) and Blue Diamond average daily rate increased 27% to €151 (Q1 2022: €119). Robinson achieved an average rate of €101, in line with prior year (Q1 2022: €101).
The Cruises segment comprises the joint venture TUI Cruises in Germany, which operates cruise ships under the brands Mein Schiff and Hapag-Lloyd Cruises, and Marella Cruises in UK. The segment operated a full fleet of 16 ships in the first quarter (Q1 2022: 14 ships operated due to a more restrictive travel environment).
Q1 2023 Cruises revenue, reflecting Marella Cruises solely (TUI Cruises is accounted for using the equity method) grew to €115.2m, an improvement of €81.1m year-on-year (Q1 2022: €34.2m). As a result, Q1 2023 underlying EBIT for the segment (including the equity result of TUI Cruises) was €0.2m, an improvement of €31.9m (Q1 2022: €-31.7m loss) with both TUI Cruises and Marella contributing to the positive development and highlight the continued improvement across all brands supported by higher volumes as well as improved occupancies. This is the third consecutive positive quarter for our Cruises business with TUI Cruises achieving Q1 2023 EAT (earnings after tax) at €8m.
Mein Schiff – Mein Schiff operated their full fleet of seven ships against six ships in the previous year, offering itineraries to the Canaries, the Caribbean and around the world with Asian itineraries resuming in the quarter for the first time since the pandemic. Occupancy of the operated fleet in Q1 2023 was 88% as a result (Q1 2022: 53%) demonstrating the strong demand for our German language, premium all-inclusive product. At €139, the average daily rate was close to pre-pandemic levels (Q1 2019: 149€) but -10% lower versus prior year (Q1 2022: €155) due to a higher mix of premium cabins with overall lower occupancies and capacity in the prior year.
Hapag-Lloyd Cruises – Hapag-Lloyd Cruises, our luxury and expeditions brand, operated itineraries around the world as well as voyages to Antarctica with, as in Q1 2022, their full fleet of five ships in Q1 2023. Q1 average daily rate was €669, well above pre-pandemic levels (Q1 2019: €591), an increase of 7% on prior year (Q1 2022: €624). Q1 occupancy of the fleet was 65% (Q1 2022: 50%), underlining the increased demand for these cruises.
Marella Cruises – With all four ships in operation against three in Q1 2022, our UK cruise brand, offered itineraries to the Caribbean and the Canaries. The business achieved an average daily rate of £157 up 10.7 % (Q1 2022: £142) and above the pre-pandemic level of £137 with occupancy at 91%, versus a previous Q1 of 48% supported by an improved trading environment.
In TUI Musement, our tours and activity business, Q1 2023 revenue of €141.4m, was up €75.1m year-on-year (Q1 2022: €66.3m) highlighting the growth in this area, with an underlying EBIT loss of €-13.0m in line with prior year (Q1 2022: €-12.7m loss), due to investment in particular in the B2C distribution channel. We continued to accelerate and enhance our digital transformation at TUI Musement to drive the customer experience throughout all channels, providing support and expertise in resort both in person and through our dedicated TUI App.
TUI Musement provided 5.0m transfers to guests in their destinations against 3.3m in the same quarter last year in line with the recovery to a more normalised trading environment across our global destinations. In addition, 1.7m experiences were sold, up 0.7m year-on-year (Q1 2022: 1.1m).
Q1 2023 revenue of €3,229.1m, was up €1,175.7m year-on-year (Q1 2022: €2,053.4m). Q1 underlying EBIT was the usual seasonal loss for the sector of €-193.9m which however was an improvement of €65.1m year-on-year (Q1 2022: €-259.0m loss). The results were supported by higher prices and also reflect a restriction free trading environment year-on-year with good demand for our wide and varied product offering. The overall market continued to be influenced by uncertainties resulting in inflationary pressures especially on energy as well as exchange rate volatility. As a consequence, short-term bookings continued to make up a higher proportion of overall bookings. Traditional short- and medium haul destinations such as the Canaries and Egypt were again popular destinations for our customers, with long-haul destinations such as Mexico and the Dominican Republic also in demand.
A total of 3,293k customers departed in Q1 2023, an increase of 1,038k customers versus Q1 2022. Capacity operated was 86% of Q1 2019 levels, with an average load factor achieved of 85% for Q1 2023 (Q1 2019: 83%).
Northern Region reported Q1 2023 revenue of €1,343.1m, which was up €690.9m year-on-year (Q1 2022: €652.2m). Q1 underlying EBIT loss for the region of €-122.0m decreased by €49.7m year-on-year (Q1 2022: €-171.7m loss) with both the UK and Nordic results higher supported by a return to a more normalised operating environment. This was offset to an extent by disruption costs due to winter storm Elliot in North America impacting the key winter business in Canada.
Q1 2023 customer volumes increase to 1,208k versus 665k customers in Q1 2022 underlining the market recovery. Online distribution continues to be strong at 68%, which was down 5%pts against prior year (Q1 2022: 73%) but slightly ahead of pre-pandemic levels (Q1 2019: 67%). The comparison against last year is however limited due to lower volumes and longer retail shop closures due to the COVID-19 restrictions last year. Direct distribution was at 93% broadly in line with prior year (Q1 2022: 94%) and at pre-pandemic levels (Q1 2019: 93%).
Q1 revenue of €1,351.1m, was up €365.9m year-on-year (Q1 2022: €985.1m) with a significant improvement in the underlying EBIT loss for the region of €-28.3m, almost halving the prior year losses (Q1 2022: €-55.0m loss) and returning to above pre-pandemic levels (Q1 2019: €-37,1m). The significant improvement was driven in particular by a strong operational performance in the key source market and a return to a more normalised trading environment.
Customer volume increased by 33.2% to 1,222k versus prior year (previous year 917k) in line with the easing of travel restrictions due to COVID-19. Online distribution for Central Region reached 28%, down 2%pts against prior year whereby comparison is limited due to lower volumes and longer retail shop closures due to the COVID-19 restrictions last year. Against pre-pandemic levels, online distribution was up by 7%pts (Q1 2019: 21%) emphasising the significant development of our online offering in this region in line with consumer demand for this channel. Direct distribution was down 2%pts to 54% against Q1 2022 of 56% but slightly ahead versus pre-pandemic levels (Q1 2019: 49%).
In Western Region Q1 2023 revenue of €534.9m, was up €118.9m year-on-year (Q1 2022: €416.1m). Q1 underlying EBIT loss of €-43.7m, decreased by €-11.3m year-on-year (Q1 2022: €-32.4m loss). Despite improving volumes in the region year-on-year, results in the Netherlands were impacted by a softer trading environment post summer flight disruptions in Schiphol.
Customer volumes increased by 28.2% to 863k guests year-on-year (Q1 2022: 673k). Online distribution for region stood at 62%, 1%pt below prior year but up 3%pts versus pre-pandemic levels (Q1 2019: 59%). Direct distribution was down 3%pts to 79% versus last year (Q1 2022: 82%) but up 3%pts against pre-pandemic levels (Q1 2019: 76%).
Q1 2023 underlying EBIT loss of €-18.3m, improved €13.0m year-on-year (Q1 2022: €-31.3m loss) supported by cost savings across the segment.
Financial position and net assets Cash Flow / Net capex and investments / Net debt In the first three months of financial year 2023, TUI Group’s business volume was significantly higher than in Q1 2022 which was still impacted by measures to contain the spread of COVID-19. TUI Group’s results generally also reflect the significant seasonal swing in tourism between the winter and summer travel months. In addition to seasonality, the winter season of the previous year was also negatively affected by the impact of the COVID 19 pandemic.
TUI Group's operating cash outflow in Q1 2023 of €1,670.9m increased by €706.3m compared to previous year, due to an increase in supplier payments as a result of higher business volumes in the previous Summer, in addition to slightly lower December bookings received in Q1 2023.
Net debt position as at 31 December 2022 of €-5.3bn was close to previous year level (31 December 2021: €-5.1bn).
* Including €21.4m for Q1 2023 (Q1 2023: €3.7m) cash gross capex of the aircraft leasing companies, which are allocated to Markets & Airlines as a whole, but not to the individual segments Northern Region, Central Region and Western Region.
Cash gross capex in Q1 2023 was 104.5% higher year-on-year. This increase was mainly due to higher investments in Hotels & Resorts and the airline sector. Net capex and investments of €149.0m increased by €95.6m year-on-year. The divestments include an inflow of €71m from the sale of the stakes in RIU Hotels S.A. in financial year 2021.
Comments on the consolidated income statement In the first three months of financial year 2023, TUI Group’s business volume was significantly higher than in Q1 2022 which was still impacted by measures to contain the spread of COVID-19. TUI Group’s results generally also reflect the significant seasonal swing in tourism between the winter and summer travel months. In addition to seasonality, the winter season of the previous year was also negatively affected by the impact of the COVID 19 pandemic.
In Q1 2023, consolidated revenue increased by €1.4bn year-on-year to €3.8bn.
Alternative performance measures The Group’s main financial KPI is underlying EBIT. We define the EBIT in underlying EBIT as earnings before interest, income taxes and expenses for the measurement of the Group’s interest hedges. EBIT by definition includes goodwill impairments.
One-off items carried here include adjustments for income and expense items that reflect amounts and frequencies of occurrence rendering an evaluation of the operating profitability of the segments and the Group more difficult or causing distortions. These items include gains on disposal of financial investments, significant gains and losses from the sale of assets as well as significant restructuring and integration expenses. Any effects from purchase price allocations, ancillary acquisition costs and conditional purchase price payments are adjusted. Also, any goodwill impairments are adjusted in the reconciliation to underlying EBIT.
The TUI Group’s operating loss adjusted for special items decreased by €120.6m to €-153.0m in Q1 2023.
Other segment indicators
Corporate Governance Composition of the Boards
In Q1 2023 the composition of the Boards of TUI AG changed as follows:
Executive Board As of 30 September 2022 Friedrich Joussen has resigned as Chief Executive Officer of TUI AG. Sebastian Ebel, previously Chief Financial Officer, took over as CEO as of 1 October 2022. Also effective 1 October 2022 the Supervisory Board appointed Mathias Kiep, previously Group Director Controlling, Corporate Finance and Investor Relations as the new CFO. Both new appointments have a contract term of three years.
Frank Rosenberger, Member of the Board of Management responsible for IT and Future Markets, left TUI Group on 31 October 2022.
Supervisory Board There were no changes in the composition of the Supervisory Board in Q1 2023.
The current, complete composition of the Executive Board and Supervisory Board is published on our website, where it is permanently accessible to the public.
Risk and Opportunity Report Successful management of existing and emerging risks is critical to the long-term success of our business and to the achievement of our strategic objectives.
We aggregate the risks into principal risks, were senior management is deciding its risk appetite upon. Full details of our risk governance framework and principal risks can be found in the Annual Report 2022.
Details see Risk Report in our Annual Report 2022, from page 34
External events, namely the COVID 19-pandemic, the impact on input cost due the Ukraine war, and supply chain disruptions impact the principal risks. The impact is higher if a combination of principal risks is affected.
Although the impact of the COVID-19 pandemic on economic activity has diminished, the global geopolitical and economic environment remains challenging.
The booking dynamics in our most important markets have so far remained largely unaffected by Russia's war of aggression on Ukraine. However, the intensified general price increase , especially due to rising energy costs, may lead to a reduction in the private budget available for travel services, thus lowering purchasing power and resulting in declining customer demand. In addition, the war is affecting our input cost volatility risk: Fuel and other services we source in US-Dollars and the jet-fuel or bunker price itself have a significant impact on our cost structure. Whereas we seek to minimize these effects through hedging, the lines with bank for doing so, continue to be tight, hence any unhedged position may create unwanted impacts on our earnings. This particularly affects the results of the Northern Region, Central Region, Western Region and Cruises segments.
Our operation is dependent on a complex chain of supply of goods and services. In some areas, suppliers cannot easily be interchanged, leading to a reliance on these key suppliers. The strong industry recovery immediately after the COVID-19 pandemic, compounded by a tight labour market, has led to significant operational issues particularly in the European airline operations. Although TUI as well as the service suppliers have placed numerous measures to increase the resilience, there remains the risk that the peak summer operation may still be impacted by disruptions causing additional cost or an adverse impact on our bookings.
From the Executive Board’s perspective, despite the existing risks, TUI Group currently has and will continue to have sufficient funds, resulting from both borrowings and operating cash flows, to meet its payment obligations and to ensure the going concern of the company accordingly in the foreseeable future. In this context, the Executive Board assumes that the credit lines expiring in summer 2024 will be refinanced. Therefore, as at 31 December 2022, the Executive Board does not identify any material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.
In its assessment, the Executive Board assumes that booking behaviour in the financial year 2023 will largely correspond to the pre-pandemic level. The Executive Board assumes that travel behaviour will not be affected by further long-term closures and lockdowns or by the impact of Russia’s war of aggression against Ukraine.
The Executive Board does not consider the remaining risk with regard to a further pandemic / war-related change in booking behaviour to be a threat to the company’s existence. Nevertheless, the TUI Group’s performance might be impaired by the following factors. The intensified general price increase of recent months could continue, in particular due to rising energy costs, and lead to a significant reduction in the private budget available for travel services, thus lowering purchasing power and resulting in declining customer demand. In addition, a permanent increase in fuel costs as well as other services, especially those we purchase in US dollars, could lead to an increase in our input costs. Further burdens could result from continued or increased flight disruptions. If these risks were to materialise, compliance with the financial covenants as at 31 March 2023 and 30 September 2023 could be jeopardised. The Executive Board considers the simultaneous occurrence of these risks to be very unlikely and therefore assumes that the financial targets (covenants) will be met.
Unaudited condensed consolidated Interim Financial Statements
Notes
General The TUI Group and its major subsidiaries and shareholdings operate in tourism. TUI AG, based in Karl-Wiechert-Allee 4, 30625 Hanover, Germany, is the TUI Group’s parent company and a listed corporation under German law. The Company is registered in the commercial registers of the district courts of Berlin-Charlottenburg (HRB 321) and Hanover (HRB 6580), Germany. The shares in TUI AG are traded on the London Stock Exchange and the Hanover and Frankfurt Stock Exchanges. In this document, the term “TUI Group” represents the consolidated group of TUI AG and its direct and indirect investments. Additionally, the unaudited condensed consolidated interim financial statements of TUI AG are referred to as “Interim Financial Statements”, the unaudited condensed consolidated income statement of TUI AG is referred to as “income statement”, the unaudited condensed consolidated statement of financial position of TUI AG is referred to as “statement of financial position”, the unaudited condensed consolidated statement of comprehensive income of TUI AG is referred to as “statement of comprehensive income” and the unaudited condensed consolidated statement of changes in equity of TUI AG is referred to as “statement of changes in equity”.
The Interim Financial Statements cover the period from 1 October 2022 to 31 December 2022. The Interim Financial Statements are prepared in euros. Unless stated otherwise, all amounts are stated in million euros (€m). TUI Group’s results generally also reflect the significant seasonal swing in tourism between the winter and summer travel months.
The Interim Financial Statements were approved for publication by the Executive Board of TUI AG on 13 February 2023.
Accounting principles Declaration of compliance The consolidated interim financial report for the period ended 31 December 2022 comprise the Interim Financial Statements and the Interim Management Report in accordance with section 115 of the German Securities Trading Act (WpHG).
The Interim Financial Statements were prepared in conformity with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the relevant interpretations of the IFRS Interpretation Committee (IFRS IC) for interim financial reporting applicable in the European Union.
In accordance with IAS 34, the Interim Financial Statements are published in a condensed form compared with the consolidated annual financial statements and should therefore be read in combination with TUI Group’s consolidated financial statements for financial year 2022. The Interim Financial Statements were reviewed by the Group’s auditor.
Going concern reporting in accordance with the UK Corporate Governance Code The TUI Group covers its day-to-day working capital requirements through cash on hand, balances with and borrowings from banks. TUI Group's net debt (financial debt plus lease liabilities less cash and cash equivalents and less short-term interest-bearing cash investments) as of 31 December 2022 was €5.3bn (as at 30 September 2022 €3.4bn).
The global travel restrictions to contain COVID-19 have had a continuous negative impact on the Group's earnings and liquidity development since the end of March 2020. To cover the resulting liquidity needs, the Group has carried out various financing measures in the financial years 2020 to 2022, which, in addition to three capital increases, the use of the banking and capital markets and cash inflows from the sale of assets, also include financing measures from the Federal Republic of Germany in the form of a KfW credit line initially totalling €2.85bn, an option bond from the Economic Stabilisation Fund (WSF) totalling €150m and two silent participations from the WSF initially totalling €1.091bn.
In financial year 2022, TUI reduced KfW's credit line to €2.1bn in various steps. In addition, 913 of the 1,500 bonds with warrants issued to WSF were redeemed and the silent participation II of the WSF of €671.0m was repaid in full ahead of schedule. Including the coupons to be shown as dividends, TUI repaid €725.4m to WSF. Following full repayment and termination of the KfW credit line, TUI has to pay remuneration to the German state for the coupons saved by the early repayment of Silent Participation II.
In the IFRS consolidated financial statements, the silent participations are reported as equity due to their nature and are therefore not included in the Group's net debt. The financing measures are described in detail in the annual reports for the past three financial years.
As at 31 December 2022, TUI Group’s revolving credit facilities totalled €3.74bn. They have a term until summer 2024 and comprised the following
With regard to the KfW credit lines, it was agreed that TUI AG would use 50% of individual cash inflows exceeding €50m, for example from capital measures or disposals of assets or companies, to reduce the financing granted to TUI AG to bridge the effects of COVID-19; there is no maximum limit.
TUI AG’s €1.64bn credit line from private banks and KfW credit line are subject to compliance with certain financial target values (covenants) for debt coverage and interest coverage, the review of which is carried out on the basis of the last four reported quarters at the end of the financial year or the half-year of a financial year. Against the backdrop of the ongoing pressures from the COVID-19 pandemic, the review has only been resumed in September 2022 and TUI was in full compliance. In addition, higher limits are to be applied on the first two cut-off dates before normalised limits have to be complied with from September 2023.
On 13 December 2022, TUI has concluded a new agreement with the WSF on the repayment of stabilization measures (“Repayment Agreement”). This agreement regulates the intended complete termination of the stabilization measures granted by the WSF by means of a right of the Company (i) to repayment of the contribution made by the WSF as a silent partner in January 2021 in the nominal amount of currently €420m (“Silent Participation I”) and (ii) to repurchase the warrant-linked bond 2020/2026 (“Warrant Bond”) issued by the Company to WSF in the remaining amount of €58.7m as well as the 58,674,899 option rights (“Warrants”) originally attached to the warrant bond. In addition, the Repayment Agreement regulates the implementation of capital measures for the purpose of refinancing the aforementioned measures.
Under the Repayment Agreement, the Company is obliged, to the extent permitted by law, to propose to the General Meeting a reduction in the Company’s share capital from currently approx. €1.785bn to then approx. €179m by consolidating shares at a ratio of ten to one in accordance with the provisions of the German Economic Stabilization Acceleration Act (Wirtschaftsstabilisierungsbeschleunigungsgesetz - “WStBG”). The amount of the reduction of approx. €1.606bn will be allocated to the Company's capital reserves and will not be distributed to shareholders. The capital reduction shall pave the way for the termination of the stabilization measures and is thus related to the recapitalization of the Company implemented in January 2021. The invitation to the Annual General Meeting, including the full agenda and the corresponding resolution proposals from Company management, has been published in the German Federal Gazette (Bundesanzeiger) and on the Company’s website at the beginning of January 2023.
Pursuant to the recapitalization measures adopted in January 2021, WSF has the right to convert Silent Participation I at a conversion price of €1.00 per share into currently up to €420m shares in the Company. In addition, under the Warrants, the WSF has the right to subscribe for currently up to 58,674,899 shares in the Company at an option price of 1.00 € per share, whereby the option price can also be paid by contributing the Warrant Bond.
The repayment agreement provides for a right of the Company to terminate the Silent Participation I in full and to repurchase the remaining Warrant Bond together with all Warrants until 31 December 2023 at a repayment price of €730,113,240.00 plus interest accruing until repayment under the stabilization measures. In economic terms, this price accounts for the existing conversion and option rights of the WSF. If the weighted average stock exchange price of the shares of the Company during the last fifteen calendar days prior to the date of the public announcement of the Refinancing Capital Increase referred to below, as adjusted for the price increase effect of the share consolidation, (“Adjusted Average Price”), is higher than 1.6816€, the repayment price shall be increased in accordance with the repayment agreement as follows: The Adjusted Average Price less a discount of 9.3% shall be multiplied by the total nominal amount of the stabilization measures in the amount of €478.7m, capped at a maximum amount of €957.4m.
WSF undertakes not to exercise its conversion and option rights under Silent Participation I and the Warrants until 31 December 2023. The Company is obliged to exercise its repayment and repurchase right under the Repayment Agreement in the event of successful completion of the Refinancing Capital Increase referred to below. If the stabilization measures are not fully terminated by 31 December 2023, the Company will pay WSF an at market standstill premium.
To finance the repayment of the WSF and thus the termination of the stabilization measures, the Company is obligated under the Repayment Agreement, to the extent permitted by law, to use its best efforts to implement a rights issue capital increase from the Authorized Capital 2022/I existing pursuant to Art. 4 par. 5 of the Articles of Association in the amount of approx. €162m and from Authorized Capital 2022/II existing pursuant to Art. 4 par. 7 of the Articles of Association in the amount of approx. €627m (“Refinancing Capital Increase”). This obligation applies for a period starting from the effective date of the capital reduction referred to above until 31 December 2023 – subject to the positive assessment of the then prevailing capital market conditions by the Board of Management and Supervisory Board. The proceeds from this Refinancing Capital Increase shall be used primarily for a full repayment of Silent Participation I and a repurchase of the Warrant Bond and the Warrants.
The Company intends to use (i) the proceeds from the exercise of the Authorized Capital 2022/I exclusively for the priority of the full repayment of the WSF and (ii) the proceeds from the exercise of Authorized Capital 2022/II predominantly for a substantial redemption of KfW's credit lines, it being understood that both capital increases shall be carried out simultaneously in one subscription offer.
The effectiveness of the repayment agreement is still subject to confirmation by the European Commission that it does not raise any objections under state aid law. Additionally the General Meeting needs to approve the reduction in the Company’s share capital and a rights issue capital increase must have been implemented before the repayment agreement can be closed.
Currently, TUI Group is only marginally effected by the negative financial impact of the COVID-19 pandemic.
Contact restriction measures and travel restrictions were gradually eased in most countries in the first months of the calendar year 2022 and business was fully resumed in all segments. As of April 2022, the entire fleet of the Cruises Segment was in operation, and as of summer 2022, the Hotels & Resorts Segment was able to offer the entire product portfolio. Demand recovered very robustly, albeit later than assumed in the previous year’s planning due to the travel restrictions in place at the beginning of the financial year 2022. In the Cruises segment, the recovery in demand started later than in the other segments. A more short-term booking behaviour continues to be observed.
From the Executive Board’s perspective, despite the existing risks, TUI Group currently has and will continue to have sufficient funds, resulting from both borrowings and operating cash flows, to meet its payment obligations and to ensure the going concern of the company accordingly in the foreseeable future. In this context, the Executive Board assumes that the credit lines expiring in summer 2024 will be refinanced. Therefore, as at 31 December 2022, the Executive Board does not identify any material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.
In its assessment, the Executive Board assumes that booking behaviour in the 2023 financial year will largely correspond to the pre-pandemic level. The Executive Board assumes that travel behaviour will not be affected by further long-term closures and lockdowns or by the impact of Russia’s war of aggression against Ukraine.
The Executive Board does not consider the remaining risk with regard to a further pandemic / war-related change in booking behaviour to be a threat to the company’s existence. Nevertheless, the TUI Group’s performance might be impaired by the following factors. The intensified general price increase of recent months could continue, in particular due to rising energy costs, and lead to a significant reduction in the private budget available for travel services, thus lowering purchasing power and resulting in declining customer demand. In addition, a permanent increase in fuel costs as well as other services, especially those we purchase in US dollars, could lead to an increase in our input costs. Further burdens could result from continued or increased flight disruptions. If these risks were to materialise, compliance with the financial covenants as at 31 March 2023 and 30 September 2023 could be jeopardised. The Executive Board considers the simultaneous occurrence of these risks to be very unlikely and therefore assumes that the financial targets (covenants) will be met.
In accordance with Regulation 30 of the UK Corporate Governance Code, the Executive Board confirms that, in its opinion, it is appropriate to prepare the consolidated interim financial statements on a going concern basis.
Accounting and measurement methods The preparation of the Interim Financial Statements requires management to make estimates and judgements that affect the reported values of assets, liabilities and contingent liabilities at the balance sheet date and the reported values of revenues and expenses during the reporting period.
Both the recent development of the pandemic and current trading for the summer programme have confirmed the business performance guidance provided by TUI at the end of financial year 2022. Additionally a risk assessment was performed for the Group’s assets to identify any indications of impairment as at 31 December 2022. On the basis of that assessment, TUI does not see any indication that the Group’s assets may generally be impaired.
The accounting and measurement methods adopted in the preparation of the Interim Financial Statements as at 31 December 2022 are materially consistent with those followed in preparing the annual consolidated financial statements for the financial year ended 30 September 2022, except for the initial application of new or amended standards, as outlined below.
The income taxes were recorded based on the best estimate of the weighted average tax rate that is expected for the whole financial year.
The repayment agreement with the WSF has not been recognized as per 31. December 2022 as the conditions for its effectiveness and closing have not yet been met and as it is not sufficiently certain at this time that they will be met. For further details on the repayment agreement please see ‘Going concern reporting in accordance with the UK Corporate Governance Code’.
Newly applied standards Since the beginning of financial year 2023, TUI Group has initially applied the following standards, amended by the IASB and endorsed by the EU, on a mandatory basis:
Group of consolidated companies The Interim Financial Statements include all material subsidiaries over which TUI AG has control. Control requires TUI AG to have decision-making power over the relevant activities, be exposed to variable returns or have entitlements regarding the returns, and can affect the level of those variable returns through its decision-making power.
The Interim Financial Statements as of 31 December 2022 comprised a total of 270 subsidiaries of TUI AG.
Acquisitions – Divestments Acquisitions in the period under review In 3M 2023, no companies were acquired.
No acquisitions were made after the reporting date.
Acquisitions of the prior financial year In financial year 2022, no companies were acquired under IFRS 3.
Divestments In 3M 2023, no companies were sold.
No divestments took place after the reporting date.
Notes to the unaudited condensed consolidated Income Statement In the first three months of financial year 2023, TUI Group’s business volume was significantly higher than in Q1 2022 which was still impacted by measures to contain the spread of COVID-19. TUI Group’s results generally also reflect the significant seasonal swing in tourism between the winter and summer travel months. In addition to seasonality, the winter season of the previous year was also negatively affected by the impact of the COVID 19 pandemic.
In the first three months of the financial year 2023, consolidated revenue increased by €1.4bn year-on-year to €3.8bn.
Cost of sales relates to the expenses incurred in the provision of tourism services. In addition to the expenses for staff costs, depreciation, amortisation, rental and leasing, it includes all costs incurred by TUI Group in connection with the procurement and delivery of airline services, hotel accommodation and cruises and distribution costs.
Due to the increased business volume, the cost of sales increased by 48.1% to €3.7bn in 3M 2023.
In the prior year, government grants were awarded due to the measures in place to contain the COVID-19 pan-demic. When these measures ended in financial year 2022, the various aid programmes were also terminated. The government grants reported under cost of sales and administrative expenses include in particular grants for wages and salaries as well as social security contributions directly reimbursed to the relevant company. In addition, a number of Group companies have received government grants, e. g. in the form of grants for fixed costs.
Administrative expenses comprise all expenses incurred in connection with the performance of administrative functions and break down as follows:
The cost of sales and administrative expenses include the following expenses for staff and depreciation/amortisation:
The impairments of €4.2m were presented within cost of sales (Q1 2022 €2.2m). In 3M 2023, no reversals of impairment losses were recognized. In the first quarter of the prior year reversals of impairments of €4.9m were recognized, all recorded in cost of sales.
In the first three months of the financial year 2023 other income mainly includes €4.7m from the disposal of the Jet Set House (Crawley). In the prior year, this item had primarily included income from the disposal of TUI Group companies.
In 3M 2023 other expenses mainly results from the disposal of aircraft assets. In the previous year, other expenses also included losses from the disposal of aircraft assets.
The improvement in the net financial result from €-127.0 m in the first three months of the previous year to €-114.1m in the current financial year is mainly the result of less interest expenses.
The tax income arising in the first three months of 2023 is mainly driven by the seasonality of the tourism business.
TUI Group’s result attributable to non-controlling interests is substantially a gain, primarily relating to RIUSA II Group at an amount of €24.0m (Q1 2022 €2.2m loss).
Notes to the unaudited condensed consolidated Statement of Financial Position
Goodwill decreased by €18.6m€ to €2,952.0m due to foreign exchange translation. The following table presents a breakdown of goodwill by cash generating unit (CGU) at carrying amounts.
As at 31 December 2022, a risk assessment of the capitalised goodwill was carried out based on updated information for the current financial year. As part of this assessment, there were no indications that led to a requirement to perform impairment testing of the capitalised goodwill. In this context, please refer to the section ‘Accounting and measurement methods’.
Compared to 30 September 2022 property, plant and equipment increased by €13.8m to €3,414.7m. Additions of €187.8m included €66.1m of acquisitions in the Hotels & Resorts segment. The construction of a new hotel in Mexico and the renovation of hotels in Cape Verde and Mauritius led to additions in the Riu Group totalling €60.5m. In addition, advance payments of €59.1m were made for the future delivery of additional aircraft. Furthermore, additions of €27.5m were attributable to payments on account to carry out maintenance work on cruise ships. Further additions related to the purchase of aircraft engines at €17.0m and of aircraft spare parts at €6.0m. The reclassification of an aircraft from right-of-use assets was the result of the exercise of an existing purchase option and led to an increase in property, plant and equipment of €18.3m.
On the other hand, property, plant and equipment decreased by €96.6m due to foreign exchange translation. Depreciation and amortisation of €61.5m led to a further decrease in property, plant and equipment. The planned sale of two aircraft engines led to a reclassification of €31.3m to assets held for sale. In this context, please refer to the section ‘Assets held for sale’.
Compared to 30 September 2022 right-of-use assets decreased by €230.3m to €2,741.2m. The foreign exchange translation led to a decrease in right-of-use assets of €137.1m. Furthermore, depreciation charged of €124.1m led to a decrease in right-of-use assets. The reclassification of an aircraft into property, plant and equipment led to a further reduction of right-of-use assets by €18.3m (in this context, we refer to the section ‘Property, plant and equipment’). Disposals also reduced the right-of-use assets by €6.7m.
On the other hand, modifications and reassessments of existing lease contracts increased the right-of-use assets by €57.5m. The increase is mainly due to contract extensions related to leased aircraft (€35.9m) and hotel leases (€13.2).
The corresponding liabilities are explained in the section ‘Lease Liabilities’.
The decrease in current trade and other receivables results from reduced security deposits issued to secure advance payment from customers.
As at 31 December 2022, two aircraft engines with a total value of €31.0m were classified as held for sale. The sale of the aircraft engines is planned for the beginning of February 2023. During the period under review, there were no reclassifications to assets held for sale.
As at the end of the prior financial year, the building at Jet Set House (Crawley) of TUI Airways Limited was classified as held for sale (€2.7m). The disposal transaction was completed on 3 October 2022. The purchase price payment of £6.5m was made on 3 October 2022.
The pension provisions for unfunded plans and underfunded plans increased by €54.1m to €655.4m compared to the end of the previous financial year.
The overfunding of funded pension plans reported in other non-financial assets decreased by €44.3m from €163.4m as at 30 September 2022 to €119.1m as at 31 December 2022.
This development is attributable in particular to remeasurement effects due to increased discount rates in the UK compared to 30 September 2022.
Non-current financial liabilities increased by €1,928.8m to €3,660.2m compared to 30 September 2022. This increase was primarily attributable to an increase in liabilities to banks related to credit lines with maturity in July 2024 of €1,944.5m.
The main financing instrument is a syndicated revolving credit facility (RCF) between TUI AG and the existing bank-ing syndicate which from 2020, included the KfW. The volume of this revolving credit facility totals €3.555bn at 31 December 2022.
At 31 December 2022, the amounts drawn under the revolving credit facilities totalled €2,449.8m (30 September 2022 €562.0m).
Current financial liabilities decreased by €28.3m to €291.6m at 31 December 2022 compared to €319.9m at 30 September 2022.
For more details on the terms, conditions and the reductions of the credit lines as well as the redemption of the bond with warrants, please refer to the section ‘Going Concern Reporting under the UK Corporate Governance Code’.
Compared to 30 September 2022, the lease liabilities decreased by €271.6m to €2,935.9m. Payments of €202.4m led to a decline in lease liabilities. Furthermore, lease liabilities decreased by €165.0m due to foreign exchange translation. On the other hand, changes and remeasurements of existing leases resulted in an increase in lease liabilities of €51.3m. In addition, the lease liabilities increased by €42.5m due to interest charges.
The other financial liabilities include touristic advance payments received for tours cancelled because of COVID-19 restrictions of €15.5m (as at 30 September 2022 €16.7m), for which immediate cash refund options exist and which have to be repaid shortly if the customer opts for payment. Further obligations from COVID-19 related cancelled holidays do not exist.
Overall, equity decreased by €544.1m when compared to 30 September 2022, from €645.7m to €101.6m.
For the Silent Participation I, a coupon for financial year 2022 in the amount of €16.8m was paid to the Economic Stabilisation Fund in December 2022 and reported in line Coupon on silent participation.
In the first three months of the financial year 2023, TUI AG paid no dividend (previous year: no dividend).
The Group loss in the first three months of the financial year 2023 is mainly caused by the seasonality of the tourism business.
The proportion of gains and losses from hedging instruments for effective hedging of future cash flows includes an amount of €-136.3m (pre‑tax) carried under other comprehensive income in equity outside profit and loss (previous year €-3.9m).
The revaluation of pension obligations is also recognised under other comprehensive income directly in equity without effect on profit and loss.
The amounts shown in the column ‘carrying amount’ (as shown in the balance sheet) in the tables above can differ from those in the other columns of a particular row since the latter include all financial instruments. That is the latter columns include financial instruments which are part of disposal groups according to IFRS 5. In the balance sheet, financial instruments, which are part of a disposal group, are shown as separate items. If such financial instruments are included, further details on these financial instruments are explained in the section ‘Assets held for sale’.
The instruments measured at fair value through other comprehensive income (OCI) within the other financial assets class are investments in companies based on medium to long-term strategic objectives. Recording all short-term fluctuations in the fair value in the income statement would not be in line with TUI Group's strategy; these equity instruments were, therefore, designated as at fair value through OCI.
In the period under review the fair values of current other receivables, current other financial assets and current liabilities to banks were generally determined. This approach is in line with the previous financial year, taking into account yield curves and the respective credit risk premium (credit spread) based on credit rating. As a result, the assumption that the carrying amount approximately corresponds to the fair value due to the short remaining term has been adjusted to the current market conditions due to the COVID-19 pandemic.
The fair values of non-current trade receivables and other receivables correspond to the present values of the cash flows associated with the assets, taking account of current interest parameters which reflect market and counterparty-related changes in terms and expectations. In the case of cash and cash equivalents, current trade receivables, current trade payables and other financial liabilities the carrying amount approximates the fair value due to the short remaining term.
The COVID-19 pandemic significantly impacted TUI's business operations, causing a strong increase in TUI's credit risk premiums. The significant increase in TUI’s credit risk has a direct impact on the effectiveness of hedging relationships according to IAS 39 and explicitly on the retrospective hedge effectiveness test, because when calculating retrospective effectiveness, the credit risk is included in the derivative instrument entered into with the counterparty, but not in the hypothetical derivative. As a result, fuel price, interest rate and currency hedges had to be de-designated as they no longer met the effectiveness requirements of IAS 39. All future changes in the value of these de-designated hedges are also taken to the cost of sales respectively in the financial result in the case of interest rate hedges in the income statement through profit and loss and recognised as other derivative financial instruments from the date of the termination of the cash flow hedge accounting. As at 31 December 2022, the fair value of these reclassified fuel price hedges totalled €+16.9m at a nominal volume of €239.5m, while the fair value of the interest rate hedges amounted to €+5.5m at a nominal volume of €300.8m and the fair value of foreign currency hedges totalled €+4.1m at a nominal volume of €46.9m.
Fair value measurement The table below presents the fair values of recurring, non-recurring and other financial instruments measured at fair value in line with the underlying measurement level. The individual measurement levels have been defined as follows in line with the inputs:
At the end of every reporting period, TUI Group checks whether there are any reasons for reclassification to or from one of the measurement levels. Financial assets and financial liabilities are generally transferred out of Level 1 into Level 2 if the liquidity and trading activity no longer indicate an active market. The opposite situation applies to potential transfers out of Level 2 into Level 1. In the reporting period, there were no transfers between Level 1 and Level 2.
Reclassifications from Level 3 to Level 2 or Level 1 are made if observable market price quotations become available for the asset or liability concerned. In the reporting period there were no other transfers from or to Level 3. TUI Group records transfers from or to Level 3 at the date of the obligating event or occasion triggering the transfer.
Level 1 financial instruments The fair value of financial instruments for which an active market exists is based on quoted prices at the reporting date. An active market exists if quoted prices are readily and regularly available from an exchange, dealer, broker, pricing service or regulatory agency and these prices represent actual and regularly occurring market transactions on an arm’s length basis. These financial instruments are classified as Level 1. The fair values correspond to the nominal amounts multiplied by the quoted prices at the reporting date. Level 1 financial instruments primarily comprise shares in listed companies classified as at fair value through OCI and bonds issued classified as financial liabilities at amortised cost.
Level 2 financial instruments The fair values of financial instruments not traded in an active market, e.g., over-the-counter (OTC) derivatives, are determined by means of valuation techniques. These valuation techniques make maximum use of observable market data and minimise the use of Group-specific assumptions. If all essential inputs for the determination of the fair value of an instrument are observable, the instrument is classified as Level 2.
If one or several key inputs are not based on observable market data, the instrument is classified as Level 3.
The following specific valuation techniques are used to measure financial instruments:
Level 3 financial instruments The table below presents the fair values of the financial instruments measured at fair value on a recurring basis, classified as Level 3:
Evaluation process The fair value of financial instruments in level 3 has been determined by TUI Group's financial department using the discounted cash flow method. This involves the market data and parameters required for measurement being compiled or validated. Non-observable input parameters are reviewed based on internally available information and updated if necessary.
In principle, the unobservable input parameters relate to the following parameters: the (estimated) EBITDA margin is in a range between 8.3 % and 24.0 % (30 September 2022: 8.3 % and 24.0 %). The constant growth rate is 1 % (30 September 2022: 1 %). The weighted average cost of capital (WACC) is in a range between 9.62%-10.17 % (30 September 2022: 9.5 %-11.3 %). Due to materiality, no detailed figures have been provided. With the exception of the WACC, there is a positive correlation between the input factors and the fair value.
The increase of the fair values of the Other financial assets in Level 3 mainly results from a valuation effect in the amount of €1.1m and foreign exchange rate effects in the amount of €-0.1m.
The Other receivables according to IFRS 9 in Level 3 at a carrying amount of €36.0 as at 31 December 2022 (as at 30 September 2022 €106.5m) relate to a variable purchase price receivable from the sale of RIU Hotels S.A., carried as a financial instrument in the measurement category at fair value through profit and loss. The fair value is determined using a probability calculation for the future gross operating profit, taking account of contractual entitlements to an additional purchase price demand and an appropriate risk-adjusted discount rate (3.49 %, 30 September 2022: 1.99 to 2.87 %). Gross operating profit is defined as total revenue minus operating expenses. The cash flows from the contractual claims set out in the underlying Memorandum of Understanding depend solely on a number of contractually determined Riu hotels delivering the gross operating profit for calendar year 2023.
The variable purchase price payment varies as a function of delivering the contractually fixed gross operating profit. The maximum amount is limited. At least 90 % of the target gross operating profit contractually agreed for 2023 has to be achieved in order to generate a variable purchase price payment. If the 90 % target is not met, no further purchase price payment will be made. The maximum purchase price payment totals €39.7m. Due to different expectations regarding target achievement, potential purchase price payments vary between €0 and €39.7m.
TUI expects the hotels concerned to deliver around 100 % to 105 % of cumulative gross operating profit in calendar year 2023. The current planning for the relevant hotels (input parameters) is regularly reviewed by the responsible accounting staff.
Sensitivity analysis shows that an increase in the hotels’ gross operating profit of 10 % would result in a change in the present value of the additional purchase price receivable of €2.0m (as at 30 September 2022 €2.0m), while a reduction in gross operating profit of 10 % would result in a change in the present value of €-24.4m (as at 30 September 2022 €-24.4m). An interest rate shift of +/-100 basis points would alter the present value of the purchase price receivable by €0.4m (as at 30 September 2022 €0.5m).
Effects on results The effects of remeasuring financial assets carried at fair value through OCI as well as the effective portions of changes in fair values of derivatives designated as cash flow hedges are listed in the statement of changes in equity.
As at 31 December 2022, contingent liabilities amounted to €89.6m (as at 30 September 2022 €93.5m). They are mainly attributable to the granting of guarantees for the benefit of hotel and cruises activities and the granting of guarantees for contingent liabilities from aircraft leasing agreements. The contingent liabilities are reported at an amount representing the best estimate of the expenditure required to meet the potential obligation at the balance sheet date.
As at 31 December 2022 order commitments in respect of capital expenditure decreased by €72.7m as against 30 September 2022.
The decrease in order commitments is largely attributed to a decline in aircraft obligations. Scheduled payments and the effects of foreign exchange for order commitments denominated in non-functional currencies is to a greater extent partially offset by new aircraft orders undertaken in the period. The commitments for maintenance and repairs which are reported within other financial commitments decreased particularly in the segment Hotels & Resorts due to a reduction of refurbishment projects undertaken.
The cash flow statement shows the flow of cash and cash equivalents on the basis of a separate presentation of cash inflows and outflows from operating, investing and financing activities. The effects of changes in the group of consolidated companies and of foreign currency translation are eliminated.
In the period under review, cash and cash equivalents decreased by €194.2m to €1,542.7m.
In 3M 2023, the cash outflow from operating activities totalled €1,670.9m (Q1 2022 cash outflow of €964.6m), including an inflow of €6.4m (Q1 2022 €1.3m) from interest payments and €2.2m (Q1 2022 €0.1m) from dividends received from companies measured at equity. Income tax payments resulted in a cash outflow of €28.9m (Q1 2022 €6.1m).
The total cash outflow from investing activities totalled €147.6m (Q1 2022 cash outflow of €53.2m). This amount included a cash outflow for capital expenditure on property, plant and equipment and intangibles of €228.6m. The Group recorded a cash inflow of €9.9m from the divestment of property, plant and equipment and intangible assets. TUI recorded a cash inflow of €70.7m from the earn-out payment in connection with sale of the stakes in Riu Hotels S.A., effected in financial year 2021. A cash inflow of €2.1m resulted from the sale of money market funds.
The cash inflow from financing activities totalled €1,634.7m (Q1 2022 cash inflow of €1,077.2m).
In the financial year under review, TUI AG increased its syndicated credit facility by €1,884.6m. Other TUI Group companies took out loans worth €99.8m. A cash outflow of €210.5m resulted from the redemption of financial liabilities, including an amount of €162.8m for lease liabilities. Interest payments resulted in a cash outflow of €122.3m. TUI AG paid an amount of €16.8m as coupon on Silent Participation I of the German Economic Stabilisation Fund, carried as a dividend.
In addition, cash and cash equivalents decreased by €10.6m (Q1 2022 increase by €3.8m) due to changes in exchange rates.
As at 31 December 2022, cash and cash equivalents worth €637.1m were subject to restrictions (as at 30 September 2022 €526.1m).
On 30 September 2016, TUI AG entered into a long-term agreement to close the gap between the obligations and the fund assets of defined benefit pension plans in the UK. At the balance sheet date, an amount of €66.6m was deposited as security within a bank account (as at 30 September 2022 €66.1m). TUI Group can only use this amount of cash and cash equivalents if it provides alternative collateral.
Furthermore, an amount of €116.1m (as at 30 September 2022 €116.1m) related to cash collateral received, which was deposited with a Belgian subsidiary without acknowledgement of debt by the Belgian tax authorities in financial year 2013 in respect of long-standing litigation over VAT refunds for the period from 2001 to 2011. The purpose was to suspend the accrual of interest for both parties. In order to collateralise a potential repayment, the Belgian government was granted a bank guarantee. Due to the bank guarantee, TUI’s ability to dispose of the cash and cash equivalents is restricted.
The remaining €454.5m (as at 30 September 2022 €343.9m) relate to cash and cash equivalents to be deposited due to statutory or regulatory requirements, mainly in order to secure customer deposits and credit card payables.
The segment data shown are based on regular internal reporting to the Executive Board. Since the 2020 fiscal year, the internationally more commonly used earnings measure "underlying EBIT" is used for value-based management. Accordingly, this represents the segment performance indicator within the meaning of IFRS 8.
We define the EBIT in underlying EBIT as earnings before interest, income taxes and expenses from the measurement of the Group's interest rate hedging instruments. Impairment losses on goodwill are by definition included in EBIT.
Underlying EBIT has been adjusted to exclude certain items which, due to their size and frequency of occurrence, make it difficult or distort the assessment of the operating performance of the business areas and the Group. These items include gains and losses on the disposal of financial assets, significant gains and losses on the disposal of assets and significant restructuring and integration expenses. In addition, all effects from purchase price allocations, incidental acquisition costs and contingent purchase price payments are adjusted. Impairment losses on goodwill have also been eliminated in the reconciliation to underlying EBIT.
In 3M 2023, underlying EBIT includes results of investments accounted for using the equity method of €-4.4m (Q1 2022 €-2.3m). For a split up by segments, please refer to Note 6 ’Share of result of investments accounted for using the equity method’.
Net income for separately disclosed items of €0.7m included €2m income from the release of restructuring provisions no longer needed in Western Region and €1m release of restructuring provisions no longer needed in TUI Musement for the termination of the Tantur / TUI Russia business in the previous financial year, partly offset by €2m restructuring expenses in All Other Segments.
Net income for the separately disclosed items of €9.3m in Q1 2022 include income of €21m from the sale of the shares in Nordotel S.A, fully consolidated in the Hotels & Resorts segment, to Grupotel S.A., a joint venture of the TUI Group. In addition, restructuring expenses in the Central Region (€9m) and All Other Segments (€3m) segments were adjusted.
Expenses for purchase price allocations of €6.4m (previous year €7.1m) relate in particular to the scheduled amortisation of intangible assets from acquisitions made in previous years.
Apart from the subsidiaries included in the Interim Financial Statements, TUI AG, in carrying out its business activities, maintains direct and indirect relationships with related parties. All transactions with related parties were executed on an arm’s length basis.
Detailed information on related parties is provided under section 50 in the Notes to the consolidated financial statements 2022. Responsibility Statement
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting and in the accordance with (German) principles of proper accounting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.
The Executive Board
Hanover, 13 February 2023
Sebastian Ebel David Burling Mathias Kiep Peter Krueger Sybille Reiss Review Report
To TUI AG, Berlin/Germany and Hanover/Germany
We have reviewed the condensed interim consolidated financial statements – comprising the condensed income statement, the condensed statement of comprehensive income, the condensed statement of financial position, the condensed statement of changes in equity, the condensed statement of cash flows as well as selected explanatory notes to the consolidated financial statements – and the interim Group management report for the period from 1 October 2022 until 31 December 2022 of TUI AG, Berlin and Hanover, which are part of the financial report under § 115 WpHG section 7 (Wertpapierhandelsgesetz: German Securities Trading Act). The preparation of the condensed interim consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) applicable to interim financial reporting as adopted by the EU, and of the interim group management in accordance with the requirements of the WpHG applicable to interim Group management reports is the responsibility of the entity’s executive board. Our responsibility is to issue a review report on the condensed interim consolidated financial statements and on the interim Group management report based on our review.
We conducted our review of the condensed interim consolidated financial statements and of the interim Group management report in compliance with the German Generally Accepted Standards for the Review of Financial Statements promulgated by the Institut der Wirtschaftsprüfer (IDW) and in supplementary compliance with the International Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. Those standards require that we plan and perform the review to obtain a limited level of assurance to preclude through critical evaluation that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU or that the interim Group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim Group management reports. A review is limited primarily to inquiries of personnel of the entity and to analytical procedures applied to financial data and thus provides less assurance than an audit. Since, in accordance with our engagement, we have not performed an audit, we do not express audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the condensed interim consolidated financial statements of TUI AG, Berlin and Hanover, have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, or that the interim Group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim group management reports.
Hanover/Germany, 13 February 2023
Deloitte GmbH Wirtschaftsprüfungsgesellschaft
Annika Deutsch Elmar Meier German Public Auditor German Public Auditor Cautionary statement regarding forward-looking statements
The present Interim Financial Report contains various statements relating to TUI Group’s and TUI AG’s future development. These statements are based on assumptions and estimates. Although we are convinced that these forward-looking statements are realistic, they are not guarantees of future performance since our assumptions involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors include market fluctuations, the development of world market prices for commodities and exchange rates or fundamental changes in the economic environment. TUI does not intend to and does not undertake any obligation to update any forward-looking statements in order to reflect events or developments after the date of this Report.
Financial calendar
Contacts
Nicola Gehrt Group Director Investor Relations Tel: + 49 (0)511 566-1435
Adrian Bell Senior Manager Investor Relations Tel: + 49 (0)511-2332
James Trimble Investor Relations Manager Tel: +44 (0)1582 315 293
Stefan Keese Investor Relations Manager Tel: + 49 (0)511 566-1387
Anika Heske Junior Investor Relations Manager Tel: + 49 (0)511 566-1425
TUI AG Karl-Wiechert-Allee 4 30625 Hannover Tel: + 49 (0)511 566-00 www.tuigroup.com
This Interim Financial Report, the presentation slides and the video webcast for Q1 2023 (published on 14 February 2023) are available at the following link: www.tuigroup.com/en-en/investors
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| ISIN: | DE000TUAG000 |
| Category Code: | QRF |
| TIDM: | TUI |
| LEI Code: | 529900SL2WSPV293B552 |
| OAM Categories: | 3.1. Additional regulated information required to be disclosed under the laws of a Member State |
| Sequence No.: | 222814 |
| EQS News ID: | 1558525 |
| End of Announcement | EQS News Service |