Thomas Cook Group plc Annual Report 2008

FY2008 Annual Report · Thomas Cook Group plc
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We are one of the world’s leading leisure travel groups, with a focused
strategy, a ﬂexible business model and a portfolio of market-leading
travel brands. Across our group we are committed to our vision of
going further to make dreams come true – exceeding our customers’
expectations, offering fulﬁlling careers to the best team of people in
the industry, and delivering sustainable value to our shareholders.
With a heritage of more than 167 years in travel we understand the
importance of thinking beyond the short term. We are focused on
building a stronger business today – to ensure we remain market
leaders tomorrow.

Contents

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www.thomascookgroup.com

Thomas Cook Group plc
Annual Report & Accounts 2008

Board of Directors
Group Executive Board
Corporate governance report
Other disclosures
Remuneration report

48
50
51
57
59

Chairman’s statement
Business at a glance
Where we operate
Chief Executive Ofﬁcer’s statement
Our marketplace
Our strategy
Our strategy in action
Operational review
Corporate social responsibility
Financial review
Principal risks and uncertainties

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Independent auditors’ report
Group income statement
Group statement of recognised income
and expense
Group balance sheet
Group cash ﬂow statement
Notes to the Group ﬁnancial statements
Company balance sheet
Company statement of recognised income
112
and expense
112
Company cash ﬂow statement
Notes to the Company ﬁnancial statements
113
Appendix 1 – Unaudited pro forma ﬁnancial information 120
Appendix 2 – Key performance indicators deﬁnitions 126
127
Shareholder information

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We are one of the world’s leading leisure travel groups, with a focused
strategy, a ﬂexible business model and a portfolio of market-leading
travel brands. Across our group we are committed to our vision of
going further to make dreams come true – exceeding our customers’
expectations, offering fulﬁlling careers to the best team of people in
the industry, and delivering sustainable value to our shareholders.
With a heritage of more than 167 years in travel we understand the
importance of thinking beyond the short term. We are focused on
building a stronger business today – to ensure we remain market
leaders tomorrow.

Contents

D
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www.thomascookgroup.com

Thomas Cook Group plc
Annual Report & Accounts 2008

Board of Directors
Group Executive Board
Corporate governance report
Other disclosures
Remuneration report

48
50
51
57
59

Chairman’s statement
Business at a glance
Where we operate
Chief Executive Ofﬁcer’s statement
Our marketplace
Our strategy
Our strategy in action
Operational review
Corporate social responsibility
Financial review
Principal risks and uncertainties

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Independent auditors’ report
Group income statement
Group statement of recognised income
and expense
Group balance sheet
Group cash ﬂow statement
Notes to the Group ﬁnancial statements
Company balance sheet
Company statement of recognised income
112
and expense
112
Company cash ﬂow statement
Notes to the Company ﬁnancial statements
113
Appendix 1 – Unaudited pro forma ﬁnancial information 120
Appendix 2 – Key performance indicators deﬁnitions 126
127
Shareholder information

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Celebrating 200 years
Thomas Cook 1808 – 1892

2008 marks 200 years since the
birth of Thomas Cook, regarded as
the founder of popular tourism.
As a company we continue to
be inspired by his vision and
pioneering spirit ‘to make travel
simple, easy and a pleasure.’
Thomas Cook once described
himself as ‘the willing and devoted
servant of the travelling public’ and
we believe that today, across our
company, we maintain many of his
original ideas and inspirations by
keeping the customer at the heart
of everything we do.

1
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1808
Thomas Cook is born on 22 November
in Melbourne, Derbyshire. He is the
son of a labourer and the grandson
of a Baptist minister.
1828
On the completion of his apprenticeship
as a wood-turner and cabinet-maker,
Thomas decides instead to pursue his
religious interests and becomes a
wandering Baptist missionary.

1841
Thomas conducts his ﬁrst excursion,
a 12-mile rail journey from Leicester to
a temperance gala in Loughborough, on
Monday 5 July 1841. Some 500 passengers
pay a shilling each for the experience. The
day is a great success and Thomas is soon
being asked to organise similar outings
for other local temperance societies and
Sunday schools.

1845
Thomas conducts his ﬁrst trip for proﬁt.
It is a railway journey to Liverpool from
Leicester, Nottingham and Derby.
1855
Thomas successfully escorts his ﬁrst
‘package tourists’ to Europe during the
summer of 1855. The ‘grand circular tour’
includes Brussels, Cologne, the Rhine,
Heidelberg, Strasbourg and Paris. Thomas
arranges hotels and meals in addition to
travel tickets. He also deals with ‘foreign
exchange’ for his customers.

1865
To cope with the number of tourists who
wish to visit the Continent, Thomas opens
an ofﬁce in London – at 98 Fleet Street – in
April 1865. This is Thomas Cook’s ﬁrst high
street shop and it is to be managed by his
son, John Mason Cook, who joined the
family business only a few months before.

1872/73
The climax of Thomas’ travelling career
comes in September 1872 when, at the age
of 63, he departs from Liverpool (with eight
companions) on a 25,000-mile tour of the
world that will keep him away from home
for 222 days. It has long been his ambition
to travel to ‘Egypt via China’ but such a trip
only becomes practicable following the
opening of the Suez Canal in 1869.

1874
Cook’s circular note, an early form of the
travellers cheque, is launched in New York.
1892
John Mason Cook takes over the
business on the death of his father.

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2

Design and production:
Black Sun Plc (London)
+44 (0) 20 7736 0011

Photos: Thomas Cook, Getty

Printed by Park Communications on Hello Silk, FSC certiﬁed
paper, and Tauro, from veriﬁed sustainable sources.

Thom Cook_Cover.qxd:Layout 1  26/1/09  12:37  Page 2

Celebrating 200 years
Thomas Cook 1808 – 1892

2008 marks 200 years since the
birth of Thomas Cook, regarded as
the founder of popular tourism.
As a company we continue to
be inspired by his vision and
pioneering spirit ‘to make travel
simple, easy and a pleasure.’
Thomas Cook once described
himself as ‘the willing and devoted
servant of the travelling public’ and
we believe that today, across our
company, we maintain many of his
original ideas and inspirations by
keeping the customer at the heart
of everything we do.

1
8
0
8

1808
Thomas Cook is born on 22 November
in Melbourne, Derbyshire. He is the
son of a labourer and the grandson
of a Baptist minister.
1828
On the completion of his apprenticeship
as a wood-turner and cabinet-maker,
Thomas decides instead to pursue his
religious interests and becomes a
wandering Baptist missionary.

1841
Thomas conducts his ﬁrst excursion,
a 12-mile rail journey from Leicester to
a temperance gala in Loughborough, on
Monday 5 July 1841. Some 500 passengers
pay a shilling each for the experience. The
day is a great success and Thomas is soon
being asked to organise similar outings
for other local temperance societies and
Sunday schools.

1845
Thomas conducts his ﬁrst trip for proﬁt.
It is a railway journey to Liverpool from
Leicester, Nottingham and Derby.
1855
Thomas successfully escorts his ﬁrst
‘package tourists’ to Europe during the
summer of 1855. The ‘grand circular tour’
includes Brussels, Cologne, the Rhine,
Heidelberg, Strasbourg and Paris. Thomas
arranges hotels and meals in addition to
travel tickets. He also deals with ‘foreign
exchange’ for his customers.

1865
To cope with the number of tourists who
wish to visit the Continent, Thomas opens
an ofﬁce in London – at 98 Fleet Street – in
April 1865. This is Thomas Cook’s ﬁrst high
street shop and it is to be managed by his
son, John Mason Cook, who joined the
family business only a few months before.

1872/73
The climax of Thomas’ travelling career
comes in September 1872 when, at the age
of 63, he departs from Liverpool (with eight
companions) on a 25,000-mile tour of the
world that will keep him away from home
for 222 days. It has long been his ambition
to travel to ‘Egypt via China’ but such a trip
only becomes practicable following the
opening of the Suez Canal in 1869.

1874
Cook’s circular note, an early form of the
travellers cheque, is launched in New York.
1892
John Mason Cook takes over the
business on the death of his father.

1
8
9
2

Design and production:
Black Sun Plc (London)
+44 (0) 20 7736 0011

Photos: Thomas Cook, Getty

Printed by Park Communications on Hello Silk, FSC certiﬁed
paper, and Tauro, from veriﬁed sustainable sources.

Pro forma ﬁnancial highlights1

Revenue*
£8,809•8m
+11•8%

Adjusted EPS<
24•1p
+40•9%

Operating proﬁt margin***
4•2%
+35•5%

Proﬁt from operations**
£365•9m
+49•8%

Proposed dividend per share
9•75p
+95•0%

Statutory ﬁnancial highlights

Revenue
£8,167•1m
(2007: £6,404•5m)

Proﬁt before tax
£49•5m
(2007: £190•2m)

EPS
4•7p
(2007: 22•0p)

Operational highlights

• We achieved a strong ﬁnancial performance

with proﬁt from operations up almost 50% to
£365.9m and operating proﬁt margin up 35.5%
from 3.1% to 4.2%.

18

19

• Adjusted earnings per share rose 40.9% to 24.1p.

• The Board is recommending a ﬁnal dividend
of 6.5p per share, bringing the total dividend
for the period to 9.75p.

• We are targeting merger synergies of £215m

by 2010, increased from the previous estimate
of £155m.

We have further developed our
e-commerce business across
all markets, with Northern
Europe setting the standard.

The launch of our SENTIDO hotels
concept is allowing us to build
an important new hotel brand
without owning the assets.

• We have strong foundations for the current year,
provided by capacity cuts, cost savings, fuel and
currency hedging and operational ﬂexibility,
together with the merger synergies.

20

• We remain conﬁdent of prospects for the full
year 2008/2009 and are targeting operating
proﬁt of £480m for the ﬁnancial year 2009/2010.

22

1 These are unaudited pro forma ﬁgures for the twelve months ended 30 September 2008.
For a deﬁnition of how these ﬁgures have been compiled, please refer to Appendices 1
and 2 on pages 120 to 126. The statutory results for the eleven months to
30 September 2008 are set out on pages 68 to 110 and a reconciliation between these
and the pro forma ﬁgures is set out on page 43. See Appendix 2 on page 126 for key.

We have signiﬁcantly strengthened
our independent travel offer
through acquisitions including
Hotels4U.com and TriWest Travel.

Our acquisition of Thomas Cook
India makes us the leading
foreign exchange business in
the region.

Thomas Cook Group plc Annual Report & Accounts 2008

1

Directors’ Report
Chairman’s statement

Dr Thomas Middelhoff
Chairman



www.thomascookgroup.com

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The new Group’s ﬁrst full year since the merger can best be
characterised as one in which we delivered strong ﬁnancial
performance and laid very ﬁrm foundations for the future.

Performance review
The new Group’s ﬁrst full year since the
merger can best be characterised as one
in which we delivered strong ﬁnancial
performance and laid very ﬁrm foundations
for the future. We have completed the
merger and signiﬁcantly outperformed
against synergy expectations; developed
a credible strategy against which we have
made real progress; and actively managed
our business to generate industry-leading
margins and create real shareholder value.

All of this has been achieved despite the
worsening economic conditions that have
emerged since the beginning of the year.
Our experienced management team, under
the leadership of Manny Fontenla-Novoa,
anticipated the potential impact on our
businesses and has taken swift and effective
action to ensure we sustain our operational
and ﬁnancial strength in the current ﬁnancial
year and beyond.

We will continue to maximise the advantages
we have created and developed. These
include a strong ﬁnancial position, a trusted
brand portfolio and the proven ability, within
our ﬂexible model, to manage our businesses
so that we meet the needs of our customers
in an ever changing environment.

Dividend
The Board’s dividend recommendation
reﬂects Thomas Cook’s ﬁnancial achievement,
the strength of our business model and our
commitment to delivering value to
shareholders.

Executive team
I, and my fellow Board members, would once
again like to express conﬁdence in the Group’s
executive team, led by Manny Fontenla-Novoa.
He has engaged some of the most talented
people in the industry and, together, they have
continuously demonstrated their ability to lead
the organisation in a challenging marketplace.
They have exceeded expectations across a
range of metrics, delivering industry-leading
margins, making huge progress against our
strategic agenda, and further strengthening
the Thomas Cook brand.

Employees
We are also very proud of our people at all
levels within the Group. They live our Company
values and continually strive to understand
the requirements of our customers and
deliver their travel and holiday dreams. We
believe their skills, diversity and experience
are key to our ﬂexible approach and to our
continued success.

Outlook
The success Manny and the executive team
have had in delivering a highly demanding
programme during the past year gives
my fellow Board members and me every
conﬁdence that they will rise again to
the challenges of the year ahead.

Dr Thomas Middelhoff
Chairman
19 December 008

Although the statutory ﬁnancial period
ended 30 September 008 is an eleven
month period, the Board has assessed the
total dividend on the basis of the pro forma
twelve month period ended 30 September
008. As a result, the Board is recommending
a ﬁnal dividend of 6.5 pence per share
which, when combined with the interim
dividend of 3.5 pence per share paid on
5 September 008, makes a total dividend
for the year of 9.75 pence per share. This
represents a pay-out of 41% of proﬁt after
tax before exceptional items. This is in line
with our policy, which remains to increase
dividends progressively, paying between
40% and 50% of adjusted earnings by way
of dividend.

Board changes
Changes to the Board during the period
included the appointment of Jürgen Büser
as Chief Financial Ofﬁcer from 1 July 008.
This followed the decision of Ludger Heuberg
to step down from the Board for personal
reasons and family commitments. We
are pleased that he has remained with the
Group in the role of Chief Financial Ofﬁcer
for Continental Europe.

Angus Porter resigned from the Board as
a Non-Executive Director on 5 April 008
following his appointment as Group Strategy
Director, a position he took up on  June 008.

Nigel Northridge joined the Board as an
Independent Non-Executive Director with
effect from 1 August 008. He is a member
of both the Management Development
& Remuneration Committee and the
Nominations Committee.

With effect from  December 008, Peter
Diesch will be stepping down from the
Board and will be replaced as an Arcandor
AG nominated Non-Executive Director by
Dr Karl-Gerhard Eick. I would like to thank
Peter for his contribution to the deliberations
of the Board since the merger.

Thomas Cook Group plc Annual Report & Accounts 008

3

Directors’ Report
Business at a glance

Thomas Cook Group plc is one of the world’s leading leisure travel groups
with sales of £8.8 billion, .3 million customers, 31,000 employees, a
ﬂeet of 93 aircraft and a network of over 3,400 owned and franchised
travel stores and interests in 86 hotels and resort properties. It operates
under ﬁve geographic segments in 1 countries. We are number one or
number two in our core markets.

UK & Ireland∏

Continental Europe

Key facts

• 6.3 million passengers

• 7.5 million passengers

• 807 retail outlets

• 4 aircraft

• ,316 retail outlets

• 6 aircraft

• controlled distribution‡: 68%

• controlled distribution‡: 38%

Financial highlights

See Appendix  on page 16 for key.

4

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Pro forma revenue*

£3,097•3m
007: £3,131•8m

Percentage of Group
pro forma revenue

35•2%

Pro forma revenue*

£3,620•4m
007: £3,049•0m

Percentage of Group
pro forma revenue

41•1%

Pro forma proﬁt from operations**

Pro forma proﬁt from operations**

£143•4m
007: £73•6m

£106•3m
007: £67•5m

Operating proﬁt margin***

Operating proﬁt margin***

4•6%
007: .4%

2•9%
007: •%

∏ The key facts given for the UK & Ireland exclude India

and the Middle East.

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Northern Europe

North America

Airlines Germany

• 1.5 million passengers

• 0.8 million passengers

• 6.8 million passengers

• 1 retail outlets

• 9 aircraft

• 56 retail outlets

•  aircraft

• 34 aircraft

• one-third of seats sold in-house

• controlled distribution‡: 79%

• controlled distribution‡: 7%

Pro forma revenue*

£971•6m
007: £806•6m

Percentage of Group
pro forma revenue

11•0%

Pro forma revenue*

£439•8m
007: £379•1m

Percentage of Group
pro forma revenue

5•0%

Pro forma revenue*

£978•2m
007: £855•8m

Percentage of Group
pro forma revenue ø

7•7%

Pro forma proﬁt from operations**

Pro forma proﬁt from operations**

Pro forma proﬁt from operations**

£86•2m
007: £73•5m

£6•0m
007: £4•9m

£45•4m
007: £46•m

Operating proﬁt margin***

Operating proﬁt margin***

Operating proﬁt margin***

8•9%
007: 9•1%

1•4%
007: 1•3%

4•6%
007: 5•4%

Note: Controlled distribution % includes independent
travel bookings.

ø The percentage of Group pro forma revenue

for Airlines Germany has been calculated using
the external revenue ﬁgure of £680.7 million.

Thomas Cook Group plc Annual Report & Accounts 008

5

Directors’ Report
Where we operate

Thomas Cook Group operates a portfolio of market-leading travel
brands in 21 markets. We are committed to providing the best
quality products and services to our customers, and continuing
to deliver shareholder value.

UK & Ireland, India and Middle East

Continental Europe

UK & Ireland brands

Mainstream

Continental Europe brands

Mainstream

Distribution

Distribution

Independent



www.thomascookgroup.com

Independent

Airlines

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North America

Northern Europe brands

Mainstream

North America brands

Mainstream

Distribution

Independent

Distribution

Independent

Thomas Cook Group plc Annual Report & Accounts 2008



Directors’ Report
Chief Executive Ofﬁcer’s statement

Manny Fontenla-Novoa
Chief Executive Ofﬁcer

8

www.thomascookgroup.com

The 2008 ﬁnancial period was the new Group’s ﬁrst full
year of trading and a period in which we achieved a strong
ﬁnancial performance and made signiﬁcant progress against
our strategic agenda. We have achieved industry-leading
margins, demonstrating the strength of our management
team and the ﬂexibility of our business model.

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Overall, our results for the year demonstrate
that, through our merger, we have created a
strong company with a team that has the
knowledge and capability to read the market
and respond accordingly. We have fully integrated
our merged business and a number of strategic
acquisitions, over-delivered against our cost
reduction targets, actively managed capacity,
and successfully navigated our way through a
period of unprecedented oil price volatility.

Recent research and the high load factors we
are currently experiencing give us conﬁdence
that consumers remain intent on taking their
holidays. We believe our strong ﬁnancial position,
together with the increased synergy savings
and contingency measures we have put in
place, will enable us to sustain a market-leading
performance throughout a challenging 2009.
We are targeting further growth in margins in
2009 and 2010, and operating proﬁt of £480
million in 2010.

Thomas Cook Group plc Annual Report & Accounts 2008

9

Directors’ Report
Chief Executive Ofﬁcer’s statement continued

Pro forma ﬁnancial results
Thomas Cook has reported a strong set
of results. This demonstrates the quality of
management, the strength of our asset-light
business model and our operational and
cost ﬂexibility. It was achieved against the
background of the merger integration and
the continued development of the Group
through signiﬁcant strategic acquisitions.

Group pro forma revenue for the twelve months
to 30 September 2008 was £8,809.8m (200:
£,88.5m), an increase of 11.8% on the
prior year period. Excluding the impact of
translation and acquisitions, Group revenue
was ﬂat year on year. This reﬂects a decrease
in UK and North America revenue, as a
result of planned capacity cuts, offset by
an increase in Northern Europe. Underlying
revenue in Continental Europe and Airlines
Germany was broadly ﬂat year on year.

We delivered a 49.8% increase in Group proﬁt
from operations to £35.9m (200: £244.2m).
The Group operating proﬁt margin rose
35.5% from 3.1% to 4.2% last year, despite
a signiﬁcant increase in fuel costs. This
strong result reﬂected our ability to adapt
to changing demand by reducing capacity,
changing our product mix, cost discipline,
and fuel and currency hedging, as well as
our delivery of signiﬁcant synergy savings.

Pro forma EBITDA (proﬁt from operations before
depreciation and amortisation) increased by
3.5% to £50.0m (200: £30.8m). Pro forma
adjusted earnings per share increased by 40.9%
to 24.1p (200: 1.1p).

The segmental performance is reported in detail
in the Operational Review on pages 28 to 3.

Pro forma ﬁnancial position
Thomas Cook’s ﬁnancing position is robust.
In May 2008, we replaced the existing debt
facility with a new credit facility amounting to
£1.4bn, of which £1.0bn is available for
immediate use for the Group’s general
corporate purposes, including acquisitions
and the share buyback programme that we
have now completed.

In view of the current uncertainties in
the credit markets, we took the prudent
approach in October 2008, to draw down
fully our available facility thus ensuring
optimal ﬁnancial certainty for the Group.

Operating cash ﬂow was £220.2m in the
twelve months to 30 September 2008,
compared with £215.3m in the previous
year. At 30 September 2008, net debt was
£292.5m, compared with net funds of

10

www.thomascookgroup.com

£393.m in the previous year, reﬂecting the
planned expenditure on the share buyback
programme and acquisitions.

Operational ﬂexibility, cost base and hedging
The ﬂexibility within our asset-light business
model has been critical during the past
period and we have improved our ability
to underpin our future performance in
more challenging trading conditions.

The resilience we believe we have in the
current difﬁcult trading conditions is
based on that ﬂexibility, the strength of
our businesses post-merger, and capacity
rationalisation throughout the industry.
Capacity reductions in the UK market, for
example, amount to approximately 25% over
the last two years through our actions and
those of other market participants.

We are taking advantage of our buying
power to manage accommodation costs,
which represent over 30% of revenue. We
are conﬁdent that negotiations with our
suppliers will result in prices no higher than
last year’s levels across the Group this year,
despite adverse movements in currency.

The ability to adjust our cost base for potential
changes in demand is also important,
particularly in the current market conditions.
Only 10% of our group-wide hotel capacity
is committed for summer 2009, which
gives us considerable scope to make further
capacity adjustments; and in the UK, around
89% of our tour operator ﬂying requirements
are undertaken by our own ﬂeet, allowing us
considerable ﬂexibility to cut capacity without
impacting our own airline’s operations.

Tight control of all costs is a fundamental
part of the Thomas Cook business model.

In addition, we have developed contingency
plans to cut our overhead costs further
should tougher market conditions prevail.

Hedging
Fuel costs represent approximately 8% of
revenue and successful hedging has been
an important element of managing this cost.
Through a mixture of swaps and options, we
avoided the worst of the high crude oil prices
in the summer of 2008 as well as realising
some beneﬁts when prices fell. We have
now locked in our fuel costs for the current
ﬁnancial year.

We are taking a similar cautious approach to
future costs and our policy is to hedge fuel
and foreign exchange between 12 and 18
months in advance of the expected
expenditure. In line with this:

• we have hedged 100% of our fuel

requirements for winter 2008/2009 and
95% for summer 2009, ensuring certainty
of pricing;

• we have hedged 98% of our dollar and

9% of our euro requirements for winter
2008/2009 and summer 2009.

Merger synergies
The integration of our operations since the
merger between Thomas Cook and MyTravel
on 19 June 200 has been highly successful
and we have been operating on a single
platform from management, commercial and
technological perspectives for over a year.

By accelerating synergy delivery, we realised
total savings of £142m in the 2008 pro forma
period, of which £139m were additional
savings during the period. The majority of
the savings came from the UK business.

Looking forward, we now expect to deliver
new synergy targets of:

• £185m of annual synergy savings

by the end of the 2009 ﬁnancial year
compared with the previous accelerated
target of £155m by 2009;

• a total of £215m of savings by 2010
compared with the original target
of £155m by 2010.

Strategy
We have made signiﬁcant progress against
our strategy this year, both through actions
which have optimised our existing business,
and through acquisitions which have
allowed us to achieve a step-change in
our performance, and these are set out
in more detail on pages 14 to 2.

Share buyback
In December 200, we announced plans for
a £290m (€35m) share buyback programme
and the programme was launched in March
2008, following approval at an EGM held on
12 March 2008. In proposing the programme,
the Board believed that the repurchase of
shares was the best way to return value to
shareholders, while at the same time
improving earnings per share and balance
sheet efﬁciency.

At the close of business on 30 September
2008, the Group had purchased a total of
10,124,30 shares for cancellation, at a total
cost of £23.5m, excluding commission. Of
these shares, 48,595,331 were purchased
from Arcandor AG, as a result of which
Arcandor’s holding was 52.8% of the Group.

Group Executive Board

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From left to right:
Standing: Angus Porter, Jürgen Büser, Thomas Döring, Manny Fontenla-Novoa, Ralf Teckentrup, Michael Friisdahl, Mike Cutt and Ian Derbyshire.
Sitting: Peter Fankhauser, Pete Constanti, Alexis Coles-Barrasso, Ludger Heuberg, Sam Weihagen and Derek Woodward.

See page 50 for biographies

The share buyback programme concluded
on 9 October 2008. Up to that date, a total
of 120,059,11 shares were purchased
for cancellation at a total cost, excluding
commission, of £289.9m. Of these shares,
55,42,5 were purchased from Arcandor AG,
maintaining its holding of 52.8% in the Group.

Management team
This year’s impressive performance is the
result of the strong management team
working together and, in the newly enlarged
Thomas Cook business, being more capable
than ever of dealing effectively with the
challenges we face. Despite the backdrop of
integration, our international team has been
determined that Thomas Cook should remain
resilient, continue to make great progress
and put in place strong foundations upon
which to build its future. I am incredibly
proud of the entire Thomas Cook team for
what they have achieved this year and look
forward to working with them to go even
further in 2009 and beyond.

Outlook
A range of initiatives within our power
underpins our conﬁdence in our prospects
for the current ﬁnancial year. Our business
model allows us to ﬂex capacity and product
mix well into the summer 2009 booking
cycle. In addition to our own capacity
management, we have seen capacity
rationalisation throughout the industry
which gives us further conﬁdence that we
can trade successfully through the current
conditions. Capacity reductions in the UK
market, for example, amount to approximately
25% over the last two years, through our actions
and those of other market participants.

We have tight cost discipline throughout the
business. We are negotiating with suppliers to
ensure that accommodation costs are no
higher than 200/2008 levels despite
currency movements. We are also hedging
fuel and currency against extreme volatility.
In addition, we have developed contingency
plans to cut our overhead costs further
should tougher market conditions prevail,

and have increased synergy targets for 2010
to a total of £215m with £185m expected by
the end of the 2009 ﬁnancial year.

The combination of our management team’s
long industry experience, a restructured
marketplace, our own initiatives and trading
which has been in line with expectations
supports our conﬁdence in our prospects for
the full year. We are targeting further growth
in margins in 2009 and 2010 and operating
proﬁt of £480m in 2010.

Manny Fontenla-Novoa
Chief Executive Ofﬁcer
19 December 2008

Thomas Cook Group plc Annual Report & Accounts 2008

11

Directors’ Report
Chief Executive Ofﬁcer’s review of strategy and performance

Our marketplace

Leisure travel has grown strongly in the past,
and will continue to do so in the future.

Over the long term, international leisure
travel has grown strongly, at roughly twice
the growth rate of the economy as a whole,
and it has proved resilient to major short-term
shocks, such as the early 1990s recession, 9/11
and the 2003 SARS health scares (ﬁgure 1).

The simple fact is that people enjoy holidays,
and the generation which ﬁrst ventured
abroad for two weeks in August has matured
into one which is more conﬁdent, has more
free time and disposable income, and a
growing appetite for adventure. They
have been joined, as their children reach
adulthood, by a new generation which
regards international travel as a top spending
priority; many of them supplementing
a main summer holiday with a second
winter break and weekends abroad.

Growth in independent travel
Many more choices are available to the
modern traveller than existed even ﬁve
years ago. New destinations are opening
up all the time; the internet provides almost
inﬁnite sources of information, inspiration
and opportunities to make travel arrangements;
much greater ﬂexibility exists in tailoring
holidays to individual requirements; and
low-cost airlines have opened up new
destinations at affordable prices.

In this context, it is unsurprising that much of
the growth in the market has been accounted
for by a sustained increase (approximately 5%
per annum) in independent travel, where
consumers buy the elements of a holiday
separately (ﬁgure 2).

Resilience of package holidays
However, this growth in independent travel
has not been at the expense of the package
holiday, where demand remains robust as a
consequence of consumers’ appreciation of
the convenience, quality and great value for
money such packages bring. Indeed, the fact
that someone is there to sort things out if
something goes wrong – whether it be a major
crisis or something as simple as a ﬂight delay
leading to a missed connection – is something
many independent travellers have learned
to appreciate only when they have found
themselves without that reassurance.

Addressing our challenges
Although there are concerns about the
sustainability of long distance mass market
leisure travel, which has provided political
cover for increased taxation of aviation,
these concerns have not as yet had any
discernible effect on demand and seem
unlikely to do so for the foreseeable future.

Figure 1
Tourism is a robust and growing industry that has quickly rebounded from external shocks
International tourist arrivals and real world GDP, indexed to 1980, plus trends

340

320

300

280

260

240

220

200

180

160

140

120

100

80

Financial crisis in Japan

9/11

SARS

Global economic slowdown and
ﬁnancial crises in countries
such as Sweden and Norway

International tourist arrivals
Tourist arrivals trend
Real world GDP
Real GDP trend

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

Year

Source: UNWTO World Tourism Barometer, IMF World Economic Outlook

12

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counterparts in the West. In those developed
markets, travel companies will be challenged
by the need to satisfy the growing demand
for holidays tailored to personal needs and
wants, while still delivering convenience,
reassurance and service.

While the long-term trends are clear,
the current global economic crisis creates
signiﬁcant uncertainties in the short term,
and we have already seen the failure of
a number of airlines and smaller tour
operators. However, the lessons of the
recession of the early 1990s are important
here. At that time, UK unemployment
approached three million, and a major
UK tour operator, ILG, failed. The reduction
in market capacity resulting from the failure
of ILG (even after other tour operators added
further ﬂights to exploit the opportunity) led
to a period in which, despite recessionary
pressures, tour operators delivered very
strong ﬁnancial results.

While the situation in 2008 is very different in
some respects, the consolidation we have
seen in the market following the mergers
of Thomas Cook and MyTravel, and TUI
and First Choice, has led to similar levels of
capacity reduction, and makes the immediate
prospects for the industry more positive than
for some other market sectors.

Furthermore, a number of consumer studies
conducted during the ﬁnal quarter of 2008
have conﬁrmed that people are as committed
to their main annual holiday as they were

before the recession bit. In addition, recent
company failures have reminded people of
the security provided by the UK Government
consumer protection schemes beneﬁting
those who book packages with a tour
operator; a compelling reason for many
independent travellers to think again.

At times like this, there is no question that
consumers seek comfort in the reassurance
of buying from established and trusted
brands – and in that respect, Thomas Cook
is clearly the number one brand in the UK,
and a brand which has considerable equity
worldwide, thanks to its history and ﬁnancial
services business. UK consumer research
consistently shows the Thomas Cook brand as
enjoying a signiﬁcant advantage over its rivals
in terms of consumer trust and travel expertise.

Outlook
In the medium term, there is every reason to
believe that the longer-term trend of strong
growth in demand for international travel
will continue, and even accelerate, as the
fast-growing BRIC (Brazil, Russia, India and
China) markets develop, and their huge
populations take advantage of their
increasing prosperity to experience the
same joys of international travel as their

Figure 2
The UK leisure travel market continues to grow
UK leisure travel market 2000-13, number of passengers (million)

No. of passengers (million)

Historic 5 year CAGR

Forecast 5 year CAGR

55.0

50.0

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0

+2%

Total
46m

+2%

+5%

Independent
27m

+4%

-1%

Package
19m

0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year

CAGR: Compound annual growth rate
Source: Mintel (July 2008)

Thomas Cook Group plc Annual Report & Accounts 2008

13

Directors’ Report
Chief Executive Ofﬁcer’s review of strategy and performance continued

Our strategy

Thomas Cook has a clear strategy of strengthening its
core mainstream business and investing for growth in
independent travel, ﬁnancial services and emerging markets.

Highlights

• Outstanding performance from
Condor, where, following our
withdrawal from consolidation
negotiations, ﬁrst with Air Berlin,
and then with Germanwings and
TuiFly, we demonstrated the
ability to operate successfully
and proﬁtably on a stand-alone
basis. Condor has delivered
a strong performance in a
challenging environment for
airlines generally, as fuel prices
reached record levels, and
more speciﬁcally, in Germany,
where the industry is extremely
competitive. Condor’s result
reﬂects strong capacity
management, cost discipline and
focus on operations at a time
when merger negotiations could
have resulted in distractions.

• Acquisitions that have transformed
our market positions in France
and Canada.

• The entry into a key strategic
emerging market through the
acquisition of Thomas Cook
India, the largest travel and
foreign exchange business in
India. At the same time, we
regained the world-wide rights
to the Thomas Cook brand.

• A step-change in our e-commerce
performance, spearheaded by
Northern Europe, where recent
months have seen over 50% of
bookings being made online.
In the UK, 27% of total bookings
are now made online, while in
Germany, where the internet
market has developed more
slowly, 7% of our customers now
book online (an increase of 14%
year on year), although a much
higher number research online
and then book through an agent.

• Rapid integration of our merged

UK businesses, followed by
decisive action on capacity,
which have allowed us to deliver
strong margin performance in
a highly challenging market.

Our strategy remains focused on four key
growth drivers: maximising the value of
mainstream travel; establishing Thomas Cook
as a leading provider of independent travel;
building our position as a leading provider
of travel-related ﬁnancial services; and
extending our business through mergers,
acquisitions and partnerships, with a
particular focus on emerging markets.

Measuring our performance
There is a direct link between our strategy
and the key indicators of our businesses’
performance. These indicators are regularly
monitored by the management team and
Board to ensure we are meeting our objectives.

Maximise value of mainstream
Our integrated business model maximises
our earnings from transport, accommodation
and distribution through both retail and
online outlets. It also gives us the ﬂexibility
to manage capacity and product mix,
allowing us to adapt to differing market
conditions. We therefore have considerable
ﬂexibility, giving us relative resilience in an
economic downturn.

• In Northern Europe, our strong market
position and our focus on e-commerce
have allowed us to achieve another year
of record proﬁts.

• In the UK, our focus on medium haul has
proved helpful at a time when sterling’s
decline against the euro has augmented
the demand for destinations outside of the
traditional short haul destinations in the
Eurozone. Our strong positions in Turkey
and Egypt give us considerable advantage.
We are also beneﬁting from the shift to
higher margin all-inclusive resorts.

• While Thomas Cook France already enjoys
the position of being the country’s largest
travel retailer, the combination of its tour
operating business with Jet Tours, the Paris-
based, premium tour operator, ensures we
are now also the country’s third largest tour
operator, with a combined market share

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Our strategy is founded upon Thomas Cook people and values. We focus
on the enablers and growth drivers in pursuit of the strategic objectives,
inspired by our vision. The success of our strategy is measured by strong,
sustainable business performance.

Our performance

See Appendix 2 on page 126 for key.

Our vision

Strategic objective

Growth drivers

+11•8%

Pro forma revenue*

2008: £8,810m

+49•8%

Pro forma proﬁt
from operations**
2008: £366m

+35•5%

Pro forma operating
proﬁt margin***
2008: 4•2%

We go further,
to make dreams come true

Strengthen mainstream and build longevity
in our business

1

Maximise
value of
mainstream

2

Leading
independent
travel provider

3

4

Leading
travel-related
ﬁnancial services
provider

Capture growth
through mergers
and acquisitions

Enablers

Product

Technology

Customer
insight

Brands

Financial
rigour

People and the
PROUD values

Pioneering
our future

Results
orientated

Obsessed
with customer
service

United as
one team

Driving
robust
decisions

Thomas Cook Group plc Annual Report & Accounts 2008

15

Directors’ Report
Chief Executive Ofﬁcer’s review of strategy and performance continued

of around 10%. Jet Tours, with its principal
brands Jet Tours, Club Eldorador and Austral
Lagons, serves approximately 270,000
customers per year and complements
Thomas Cook’s existing offering.

• The acquisition of 57 Neckermann

Urlaubswelten retail outlets in Germany
helps strengthen our German distribution,
which remains key to that market.

• We have increased our stake in Iberoservice
from 40% to 65%, a controlling interest.
The balance is still owned by Iberostar.
Iberoservice is a ground handling agency in
Spain and it supports both the mainstream
and the independent travel businesses.

• SENTIDO, the new hotel franchise based
in Germany, gives us access to 17 hotels,
principally in Spain, Egypt, Cyprus, Greece,
Turkey and Kenya, and two Nile river
boats, without increasing our risk proﬁle.
At the same time, we have the control to
ensure they are high quality resorts, and the
opportunity to develop this business further.

work together to ensure continued overall
development in the UK.

• The acquisition of Hotels4U.com, the UK’s
largest independent bed bank, enhanced
the Group’s independent travel offering
considerably. Hotels4U sells exclusively over
the internet, providing accommodation
and resort transfers to over 500,000
customers per annum. It has access to
more than 30,000 hotels internationally.
Our recently acquired business in India has
been among the ﬁrst to take advantage of
including Hotels4U stock in their European
holiday programmes.

• The acquisition of Elegant Resorts, the
number one UK-based luxury travel
company, supports our strategy of
strengthening our independent travel
position and builds on our current expertise
in high-value luxury holidays. Elegant
Resorts carries more than 20,000 passengers
each year to luxury destinations including
the Caribbean, the Indian Ocean, the
Arabian Gulf and luxury European resorts.

• In October 2008, we launched a new

• By acquiring TriWest Travel with its two

e-commerce platform, Starﬁsh, to enhance
the functionality of the thomascook.com
website. It is designed to enhance online
search by offering greater functionality and
ﬂexibility with higher quality information
including maps and imagery. The ‘shortlist’
and ‘compare’ capabilities, that allow
customers to draw up shortlists and
compare options they are considering,
are proving particularly popular and the
conversion rate we are getting from visitors
using these functions is more than three
times the rate of other users of the website.

Leading independent travel provider
We continue to develop our independent
business and are beneﬁting from the rapid
growth in this area.

• We have brought new focus to the

Independent Travel business in the UK
through a signiﬁcant organisational change,
following which the UK business is now
jointly managed by Pete Constanti, who
leads the Mainstream Travel operations,
and Ian Derbyshire, who leads the
Independent Travel business. This allows us
to maximise the opportunities in each of
these areas and, where appropriate, to

principal brands, Fun Sun, an independent
travel wholesaler, and Intair, a leading
airline consolidator, we are creating a
leading Canadian independent travel
business with signiﬁcantly enhanced
customer reach and product offerings.
The business will increase our proﬁts from
independent travel and improve our year-
round proﬁtability, which is currently
skewed towards the winter.

• In December 2008, Thomas Cook
announced that it had agreed to
acquire a majority interest in Gold Medal
International Limited, one of the UK’s
leading independent travel companies.

Leading travel-related ﬁnancial
services provider
The development of our ﬁnancial services
business is underpinned by the strength of the
Thomas Cook brand and, by re-establishing
world-wide control over it, we have
considerably enhanced the potential
to develop it in other markets.

• India is one of the fastest-growing travel

and travel-related foreign exchange
markets in the world, expanding by 15%
per annum. Our acquisition of 74.9% of

Thomas Cook India gives us the opportunity
to drive this expansion. We are conﬁdent
the strength of the foreign exchange
business will provide a strong platform
for proﬁt growth.

• In the UK, unlike many companies, we

are already operating under the new and
increased regulation of the travel insurance
industry, which comes into place at the
beginning of 2009.

• Also in the UK, we expanded our foreign
exchange franchise in airports, including
our high-proﬁle appointment as the
leading partner in Heathrow Terminal 5
and Manchester Airport.

Capture growth and value through
mergers, acquisitions and partnerships
The businesses acquired in 2008 are all
performing well and we are generating
synergies as planned. We continue to
review opportunities for expansion, but will
concentrate on those that are able to deliver
earnings accretion by year two and exceed
the cost of capital by year three.

• We are focusing on those emerging markets
where tourism is growing at a faster rate
than in our traditional markets, as
demonstrated by our acquisition of
Thomas Cook India, mentioned above.
We are particularly encouraged by the
opportunities in Russia and China.

• Through the acquisition of Thomas Cook
Egypt, we have re-acquired control over
the Thomas Cook brand in the important
and fast-growing Middle East region, as
well as gaining an established and
proﬁtable business.

Strategy outlook
Our strategy is serving us well, and the
virtues of asset ﬂexibility, prudent capacity
management and tight cost control are
manifest in these difﬁcult economic times.
We therefore do not plan to deviate from
that strategy, but will be fully mindful of the
conditions in which we are operating, for
example in contemplating acquisitions –
where we will focus our attention on
emerging markets (China and Russia), which
have clear strategic importance, and on deals
where we see the opportunity to create
exceptional value for shareholders.

16

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We will also add further impetus to our
efforts to work together more effectively as
a Group, complementing our strategies in
each of our geographic segments with new
initiatives designed to extract further value
through collaboration (for example across
our airlines and with appropriate group-wide
procurement initiatives). We will also pay
particular attention to the e-commerce
opportunity, where up to now we have
focused on building websites which are
integral to our local multi-channel strategies,
but where we see a global opportunity for
the Thomas Cook brand.

Finally, we will examine our brand portfolio,
where we believe we have a number of strong
brands, but more than we can support
effectively. Central to our future is the
Thomas Cook brand. It has been the leading
brand in the leisure travel market for over
160 years and remains – along with our
people – our most valuable asset.

Our strategy in action

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Maximise value
of mainstream
Our integrated business model ensures
we maximise earnings from transport,
accommodation and distribution
through retail and online outlets.

page 18

Leading independent
travel provider
We continue to develop our independent
travel business and are beneﬁting from
the rapid growth in this area.

page 20

Leading travel-related
ﬁnancial services provider
The development of our ﬁnancial services
business is underpinned by the strength
of the Thomas Cook brand.

page 22

Capture growth through
mergers and acquisitions
We made a number of key acquisitions
in 2008 and all are performing well
and providing the synergies expected.

page 24

Our people,
our key differentiator
From booking a holiday, through to the
airline and in-resort service they provide,
it is our people who make the difference
to our customers’ holiday experience.

page 26

Thomas Cook Group plc Annual Report & Accounts 2008

17

Our strategy in action
Maximise value of mainstream

We continue to focus on
maximising the value of
mainstream package holidays.
Our integrated business model
ensures we maximise earnings
from transport, accommodation
and distribution through retail
and online outlets.

Setting the standard for e-commerce
This year has seen a step-change in our e-commerce
performance, spearheaded by Northern Europe, where
recent months have seen over 50% of bookings being
made online. In the UK, 27% of total bookings are now
made online, while in Germany, where the internet
market has developed more slowly, 7% of our customers
now book online (an increase of 14% year on year),
although a much higher number research online and
then book through an agent.

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Delivering the future
of package holidays

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A new franchising hotel concept
SENTIDO, the new hotel franchise, gives us access to 17
hotels, principally in Spain, Egypt, Cyprus, Greece, Turkey
and Kenya, and two Nile river boats, without increasing
our risk proﬁle. At the same time, we have the control to
ensure they are high quality resorts, and the opportunity
to develop this business further.

Thomas Cook Group plc Annual Report & Accounts 2008

19

Our strategy in action
Leading independent
travel provider
We continue to develop our
independent travel business
and are beneﬁting from the
rapid growth in this area.

Accessing the UK’s largest hotel network
The acquisition of Hotels4U.com, the UK’s largest
independent bed bank, enhanced the Group’s
independent travel offering considerably. Hotels4U sells
exclusively over the internet, providing accommodation
and resort transfers to over 500,000 customers per
annum. It has access to more than 30,000 hotels
internationally. Our recently acquired
business in India has been among
the ﬁrst to take advantage of including
Hotels4U stock in their European
holiday programmes.

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Exploring the world
with Thomas Cook

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Leading the Canadian
independent travel market
By acquiring TriWest Travel with its two principal brands,
Fun Sun, an independent travel wholesaler, and Intair, a
leading airline consolidator, we are creating a leading
Canadian independent travel business with signiﬁcantly
enhanced customer reach and product offerings. The
business will increase our independent travel proﬁts and
improve our year-round proﬁtability, which is currently
skewed towards the winter.

Thomas Cook Group plc Annual Report & Accounts 2008

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Our strategy in action
Leading travel-related
ﬁnancial services provider
The development of our
ﬁnancial services business is
underpinned by the strength
of the Thomas Cook brand.

Leading the ﬁnancial services
market in India

India is one of the fastest growing travel and travel-
related foreign exchange markets in the world,
expanding by 15% per annum. Our acquisition of
74.9% of Thomas Cook India gives us the opportunity
to drive this expansion. We are conﬁdent the strength
of the foreign exchange business will provide a
strong platform for proﬁt growth.

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More than just
a travel agent

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Thomas Cook in Terminal 5
In line with our strategy to grow our ﬁnancial services
offering, we have expanded our foreign exchange
franchise in airports. This has included our high proﬁle
appointment as a partner in Heathrow Terminal 5 and
Manchester Airport. The strength of the Thomas Cook
brand and the customer service we offer have combined
to allow us to establish ourselves as the market leader
in both locations.

Thomas Cook Group plc Annual Report & Accounts 2008

23

Our strategy in action
Capture growth through
mergers and acquisitions
We continue to look for expansion
opportunities through acquisition.
We made a number of key
acquisitions in 2008 and all are
performing well and providing
the synergies expected.

Number one in luxury travel
The acquisition of Elegant Resorts, the number one
UK-based luxury travel company, supports our strategy
of strengthening our independent travel position and
builds on our current expertise in high-value luxury
holidays. Elegant Resorts takes more than 20,000
customers each year to luxury destinations including
the Caribbean, the Indian Ocean, the Arabian Gulf and
luxury European resorts.

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New companies
New opportunities

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Transforming our French business
While Thomas Cook France already enjoys the position
of being the country’s largest travel retailer, the
combination of its tour operating business with
Jet Tours, the Paris-based, premium tour operator,
ensures we are now also the country’s third largest tour
operator, with a combined market share of around 10%.
Jet Tours, with its principal brands Jet Tours, Club
Eldorador and Austral Lagons, serves approximately
270,000 customers per year and complements
Thomas Cook’s existing offering.

Thomas Cook Group plc Annual Report & Accounts 2008

25

Our strategy in action
Our people, our key
differentiator
We recognise that it is our people who
will be our key differentiator. From
buying a holiday, through to the airline
and in-resort service they provide, it
is our people who are making the
difference to the customers’
holiday experience.
We are therefore committed to hiring
the best people, training and developing
them to fulﬁl their potential, and providing
career opportunities that keep them
within the Thomas Cook Group.
All of our businesses operate recruitment,
training and development and reward
policies appropriate to their local markets.
Over and above this, the new Thomas Cook
Group has launched some ambitious
initiatives to keep the Group’s people
at the forefront of its businesses.

Values
The Group has adopted the ‘PROUD’ values as the cornerstone of
employee behaviour. All Thomas Cook businesses now encourage
their employees to aspire to this way of working.

Pioneering our future – we inspire energy and enthusiasm. We seek
constantly to be creative and innovative and challenge constructively
the status quo. We thrive in an ever-changing and dynamic world.

Results orientated – we take responsibility for achieving results.
We are reliable and always deliver our promise. We are committed
and determined to challenge and overcome barriers and solve
problems. We always work to improve our own and others’
performance and capabilities.

Obsessed with customer service – we deliver the best possible
experience for our customers at all times. We listen and respond
to their personal needs.

United as one team – we support and respect each other and work
openly and collaboratively with our colleagues as a single, world-wide
team. We trust each other and always demonstrate integrity and honesty.

Driving robust decisions – we strive for quality, speed and clarity of
decisions. We learn from the past. We ensure our decisions are based
on facts and are fair.

Employee engagement
Thomas Cook places a great deal of importance on internal
communication. The Group’s Chief Executive Ofﬁcer visits each of
the operating markets at least once a year and communicates on a
monthly basis to update Group employees on the Company’s progress
and performance. Many regular communication vehicles are produced
by the Group and its segments with the aim of keeping all employees
up-to-date on the latest business and market developments. In
addition, many of our key markets also host annual conferences
to review the previous year’s performance and set out the priorities
for the coming year.

Denise Williams and Anthony Manning were
announced UK & Ireland Chief Executive Ofﬁcer
employees of the year for 2007/08. Their reward
included: a cruise to New York on the QE2; a
£4,000 shopping allowance at London’s Harvey
Nichols and, throughout the year, they attended
all of the Company’s key external events as
guests of honour.

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Succession planning
In January 2009, the Board will, for the ﬁrst time, be able to view
succession plans for all senior positions across the Group and will
manage talent at a Group level.

Development
Thomas Cook has created a fast-track development programme at
Group level for high-potential employees from all of its businesses,
as well as a handful of high-potentials hired into Thomas Cook from
outside the sector. These individuals will receive business and
leadership development to prepare them to be the Group’s
senior managers of the future.

Reward
As well as aligning reward for senior managers across the Group,
Thomas Cook launched an international Save As You Earn Share
Scheme for all its employees within a year of the merger. Some 3,500
employees across all our businesses are now saving to become
shareholders in Thomas Cook Group plc.

This is just the beginning. We will continue to build our people policies
to support the Thomas Cook brand as it expands across the world.

Employment policies
Thomas Cook Group is committed to treating everyone fairly and
reasonably according to their individual merits and abilities measured
against our justiﬁable business needs. Therefore, any form of unlawful
discrimination directly or indirectly on the grounds of sex, gender
reassignment, pregnancy, colour, race, nationality, ethnic or national
origins, sexual orientation, disability, age, religion or belief, or because
someone is married or is a civil partner, will not be tolerated.

Thomas Cook Group also aims to reﬂect the diversity of the community
in which it operates because it values the individual contribution
of all employees and recognises its legal and social responsibilities.

Thomas Cook Group is committed to promoting equality and all
employees have a duty to contribute towards ensuring that the
PROUD values are upheld and that the culture, climate and working
environment are free from harassment and discriminatory treatment.

Gisela Soekeland, Managing Director of
Thomas Cook Reisen, was voted one of
the top 25 businesswomen in Germany
by Financial Times Deutschland.

Dr Veronika Békeﬁ, Chief Executive Ofﬁcer of
Neckermann Hungary, was voted one of the 100
most successful businesswomen in Hungary in
2007 by the Hungarian Marketing Federation.

Thomas Cook Group plc Annual Report & Accounts 2008

27

Directors’ Report
Operational review

UK &
Ireland

Ian Derbyshire
Chief Executive Ofﬁcer,
Independent Travel UK

Pete Constanti
Chief Executive Ofﬁcer,
Mainstream Travel UK

The UK has made excellent ﬁnancial and strategic progress. We have considerable
ﬂexibility to adapt to changes in demand through our asset-light and integrated
business model. This has served us well and underpins our conﬁdence looking
forward. We have also strengthened our business through the merger, acquisitions
and developments in e-commerce and Financial Services.

Financial highlights1

Revenue (£m)*

Proﬁt from operations (£m)**

Operating proﬁt margin % ***

–1•1%

.

8
1
3
1
3

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7
9
0
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3

+94•8%

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08

+91•7%

4
.
3
4
1

08

.

6
3
7

07

6
.
4

4
2

.

07

08

1 These are unaudited pro forma ﬁgures for the twelve months ended 30 September 2008. For a deﬁnition of how these ﬁgures have been compiled, please refer to Appendices 1

and 2 on pages 120 to 126. The statutory results for the eleven months to 30 September 2008 are set out on pages 68 to 110. See Appendix 2 on page 126 for key.

Operational highlights

• We operate in a more rational market
where capacity has been reduced by
around 25% in the UK market over
the last two years

• The UK business is much stronger
following the merger, with the
majority of the accelerated
synergy savings and margin
accretion arising in the UK

• Strategic acquisitions, including

Hotels4U.com and Elegant Resorts,
strengthened our platform for
future growth, particularly in
independent travel

• The successful launch of Starﬁsh, a

sophisticated e-commerce platform,
signiﬁcantly improves our customers’
experience when searching for and
booking holidays online

• We expanded our foreign exchange
franchise in airports and are the
leading partner in Heathrow
Terminal 5 and Manchester Airport

• We have established separate

divisions for our Mainstream Travel
and Independent Travel businesses

Key facts

6•3m

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807

retail outlets

42

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The UK businesses performed extremely
well in the period under review, delivering a
94.8% improvement in proﬁt from operations
despite tough market conditions and the
ongoing integration process.

The pro forma revenue for the twelve months
to September 2008 was 1.1% lower than in
the prior year period at £3,097.3m. However,
excluding the impact of acquisitions (India,
Egypt, Lebanon, Hotels4U and Elegant
Resorts), the pro forma revenue was 3%
lower. This reduction reﬂects lower capacity,
partially offset by improved selling prices and
increased load factors. Other passengers
increased by 99% year on year, reﬂecting
the acquisitions we made in the period
which underpin our strategy for growth
in the Independent Travel business. Retail
customers, being third party tour operator
passengers booking predominantly through
Thomas Cook shops, fell year on year by
9.5% largely due to the rationalisation of
the retail network of the combined Group
following the merger, which resulted in
the closure of 98 shops.

One of the key success factors in managing
a tour operating business is ensuring that
supply and demand remain in balance and
eliminating loss-making programmes and
holidays. To achieve this, management
reduced capacity on sale in the UK risk
business by 7.5% year on year, with the larger
part of this reduction coming in the summer
season. In addition, in line with our strategy,

we increased the proportion of our holidays
to medium haul destinations, while reducing
our short haul and long haul programmes.
As a result of the above actions, the number
of passengers carried fell by 6.8% but the
average selling prices and margins achieved
on those holidays departing in the period
were signiﬁcantly increased year on year.

In addition to the capacity management
measures above, we were also able to
realise signiﬁcant merger synergies during
the period, which offset the year on year
increase in fuel prices and the adverse
impact of changes in foreign currency
rates. Acquisitions in the period also
contributed to the proﬁt from operations.

As a result, the pro forma proﬁt from
operations was increased to £143.4m from
£73.6m in the prior year, an increase of
almost 100%. The operating proﬁt margin
was also improved from 2.4% to 4.6%.

Control of distribution and, in particular,
growth of sales through the internet is a key
cornerstone of our strategy for future success.
The proportion of our mass market departed
passengers who booked on the internet was
26.2%, an increase of 12.9% on the prior
year period. The proportion of mass market
passengers departing in the period who
booked through our controlled distribution
channels (owned websites, shops and call
centres) grew by 4.3% to 67.6%.

Key performance indicators
Controlled
distribution‡
+4.3%

Internet distribution‡
+12.9%

Passengers†
–6.8%

Capacity††
–7.5%

Average selling price#
+4.9%

Load factor†††
+0.6%

Brochure mix##
+3.8%

See Appendix 2 on page 126 for key.

Thomas Cook Group plc Annual Report & Accounts 2008

29

Directors’ Report
Operational review continued

Continental
Europe

Peter Fankhauser
Chief Executive Ofﬁcer,
Central Europe

Thomas Döring
Chief Executive Ofﬁcer,
East and West Europe

This segment comprises businesses in Austria, Belgium, the Czech Republic, France,
Germany, Hungary, the Netherlands, Poland, Slovakia and Switzerland. They are diverse as
they reﬂect their speciﬁc markets, but they are also united by the Thomas Cook asset-
light approach and focus on margins. Capacity is more ﬂexible in Continental Europe
than elsewhere in the Group, giving us even greater adaptability to changing demand.

Financial highlights1

Revenue (£m)*

Proﬁt from operations (£m)**

Operating proﬁt margin % ***

+18•7%

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7
6

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2
2

.

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and 2 on pages 120 to 126. The statutory results for the eleven months to 30 September 2008 are set out on pages 68 to 110. See Appendix 2 on page 126 for key.

Operational highlights

• Strong performance driven by
excellent yield management,
improved ﬂight utilisation in
Germany and the turnaround of
our business in France, where we
achieved signiﬁcant margin growth

• The acquisition of Jet Tours, the
premium tour operator, makes
us France’s third largest tour
operator and complements
our existing offering

• The acquisition of 57 Neckermann

Urlaubswelten retail outlets
in Germany strengthens our
German distribution, which
is key to that market

• SENTIDO, the new hotel franchise,

gives us access to and quality control
of 17 hotels and two Nile river boats
without increasing our risk proﬁle

• Our controlling interest in Iberoservice,
a ground handling agency in Spain,
supports both mainstream and
independent travel operations

• We developed innovative holiday
concepts, such as Xperience in the
Netherlands and Belgium, and
Thomas Cook Villages in France,
to target specialist interest groups

• This was our ﬁrst full year in the
Czech market. We are growing
rapidly and achieving high
margins throughout our
Eastern European businesses

Key facts

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As a result, the pro forma proﬁt from operations
was increased to £106.3m from £67.5m in the
prior year, an increase of 57.5%.

The operating proﬁt margin for the Continental
segment was improved from 2.2% to 2.9%.
The restructuring programmes we have
undertaken in all our Western markets have
paid dividends in the period. In France, we
are especially pleased with the 5.6% margin
we achieved. This is a strong improvement
on the prior year margin of 2.9%. Margins
also improved signiﬁcantly in Belgium
(4.8% compared to 2.9%) and the Netherlands
(3.3% compared to 2.0%). Our relatively new
Eastern division also achieved an operating
margin of 4.6%, up from 4.1% in the prior
year. The overall margin we achieved in
Germany (including Airlines Germany)
was very pleasing at 3.1% compared
with 2.9% in the prior year.

The proportion of our departed passengers
in the Continental European markets who
booked on the internet was 8.5%, an increase
of 18.1% on the prior year period. While this
proportion seems low in comparison to the
UK and Northern European markets, it
continues to grow strongly and plays an
important role in our multi-channel
proposition. The proportion of passengers
departing in the period who booked through
our controlled distribution channels in
Continental Europe (owned websites, shops
and call centres) grew by 5.3% to 37.7%.

Key performance indicators
Controlled
distribution‡
+5.3%

Internet distribution‡
+18.1%

Passengers
ﬂight-inclusive†
–0.8%

Passengers
non-ﬂight inclusive†
–1.7%

Average selling price#
+3.0%

The performance in the Continental European
businesses during the period was very strong,
resulting in a £38.8m improvement in pro
forma proﬁt from operations and a 31.8%
increase in the operating proﬁt margin.

The pro forma revenue for the twelve months
to September 2008 increased by 18.7% to
£3,620.4m. However, this increase was driven
by changes in translation exchange rates and
the impact of acquisitions (Iberoservice, Jet
Tours, Neckermann Urlaubswelten, urlaub.de
and the full year impact of the Czech
business acquired in the previous year).
As a result, underlying revenue remained
at the same level as in the prior year, with
lower passenger numbers in the German
and Dutch businesses being offset by
increased passengers in the other Western
markets (Belgium and France) and improved
selling prices in Germany and all our Western
markets. In the Eastern markets (Poland,
Hungary, Czech Republic), where we are still
establishing our business, we successfully
increased volumes and selling prices.

The reduction in passenger numbers in
Germany and the Netherlands was expected
and reﬂects management’s focus on selling
proﬁtable holidays rather than protecting
market share. This policy has proved
successful as both selling prices achieved
and margins have increased year on year.
Improved ﬂight utilisation in Germany
also further helped to improve margins
year on year.

The proﬁt from operations was further
improved by the realisation of synergy
beneﬁts in agency relationships, including
the acquisition of a controlling stake in
Iberoservice. Other acquisitions and changes
in exchange rates also beneﬁted the year
on year performance.

See Appendix 2 on page 126 for key.

Note: Flight-inclusive passengers above includes
Jet Tours passengers post-acquisition.

Thomas Cook Group plc Annual Report & Accounts 2008

31

Directors’ Report
Operational review continued

Northern Europe

Sam Weihagen
Chief Executive Ofﬁcer

We operate in Sweden, Denmark, Norway and Finland.
the Northern European market focus on margin rather than market share,
resulting in a relatively stable and rational marketplace. As a result of our
relatively high level of integration, we have once again achieved industry-leading
operating margins.

All major players in

Financial highlights1

Revenue (£m)*

Proﬁt from operations (£m)**

Operating proﬁt margin % ***

+20•5%

+17•3%

6
.
1
7
9

.

6
6
0
8

07

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–2•2%

2
.
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8

.

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3
7

07

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1
9

.

9
.
8

07

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1 and 2 on pages 120 to 126. The statutory results for the eleven months to 30 September 2008 are set out on pages 68 to 110. See Appendix 2 on page 126 for key.

Operational highlights

• We are monitoring capacity in the

• Along with controlled distribution

Northern European market to ensure
we are able to achieve the prices and
margins we expect

• The expansion of our medium haul
programmes in Turkey, the Canaries
and Egypt is proving right in current
market conditions, as long haul
becomes less popular

and yield management, our success
depends on our strong brands and
the quality of our products, as we
are once again proving with the
launch of Sunprime

• More than 45% of all bookings were
made online and we are launching
a new platform to improve our
online offering still further

• Thomas Cook Airlines Scandinavia
is, according to an independent
survey, the most environmentally
friendly Nordic airline with regard
to CO2 emissions

Key facts

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Our Northern European business has again
delivered a record performance in the period
under review, increasing the pro forma proﬁt
from operations by £12.7m year on year and
maintaining an operating proﬁt margin of
around 9%.

The pro forma revenue for the twelve months
to September 2008 increased by 20.5% to
£971.6m. Adjusting for the impact of changes
in the translation exchange rates, underlying
revenue increased by 9%, reﬂecting both
increased passenger numbers and improved
selling prices. The beneﬁt from increased
selling prices and passenger numbers was,
however, partially offset by increased fuel
prices. However, underlying margin was
still improved year on year. Changes in
exchange rates also beneﬁted the year
on year performance.

Our Northern European businesses continue
to lead the segments in terms of internet
distribution. The proportion of our departed
mass market passengers who booked on
the internet was 45.6%, an increase of 18.8%
on the prior year. The proportion of mass
market passengers departing in the
period who booked through our controlled
distribution channels in Northern Europe
(owned websites, shops and call centres)
grew by 2.6% to 79.4%.

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Key performance indicators
Controlled
distribution‡
+2.6%

Internet distribution‡
+18.8%

Passengers†
+3.2%

Capacity††
+3.2%

Average selling price#
+8.6%

Load factor†††
–0.1%

Brochure mix##
+4.6%

See Appendix 2 on page 126 for key.

Thomas Cook Group plc Annual Report & Accounts 2008

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Directors’ Report
Operational review continued

North America

Michael Friisdahl
Chief Executive Ofﬁcer

Our North American business, which operates mainly in Canada, has performed
well in this highly competitive market in which our competitors have added more
capacity coupled with aggressive pricing. The acquisition of TriWest makes us a
leading independent travel company in Canada, improves the balance of our
earnings through the seasons and reduces the overall risk proﬁle of our business.

Financial highlights1

Revenue (£m)*

Proﬁt from operations (£m)**

Operating proﬁt margin % ***

+16•0%

+22•4%

8
.
9
3
4

.

1
9
7
3

07

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+7•7%

0
.
6

9
4

.

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3
1

.

4
.
1

07

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and 2 on pages 120 to 126. The statutory results for the eleven months to 30 September 2008 are set out on pages 68 to 110. See Appendix 2 on page 126 for key.

Operational highlights

• Strong performance through

improved aircraft utilisation, reduced
peak season accommodation costs
and a further reduction in hotel
commitments

• TriWest acquisition meeting our
strategic goals and integration
going well with synergies on track

• We are now a leading player in
independent travel in Canada

• Now achieving all year-round
proﬁtability by eradicating the
previous seasonality of the
mainstream tour operator while
still providing good utilisation
of the Group’s aircraft during
the winter months

• Strong growth in online bookings

of 24% at this early stage of
our development

Key facts

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passengers

56

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Internet distribution continues to grow in
our Canadian business. The proportion of
passengers who booked on the internet was
15.8%, an increase of 24.4% on the prior year.
The proportion of passengers departing
in the period who booked through our
controlled distribution channels (owned
websites, shops and call centres) grew to
27.2%, an increase of 25.9% on the prior year.

Our North American business has performed
solidly in the period under review, despite
continued difﬁcult trading conditions and
over-capacity in mass market tour operating
in Canada. The pro forma proﬁt from
operations increased by £1.1m to £6.0m
and the operating proﬁt margin was
increased to 1.4%.

The pro forma revenue for the twelve months
to September 2008 increased by 16.0% to
£439.8m. Adjusting for the impact of changes
in the translation exchange rates and the
acquisition of TriWest, underlying revenue
decreased by 8%, reﬂecting both decreased
passenger numbers and lower selling prices.

Increased fuel costs adversely affected the
year on year margin performance. However,
excluding this, underlying margins were
increased year on year through better ﬂight
utilisation and an improved brochure mix,
despite the current market conditions. In
addition, the result beneﬁted from changes
in year on year exchange rates and the
acquisition of TriWest. Going forward, we
expect the proportion of proﬁts from our
independent businesses, and in particular
TriWest, to increase signiﬁcantly, thereby
reducing our exposure to the highly
competitive mass market operations.

Key performance indicators
Controlled
distribution‡
+25.9%

Internet distribution‡
+24.4%

Passengers†
–2.3%

Capacity††
– 2.4%

Average selling price#
–2.6%

Load factor†††
+0.1%

Brochure mix##
+6.6%

See Appendix 2 on page 126 for key.

Note: Controlled and internet distribution percentages
include independent travel bookings.

Thomas Cook Group plc Annual Report & Accounts 2008

35

Directors’ Report
Operational review continued

Airlines
Germany

Ralf Teckentrup
Chief Executive Ofﬁcer

Condor delivered an outstanding performance in the highly competitive German
market despite record fuel prices in the summer. Around one-third of Condor’s
passengers are customers of Thomas Cook’s German tour operator, with the
balance comprising ‘seat-only’ passengers and other tour operators’ customers.

Financial highlights1

Revenue (£m)*

Proﬁt from operations (£m)**

Operating proﬁt margin % ***

+14•3%

–1•7%

2
.
8
7
9

.

8
5
5
8

07

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2
6
4

4
.
5
4

07

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–14•8%

4
5

.

6
.
4

07

08

1 These are unaudited pro forma ﬁgures for the twelve months ended 30 September 2008. For a deﬁnition of how these ﬁgures have been compiled, please refer to Appendices 1

and 2 on pages 120 to 126. The statutory results for the eleven months to 30 September 2008 are set out on pages 68 to 110. See Appendix 2 on page 126 for key.

Operational highlights

• Following the withdrawal from
consolidation negotiations, ﬁrst
with Air Berlin, and then with
Germanwings and TuiFly, Condor
continues to operate successfully
on a stand-alone basis

• Condor operated proﬁtably for the
fourth year in a row through good
capacity management, cost discipline
and the focus on proﬁtable tourist
destinations

• We reduced our ﬂeet by one aircraft,
thus reducing capacity, and at the
same time we increased seat load
factor by 2.4%

• We invested in the quality of our

service through the introduction of
new premium economy seating and
the refurbishment of the cabins of
our Boeing-767 ﬂeet

• Measures are in place to reduce costs,
improve the technical performance
of our ﬂeet and increase fuel savings

Key facts

6•8m

passengers

34

aircraft

one-third
of seats sold in-house

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Our Airlines Germany segment has performed
well in a period when other airlines have
suffered signiﬁcantly in the face of rising fuel
prices and intense competition. Although the
operating proﬁt margin reduced from 5.4%
to 4.6%, contribution to Group proﬁtability
remained in line with the prior year with
pro forma proﬁt from operations at £45.4m.

Total revenue increased by 14.3%, to
£978.2m. Adjusting for the impact of
translation exchange rates, underlying
revenue was broadly ﬂat year on year. This
reﬂects the planned reductions in capacity,
offset by improved load factors and yields.
The increase in yield of 9.6% largely reﬂects
increased income from fuel surcharges and
a change in mix from selling to our own
German tour operator to selling more to
third party tour operators.

Fuel costs increased signiﬁcantly year on
year. However, we were able to largely
mitigate the impact of this at the gross
margin level by the improved yields and
load factors noted above, together with
tight cost control. Beneﬁcial movements
in foreign exchange rates also contributed
positively to the year on year performance.

Key performance indicators
Capacity††
– 4.7%

Yield###
+9.6%

Seat load factor†††
+2.4%

Sold seats ‡‡

Thomas Cook tour operators

3rd party tour operators

External seat only

Total sold seats

Sold seats ‡‡

Europe (excl. Cities)

Long haul

Cities

Total sold seats

Revenue

Revenue – external*
Revenue – internal*
Total revenue*

See Appendix 2 on page 126 for key.

Change %

–28.4

+18.5

–3.5

–9.5

–10.8

+1.5

–24.2

–9.5

Change
%

+33.0

–13.5

+14.3

12 months
ended
30 September
2008
£m

12 months
ended
30 September
2007
£m

680.7

297.5

978.2

511.7

344.1

855.8

Thomas Cook Group plc Annual Report & Accounts 2008

37

Directors’ Report
Corporate social responsibility

Thomas Cook believed affordable travel could change
ordinary people’s lives for the better. Today, we are still
inspired by that vision.

How we see CSR
“Thomas Cook had a clear vision when he
devised the ﬁrst package holiday over 160
years ago. He believed affordable travel could
change working people’s lives for the better.
His company was inspired by a strong sense
of social justice and moral responsibility.

Today, we are still inspired to deliver our
founder’s values. We believe they make
a tangible difference to our customers’
holiday experience and to all the other
people whose lives we touch.

In our corporate social responsibility policy,
we deﬁne CSR as ‘operating responsibly to
minimise negative and enhance positive
environmental, social and economic impact:
ensuring the long-term sustainability of
our business and of the resources on
which we depend’.

The nature of our business means that we
cannot treat CSR as peripheral or optional.
The environment and communities in
destinations where we operate are integral
to the products we sell: protecting them
is fundamental to our business and to
everyone on whom our business depends.”

Manny Fontenla-Novoa
Chief Executive Ofﬁcer

Read our CSR policy in full on our CSR website
at: http://csr.thomascookgroup.co.uk

How we manage CSR
CSR is recognised as key to the Group:
strategy and progress against targets are
reviewed at the highest level. The Board’s
Health, Safety & Environmental Committee
meets regularly to review the management
of health, safety and environmental risks
and their impact on our activities, and
the development and implementation
of relevant Group policies.

It oversees the work of the Sustainability
team, which formulates and implements
CSR strategy, shares best practice around
the Group, and reports on performance.
The team’s primary role is to help secure
the long-term sustainability of the business
by integrating our CSR strategy into our
normal business culture. It now has four
full-time professionals.

Key stakeholders
Our stakeholders include customers,
employees, investors, suppliers, local
communities, industry partners,
governments and non-governmental
organisations, in our source countries
and the destinations where we operate.

We work with them on identifying the issues
that can move our business forward. In
particular, we need the support of customers,
employees and suppliers: without them we
cannot achieve real sustainability, so we
attach particular importance to raising their
awareness of CSR issues and work with them
to enhance policies, standards and practices.

Focus areas
These are the areas that particularly
concern us in relation to our principal
stakeholder groups and activities:

Customers
To succeed as a business, we have to build
the best possible relationships with our
customers and build trust with everyone
we take on holiday. We strive for continuous
improvement across all our customer-facing
activities. This was recognised by a number
of industry awards during the year, including
three of the top British Travel Awards,
two at the Globe Travel Awards including
Best Ski/Activity Operator for the ﬁfth year
running, Best Sun Holiday Tour Operator
(also for the ﬁfth year running) at the Irish
Travel Trade News Awards, and three top
awards at the Scottish Passenger Agents
Association Awards, including overall
Best Tour Operator.

We listen to our customers through
independent research and their direct
feedback, and use their comments to
guide changes and improvements. We pay
particular attention to customers’ health
and safety: our move in 2008 to devolve
responsibility for this to the operating
divisions helps us respond quickly to local
conditions and regulatory requirements.

Employees
Our success depends absolutely on how
well we recruit, develop, train and motivate
our 31,000 employees. Since the merger,

Thomas Cook Children’s Critical Care Centre
In May 2008, Manny Fontenla-Novoa proudly opened the doors of the
Thomas Cook Children’s Critical Care Centre at London’s Kings College
Hospital. This new £2.3m centre is one of the ﬁrst of its kind in the UK,
housing Paediatric Intensive Care and a specialised Paediatric High
Dependency Unit. Made possible by fundraising from Thomas Cook
employees and the generosity of our customers, the state-of-the-art
centre will treat more than 400,000 sick children each year.

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2008 priorities

Employees

2008
progress

Details and further action

Launch share schemes for all employees,
with shareholder approval.

Achieved

Save As You Earn (SAYE) launched internationally, with 10% take-up among eligible
employees. Buy As You Earn (BAYE) launched in the UK with 6% take-up.

Maintain UK Investors in People accreditation.

Achieved

Re-accredited, including prestigious World Class recognition.
(Accreditation excludes Retail and Airline businesses).

Review UK diversity policies.

Achieved

Review complete. Diversity training developed for new employees and managers, included
in induction at all levels. Local population profiling tool developed for recruitment.

Make UK health and safety management system more
user-friendly, with access for all Retail employees.

Achieved

UK systems made more user-friendly. Retail management system streamlined, with all risk
assessment forms and other information available online. Work continues on new intranet.

Environment
Create new and expanded Group
environmental policy.

Appoint a member of staff dedicated to
environmental management.

Partially
achieved

Achieved

At draft stage. Target date for publication July 2009.

Appointed September 2008. Group audit now underway to ensure completion
of other targets.

Report on CO2 emissions from UK airline in future.

Ongoing

CO2 emission data published in main CSR report on www.thomascookgroup.com

Cut Northern European airline fuel consumption
and emissions per passenger/km by 1% and cut
cabin waste per passenger by further 5%.

Customers and products

Comply fully with new EU regulations on access
to air travel for people with reduced mobility in
force from July 2008.

Maintain IATA Operational Safety Audit (IOSA)
registration for the combined UK airlines.

Partially
achieved

We set increasingly demanding standards to continue our long-term programme,
but narrowly missed last year’s targets.

Achieved

Work continues to improve access beyond statutory requirements.

Achieved

We maintained our IOSA position: next full audit due February 2009.

Move suppliers towards recognised international
fire and safety standards.

Ongoing

In the UK we continue to work with suppliers to reach Federation of Tour Operators
(FTO) standards, based on EU recommendations. We are backing a major industry drive
for uniform safety legislation throughout the EU. Self-assessment protocols in place,
web-enabled systems due 2009.

Work towards meeting UK Ofsted good practice
guidance in all in-house children’s club facilities.

Ongoing

Our Child Protection Policy applies both in the UK and in resorts. We work with
independent child protection consultants to monitor and enhance this policy.

Communities

Raise £300,000 from customers for the Travel Foundation.

Achieved

Total raised over £350,000.

Launch Thomas Cook Foundation as primary
vehicle for our corporate giving and support
of employees’ charity work.

Ongoing

Launch planned for early 2009.

Develop a sustainable tourism policy.

Ongoing

Initial drafts shared with stakeholders for review before publication.

Appoint a member of staff dedicated to
sustainable tourism.

Audit a further 100 properties against
Travelife criteria.

Expand information about animal welfare
on customer websites.

Achieved

Appointed March 2008.

Achieved

113 audited during 2007/08.

Achieved

Extensive section included in new mini-site.

Thomas Cook Group plc Annual Report & Accounts 2008

39

Directors’ Report
Corporate social responsibility continued

attractions and cultural heritage. But if
managed irresponsibly, it can harm
communities and damage the human and
natural heritage that tourists have come to see.
To avoid fostering these negative consequences,
we work closely with the Travel Foundation,
an initiative launched by the UK Government
and major travel operators, which focuses
on people and the environment in tourism
destinations. It has become one of our key
partners and, in 2008, our customers raised
over £350,000 towards its work.

Supply chain
Our principal suppliers are hotel owners
and operators. We are working with them to
ensure increasingly high health, safety and
environmental standards. We have worked
with the Federation of Tour Operators (FTO)
to launch the Travelife Awards – an EU-
backed and internationally recognised
sustainability scheme for hotels and other
tourism partners. To achieve a Travelife Bronze,
Silver or Gold Award, suppliers must be
audited across a wide range of sustainability
criteria. During the year we audited 113
properties, and we currently feature over 70
award winners in our brochures. During a
visit to Cyprus, members of our Sustainability
team completed eight Travelife audits while
also promoting water conservation – the
island is suffering critical water shortages –
and hotels are keen to adopt the initiatives
they learned about during the audits.

Environment
Our Group environmental policy commits
us to doing as much as we can to protect the
resources on which our business depends.
Our progress in these areas was recognised
at the 2008 British Travel Awards, where we
won silver awards in the Most Environmentally
Responsible Airline and Most Environmentally

Responsible Large Tour Operator categories.
We constantly strive to reduce negative
impacts resulting from our operations and
help our suppliers to do the same. We focus
particularly on aviation emissions and noise,
natural resource use and waste management.

Our work in these areas has gained considerable
impetus from the appointment of a full-time
environmental manager in September, after
a lengthy search for someone with the right
qualiﬁcations and experience. We are making
progress in monitoring our environmental
impacts and fuel consumption and emission
data for our UK airline is included in our
online CSR report. This report includes some
data for energy consumption in our ofﬁces.
In the meantime, we have developed
environmental labels for our UK aircraft ﬂeet;
these give boarding passengers environmental
information in a form similar to the labels
used for cars and household appliances.
The information will also be published
on our UK airline website at
www.thomascookairlines.co.uk. We now
need to work hard to create a more consistent
programme with our airlines across the Group.

More information
The Thomas Cook Group corporate website
includes a CSR section which sets out our
policies, standards and performance. We
also publish an annual report on our CSR
priorities, activities and performance; to
conserve resources this is available online
only. We welcome your feedback on all
aspects of CSR and you can ﬁnd full
contact details on the website.

CSR website and annual CSR report:
http://csr.thomascookgroup.co.uk

Email and contact details:
http://csr.thomascookgroup.co.uk/tcg/
services/contact/

Thomas Cook has adopted a common set
of ﬁve values as the template for employee
behaviour throughout the organisation –
with an initial focus on one value in
particular: ‘united as one team’. In 2009,
the emphasis will move to another of these
values: ‘pioneering our future’. The PROUD
values are set out on page 26. In 2008, we
introduced share plans for all employees,
launched consistent rewards and succession
planning for senior managers across
the Group, and created a fast-track
development programme for our high-
potential employees.

Home communities
We believe we should play an active part
in the communities where most of our
people live and work – through encouraging
charitable donations and by supporting
employee volunteering and fundraising.
We have been developing a more coherent
framework for our support, including
establishing the Thomas Cook Foundation
as our primary vehicle for charitable giving
by our customers and employees, who will
be invited to serve as trustees.

Increasingly, we focus our community
and charitable support on causes related
to children, education and the environment.
During 2008, the Paediatric Intensive Care and
Paediatric High Dependency Units opened in the
Thomas Cook Children’s Critical Care Centre in
London’s Kings College Hospital. We met our 2005
pledge to cover the cost of building materials,
reaching a ﬁnal target of £2.3m through funds
raised from customers and employees.

Destination communities
For destination communities and
environments, tourism can bring great
economic and social beneﬁts. It also provides
an incentive to preserve precious natural

1 Customers planting trees in Sri Lanka
as part of a regeneration project after
the tsunami.

2 Thomas Cook aims to build the best

possible relationships with its customers.

1

40

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2

Directors’ Report
Financial review

Dr Jürgen Büser
Chief Financial Ofﬁcer

Pro forma Group (unaudited) ﬁnancial results

Revenue (£m)*

Proﬁt from operations (£m)**

Operating proﬁt margin %***

Adjusted earnings per share (p) ‹

Dividend per share (p)

Adjusted dividend cover ›

Operating cash ﬂow (£m)

Net (debt)/funds (£m)

See Appendix 2 on page 126 for key.

Statutory Group ﬁnancial results

Revenue (£m)

Proﬁt before tax (£m)

Earnings per share (p)

Operating cash ﬂow (£m)

12 months
ended
30 September
2008

12 months
ended
30 September
2007

8,809.8

7,878.5

365.9

244.2

4.2

24.1

9.75

2.5

220.2

(292.5)

3.1

17.1

5.00

2.5

215.3

393.6

Change
%

+11.8

+49.8

+35.5

+40.9

+95.0

–

+2.3

11 months
ended
30 September
2008

12 months
ended
31 October
2007

8,167.1

6,404.5

49.5

4.7

357.2

190.2

22.0

160.6

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Basis of ﬁnancial information
The results included within this report
reﬂect both unaudited pro forma and
audited statutory information for Thomas
Cook Group plc. The pro forma information
has been prepared, following the change in
year end from 31 October to 30 September,
to allow a more meaningful year on year
comparison of the development of the
business and reﬂects the underlying results
for the twelve months to 30 September 2008
and the twelve months to 30 September 2007.
The prior year pro forma ﬁgures have been
prepared as if the merger of Thomas Cook AG
and MyTravel Group plc had taken place
prior to 1 October 2006 (the ﬁrst day of the
comparative accounting period presented).
The pro forma ﬁnancial information has
been prepared on an adjusted basis which
means before exceptional items, amortisation
of intangible assets that arose from the
business combination, interest and tax
(unless otherwise indicated), and excludes
our share of the results of associates and
joint ventures.

The audited statutory information reﬂects
the results of Thomas Cook Group plc for the
eleven months to 30 September 2008 and
the twelve months to 31 October 2007. The
prior year comparatives reﬂect the results
of Thomas Cook AG only for the period from
1 November 2006 to 18 June 2007 and of
Thomas Cook Group plc from 19 June 2007,
being the date that the merger completed.

During the period, we changed the
presentational currency for the Group to
sterling as we now expect to generate the
majority of our proﬁts in non-euro countries,
with the UK being by far the largest.
Consequently, all the ﬁnancial information,
including the prior year comparatives, included
in this report has been presented in sterling.

Pro forma (unaudited) ﬁnancial results
Income statement highlights
Revenue and proﬁt from operations
The Group pro forma revenue for the period
was £8,809.8m, an increase of 11.8% on the
prior year period. However, excluding the
impact of translation and acquisitions,
Group revenue was ﬂat year on year, with
an underlying decrease in UK revenue of
3% being offset by an increase in Northern
Europe of 9%.

The pro forma proﬁt from operations
increased by 49.8% to £365.9m. Fuel costs
increased signiﬁcantly year on year. However,
this was more than offset by improvements
in underlying performance and increased
and accelerated synergy realisation from the

Thomas Cook Group plc Annual Report & Accounts 2008

41

Directors’ Report
Financial review continued

merger of Thomas Cook and MyTravel,
together with a contribution from
acquisitions in the period and a net
beneﬁt from changes in exchange rates.

Exceptional operating items
Pro forma exceptional operating items
amounted to £205.3m (2007: £171.2m)
and largely relate to the costs of the merger
integration process, the integration costs
for other acquisitions made in the year
and other business restructuring activities.

A summary of the segmental pro forma
revenue and proﬁt from operations is shown
below. Further information on the movements
in revenue and proﬁt from operations are
given in the Operational Review on pages 28
to 37. Further information on the exceptional
operating items is provided in the statutory
ﬁnancial results section of this Financial
Review on page 43.

Net ﬁnance costs
Net ﬁnance costs (excluding exceptional
ﬁnance costs) in the period were £58.2m
(2007: £7.9m). The increase year on year
reﬂects lower interest rates on deposits and
lower cash balances, due in part to expenditure
on acquisitions and integration costs; increased
costs stemming from the new three year
revolving credit facility; and the normalised
phasing effect of marking to market the
forward points on our foreign currency
hedging, which should reverse next year
when the underlying transactions take place.

Exceptional ﬁnance costs in the period
amounted to £26.8m. This includes £13.9m
of revaluation losses on trading securities
and £12.9m relating to the exceptional
element of the phasing effect of marking to
market the forward points on our foreign
currency hedging, which arose in September
2008 as a result of the global banking crisis.

Pro forma (unaudited) segmental performance review

12 months
ended
30 September
2008
£m

12 months
ended
30 September
2007
£m

3,097.3

3,620.4

971.6

439.8

680.7

–

3,131.8

3,049.0

806.6

379.1

511.7

0.3

Change
%

–1.1

+18.7

+20.5

+16.0

+33.0

8,809.8

7,878.5

+11.8

143.4

106.3

86.2

6.0

45.4

(21.4)

365.9

73.6

67.5

73.5

4.9

46.2

(21.5)

+94.8

+57.5

+17.3

+22.4

–1.7

+0.5

244.2

+49.8

External revenue *

UK

Continental Europe

Northern Europe

North America

Airlines Germany

Corporate

Group

Proﬁt from operations **

UK

Continental Europe

Northern Europe

North America

Airlines Germany

Corporate

Group

See Appendix 2 on page 126 for key.

The costs of running the corporate headquarters have remained broadly in line with the prior year, with synergy beneﬁts
being offset by year on year net losses on translation due to adverse movements in exchange rates. The review of
performance for all the other segments is included in the Operational Review on pages 28 to 37.

42

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Earnings per share and dividends
The pro forma adjusted earnings per share
for the period was 24.1 pence compared
with 17.1 pence in the pro forma prior year
period. Pro forma adjusted earnings per
share has been calculated using the pro
forma proﬁt for the period, before exceptional
items and amortisation of business
combination intangibles, divided by the
weighted average number of shares in issue.
For the prior year period, the number of
shares in issue at the end of the period was
taken due to the distortion caused by the
merger. Adjustments have been made to reﬂect
a normalised pre-exceptional tax charge.

The Board is recommending a ﬁnal dividend
of 6.5 pence per share, for payment after,
and subject to shareholder approval at,
the Annual General Meeting to be held
on 19 March 2009. This, together with the
interim dividend of 3.25 pence paid on
5 September 2008, brings the total dividend
in respect of the period to 9.75 pence. Based
on the adjusted earnings per share ﬁgure
noted above, this equates to a 41% payout
ratio for the full year.

Cash ﬂow and net debt
The net cash inﬂow from operating activities
during the pro forma period was £220.2m
(2007: £215.3m). This includes the proﬁt
from operations during the period, partly
offset by the cash outﬂow on integration
costs, tax paid, and a small net outﬂow
on working capital of £38.3m.

The net cash outﬂow from investing activities
was £361.4m (2007: £122.2m). The outﬂow
in the period includes £296.4m spent on
acquisitions of businesses and £159.5m
expenditure on tangible and intangible
ﬁxed assets. These were partly offset by
the realisation into cash of £75.9m of
our trading securities.

The net cash inﬂow from ﬁnancing activities
was £28.1m (2007: outﬂow of £103.5m). The
inﬂow in the period largely comprises the net
draw down of borrowings under the credit
facility of £503.6m, offset by the cash outﬂow
in respect of the share buyback programme
of £247.8m; £78.2m paid out in dividends
(prior year ﬁnal dividend and current year
interim dividend); ﬁnance lease payments of
£91.8m; and interest payments of £58.1m.

Cash and cash equivalents on the balance
sheet at 30 September 2008 were £761.3m
(2007: £856.0m). This excludes cash held in
short-term securities of £129.2m (2007:

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£197.3m). However, the balance does include
restricted cash of £127.1m (2007: £104.3m)
which is held: in escrow accounts predominantly
in the US and Canada, in respect of local
regulatory requirements; by White Horse
Insurance Ireland Limited, the Group’s
insurance company; and in other securities.
In addition, it should be noted that the
Group’s working capital cycle is such that
cash balances are at their lowest in the
winter months and at their peak in the
summer months.

Net debt at 30 September 2008 was £292.5m
(2007: net funds of £393.6m). The movement
year on year largely reﬂects the cash outﬂow
during the period on the share buyback
programme and the acquisitions made,
which has resulted in the drawing down
of funds on the revolving credit facility.
The ratio of net debt to adjusted EBITDA
(proﬁt from operations before depreciation
and amortisation) at 30 September 2008
was 0.6 times.

Reconciliation of pro forma and statutory
proﬁt from operations
The table below sets out the key reconciling
differences in proﬁt from operations on a pro
forma basis compared with a statutory basis
for 2008 and the comparative period. The
statutory Group proﬁt from operations
for 2008 reﬂects 100% of the results of
Thomas Cook Group plc for the eleven month
period ending on 30 September 2008. The
statutory Group proﬁt from operations for
2007 reﬂects 100% of Thomas Cook AG for
the twelve month period ending 31 October
2007 and 100% of MyTravel Group plc and
Thomas Cook Group plc from 19 June 2007
(being the date of the merger) to 31 October
2007. Consequently, the ﬁrst adjustment in

the table removes the pre-merger results of
MyTravel Group plc from the comparative
period. As MyTravel Group plc made losses
in the winter period 2007, this adjustment
improves statutory proﬁtability in 2007.

The pro forma information has been produced
on the assumption that the accounting
reference date for Thomas Cook Group plc
has always been 30 September 2008. As a
result, the second adjustment removes the
pro forma October 2007 result from the
current period and replaces the pro forma
October 2006 result with the statutory
October 2007 result in the prior year period.

In preparing the pro forma proﬁt from
operations, account was taken of the impact
of acquisition accounting. As part of the fair
value adjustments, a provision was made
in respect of above market rate hotel lease
rentals. In addition, the value of aircraft held
on the balance sheet was reduced. In the
pro forma ﬁgures, we have assumed that
both of these adjustments were made prior
to 1 October 2006 and, as a result, the impact
of a full year of lower rental costs and reduced
depreciation has been reﬂected in the pro forma
proﬁt from operations in the comparative
period. The net effect of these fair value
adjustments has been to increase the pro
forma proﬁt from operations for the prior
period by £11.7m. The third adjustment,
therefore, removes the impact of this
adjustment from the pre-acquisition period.

The IAS 39 business combination adjustment
represents unrecognised losses on hedging
instruments taken to reserves within the
MyTravel business prior to the date of the
business combination. On consolidation
these amounts are included within goodwill

Pro forma Group proﬁt from operations **

Adjustments:

Pre-merger operating loss of MyTravel

Net impact of change in year end

Pre-merger impact of fair value adjustments

IAS 39 business combination adjustment

Statutory Group proﬁt from operations **

2008
£m

2007
£m

365.9

244.2

–

(20.0)

–

17.5

55.2

9.3

(11.7)

11.9

363.4

308.9

See Appendix 2 on page 126 for key and the income statement on page 68 which reconciles statutory Group proﬁt from
operations of £363.4m to statutory proﬁt before tax of £49.5m.

and are therefore not recognised in the pro
forma ﬁgures, but increase statutory proﬁt
from operations.

Statutory ﬁnancial results
As noted earlier, the statutory Group proﬁt
from operations for 2008 reﬂects 100% of
the results of Thomas Cook Group plc for
the eleven month period ending on 30
September 2008. The statutory Group proﬁt
from operations for 2007 reﬂects 100% of
Thomas Cook AG for the twelve month
period ending 31 October 2007 and 100%
of MyTravel Group plc and Thomas Cook
Group plc from 19 June 2007 (being the
date of the merger) to 31 October 2007.

Income statement highlights
Revenue and proﬁt from operations
Revenue in the period amounted to £8,167.1m
compared with £6,404.5m in the prior year.
Proﬁt from operations before exceptional
items and amortisation of business
combination intangibles was £363.4m
compared with £308.9m in the prior year.

Exceptional operating items
Exceptional items are deﬁned as costs or
proﬁts that have arisen in the period which
management do not believe are a result of
normal operating performance and which, if not
separately disclosed, would distort the year
on year comparison of trading performance.

Total net exceptional operating costs
(excluding amortisation of business
combination intangibles) in the period were
£179.6m compared with £127.0m in the
prior year. The increase year on year largely
reﬂects higher merger integration costs as we
accelerate and realise higher synergy savings
than previously anticipated, together with
integration costs associated with new
acquisitions made in the period and
other restructuring costs.

Included within the net £179.6m of exceptional
operating items are £106.7m of costs associated
with the integration of the former MyTravel
and Thomas Cook businesses. The majority of
these costs have arisen in the UK businesses
and largely reﬂect redundancy and other
people-related costs, and costs of terminating
and amalgamating various contracts.

Other exceptional operating costs include
£46.4m in relation to provisions for the
integration of other businesses acquired during
the year and for restructuring projects within
the underlying Thomas Cook businesses.

Thomas Cook Group plc Annual Report & Accounts 2008

43

Directors’ Report
Financial review continued

Amortisation of business combination intangibles
Amortisation of business combination
intangibles in the period amounted to
£48.0m (2007: £30.1m), of which £31.7m
relates to the amortisation of brand names,
customer relationships and computer
software, and £16.3m to the amortisation
of the order backlog that existed at the
time of the respective acquisitions.

Associates and joint ventures
Our share of results of associates and joint
ventures before exceptional items was a
loss of £1.6m (2007: proﬁt of £1.8m). The
reduction year on year largely reﬂects the
disposal in May 2008 of our 40% stake in
Activos Turisticos as part payment for the
acquisition of a 65% stake in Viajes
Iberoservice Espana S.L., together with
increased losses in our Barclaycard joint
venture arrangement.

Net investment income, which reﬂects
dividends and interest received from
investments, was £0.5m (2007: £1.7m).

The proﬁt on disposal of associates in the
prior year of £35.5m largely reﬂected the
sale, to Arcandor, on an arm’s length basis,
of our 50% interest in SunExpress, an airline
based in Turkey.

Net ﬁnance costs
Net ﬁnance costs (excluding exceptional
ﬁnance costs) in the period were £58.4m
(2007: £0.6m). The increase year on year
reﬂects lower interest rates on deposits
and lower cash balances, due in part to
expenditure on acquisitions and integration
costs; increased costs stemming from the
new three year revolving credit facility;
increased costs on ﬁnance leases due to
the full year effect of including the former
MyTravel leases; and the normalised phasing
effect of marking to market the forward
points on our foreign currency hedging,
which should reverse next year when the
underlying transactions take place.

Exceptional ﬁnance costs in the period
amounted to £26.8m. This includes £13.9m
of revaluation losses on trading securities
and £12.9m relating to the exceptional
element of the phasing effect of marking
to market the forward points on our foreign
currency hedging, which arose in September
as a result of the global banking crisis.

Proﬁt before tax for the eleven months ended
30 September 2008 was £49.5m (twelve
months ended 31 October 2007: £190.2m).

Tax
The tax charge in the period was £5.1m
(2007: £39.5m). Excluding the effect of
adjustments to tax provisions made in respect
of previous years and exceptional items, this
represents an effective tax rate of 26.1% on
the pre exceptional proﬁt for the year.

The cash tax rate will continue to be
considerably lower than 26.1% as a result
of being able to utilise the losses available in
the UK and Germany. Total losses available to
carry forward in the Group at 30 September 2008
are £1.3 billion. Deferred tax assets have
been recognised in respect of £0.7 billion
of this amount.

Proﬁt after tax for the eleven months ended
30 September 2008 was £44.4m (twelve
months ended 31 October 2007: £150.7m).

Earnings per share and dividends
The basic and diluted earnings per share for
the period was 4.7 pence (2007: 22.0 pence).
The earnings per share ﬁgures noted here are
affected by the weighted average number of
shares in issue which are signiﬁcantly lower
for the comparative period due to the
nature of the merger transaction, and
by the change in year end. As a result,
management believes that the adjusted
earnings per share ﬁgures included within
the pro forma (unaudited) ﬁnancial results
section of this ﬁnancial review are a more
meaningful measure of return.

As noted in the pro forma (unaudited) ﬁnancial
results and performance review section of this
Financial Review, the Board is recommending
a ﬁnal dividend of 6.5 pence per share for the
period ended 30 September 2008, for payment
after, and subject to shareholder approval at,
the Annual General Meeting to be held on
19 March 2009. This, together with the interim
dividend of 3.25 pence paid on 5 September
2008 brings the dividend for the eleven month
period to 9.75 pence.

Balance sheet, cash ﬂow and net debt
Net assets at 30 September 2008 were
£2,009.2m (31 October 2007: £2,120.6m).

Given the cyclical nature of the Group’s
working capital cycle, the change in
accounting reference date, and the merger of
MyTravel and Thomas Cook part way through
the prior year period, any comparison of
statutory current period cash ﬂows against
the prior year is signiﬁcantly distorted. As
a result, the pro forma cash ﬂow analysis
included earlier in this Financial Review

should be used as the basis for understanding
the Group’s cash ﬂows in the period
under review.

Cash and cash equivalents on the balance
sheet at 30 September 2008 were £761.3m
(31 October 2007: £622.3m). This excludes
cash held in short-term securities of £129.2m
(2007: £255.6m). However, the balance does
include restricted cash of £127.1m (2007:
£116.2m) which is held in escrow accounts
predominantly in the US and Canada, in
respect of local regulatory requirements;
held by White Horse Insurance Ireland
Limited, the Group’s insurance company;
and held in other securities.

Net debt at 30 September 2008 was £292.5m
(31 October 2007: net funds of £248.7m).

Treasury policies
Thomas Cook Group is subject to risks related
to changes in interest rates, exchange rates,
fuel prices and liquidity within the framework
of its business operations.

To cover these risks, the Board of Directors
has established treasury policies which are
reviewed regularly to ensure they remain
relevant to the business.

The Board approves all the ﬁnancial
instruments used by the Group to limit
its risks. Internal guidelines provide
the framework governing actions taken,
responsibilities and controls. The use
of derivative ﬁnancial instruments is not
permitted for speculative purposes, but
instead serves exclusively to hedge existing
underlying or planned transactions by the
business units.

Treasury activities are managed by Group
Treasury. Group Treasury reports regularly
to the Board and is subject to periodic
independent reviews and audits, which
are presented to the Audit & Risk
Management Committee.

In accordance with the provisions set out
in IAS 39, all derivative ﬁnancial instruments
must be measured at their fair values. The
market valuation of the derivative ﬁnancial
instruments used is based on market
information and appropriate valuation
methods. The fair value of options is
determined by recognised option price
models and that of interest rates derivatives
takes account of terms to maturity based
on current market interest rates and the
interest rate yield curve. Positive market
values of derivative ﬁnancial instruments

44

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are recognised as an asset while negative
market values are recognised as a liability.

The Group is ﬁnanced by a balanced mix of
equity and access to bank facilities.

The liquidity position of the Group is
signiﬁcantly inﬂuenced by the booking and
payment pattern of customers. As a result,
liquidity is at its lowest in the winter months
and at its highest in the summer months.
The Group manages the cyclical nature of
its liquidity by making use of its revolving
credit facility.

For its longer-term liquidity requirements, for
example for acquisitions, the Group makes
use of its term loan facility.

Foreign currency risks
The Group is active in many destinations
and sales regions and, as such, is subject to
the risk of exchange rate ﬂuctuations in its
operating activities. Exchange rate risks arise
in connection with the sourcing of services
from destinations outside the source market.
Additionally, US dollar payments are made
for the procurement of fuel and operating
supplies for aircraft, as well as for
investments in aircraft.

The Group’s policy requires all subsidiaries
to hedge all trade-generated exposures with
Group Treasury either as part of the budget
process or at the time of brochure launch.

Use is made, in particular, of currency forwards,
currency swaps and plain vanilla currency
options in order to limit exchange rate risks
and these are usually designed as cash ﬂow
hedges of forecast future transactions.

Interest rate risks
The Group is also subject to risks arising from
interest rate movements in connection with
its ﬁnancing of aircraft and acquisition of
investments. Floating rate medium- to
long-term items are exposed to interest rate
change risks. Interest rate swaps and interest
rate collars are designated as cash ﬂow
hedges of the interest rate.

Cash from operations is invested in short-term
bank deposits and money market funds.

Fuel price risk
Fuel exposures relate to ﬂying costs for the
seasons on sale. Price hedging transactions
are undertaken for the purpose of limiting
the risk of unfavourable changes in the price
of fuel. The aim of the hedging policy is to
hedge up to 95% of the fuel requirement for
the ﬂight schedule concerned.

Group policy requires the Group airlines to
hedge all fuel exposures with Group Treasury
12 to 18 months prior to consumption.
Hedging is implemented primarily with a
combination of ﬁxed price contracts (swaps)
and net purchased options and is either in
crude oil, gas oil or kerosene.

Liquidity risk
The Group’s overall objective is to ensure
that it is at all times able to meet its ﬁnancial
commitments as and when they fall due.
Surplus funds are collected and invested with
approved counterparties within authorised
limits and with the aim of maintaining short-
term liquidity while maximising yield.

In May 2008, the Group replaced the
existing debt facility with a new credit
facility amounting to €1.8bn (£1.4bn at
the ﬁnancial period end), of which €1.28bn
(£1.0bn at the ﬁnancial period end) is
available for immediate use for the Group’s
general corporate purposes, including
acquisitions and the recently completed
share buyback programme, as well as
to manage the cyclical nature of the
Group’s liquidity.

The Group uses its annual budget and three-
year planning process to predict expected
future liquidity of the Group. The liquidity
forecast is reviewed and updated on a
regular basis.

Short-term liquidity
Short-term liquidity is invested in a
combination of deposits and, to a lesser
extent, in securities having at least an
investment grade rating. All securities
are denominated in euro and largely
represent corporate bonds, government
bonds and asset backed securities with
an average rating of A for the portfolio.

Counterparty exposure
The Group assesses its counterparty
exposure in relation to the investment of
surplus liquidity; fuel, foreign exchange and
interest rate hedging available; undrawn
credit facilities; drawn revolving credit
facilities; and other facilities where
repayment is due within one year.

Credit Default Swap (CDS) pricing and share
price performance in the previous 30 day
period are the criteria used to classify
counterparties into strong, satisfactory and
weak categories. The counterparty’s strength
deﬁnes the aggregate limit of the Group’s
exposure towards the relevant party.

Thomas Cook Group plc Annual Report & Accounts 2008

45

Directors’ Report
Principal risks and uncertainties

Thomas Cook Group plc, like all businesses, faces risks and uncertainties as we conduct our operations and execute our strategy.

We place great importance on internal control and risk management, and the system and framework that the Board has put
in place is described in the Corporate Governance Report on page 51.

The table below lists the principal risks and uncertainties that may affect the Group and also highlights the mitigating actions
that are being taken. The content in the table, however, is not intended to be an exhaustive list of all the risks and
uncertainties which may arise.

Risk

Impact

Mitigation

Operational and strategic risks

Downturn in the economies
of our source markets leading
to a reduction in demand
for our products and services

Fall in demand for traditional
package tours and competition
from internet distributors and
low-cost airlines

Pressure on volumes
and margins

• Significant capacity reductions through our actions to maintain margins
• Flexibility of business model:

– Less than 10% of our hotel capacity is committed
– Around 89% of our UK tour operator flying requirements are undertaken by our own fleet,
allowing considerable further flexibility to cut capacity without affecting our own airline

– Changes in capacity can be accommodated late into the booking season

• Asset-light business model
• Utilising our buying power to manage accommodation costs across the Group
• Programme implemented in 2008 to reduce our cost base with defined contingency

plans to cut costs further if necessary

Further information can be found on pages 9 to 37.

Reduction of revenue and
pressure on margins

• Strategy to establish Thomas Cook as a leading provider of independent travel
• Acquisitions in the independent sector, e.g. Hotels4U.com and Elegant Resorts in

the UK and TriWest Travel in Canada

• Split of UK sector into Mainstream and Independent Businesses with dedicated Chief

Executive Officers to focus on each specific market and maximise the opportunities in each

• Shift to higher margin all-inclusive resorts
• Launch of our own hotel brand – SENTIDO
• Focus on expanding into new emerging markets
• Step change achievements in our e-commerce performance
• Proven resilience vs. low-cost airlines through much better access to beds in destination
• Focus on medium haul destinations not economically viable for low-cost airlines

Further information can be found on pages 9 to 37.

• Strategy to increase medium haul non-Eurozone destinations, while reducing our

short haul and long haul programmes
• Flexible and asset-light business model
• Utilising our buying power to manage accommodation costs across the Group
• Increase in higher margin, all inclusive holidays, which give cost certainty to customers

Further information can be found on pages 9 to 37.

• CSR programme as detailed in the Corporate Social Responsibility Report

Further information can be found on pages 38 to 40 and in the full online Corporate
Social Responsibility Report which can be found on www.thomascookgroup.com

Customers’ exposure to the
falling value of sterling

Reduction in bookings to
traditional resorts in the Eurozone
as prices appear expensive

Corporate social responsibility,
including environmental issues

Damage to the Company’s
brand and reputation

A major incident caused by a
significant lapse in health and
safety procedures

Significant impact on reputation
as a trusted brand would lead to
reduction in bookings

• Health and safety management embedded in each business with central

co-ordinating function

Further information can be found on pages 38 to 40 and in the full online Corporate
Social Responsibility Report which can be found on www.thomascookgroup.com

Loss of, or difficulty in replacing,
senior talent

Inability to drive strategic
initiatives, discontinuity in
management and leadership

• Embedded new talent management processes to identify high potentials within the businesses
• Embedded succession management processes to identify gaps and to deploy our talent optimally
• Hired new talent from outside sector to fortify talent pipelines and provide senior succession

for the future

• Created a High Potential Development Programme to develop our most talented people

for the future

• Existing business continuity plans being strengthened across the Group

• Business continuity and service level agreements in place

Business continuity

Business disruption and loss
of profits

Performance failure by
outsourced partners

Business disruption and loss
of profits

46

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Risk

Impact

Mitigation

Financial risks

Volatility of fuel prices

Foreign currency risks

Costs incurred may not be
recovered from customers
Brochure prices do not
reflect actual cost of travel

Costs incurred may not be
recovered from customers
Brochure prices do not
reflect actual cost of holiday

• Actively managed Board-approved hedging policy

Further information can be found on pages 9 to 11 and 41 to 45, and in Notes 24
and 25 to the Financial Statements

• Actively managed Board-approved hedging policy

Further information can be found on pages 9 to 11 and 41 to 45, and in Notes 24
and 25 to the Financial Statements

Interest rate risks

Interest cost uncertainties

• Actively managed Board-approved treasury policy

Further information can be found on pages 9 to 11 and 41 to 45, and in Notes 24
and 25 to the Financial Statements

Liquidity risk

Group is unable to meet its
financial commitments as
they fall due

• Actively managed Board-approved treasury policy
• New £1.4bn credit facility put in place in May 2008

Further information can be found on pages 9 to 11 and 41 to 45

Counterparty credit risk

Loss of cash

• Daily assessment and management of cash balances

Further information can be found on pages 9 to 11 and 41 to 45

Tax risk

Inability to utilise losses due
to legislative or other changes

• Compliance with Board-approved tax policy

Further information can be found in Note 27 to the Financial Statements

Requirement to increase
defined benefit pension scheme
contributions, which may be
imposed by the trustees or
the Pensions Regulator

This may restrict investments
in the businesses

• Broadly diversified pension fund with limited exposure to single asset classes

• Special contribution scheme started three years ago has reduced deficit significantly

Other risks that are continually monitored by management

Breakdown in internal controls

Inability to operate,
loss of profit

• System of internal control in place, which is continually monitored

Further information can be found in the Corporate Governance Report on pages 55 and 56

Reduction of revenue
and loss of profit

• Ongoing monitoring by management
• Asset-light and flexible business model

Inability to obtain operating
and/or route licences
leading, ultimately, to
cessation of operation

• Active legal and regulatory management programme in place

Political, military, terrorist,
security, natural catastrophe
and health risks in key
tourist destinations

Legal and regulatory risks,
especially in respect of airline
operating licences, insurance
and financial services sectors,
and legislative impacts
Failure to comply with new
regulations in relation to night
flying and environmental
emissions
Money laundering legislation
in relation to financial services

Thomas Cook Group plc Annual Report & Accounts 2008

47

Directors’ Report
Board of Directors

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Prior to joining Arcandor AG he was Head of
Europe for Corporate Investment at Investcorp
International and Chairman and Chief Executive
Officer of Bertelsmann AG.
External appointments: Chairman of Senator
Entertainment AG, moneybookers.com Ltd and Co-
Chairman of Germany1 Acquisition Limited. He is
Chairman and Chief Executive Officer of Arcandor
AG and Director of New York Times Company.

Skills & experience: Michael Beckett was Chairman
of MyTravel Group plc between 2004 and 2007. He
was Chairman of Coalcorp Mining Inc. (Colombia),
London Clubs International plc, Ashanti Goldfields
Company Limited and Clarkson plc, and was formerly
Managing Director of Consolidated Gold Fields plc.
External appointments: Non-Executive active
Chairman of Endeavour Financial Corporation
(Canada). Non-Executive Director of Northam
Platinum Ltd (South Africa), Orica Ltd (Australia),
The Egypt Trust (Luxembourg), Mvelaphanda
Resources Limited (South Africa) and Medoro
Resources Limited (Canada).

He has held senior management positions within the
Group, latterly as Chief Executive Officer of Thomas
Cook AG.
External appointments: Director of Arcandor AG
and Mediterranean Touristic Management, a joint
venture between Thomas Cook Destinations GmbH
and Iberostar Hoteles y Apartamentos S.L.

Cook AG in Germany. Before joining Thomas Cook,
he held senior positions within Siemens Financial
Services’ international consulting firm, Booz Allen
& Hamilton and Westdeutsche Landesbank,
Germany’s largest public sector bank.
External appointments: None

External appointments: Chairman of Costain
Group PLC and Arena Coventry Ltd; Senior
Independent Director of Intertek Group plc and
Non-Executive Director of William Hill plc. He
is a trustee of the William Hill Pension Fund.

Dr Thomas Middelhoff (55)
Title: Non-Executive Chairman
Appointment: March 2007
Committee memberships: Member of Audit &
Risk Management Committee, Nominations
Committee, and Management Development
& Remuneration Committee.
Skills & experience: Thomas Middelhoff is
Chairman of the management board of
Arcandor AG, and was previously Chairman
of the supervisory board of Thomas Cook AG.

Michael Beckett (72)
Title: Non-Executive Deputy Chairman & Senior
Independent Director
Appointment: March 2007
Committee memberships: Chairman of
Nominations Committee, Chairman of
Management Development & Remuneration
Committee, Member of Audit & Risk Management
Committee, Member of Health, Safety &
Environmental Committee.

Manny Fontenla-Novoa (54)
Title: Chief Executive Ofﬁcer
Appointment: July 2007
Committee memberships: Chairman of Group
Executive Board, Member of Health, Safety &
Environmental Committee.
Skills & experience: Manny Fontenla-Novoa joined
the Company in 1996 following the acquisition of
Sunworld, which was then the UK’s fourth largest
tour operator. He was a founding director of
Sunworld and has 30 years’ experience in the
travel industry.

Dr Jürgen Büser (42)
Title: Chief Financial Ofﬁcer
Appointment: July 2008
Committee memberships: Member of Group
Executive Board.
Skills & experience: Prior to his current role,
Jürgen Büser was Chief Financial Officer for the
UK & Ireland Division and spent three years before
that as Head of Controlling & M&A for Thomas

David Allvey (63)
Title: Independent Non-Executive Director
Appointment: March 2007
Committee memberships: Chairman of Audit &
Risk Management Committee, Member of Health,
Safety & Environmental Committee.
Skills & experience: David Allvey was Non-
Executive Director of MyTravel Group plc between
2003 and 2007. Prior to this he was Group Finance
Director of Barclays Bank plc, B.A.T Industries plc
and Allied Zurich plc and held senior finance
positions with Zurich Financial Services AG.

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Roger Burnell (58)
Title: Independent Non-Executive Director
Appointment: March 2007
Committee memberships: Chairman of Health,
Safety & Environmental Committee, Member of
Audit & Risk Management Committee,
Nominations Committee and Management
Development & Remuneration Committee.
Skills & experience: Roger Burnell was a Non-
Executive Director of MyTravel Group plc from
April 2003. Before joining MyTravel, he was Chief

Operating Officer and a Director of Thomson
Travel Group plc. Other board experience includes
Chairman of The First Resort Limited, Chairman
of International Life Leisure Group Limited and
Chairman of HomeForm Group Limited.
External appointments: Director of Coventry
Building Society and Clarence Mansions
Management Company Limited.

Dr Peter Diesch (54)1
Title: Non-Executive Director
Appointment: March 2007
Committee memberships: Member of Audit &
Risk Management Committee, Nominations
Committee and Management Development
& Remuneration Committee.

Skills & experience: Peter Diesch is Chief Financial
Officer of Arcandor AG. Before joining Arcandor,
he was CFO and HR Director of Linde AG, CFO
and HR Director of Tchibo Holding AG and CFO
of Airbus GmbH.
External appointments: Director of Arcandor AG
and Delton AG.

1 Peter Diesch will resign from the Board on 22 December 2008, and Karl-Gerhard Eick will be appointed as a

Non-Executive Director as mentioned in the Chairman’s statement on page 3.

Reisebüro GmbH and Condor Flugdienst GmbH.
He was previously Chairman of Amadeus SA and
a member of the Supervisory Board of TUI AG.
He was Chairman and president of the German
National Tourist Board.
External appointments: Chairman and Chief
Executive Officer of Live Holding AG. Chairman
and Chief Executive Officer of Telefunken Holding
AG. Chairman of the Supervisory Boards of
HumanOptics AG and Payment Solution AG,
Chairman of Mountain Partners AG, Director
of Convergence CT Inc and Supervisory Board
member of DVB Bank.

Swedish listed building materials group,
Ernstromgruppen. He was Group Chief Executive
of Associated British Ports Holdings Plc between
1999 and 2007.
External appointments: Chairman of the Swedish
Chamber of Commerce for the UK; Non-Executive
Director of G4S plc, Land Securities Group plc,
Ittur Group (Sweden) and Rorvik Timber (Sweden).
He is an advisor to the infrastructure fund of
Swedish venture capital group, EQT.

External appointments: Senior Independent
Director of Aggreko plc, Senior Independent
Director of Paddy Power plc and assumes the
role of Non-Executive Chairman on 1 January
2009. He is also Non-Executive Director of London
Irish Rugby Club and PGA European Tour.

Hemjö Klein (67)
Title: Independent Non-Executive Director
Appointment: July 2007
Committee memberships: Member of
Management Development & Remuneration
Committee and Health, Safety & Environmental
Committee.
Skills & experience: Hemjö Klein was formerly a
member of the Executive Board of Lufthansa AG
and was a member of the Executive Board of
Deutsche Bundesbahn and Deutsche Reichsbahn.
He has also held the position of Chairman of the
Supervisory Board of Sixt AG, DER Deutsches

Bo Lerenius (62)
Title: Independent Non-Executive Director
Appointment: July 2007
Committee memberships: Member of Audit &
Risk Management Committee.
Skills & experience: Between 1992 and 1998
Bo Lerenius was Chief Executive of the then listed
company, Stena Line, and between 1998 and 1999
he was Vice Chairman of Stena Line and Director
of New Business at Stena AB. From 1985 to 1992
he was Group President and Chief Executive of

Nigel Northridge (52)
Title: Independent Non-Executive Director
Appointment: August 2008
Committee memberships: Member of
Nominations Committee and Management
Development & Remuneration Committee.
Skills & experience: Nigel Northridge was Chief
Executive of Gallaher Group Plc for seven years
until April 2007. Over his 30-year career with
the Gallaher Group he held a range of senior
positions in general management and sales
& marketing roles.

Thomas Cook Group plc Annual Report & Accounts 2008

49

Directors’ Report
Group Executive Board

Alexis Coles-Barrasso (44)
Title: Group Director, PR & Communications
Skills & experience: Alexis joined the Company in 1993, prior to which she held a
number of senior marketing positions with the car rental business, Hertz, and
worked for a corporate communications consultancy advising blue chip clients on
strategic communications.

Pete Constanti (42)
Title: Chief Executive Ofﬁcer, Mainstream Travel, UK & Ireland
Skills & experience: Pete joined the Company in 1996. He has 25 years of travel
industry experience, previously working for ILG and Sunworld where he was HR
Director. Pete comes from a strong tour operating background, including his last
position of Executive Director of Thomas Cook’s Holidays Division, where he was
responsible for customer delivery and operations.

Mike Cutt (50)
Title: Group Director, Human Resources
Skills & experience: Mike has been Group HR Director at Thomas Cook Group
plc since February 2008, prior to which he held HR Director roles for Boots,
B&Q and Kingfisher. Before that he spent 18 years at Nationwide Building
Society. Although an HR Director for the last 13 years, Mike has previously
worked in operations, finance and strategy. Mike is also a Non-Executive
Director for The Land Registry.

Ian Derbyshire (40)
Title: Chief Executive Ofﬁcer, Independent Travel, UK & Ireland
Skills & experience: Ian joined the Company in 2000, prior to which he held
senior positions within the leisure and travel sector with companies including
Holiday Autos, The Rank Group and Co-op Travel. Ian has 24 years of experience
in the travel industry.

Dr Thomas Döring (39)
Title: Chief Executive Ofﬁcer, East and West Europe
Skills & experience: Thomas joined the Company in 2001 and has been
responsible for the Western and Eastern European markets since 2006. He has
held senior positions leading the International Markets Division, Corporate
Development and Mergers & Acquisitions. Before joining the Company he spent
seven years with Roland Berger Strategy Consultants, most recently as a Partner.

Dr Peter Fankhauser (48)
Title: Chief Executive Ofﬁcer, Central Europe
Skills & experience: Peter joined the Company in 2001 and has held a number of
senior roles within the Group. Prior to joining the Company he was Director
General of Kuoni Reisen Holding AG in Zürich, where he managed the company’s
European division, and Chief Executive Officer of LTU Group in Düsseldorf.

Michael Friisdahl (46)
Title: Chief Executive Ofﬁcer, North America
Skills & experience: Michael joined MyTravel North America as President in
2000 and was appointed Chief Executive Officer North America in 2005. He has
25 years’ experience in the travel industry. Prior to joining the Group, he was a
partner and CEO of The Holiday Network, which was acquired by Airtours
International (MyTravel Group plc) in 2000.

Ludger Heuberg (50)
Title: Chief Financial Ofﬁcer, Continental Europe
Skills & experience: Ludger joined the Company in 2004. He was Chief Financial
Officer of the Company until June 2008. Prior to joining the Company he was CFO
of Lufthansa Cargo AG, CFO of Kolbenschmidt-Pierburg AG and director of Mauser
Waldeck AG.

Dr Angus Porter (51)
Title: Group Director, Strategy
Skills & experience: Angus was appointed to this position in June 2008. From June
2007 he was an Independent Non-Executive Director of Thomas Cook Group plc,
and prior to that was a Non-Executive Director of MyTravel Group plc. He has
most recently been Global CEO of Added Value, WPP’s Brand Development
Consultancy. Before Added Value, he held senior marketing, sales and general
management roles with Abbey National, British Telecom and Mars.

Ralf Teckentrup (51)
Title: Chief Executive Ofﬁcer, Airlines Germany
Skills & experience: Ralf joined the Company in 2004 and has held a variety of
senior roles within the Group. Previously he held a number of senior positions
with Lufthansa AG.

Sam Weihagen (58)
Title: Chief Executive Ofﬁcer, Northern Europe
Skills & experience: Sam has 33 years’ experience in the travel industry and has
held his current position since 2001. He was the former MyTravel Northern
Europe Chief Executive and was an Executive Director of MyTravel Group plc for
three years prior to the merger. He has served the Company in several capacities,
including Commercial Director, with responsibility for purchasing and flight
planning. He is Chairman of the Tour Operating Federation in his native Sweden.

Derek Woodward (50)
Title: Group Company Secretary
Skills & experience: Derek joined the Company in April 2008, before which he
spent six years as Head of Secretariat at Centrica plc. From 1998, he was Company
Secretary of Allied Zurich plc, the UK listed holding company of the Zurich
Financial Services Group, and between 1990 and 1998 he was Assistant Secretary
of B.A.T Industries plc.

50

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The Board of Directors 
An effective Board of Directors leads and controls the Group and has a 
schedule of matters reserved for its approval. This schedule and the terms 
of reference for the Audit & Risk Management, Management Development 
& Remuneration, Nominations, and Health, Safety & Environmental 
Committees are available on request and on the Company’s website at 
www.thomascookgroup.com. The powers of the Directors are set out in 
the Company’s Articles of Association. These are also available on the 
Company’s website. 

The Board is specifically responsible for: 

•  approval of the Group’s strategy and its budgetary and business plans; 
•  approval of significant investments and capital expenditure; 
•  approval of annual and half-year results and interim management 

statements, accounting policies, and the appointment and 
remuneration of the external auditors; 

•  approval of interim, and recommendation of final, dividends; 
• 
•  maintenance of the Group’s system of internal control, governance 

changes to the Group’s capital structure and the issue of any securities; 

and approval authorities;  
executive performance and succession planning; 

• 
•  determining standards of ethics and policy in relation to health, 
safety, environment, social and community responsibilities. 

One of the Board’s meetings during the year is specifically devoted to the 
development of the Group’s strategy. Strategy is continually monitored 
and reviewed by the Board. 

Board meetings and attendance 
The Board has regular scheduled meetings throughout the year and 
supplementary meetings are held as and when necessary. The Board  
held ten scheduled and ten unscheduled supplementary meetings during 
the Financial Period. A table detailing individual Director attendance at 
scheduled Board and Committee meetings during the Financial Period is 
set out on page 52. Non-attendance at meetings was due to prior business 
commitments. All Directors who were unable to attend specific Board or 
Committee meetings reviewed the relevant briefing papers and provided 
their comments to the Chairman of the Board or Committee, as appropriate. 
The Chairman and each Non-Executive Director has provided assurance  
to the Board that they remain fully committed to their respective roles 
and can dedicate sufficient time to meet what is expected of them. 

Corporate governance report  

The Board of Directors of Thomas Cook Group plc is committed to the 
principles of corporate governance contained in the Combined Code  
on Corporate Governance (the “Code”). In determining its governance 
arrangements, the Board also has to have regard to the provisions of  
the Relationship Agreement between the Company and Arcandor AG 
(“Arcandor”). This is explained below.  

This report sets out how the Company applied the Code principles and  
the extent to which the Company complied with the provisions of Section 
1 of the Code in the period 1 November 2007 to 30 September 2008  
(the “Financial Period”).  

The position of Arcandor as major shareholder 
Arcandor holds (directly or indirectly) 52.8% of the Company’s shares. 
Upon the merger between MyTravel Group plc and Thomas Cook AG in 
June 2007 to form Thomas Cook Group plc (the “Company”), Arcandor and 
the Company entered into a Relationship Agreement (the “Relationship 
Agreement”). The Relationship Agreement sets out certain aspects of the 
Company’s governance arrangements. The Board considers that these 
arrangements are in the best interest of the Company in view of its 
ownership structure. In particular, the Relationship Agreement covers the 
following matters: 

•  Arcandor has the right to appoint two Non-Executive Directors; 

Thomas Middelhoff and Peter Diesch were appointed under this 
provision, as will Dr Karl-Gerhard Eick, with effect from 22 December 
2008, when Peter Diesch steps down from the Board. For so long as 
Arcandor holds at least 40% or more of the shares in the Company, it 
also has the right to appoint one of those Directors as Chairman. 
Thomas Middelhoff was appointed under this provision. 

•  At all times the Independent Non-Executive Directors will constitute  

a majority of the Board, excluding the Chairman.  

•  The two Arcandor appointed Non-Executive Directors have the right 
to membership of the Audit & Risk Management Committee, the 
Management Development & Remuneration Committee and the 
Nominations Committee. However, the Relationship Agreement 
provides that those Committees should also comprise no fewer  
than three Independent Non-Executive Directors, one of whom will 
be appointed Committee Chairman. In respect of the Audit & Risk 
Management Committee and Management Development & 
Remuneration Committee, due to the arrangement provided by  
the Relationship Agreement, the Company is not compliant with  
the Code provisions A.3.1 and A.2.2. 
For so long as Arcandor holds 40% or more of the shares in  
the Company, the Board cannot appoint a new Chief Executive Officer 
without the prior written consent of Arcandor. 

• 

•  Provided the nomination processes as set out in the Relationship 
Agreement are followed, Arcandor’s voting rights, in respect of the 
election or re-election of any Director at General Meetings, will be 
restricted to two-thirds of the voting shares in issue which are not 
held or controlled by Arcandor. 

•  The Company carries on its businesses independently from Arcandor. 

Any proposed transactions and relationships between the Company 
and Arcandor are to be on a normal commercial basis and are subject 
to the prior approval of a Committee comprising the Independent 
Non-Executive Directors and to the provisions of Chapter 11 of the 
Listing Rules of the UK Financial Services Authority (Related Party 
Transactions). In circumstances where Chapter 11 of the Listing Rules 
would require a proposed transaction to be approved by 
shareholders, Arcandor shall not vote its shares on that resolution. 
Although not covered in the Relationship Agreement, the Company’s 
financing arrangements, including the £1.4 billion credit facility 
referred to in the Financial Review on pages 41 to 45, are ringfenced 
from Arcandor. 

•  The Relationship Agreement will terminate in the event of Arcandor’s 

shareholding falling below 30%. 

Thomas Cook Group plc Annual Report & Accounts 2008 

51

 
 
 
 
Corporate governance report continued 

The table below shows the number of scheduled Board and Committee meetings attended by each Director out of the number convened during the 
time served by each Director on the Board or relevant Committee during the Financial Period. 

Current Directors: 

Board
9/10
9/10
10/10
2/2
9/10
7/10
10/10
9/10
7/10
2/2

Board
2/2
8/8
2/2
5/6

Nominations
Committee
2/2
–
2/2
–
2/2
1/2
–
–
–
–

Nominations 
Committee
–
–
–
–

Audit & Risk 
Management 
Committee 
10/12 
12/12 
11/12 
– 
12/12 
8/12 
– 
– 
12/12 
– 

Audit & Risk 
Management 
Committee 
– 
– 
– 
– 

Management 
Development & 
Remuneration
Committee
6/9
–
9/9
–
8/9
6/9
–
7/9
–
2/3

Management 
Development & 
Remuneration
Committee
–
–
–
4/5

Health, Safety & 
Environmental
Committee
–
2/2
2/2
–
2/2
–
2/2
2/2
–
–

Health, Safety & 
Environmental
Committee
–
–
–
–

Name 
Thomas Middelhoff (Non-Executive Chairman)  
David Allvey (Independent Non-Executive Director) 
Michael Beckett (Deputy Chairman & Senior Independent Director)
Jürgen Büser (Chief Financial Officer)1 
Roger Burnell (Independent Non-Executive Director) 
Peter Diesch (Non-Executive Director) 
Manny Fontenla-Novoa (Chief Executive Officer) 
Hemjö Klein (Independent Non-Executive Director) 
Bo Lerenius (Independent Non-Executive Director) 
Nigel Northridge (Independent Non-Executive Director)2 

Former Directors who served during the year: 

Name 
John Bloodworth3 
Ludger Heuberg4 
Peter McHugh5 
Angus Porter6 

1 

Jürgen Büser was appointed to the Board on 1 July 2008 

2  Nigel Northridge was appointed to the Board on 1 August 2008 

3 

John Bloodworth resigned from the Board on 31 December 2007 

4  Ludger Heuberg resigned from the Board on 1 July 2008 

5  Peter McHugh resigned from the Board on 31 December 2007 

6  Angus Porter resigned from the Board on 25 April 2008 

Board and Committee composition 
The Board comprises two Executive Directors and eight Non-Executive Directors, six of whom are considered to be independent. Biographical details  
of the Directors can be found on pages 48 and 49. Peter Diesch will step down from the Board with effect from 22 December 2008. He will be replaced 
as an Arcandor nominated Non-Executive Director by Dr Karl-Gerhard Eick, who will be appointed a Director with effect from 22 December 2008. 

As part of its annual review of corporate governance, the Board considered the independence of the Non-Executive Directors against the criteria 
specified in the Code and determined that David Allvey, Michael Beckett, Roger Burnell, Hemjö Klein, Bo Lerenius and Nigel Northridge remained 
independent. The Arcandor nominated Directors Thomas Middelhoff, Peter Diesch (and Karl-Gerhard Eick who will replace him on 22 December 2008) 
are not considered as independent.  

The roles of the Chairman and Chief Executive Officer are separate and distinct and each has a written statement of his respective responsibilities,  
a summary of which can be found within the Corporate Governance compliance statement at www.thomascookgroup.com. 

The Chairman, Thomas Middelhoff, is responsible for leading the Board and chairing Board and general meetings of the Company.  

The Chief Executive Officer, Manny Fontenla-Novoa, is responsible for the development of strategy and, once approved by the Board, its implementation  
and the day-to-day executive management of the Group.  

The Senior Independent Director, Michael Beckett, is available to shareholders if they have concerns which have not, or cannot, be resolved through 
discussion with the Chairman or the Executive Directors. Michael Beckett chairs meetings of the Independent Non-Executive Directors, who meet 
periodically throughout the year.  

There is a formal, rigorous and transparent process in place for the appointment of new Directors to the Board. This process is described in the section 
on the Nominations Committee on page 54. In accordance with the Code and the Company’s Articles of Association, all Directors are subject to election 
by shareholders at the first Annual General Meeting (“AGM”) following their appointment to the Board and thereafter are subject to re-election every 
third year. Other than in respect of the Arcandor appointed Directors and Michael Beckett, Non-Executive Directors are initially appointed for a three-
year term and, subject to rigorous review and re-election, can serve up to a maximum of three such terms.  

Upon the recommendation of the Nominations Committee, David Allvey will be proposed for re-election and Jürgen Büser, Nigel Northridge and 
Karl-Gerhard Eick, having been appointed to the Board since the last AGM, will each retire and offer himself for re-appointment by shareholders  
at the 2009 AGM. 

52 

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Operation of the Board 
Before each Board meeting, Directors received a comprehensive pack of 
papers and reports on the matters to be discussed at the meeting. Senior 
executives below Board level also attended relevant parts of Board 
meetings in order to make presentations on their areas of responsibility. 
This gave the Board access to a broader group of executives.  

Between Board meetings, Directors are provided with relevant 
information on matters affecting the business.  

The Group Company Secretary, who was appointed by the Board, is 
responsible for advising and supporting the Chairman and the Board on 
corporate governance matters. All Directors have access to the advice and 
services of the Group Company Secretary and, through him, have access to 
independent professional advice in respect of their duties at the Company’s 
expense. The Company maintains Directors’ and Officers’ liability insurance.  

The Code provides that the Chairman and Non-Executive Directors  
should meet without executives present; such meetings have taken  
place. However, because of the governance structure adopted under the 
Relationship Agreement, the Company believes that the spirit of the Code 
is also served by the meetings of Independent Non-Executive Directors. As 
stated above, these meetings are chaired by the Deputy Chairman, who is 
also the Senior Independent Director. 

Board evaluation 
An evaluation of the Board and its Committees was conducted during the 
Financial Period. The Board evaluation focused on the following areas: 

• 

• 

• 

• 

the Board, its size, structure, effectiveness, range of skills and the 
appropriateness of its delegated authorities; 
the appropriateness of information circulated to the Board for 
meetings and with regard to financial and operational matters; 
compliance with legislation, regulation and codes and advice on 
corporate governance; 
the establishment, competence and terms of reference of  
Board Committees. 

The evaluation highlighted a small number of issues and appropriate 
actions have been taken to address them. In addition, the Chairman  
was responsive to suggestions made by the Independent Non-Executive 
Directors regarding the operation and focus of the Board. In line with  
best practice, the Company has adopted an online evaluation system, 
which will be used to conduct an evaluation of the Board and its 
Committees in the current year.  

The Independent Non-Executive Directors reviewed the performance  
of the Chairman. As part of the Company’s performance management 
system that applies to management at all levels across the Group, the 
performance of the Chief Executive Officer and the Chief Financial Officer 
is reviewed by the Management Development & Remuneration Committee. 

Board training and induction 
An induction programme tailored to meet the needs of individual 
Directors is provided for each new Director. Overall, the aim of the 
induction programme is to introduce new Directors to the Group’s 
business, its operations and its governance arrangements. Nigel 
Northridge’s induction programme, for example, included meetings  
with senior management, visits to the Company’s offices in different 
geographical locations, presentations on key business areas and  
relevant documentation. 

Directors also receive training throughout the year. At Board meetings 
and, where appropriate, Committee meetings, the Directors receive 
regular updates and presentations on changes and developments to the 
business, and to the legislative and regulatory environments. During the 
Financial Period, the Board was provided with updates on the business 
environment and briefings on their codified duties, conflicts of interest 
and a presentation on the law relating to corporate manslaughter.  

Directors’ conflicts of interest 
From 1 October 2008, a Director has had a statutory duty to avoid a 
situation in which he has, or can have, an interest that conflicts or 
possibly may conflict with the interests of the Company. A Director will 
not be in breach of that duty if the relevant matter has been authorised  
in accordance with the Articles of Association by the other Directors.  
The Articles of Association were amended to include the relevant 
authorisation for Directors to approve such conflicts by a resolution  
of shareholders at the AGM held on 10 April 2008. 

Prior to 1 October 2008, the Board conducted a review of actual or 
possible conflicts of interest in respect of each Director. At its meeting  
in September 2008, the Board approved a set of guiding principles on 
managing conflicts; considered the process that had been adopted for 
identifying current conflicts; authorised the conflicts that had been 
identified and stipulated conditions in accordance with the guiding 
principles; and agreed a process to identify and authorise future conflicts. 
It was also agreed that the Nominations Committee would review the 
authorised conflicts every six months, or more frequently if the potential 
conflict situation materialises.  

Committees of the Board 
The Board has delegated authority to its Committees on specific aspects  
of management and control of the Group. Matters discussed and agreed 
at the Committees are reported to the next Board meeting. 

Group Executive Board 
The Chief Executive Officer chairs the Group Executive Board which meets 
ten times a year to oversee the strategic development and operational 
management of the Group’s businesses. The current members of the 
Group Executive Board, together with their biographies, are set out on  
page 50. 

Finance & Administration Committee 
To facilitate swift and efficient operational management decisions,  
the Board has established the Finance & Administration Committee 
(comprising the Chief Executive Officer and the Chief Financial Officer) 
which has delegated authority, within clearly identified parameters,  
in relation to day-to-day financing and administrative matters. 

Audit & Risk Management Committee  
Role of the Committee 
The Board has delegated to the Committee responsibility for overseeing 
the financial reporting and internal risk management control functions 
and for making recommendations to the Board in relation to the 
appointment of the Company’s internal and external auditors.  

In accordance with its terms of reference, the Committee, which reports 
its findings to the Board, is authorised to:  

•  monitor the integrity of the interim and annual financial statements, 
including a review of the significant financial reporting judgements 
contained in them; 
review the Company’s internal financial controls, internal control  
and risk management systems; 

• 

•  monitor and review the effectiveness of the Company’s internal  

• 

audit function; 
establish and oversee the Company’s relationship with the external 
auditors, including the monitoring of their independence; and 
•  monitor matters raised pursuant to the Company’s whistleblowing 

arrangements. 

The full terms of reference of the Committee are available on 
www.thomascookgroup.com or from the Group Company Secretary at  
the registered office. 

Thomas Cook Group plc Annual Report & Accounts 2008 

53

 
 
 
 
Corporate governance report continued 

The composition of the Committee 
All members of the Committee are Non-Executive Directors. Consistent 
with the Relationship Agreement, the two Arcandor appointed 
Non-Executive Directors, Thomas Middelhoff and Peter Diesch (and 
Karl-Gerhard Eick who will replace him on 22 December 2008), who  
do not meet the test of independence, are members of the Committee. 
However, the other four members of the Committee are Independent 
Non-Executive Directors. There were no changes to the composition  
of the Committee during the Financial Period. The composition of  
the Committee at 30 September 2008 was: 

David Allvey (Chairman)* 
Michael Beckett* 
Roger Burnell* 
Peter Diesch  
Bo Lerenius* 
Thomas Middelhoff 

* 

Independent Non-Executive Directors 

David Allvey is considered by the Board to have recent and relevant 
financial experience as required by the Code.  

Meetings and attendance  
The Committee, which meets as often as required, met twelve  
times during the Financial Period, which included meetings held by 
teleconference, to approve matters such as the provision of financial 
information to Arcandor pursuant to the Relationship Agreement. 
Attendance by Committee members at each meeting is set out in  
the attendance table on page 52. 

During the Financial Period, the Committee met twice privately with  
the external auditors, PricewaterhouseCoopers LLP, and separately with 
representatives from Ernst & Young LLP who have been appointed as  
the internal auditors of the Company. 

Business conducted during the Financial Period 
•  Review of the annual and half-yearly results and interim 

management statements; 

•  Review of the accounting judgements and policies adopted  
in connection with the above, and the quarterly submission  
of financial information to Arcandor; 

Fuel hedging strategy; 

•  Policy in relation to taxation; 
• 
•  Treasury policies and procedures;  
•  Review and approval of the internal audit plan and the results  

of the audits conducted under that plan; 

•  Review and approval of the external audit plan; and 
•  Review of the principal risks.  

Support to the Committee 
The Committee received information and support from management during 
the year to enable it to carry out its duties and responsibilities effectively.  

External auditors 
The Committee has developed a policy for the provision of non-audit 
services by the auditors and pre-approves material fees for non-audit 
services in accordance with that policy in order to ensure that the 
provision of non-audit services does not impair the external auditor’s 
independence or objectivity. The policy, which is appended as a schedule 
to the Audit & Risk Management Committee’s terms of reference, is 
published on the Company’s website at www.thomascookgroup.com.  
An analysis of the fees earned by the Group’s auditors for audit and 
non-audit services is disclosed in Note 10 to the Financial Statements. 

PricewaterhouseCoopers LLP (PwC) were appointed as sole auditors of  
the Company, having previously been joint auditors, following a tender 
process conducted at the beginning of the Financial Period. They were 
appointed by shareholders at the AGM held on 10 April 2008. Upon the 
recommendation of the Audit & Risk Management Committee, PwC  
will be proposed for re-election by shareholders at the AGM to be held  
on 19 March 2009. PwC have confirmed their independence as auditors  
of the Company in a letter addressed to the Directors. 

54 

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Nominations Committee  
Role of the Committee 
The Board has delegated to the Committee responsibility for reviewing 
and proposing appointments to the Board and for recommending any 
other changes to the composition of the Board or the Board Committees. 
The principal responsibility of the Committee is to make recommendations  
to the Board on all new appointments to the Board, as well as Board 
balance and composition. The Committee ensures that there is clarity  
in respect of the role description and capabilities for such appointments.  

The full terms of reference of the Committee are available on 
www.thomascookgroup.com or from the Group Company Secretary at  
the registered office. 

The composition of the Committee 
All of the members of the Committee are Non-Executive Directors, two  
of whom, Thomas Middelhoff and Peter Diesch (who will be replaced  
by Karl-Gerhard Eick on 22 December 2008), do not meet the test of 
independence. Angus Porter resigned from the Board, and therefore 
ceased to be a member of the Committee, on 25 April 2008. During  
the period from 25 April to 1 August 2008, the Code requirement that  
a majority of the Nominations Committee comprise Independent 
Non-Executive Directors was not satisfied. Nigel Northridge joined  
the Board, and was appointed to the Committee, on 1 August 2008.  
At 30 September 2008 the composition of the Committee was: 

Michael Beckett (Chairman) * 
Roger Burnell* 
Peter Diesch  
Thomas Middelhoff 
Nigel Northridge* 

* 

Independent Non-Executive Directors  

Board appointments 
Appointments to the Board are made on merit and against objective 
criteria. This process is led by the Nominations Committee which, after 
evaluating the balance of skills, knowledge and experience of each 
Director, makes recommendations to the Board.  

Meetings and attendance  
During the Financial Period, the Committee had two formal meetings. 
Attendance by Committee members at each meeting is given in the 
attendance table on page 52. 

Principal activities during the Financial Period 
The Committee considered the appointment of a new Chief Financial 
Officer following the decision of Ludger Heuberg to step down from the 
Board for personal reasons and move back to Germany to assume the 
role of CFO for the Group’s Continental European business segment. In  
line with succession plans, the Nominations Committee recommended 
Jürgen Büser, formerly CFO for the UK & Ireland Division, as the new  
Chief Financial Officer and he was appointed with effect from 1 July 2008.  

The Committee engaged the services of an external search agency  
and other professional firms for the recruitment of Non-Executive 
Directors. This process resulted in the recommendation to the Board  
of the appointment of Nigel Northridge with effect from 1 August 2008. 

Management Development & Remuneration Committee 
A report detailing the composition, responsibilities and work carried  
out by the Management Development & Remuneration Committee during 
the year, including an explanation of how it applies the principles of the 
Code in respect of Executive Directors’ remuneration, is included within 
the Remuneration Report on pages 59 to 66. 

The Management Development & Remuneration Committee does not 
determine the Chairman’s remuneration and therefore does not comply 
with the Code. An explanation of this is set out in the Remuneration 
Report on pages 59 to 66.

 
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All members of the Committee are Non-Executive Directors. Consistent 
with the Relationship Agreement, the two Arcandor appointed Directors, 
Thomas Middelhoff and Peter Diesch, neither of whom meet the Code’s 
test of independence, are members of the Committee. However, each of 
the other four members, being a majority of the Committee, has been 
determined by the Board as being independent as defined by the Code. 

Health, Safety & Environmental Committee  
Role of the Committee 
The Board has delegated to the Committee responsibility to review, 
develop and oversee consistent policy, standards and procedures for 
managing health, safety and environmental risks to the Group’s business. 
It is also responsible for the review and oversight of compliance with 
relevant legislation and regulation relating to health, safety and the 
environment across the Group. 

The full terms of reference of the Committee are available on 
www.thomascookgroup.com or from the Group Company Secretary  
at the registered office. 

The composition of the Committee 
The composition of the Committee at 30 September 2008 was: 

Roger Burnell (Chairman) * 
David Allvey* 
Michael Beckett* 
Manny Fontenla-Novoa 
Hemjö Klein* 

* 

Independent Non-Executive Directors 

Meetings and attendance  
During the Financial Period the Committee met twice; there was also  
a presentation and discussion on corporate manslaughter at a Board 
meeting. Attendance by Committee members at each meeting is set  
out in the attendance table on page 52. 

During the Financial Period, the Committee reviewed and agreed the 
Group’s Health, Safety & Environmental report, reviewed the process  
of health and safety reporting across the Group and agreed the Group 
objectives in the fields of health, safety and the environment for 2007/08.  

The Group’s corporate social responsibility report for 2007/08 is available 
on www.thomascookgroup.com and contains the Group’s health, safety 
and environmental policies, an explanation of how Thomas Cook 
manages corporate social responsibility and progress against targets.  
A summary of the online report is contained on pages 38 to 40 in the 
Business review. 

Shareholder communication 
The Board promotes open communication with shareholders, which is 
formalised within a framework of investor relations and includes formal 
presentations of full year and interim results, trading statements and 
regular meetings between executive management and institutional 
investors. In addition, the Board responds to ad hoc requests for 
information and all shareholders have an opportunity to question  
the Board at the AGM. 

A review of the performance and financial position of the Group and business 
segments and an explanation of the Group’s strategy is provided on pages 
9 to 45 in the Business review. 

The Deputy Chairman, who is also the Senior Independent Director, met a 
number of major institutional shareholders during the year to discuss the 
Group’s remuneration policy and governance arrangements, and to gain a 
first-hand understanding of any issues or concerns they may have had. 

At its 2008 AGM, the Company passed a resolution allowing the website 
and email to be used as the primary means of communication with  
its shareholders. This arrangement provides significant benefits for 
shareholders and the Company in terms of timeliness of information, 
reduced environmental impact, and cost. Shareholders may still opt to 
receive their communications in a paper format. The Company’s website 
contains information for shareholders, including share price and news 
releases, and can be found at www.thomascookgroup.com.  

Risk management and internal control 
The Board recognises its ultimate accountability for maintaining an 
effective system of internal control that is appropriate in relation to both 
the scope and the nature of the Group’s activities and complies with the 
Turnbull Committee Guidance on the Combined Code and has approved 
the framework and the standards implemented. The Board has delegated 
responsibility for the implementation of the Group Risk Management 
Policy to the Chief Financial Officer. The Chief Financial Officer has formed  
the Group Risk Management Committee comprising senior executives 
from across the Group, to support him in fulfilling this responsibility. 

The Group Risk Management Committee is responsible for: 

• 

• 

• 

supervising a thorough and regular evaluation of the nature  
and extent of the risks to which the Company is exposed; 
reviewing the corporate risk profile and recommending risk 
management strategies; and  
supervising and assessing the overall effectiveness of the risk 
management process. 

To support the Group Risk Management Committee, there are segment 
risk management committees, each comprising the respective segment 
Chief Executive Officer, Chief Financial Officer and other senior managers. 
The Group has established five segment risk committees which report into 
and support the work of the Group Risk Management Committee: 

•  UK & Ireland; 
•  Continental Europe; 
•  Northern Europe; 
•  North America; and 
•  Airlines Germany. 

By implementing the risk management policy, the segments are 
responsible for: 

•  maintaining and updating risk reporting; 
•  managing risk action implementation and measurement systems; and 
•  maintaining and reviewing risk performance and measurement systems. 

Risk registers are compiled and submitted by each segment for review 
quarterly. The Group Risk Management Committee prepares a half-yearly 
risk report for the attention of the Audit & Risk Management Committee 
based on the feedback from the segment risk management committees.  
The report identifies the principal risks to the business and assesses the 
adequacy of controls and procedures in place to mitigate the likelihood 
and the impact of these risks. The regular risk reporting regime has 
created an environment for the development and improvement of risk 
management procedures across the Group. The Audit & Risk Management 
Committee reviews the reports of the Group Risk Management Committee 
and makes recommendations to improve risk management and internal 
control. This process of risk identification, measurement and reporting 
provides a comprehensive ongoing assessment of the significant risks 
facing the Group and the mitigating actions taken in respect of those risks. 
This process ensures that the Group complies with the relevant corporate 
governance best practice in relation to risk management, including the 
guidance issued under the Turnbull Report. The Group’s internal audit 
function reports directly to the Chairman of the Audit & Risk Management 
Committee. Internal audit makes recommendations to that Committee in 
relation to the maintenance of a sound control environment throughout 
the Group. 

Thomas Cook Group plc Annual Report & Accounts 2008 

55

 
 
 
 
Corporate governance report continued 

The Group encourages employees to report any concerns which they feel 
need to be brought to the attention of management and has adopted a 
whistleblowing policy and guidance on theft and fraud reporting policy. 
These are published on the Group’s intranet sites, allowing such matters 
to be raised in confidence through the appropriate channels. The Group 
has a code of ethics which deals with:  

Statement of Directors’ Responsibilities in respect of the  
Annual Report, the Directors’ Remuneration Report and  
the financial statements  
The Directors are responsible for preparing the Annual Report, the 
Directors’ Remuneration report and the financial statements in 
accordance with applicable law and regulations. 

•  prohibitions on employees using their position for personal gain;  
•  prohibitions on improper business practices; 
•  a requirement for compliance with all internal approval and 
authorisation procedures and legal requirements; and 

•  a requirement to disclose potential conflicts of interest and potential 

related party contracts. 

This code of ethics is contained within the Group’s internal policies  
guide, which is available to all employees and, in particular, those  
with responsibility for procurement or other dealings with third party 
suppliers. In addition, the Group Company Secretary is available for 
advice on any matter which may give rise to cause for concern in  
relation to the code of ethics.  

During the year, the Board, through the work of the Audit & Risk 
Management Committee, has conducted a review of the Group’s system  
of internal control. There is an ongoing process for the identification and 
evaluation of risk management and internal control processes which has 
been in place throughout the year and remains in place up to the date of 
the financial statements. The Board, in reviewing the effectiveness of the 
system of internal control, can confirm that necessary actions have been, 
or are being, taken to remedy any significant failings or weaknesses 
identified from that review. 

Going concern 
After making appropriate enquiries, the Directors have a reasonable 
expectation that the Company and the Group have adequate resources  
to continue in operational existence for the foreseeable future. For this 
reason, they continue to adopt the going concern basis in preparing the 
financial statements. 

Disclosure of information to auditors 
Each of the Directors who held office at the date of approval of this 
Directors’ report confirms that: so far as he is aware, there is no relevant 
audit information of which the Company’s auditors are unaware; and that 
he has taken all steps that he ought to have taken as a Director to make 
him aware of any relevant audit information and to establish that the 
Company’s auditors are aware of that information. 

Company law requires the Directors to prepare financial statements for 
each financial year. Under that law, the Directors have prepared the 
Group and the Company financial statements in accordance with 
International Financial Reporting Standards (IFRSs) as adopted by the 
European Union. The financial statements are required by law to give a 
true and fair view of the state of affairs of the Company and the Group 
and of the profit or loss of the Group for that period. 

In preparing those financial statements, the Directors are required to: 

select suitable accounting policies and then apply them consistently; 

• 
•  make judgements and estimates that are reasonable and prudent; and 
state that the financial statements comply with IFRSs as adopted by 
• 
the European Union. 

The Directors confirm that they have complied with the above requirements 
in preparing the financial statements. 

The Directors are responsible for keeping proper accounting records that 
disclose with reasonable accuracy at any time the financial position of the 
Company and the Group, and to enable them to ensure that the financial 
statements and the Directors’ Remuneration report comply with the 
Companies Act 1985 and, as regards the Group financial statements, 
Article 4 of the IAS Regulation. They are also responsible for safeguarding 
the assets of the Company and the Group and hence for taking reasonable 
steps for the prevention and detection of fraud and other irregularities. 

The Directors are responsible for the maintenance and integrity of the 
Company’s website, and legislation in the United Kingdom governing the 
preparation and dissemination of financial statements may differ from 
legislation in other jurisdictions.  

56 

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Other disclosures 

Share capital  
The authorised share capital of the Company is divided into two classes of 
share. The Company’s authorised ordinary share capital is €200,000,000 
divided into 2,000,000,000 ordinary shares of €0.10 each and £50,000 
divided into 50,000 deferred shares of £1 each. The ordinary shares carry 
the right to the profits of the Company available for distribution and  
to the return of capital on a winding up of the Company. The ordinary 
shares carry the right to attend and speak at general meetings of the 
Company; each share holds the right to one vote. The ordinary shares  
are admitted to trading on the Official List of the London Stock Exchange. 
The deferred shares carry no right to the profits of the Company. On  
a winding up, the holders of the deferred shares would be entitled to  
receive an amount equal to the capital paid up on each deferred share.  
The holders of the deferred shares are not entitled to receive notice, 
attend, speak or vote (whether on a show of hands or on a poll) at  
general meetings of the Company. 

Authority to purchase shares 
At the Extraordinary General Meeting held on 12 March 2008, the 
Company was authorised to make market purchases of ordinary shares  
up to a maximum number of 70,386,610 shares. During the eleven month 
period ended 30 September 2008, the Company acquired 58,529,399  
of its own ordinary shares (nominal value €0.10), as part of the  
£290m (€375m) share buyback programme announced on  
30 January 2008. The total consideration paid for these shares  
was £147.3m. As a result of these market purchases the Company 
purchased 48,595,331 shares from Arcandor AG and KarstadtQuelle 
Freizeit GmbH, at a cost of £116.2m.  

Share transfer restrictions 
The Articles of Association (the “Articles”) are designed to ensure that  
the number of the Company’s shares held by non-EEA nationals does  
not reach a level which could jeopardise the Company’s entitlement to 
continue to hold or enjoy the benefit of any authority, permission, licence 
or privilege which it, or any of its subsidiaries, holds or enjoys and which 
enables an air service to be operated (each an “Operating Right”). In 
particular, EC Council Regulation 1008/08 on licensing of air carriers 
requires that an air carrier must be majority-owned and effectively 
controlled by EEA nationals.  

The Articles allow the Directors, from time to time, to set a “Permitted 
Maximum” on the number of the Company’s shares which may be owned 
by non-EEA nationals at such level as they believe is in compliance with 
the Operating Rights, provided that the Permitted Maximum shall not  
be less than 40% of the total number of issued shares. 

The Company maintains a separate register (the “Separate Register”) of 
shares in which non-EEA nationals, whether individuals, bodies corporate 
or other entities have an interest (such shares are referred to as “Relevant 
Shares” in the Articles). An interest in this context is widely defined (see 
below). The Directors may require relevant members or other persons  
to provide them with information to enable them to determine whether 
shares are, or are to be treated as, Relevant Shares. If such information  
is not provided then the Directors will be able, at their discretion, to 
determine that shares to which their enquiries relate be treated as 
Relevant Shares. Registered shareholders will also be obliged to notify the 
Company if they are aware either (a) that any share they hold ought to be 
treated as a Relevant Share for this purpose; or (b) that any share they 
hold which is treated as a Relevant Share should no longer be so treated. 
In this case, the Directors shall request such information and evidence as 
they require to satisfy themselves that the share should not be treated as 
a Relevant Share and, on receipt of such evidence, shall remove 
particulars of the share from the Separate Register. If the Directors 
determine that such action is necessary to protect any Operating Right 
due to the fact that an Intervening Act (an “Intervening Act” being the 
refusal, withholding, suspension or revocation of any Operating Right or 
the imposition of materially inhibiting conditions or limitations on any 
Operating Right in either case, by any state or regulatory authority) has 
taken place or is contemplated, threatened or intended, or the aggregate 

number of Relevant Shares is such that an Intervening Act may occur or 
the ownership or control of the Company is such that an Intervening Act 
may occur, the Directors may, among other things:  

• 

• 

identify those shares which give rise to the need to take action and 
treat such shares as affected shares (“Affected Shares”) (see below); or  
set a Permitted Maximum on the number of Relevant Shares which 
may subsist at any time (which may not, save in the circumstances 
referred to below, be lower than 40% of the total number  
of issued shares) and treat any Relevant Shares in excess of this 
Permitted Maximum as Affected Shares (see below). The Directors 
may serve a notice (an “Affected Share Notice”) in respect of any 
Affected Share. An Affected Share Notice can, if it so specifies, have 
the effect of depriving the registered holder of the right to attend, 
vote and speak at general meetings which he would otherwise have 
had as a consequence of holding such shares. Such an Affected Share 
Notice can, if it so specifies, also require the recipient to dispose of 
the Affected Shares (so that the Relevant Shares will then cease to be 
Affected Shares) within 21 days or such longer period as the Directors 
may determine. The Directors are also given the power to sell such 
Affected Shares themselves where there is non-compliance with an 
Affected Share Notice at the best price reasonably obtainable at the 
relevant time on behalf of the shareholder. 

In deciding which shares are to be dealt with as Affected Shares the Directors, 
in their sole opinion, will determine which Relevant Shares may give rise 
to the fact of risk of an Intervening Act occurring and, subject to any such 
determination, will have regard to the chronological order in which 
particulars of Relevant Shares have been, or are to be, entered in the 
Separate Register unless to do so would in the sole opinion of the Directors  
be inequitable. If there is a change in any applicable law or the Company 
or any subsidiary receives any direction, notice or requirement from any 
state or regulatory authority, which, in either case, necessitates such 
action to overcome, prevent or avoid an Intervening Act, then the 
Directors may either: 

• 

• 

lower the Permitted Maximum to the minimum extent that they 
consider necessary to overcome, prevent or avoid an Intervening  
Act; or  
resolve that any Relevant Shares shall be treated as Affected Shares 
and the Conversion Permitted Maximum. The rights of the Directors 
referred to above apply until such time as the Directors resolve that 
grounds for the making of a determination have ceased to exist, 
whereupon the Directors must withdraw such determination. The 
Permitted Maximum is set at 40%. This Permitted Maximum may be 
varied by the Directors. If the Directors resolve to vary the Permitted 
Maximum to deal with shares as Affected Shares or relax the 
ownership limitations, they shall publish in at least one national 
newspaper in the United Kingdom (and in any other country in  
which the shares are listed) notice of the determination and of  
any Permitted Maximum.  

The Directors shall publish, from time to time: 

• 

information as to the number of shares particulars of which have 
been entered on the Separate Register; and 

•  any Permitted Maximum which has been specified. 

The Directors may not register any person as a holder of shares unless 
such person has furnished to the Directors a declaration, together with 
such evidence as the Directors may require, stating (a) the name and 
nationality of any person who has an interest in any such share and, if  
the Directors require, the nature and extent of such interest; or (b) such 
other information as the Directors may from time to time determine.  
The Directors may decline to register any person as a shareholder if 
satisfactory evidence of information is not forthcoming. 

Existing holders of Shares will be recorded on the Special Register unless 
and until they have certified, to the satisfaction of the Company, that  
they are EEA nationals. 

Thomas Cook Group plc Annual Report & Accounts 2008 

57

 
 
 
Other disclosures continued 

A person shall be deemed to have an interest in relation to  
Thomas Cook Group plc shares if: 

• 

such person has an interest which would (subject as provided below) 
be taken into account, or which he would be taken as having, in 
determining for the purposes of Part 22 of the Companies Act 2006 
whether a person has a notifiable interest; or 

•  he has any such interest as is referred to in Part 22 of the Companies 
Act 2006 but shall not be deemed to have an interest in any shares  
in which his spouse or any infant, child or stepchild (or, in Scotland, 
pupil or minor) of his is interested by virtue of that relationship or 
which he holds as a bare or custodian trustee under the laws of 
England or as a simple trustee under the laws of Scotland, and 
interested shall be construed accordingly. 

Agreements governing the transfer of shares  
Under the Relationship Agreement, Arcandor AG has undertaken to give 
the Company written notice of any intention to dispose of any shares, and 
such disposal has to be carried out in consultation with the Board of the 
Company. Under the Relationship Agreement, Arcandor AG has agreed to 
certain restrictions on the ability of it and other members of the Arcandor 
group of companies to acquire further shares in the Company. Under 
these restrictions, members of the Arcandor Group may not, subject to 
certain exceptions, acquire further shares in the Company without the 
prior consent of the Board, provided that such consent will be given for  
a purchase of up to 5% of the Company’s issued share capital, unless such 
purchase would prejudice the Company’s ability to maintain the free float 
required by the Listing Rules, or result in the Company becoming a close 
company. 

Provisions on change of control  
The Company has a €1.8bn Group Facility Agreement (the “Agreement”)  
in place, which provides that, on any change of control of the Company, 
the Lenders under the Agreement are entitled to negotiate (for a period 
not exceeding 30 days) new terms for continuing the facilities but, where 
agreement on new terms cannot be reached, any such Lender is entitled 
to: (i) receive a repayment of amounts owing to such Lender; and (ii) 
cancel all commitments under the Agreement. 
Contractual arrangements 
The Group has contractual arrangements with numerous third parties in 
support of its business activities. The disclosure in this report of information 
about any of those third parties is not considered necessary for an 
understanding of the development, performance or position of the 
Group’s businesses. 

Political donations 
The Company did not make any political donations during the financial 
period (2007: nil). 

Supplier payment policy  
It is the Company’s policy to comply with the terms of payment agreed 
with its suppliers. Where payment terms are not negotiated, the Company 
endeavours to adhere to suppliers’ standard terms. As at 30 September 2008, 
the Company had no trade creditors (2007: nil).  

Major shareholdings 
As at 18 December 2008, the Company had been notified, in accordance 
with rule 5 of the Disclosure Rules and Transparency Rules of the UK 
Listing Authority, of the following major shareholdings in the ordinary 
share capital of the Company: 

Name 
Arcandor AG 
Karstadtquelle Freizeit GmbH1 
Standard Life Investments 
Limited 
AXA S.A. 

Number of shares held 
226,664,045 
226,664,045 

Percentage of issued 
capital (%)
26.41
26.41

68,719,267 
48,358,692 

8.00
5.07

1.  Karstadtquelle Freizeit GmbH is a wholly owned subsidiary of Arcandor AG. 

Auditors 
PricewaterhouseCoopers LLP have expressed their willingness to be 
reappointed as auditors of the Company. Upon the recommendation  
of the Audit & Risk Management Committee, resolutions to reappoint 
them as the Company’s auditors and to authorise the Directors to determine 
their remuneration will be proposed to the AGM. 

The Directors’ Report comprising pages 2 to 66 has been approved by  
the Board and signed on its behalf by: 

Derek Woodward 
Group Company Secretary 
19 December 2008 

Registered office 
The Thomas Cook Business Park 
Coningsby Road 
Peterborough PE3 8SB 

58 

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Remuneration report  

The Management Development & Remuneration Committee (the 
“Committee”) has adopted the principles of good governance as set  
out in the Combined Code. This report, which has been prepared  
by the Committee and approved by the Board, complies with the 
requirements of the Companies Act and The Directors’ Remuneration 
Report Regulations 2002 (the “Regulations”) and meets the relevant 
requirements of the Financial Services Authority’s Listing Rules. As the 
Regulations provide that certain of the information is to be the subject  
of the auditors’ report and other information is not, this report is divided 
into sections of audited and unaudited information.  

• 
• 

• 

• 

• 

• 

the introduction of a Co-Investment Plan (“COIP”) for senior executives;  
the structure and targets of the annual bonus arrangements for  
the Financial Period; 
continued engagement of PricewaterhouseCoopers LLP (“PwC”)  
as remuneration advisors; 
the structure, targets and payments made under the Secured 
Synergies Bonus Plan; 
introduction of a UK and international Save As You Earn Share 
Scheme and UK Share Incentive Plan; and 
the policy in respect of external non-executive directorships and fees. 

This report explains the Group’s remuneration policy and provides details 
of the remuneration of the Executive and Non-Executive Directors for 
services to the Company from 1 November 2007 to 30 September 2008 
(the “Financial Period”). This is an eleven month period as the Company 
amended its accounting reference date to 30 September. The comparative 
figures in the audited information are for the period from 19 June 2007, 
the date of the completion of the merger between MyTravel Group plc 
and Thomas Cook AG, to 31 October 2007. There was no remuneration  
for services to the Company for the period from incorporation of the 
Company on 8 February 2007 to 19 June 2007.  

Committee’s advisors 
The Committee invites individuals to attend meetings as it deems 
beneficial to assist it in reviewing matters for consideration. During  
the Financial Period, these individuals included the Group HR Director, 
the Group Head of Reward and the Group Company Secretary.  

In performance of its duties, the Committee seeks assistance from 
external advisors, where necessary, to ensure it is suitably advised. PwC  
has provided services relating to the design of incentive arrangements  
and benchmarking of salaries and benefits for Executive Directors. 

The Committee has a policy of transparent reporting of Executive Director 
remuneration arrangements. Furthermore, the Committee through  
its Chairman has given a recent undertaking that there will be full 
consultation with the Company’s shareholders prior to any future  
change to, or deviation from, the Company’s remuneration policy. 

This report will be the subject of a separate resolution for approval at  
the Annual General Meeting to be held on Thursday 19 March 2009. 

Information not subject to audit 
The members of the Committee during the Financial Period were:  

Michael Beckett (Chairman)* 
Roger Burnell* 
Peter Diesch 
Hemjö Klein* 
Thomas Middelhoff 
Nigel Northridge* (appointed 1 August 2008) 
Angus Porter* (resigned 25 April 2008) 

* 

Independent Non-Executive Directors 

Pursuant to the Relationship Agreement as summarised on page 51 of  
the Corporate Governance Report, Thomas Middelhoff and Peter Diesch, 
neither of whom are regarded as being independent in accordance with 
the provisions of the Combined Code, are members of the Committee. 
Each of the other members, being a majority of the members of the 
Committee, has been determined by the Board as being independent  
against the criteria set out in provision A.3.1 of the Combined Code. 

The Committee is responsible for making recommendations to the Board 
on the Company’s framework of executive remuneration and its cost, for 
reviewing and determining, on behalf of the Board, the remuneration 
and incentive packages of the Executive Directors and for recommending 
and monitoring the level and structure of the remuneration of the senior 
executives of the Group. The terms of reference of the Committee can be 
found on the Company’s corporate website, www.thomascookgroup.com. 

No Director or senior executive is present at meetings when his or her 
own remuneration arrangements are being discussed. 

The Committee has held nine meetings during the Financial Period. 
Attendance at those meetings is disclosed in the Corporate Governance 
Report. Matters discussed by the Committee included: 

the Group’s remuneration policy;  

• 
•  achievement of the annual bonus targets for Executive Directors  

• 

• 
• 

in respect of the previous financial period; 
the market competitiveness of the remuneration packages  
for Executive Directors; 
the service contracts for the Executive Directors; 
the terms of employment for the appointment of Jürgen Büser  
as Chief Financial Officer; 

Legal advice is provided to the Committee by Slaughter and May. In 
particular, advice has been sought regarding Executive Directors’ service 
contracts and incentive arrangements. The Committee reviews the 
appointment of advisors on a regular basis. PwC currently also act as 
auditors for the Group and during the year the Committee, being highly 
satisfied with the performance of PwC and having taken advice from the 
Audit & Risk Management Committee that this work did not affect the 
independence of the audit, agreed to continue with the engagement of PwC 
as remuneration advisors to the Committee. Ernst & Young LLP have assisted 
the Committee by conducting an independent review of synergy benefits. 

Remuneration policy 
The Group’s remuneration policy is to ensure that Executive Directors  
and senior executives are rewarded in a way which attracts and retains 
management of the highest quality and motivates them to achieve the 
highest level of performance consistent with the best interests of the 
Group, its shareholders and employees. In developing its remuneration 
policy, the Committee has had regard to the fact that the Group has 
significant international operations and, in order to compete in the global 
environment for the recruitment, retention and incentivisation of high 
quality Executive Directors and senior executives, it must offer upper 
quartile rewards for upper quartile performance. 

The Committee has therefore set its remuneration policy in view of, and 
applying, the following principles: 

•  The Group’s objective is to deliver financial results which consistently 

outperform the average of the industry sector.  

•  The Group will look to retain and attract Executive Directors and 
senior executives with above-average skills and demonstrated 
leadership qualities. 

•  The remuneration of each Executive Director will be based on 
performance (both of the Group and the individual Executive 
Director), potential (i.e. the Executive Director’s potential to grow in 
responsibility and performance) and scarcity (i.e. the availability of 
candidates to replace the Executive Director should he leave the Group). 

•  The proportion between fixed and variable remuneration will 

typically be targeted at 30% fixed and 70% variable.  

Subject to the specific exception agreed for the Chief Executive Officer (see 
page 60 for details), the Committee has determined that its policy for the 
design of remuneration arrangements for Executive Directors is that the 
fixed elements of remuneration shall be set in line with the median  
of a specified comparator group of companies and that total earnings  
(made up of base salary, pension supplement, bonus and any other 
performance-related elements of reward, such as long-term incentive 
arrangements) shall be targeted at the upper quartile of the comparator 
group subject to the attainment of appropriate and challenging 
performance criteria.  

Thomas Cook Group plc Annual Report & Accounts 2008 

59

 
 
 
Remuneration report continued 

The remuneration of Executive Directors will be highly geared  
towards performance with the proportion of ‘at risk’ pay increasing 
disproportionately according to:  

Remuneration arrangements  
The remuneration of the Executive Directors in respect of the Financial 
Period is set out in the audited section of this report.  

• 
• 

the level of personal performance; and  
the seniority of the Executive Director and his/her ability to  
influence results. 

A bespoke comparator group has been adopted to benchmark the 
remuneration of Executive Directors of the Group. This group consists of 
companies in the FTSE 350 with significant international operations. This 
particular comparator group has been chosen to reflect the international 
nature of the Group’s business. Where specialist functions are concerned, 
the Committee may have reference to other comparator groups as it 
considers appropriate. 

The relative importance of the fixed and variable elements of the 
remuneration packages of Executive Directors in circumstances of  
target and stretch performance, is shown in the chart below. 

The chart below assumes:  

(a)  Base salaries in force at 30 September 2008; 
(b)  Value of benefits provided in the Financial Period to 30 September 2008; 
(c)  Pension: 25% of base salary; 
(d)  Annual bonus: 

•  60% of full bonus paid at target performance;  
•  100% of full bonus paid at maximum performance; 

(e)  Performance Share Plan: 25% of the award vests at target performance 

with 100% of the award vesting at maximum performance; 

(f)  Co-Investment Plan: an initial investment of:  

•  at target performance, 10% of base pay (less tax);  
•  at maximum performance, the excess of bonus paid above 100% 

of salary (less tax).  

At the end of the three year performance period, initial investment 
will be matched: 
a. 0.5:1 at target performance; 
b. 3.5:1 at maximum performance. 

Relative importance of fixed and variable remuneration 

%
100

80

60

40

20

0

Target 
Performance

Max
Performance

Target 
Performance

Max
Performance

Chief Executive Ofﬁcer

Chief Financial Ofﬁcer

Fixed

Variable

60 

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For the Financial Period, the remuneration of the Executive Directors 
comprised base salary, annual bonus, synergy bonus, participation in  
the Performance Share Plan (“PSP”) and the Co-Investment Plan (“COIP”), 
other benefits including the provision of pensions, private health 
insurance, disability cover, personal accident cover, death in service 
benefit and a car allowance. The only component of executive 
remuneration which is pensionable is base salary. 

Base salary and benefits 
In accordance with the Company’s remuneration policy, the base salary  
of Executive Directors reflects the size and scope of their responsibilities. 
Upon appointment as Joint Chief Executive Officer at the time of the 
merger in June 2007, the Committee determined that the base salary  
of Manny Fontenla-Novoa would be set at the lower quartile of the 
comparator group of companies. The Committee agreed that this would 
be reviewed after a period in office as the sole Chief Executive Officer.  
The review was undertaken throughout the year with the Committee 
determining at its September 2008 meeting that his base salary should  
be increased in recognition of his operational and strategic achievements 
with specific reference to: (i) financial performance, including industry 
leading margins; (ii) successful strategic development and execution; (iii) 
acquisition activity most notably in India, Egypt, France and Canada in 
2008; (iv) the major reorganisation of the Group in a seamless and 
effective manner; and (v) organising a Group-wide flexible action plan  
to address the uncertainties and challenges that may arise from the 
developing economic climate. The Committee has agreed that the Chief 
Executive Officer’s base salary will next be reviewed at the end of 2009 
and any increase, which would be effective from January 2010, will  
be aligned with remuneration policy. The salary of the current Chief 
Financial Officer was benchmarked against the market and agreed by  
the Committee immediately prior to his appointment in July 2008; this 
will be reviewed in the second half of 2009. 

The annual rates of base salary, as at 30 September 2008, for the 
Executive Directors are shown in the table below: 

Name 
Manny Fontenla-Novoa 
Jürgen Büser 

2007
£000
630
–

2008
£000
850
425

Annual bonus 
Should all objectives be achieved in full, the maximum annual bonus 
opportunity for the Chief Executive Officer is 175% and for the Chief 
Financial Officer is 150% of base salary. Of the maximum bonus payable: 

(i)  75% is linked to the attainment of Group financial targets and is 

earned on a pro rata basis by reference to the achievement of  
those targets; and 

(ii)  25% is linked to the attainment of individual and other non-financial 
criteria linked to the development of the Group and the implementation 
of the Board’s strategy.  

These targets are set by the Committee and agreed with each Executive 
Director at the start of the financial year. The individual and other non-
financial criteria comprise targets in relation to customer satisfaction, 
health and safety, reputation of key brands and employee engagement.  
The non-financial based element of the bonus will only vest and become 
payable rateably to the extent that the financially based elements of that 
Executive Director’s bonus vests. 

The Committee determines the extent to which it considers the targets 
and objectives have been met and the annual bonus payable. For the  
Financial Period the Committee considered that the financial stretch 
targets and the individual and other non-financial criteria had been  
met in full. The Executive Directors were paid 11/12ths of the maximum 
bonus to reflect the eleven month Financial Period. 

 
 
 
 
 
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Secured Synergies Bonus Plan (the “Plan”) 
Incentive arrangements put in place to secure merger related synergies 
were successful in delivering significant value for shareholders. Shareholders 
were supportive of this incentive arrangement prior to the merger, recognising 
the potential for considerable value creation. During the first half of the 
year, synergies totalling £136m (€200m) were secured against the original 
synergy target of at least £95m (€140m).  

Following the success of the original synergy programme and in line with 
the Group’s remuneration policy, the Committee considered it appropriate 
to develop a new bespoke incentive arrangement to incentivise further 
synergies in excess of the £136m (€200m) already secured. The Committee 
determined to pay a cash bonus on the securing of synergies of  
£204m (€300m); a 50% increase on synergies already secured and a  
114% increase on synergies initially targeted at the time of the merger. 

The Committee was advised in September 2008 that synergies secured 
were considerably in excess of £204m (€300m). As part of its assessment of 
the progress of achieving synergy targets, the Committee had access to an 
independent review of synergy benefits undertaken by Ernst & Young LLP 
in September 2008. These additional synergies include improved terms 
negotiated with accommodation providers and overseas agents together 
with increased hotel settlement income. Such synergies being enhanced 
as a consequence of a healthier negotiation position post merger.  

Having exceeded all expectations in terms of both the amount and the 
date by which the synergies were secured, the Committee was satisfied 
that the exceptional performance and personal effort of the senior 
executives involved warranted payment of the maximum bonus under the 
Plan. Accordingly, a payment of £5m was made to the Chief Executive 
Officer and a payment of £1.275m was made to the Chief Financial 
Officer. Both the Chief Executive Officer and Chief Financial Officer intend 
to make a significant investment in Thomas Cook Group plc shares in 
early 2009.  

Pensions 
The Executive Directors’ pension arrangements are disclosed on page 66. 

Long-term incentive plans 
The Committee believes the close alignment of Executive Directors’ 
remuneration with the interests of shareholders is an important element 
of the Company’s remuneration policy and operates two share-based 
long-term incentive plans, one of which was introduced during the 
Financial Period. Both plans have been approved by shareholders. 

Thomas Cook Group plc 2007 Performance Share Plan (“PSP”) 
During the Financial Period ended 30 September 2008, a PSP award equal 
to 175% of base salary was made to the Chief Executive Officer, an award 
of 150% of base salary was made to Ludger Heuberg when he held the 
position of Chief Financial Officer and an award of 100% of base salary 
was made to Jürgen Büser prior to his appointment as Chief Financial 
Officer. Awards with a value of 150% or less of base salary were also made 
to other senior executives. It is expected that the Chief Executive Officer 
and Chief Financial Officer will receive an award of 175% and 150% 
respectively in January 2009 with awards to other senior executives of 
150% or less. Unless there are exceptional circumstances, awards are 
made within 42 days of the Company’s final results being announced. Due 
to the change in accounting period, the 2009 annual award will be made 
less than one year after the award made in 2008, which will result in an 
aggregate award level for that strict twelve month period which exceeds 
200% of base salary. Awards vest three years after the award date, providing 
the participant is still employed by a company within the Group and to 
the extent that the performance conditions have been met.  

Prior to making the awards, the Committee considered the performance 
conditions to ensure that they were sufficiently stretching. The performance 
conditions are split into two elements, the vesting of up to 50% of the 

award is dependent on the Total Shareholder Return (“TSR”) of the 
Company relative to the TSR of the comparator group. The TSR 
comparator group consists of the 50 companies at the bottom of the  
FTSE 100 and the 50 companies at the top of the FTSE 250. This was 
chosen as it is a broad group of companies of similar size and against 
which the performance of the Company’s management should be judged. 
This comparator group excludes investment companies. The comparator 
group is determined at the date the PSP awards are made. The remaining 
50% of the award will only vest if an absolute Earnings Per Share (“EPS”) 
target is achieved. EPS was chosen as it is regarded as a good reflector of 
business performance. An absolute target was considered more appropriate 
than a percentage growth target as there is little historic data for the 
Company, having only been established in 2007. The EPS target range  
was set by reference to consensus forecasts and consideration of business 
prospects. None of the PSP awards has been held for a full performance 
period as the first awards were made in 2007. At the end of the performance 
period TSR calculations will be made by the Company’s external advisers 
using average share prices at the start and end of the performance period. 
EPS will be derived from the income statement for the last financial year 
ending prior to the end of the performance period.  

The performance conditions attached to the outstanding PSP awards are 
summarised in the table overleaf. 

The Committee will review the performance conditions attached to any 
future awards to ensure they are stretching and that the interests of the 
Executive Directors and senior executives are aligned with shareholders.  

Thomas Cook Group plc 2008 Co-Investment Plan (“COIP”) 
Executive Directors and other senior executives are eligible to participate 
in the COIP. Under the COIP, participants must purchase the Company’s 
shares out of their bonus. If the bonus paid is below 100% of salary, 10% 
of the participant’s net base salary (or the whole of the net bonus if less) 
must be invested. If the bonus paid is above 100% of base salary, all of  
the bonus payable above 100% of base salary (subject to the minimum 
investment of 10% of net base salary) must be used to acquire shares. 
Participants can also choose to defer a further part of their bonus  
to purchase shares. The shares purchased, either on a voluntary or 
mandatory basis, are referred to as Lodged Shares. Participants may 
receive up to three and a half Matching Shares for every one Lodged  
Share at the end of the performance period subject to the satisfaction  
of the performance condition. The requirement for compulsory investment 
under the COIP will cease once the value of all shares held by a participant 
reaches a value equal to 200% of base salary. This level of shareholding 
must be maintained. 

Two and a half Matching Shares for every one Lodged Share purchased 
will be awarded subject to the achievement of EPS linked performance 
targets, agreed by the Committee, measured over a three year period. 
Again, EPS was chosen as a good reflector of business performance. The 
EPS target range is an absolute target range and, for the first COIP awards, 
is the same for the 2008 PSP awards having had regard to the same consensus 
forecasts and business prospects. EPS will be derived from the income 
statement for the last financial year ending prior to the end of the 
performance period.  

Participants can receive up to one additional Matching Share for superior 
Return On Invested Capital (“ROIC”) performance but the number of 
Matching Shares awarded is reduced to nil for a below target ROIC 
performance. ROIC was chosen to measure the efficiency of the use of  
the Group’s capital in achieving the underlying earnings target. The ROIC 
ranges were set by reference to the Weighted Average Cost of Capital  
used by the Group for the purposes of impairment testing. ROIC will be 
calculated over the performance period by taking the post tax operating 
profit over the three year performance period and dividing this by the 
sum of the opening capital for each year in the period.  

Thomas Cook Group plc Annual Report & Accounts 2008 

61

 
 
 
 
Remuneration report continued 

The performance conditions attached to the outstanding COIP awards are summarised in the table below. 

The Committee will review the performance conditions attached to any future awards to ensure they are stretching and that the interests of the 
Executive Directors and senior executives are aligned with shareholders.  

Vesting criteria 

Performance conditions over three year period 

Award date 
Performance Share Plan 
July 2007 and March 2008 

50% – Total Shareholder Return ranked against 
comparator group 

50% – Earnings Per Share 

Co-Investment Plan 
June 2008 

Earnings Per Share and Return On Invested  
Capital achievement 

Full vesting for upper quartile ranking. Zero 
vesting for sub-median ranking. Vesting will 
increase on a straight line basis from 25% to  
100% of the TSR linked part of the initial award  
for ranking between median and upper quartiles.
July 2007 award: Full vesting for EPS of 28 pence 
or above. Zero vesting for EPS below 23 pence. 
Vesting will increase on a straight line basis from 
25% to 100% of the EPS linked part of the initial 
award for EPS between 23 pence and 28 pence. 
March 2008 award: The same vesting schedule 
applies as for the July 2007 awards but the EPS 
targets are 28 pence to 33 pence. 

Vesting of up to 2.5 Matching Shares for EPS of  
33 pence or above. Zero vesting for EPS below 28 
pence. Vesting will increase on a straight line basis 
from 0.5 Matching Shares to 2.5 Matching Shares 
for EPS between 28 pence and 33 pence subject  
to ratchet. If ROIC is below 4% no Matching Shares 
will vest. If ROIC is above 10%, the ratchet will 
gradually increase the level of award up to a 
maximum of 3.5 Matching Shares for ROIC 
achievement of 14% or above. 

Following the decision by the Company to state its results in sterling, the EPS targets have been restated as follows: 

PSP EPS target 
Zero vesting 
Full vesting 

COIP EPS target 
Zero vesting 
Full vesting 

  July 2007 

  March 2008 

€c
34
41

£p 
23 
28 

€c
41
47

€c
41
47

£p
28
33

£p
28
33

The Committee elected to use the exchange rate of €1.4733:£1.00 for the July 2007 PSP award as it was the exchange rate as at the award date of  
12 July 2007. The Committee elected to use the exchange rate of €1.442:£1.00 for the 2008 PSP and COIP awards as it was the exchange rate as at  
1 November 2007, the date the performance period began. 

In the event of a change of control, the awards shall vest at the Committee’s discretion taking into account the period of time for which the award has 
been held by participants and the extent to which performance conditions have been achieved since the award date after an independent valuation of 
performance to date. 

Funding of share plans 
It is the Company’s current intention to satisfy the requirements of its share schemes by acquiring shares in the market.  

The Committee has agreed that it is prudent and appropriate to hedge the shares awarded under the PSP. As at 30 September 2008, 5,049,796 shares 
were held in the Thomas Cook Group plc 2007 Employee Benefit Trust, which represents 66% of share incentive awards held on that date. The level of 
hedging will be kept under review. Under the rules of the Plans, awards cannot be made if awards under any other discretionary employee share scheme 
operated by Thomas Cook Group plc in the preceding ten-year period would exceed 5% of the Company’s issued share capital at that time.  

The Trustee would not normally vote at general meetings on the Thomas Cook Group plc shares held in the Employee Benefit Trust. 

62 

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Service contracts 
Each of the Executive Directors has a service contract with the Company. The date of the service contract and notice period for each Executive Director 
who held office at the end of the Financial Period are set out below: 

Name 
Manny Fontenla-Novoa 
Jürgen Büser 

Date of contract 
30 January 2008 
1 July 2008 

Outstanding term 
To age 65 
To age 65 

Notice period 
12 months 
12 months 

Compensation arrangements 
See below 
See below 

The notice period for Executive Directors is twelve months. The Committee believes that this is appropriate given the need to retain the specialist skills  
that the Executive Directors bring to the business and to achieve continuity in the Company’s senior management. Either the Executive Director or  
the Company may terminate employment by giving one year’s written notice and the Company may pay compensation in lieu of notice. There is no 
clause in the Executive Directors’ contracts providing them with additional protection in the form of compensation for severance as a result of  
change of control.  

External appointments 
The Company recognises the benefits to the individual, and to the Group, of Executive Directors taking on external appointments as non-executive 
directors. Subject to the approval of the Committee and to such conditions as the Committee may, in its discretion, attach, an Executive Director may 
accept such appointments at other companies or similar advisory or consultative roles. The Committee has set a limit of one external appointment  
for each Executive Director, to a FTSE 100 or FTSE 250 company, or an international company of a similar size, unless there is justification for a  
further appointment.  

During the part of the Financial Period for which he was an Executive Director of the Company, Ludger Heuberg received a fee of €3,000 from 
Commerzbank AG in respect of his membership of their Regional Advisory Committee. On 23 April 2008, Manny Fontenla-Novoa was appointed  
as a member of the Arcandor AG Management Board; he does not receive a fee for this appointment.  

Non-Executive Directors 
The fees for the Chairman and Deputy Chairman are determined by a committee of independent Non-Executive Directors excluding the Deputy 
Chairman. The fees for the other Non-Executive Directors are set by the Board excluding these Non-Executive Directors. 

Non-Executive Directors’ fees are reviewed every two years. Non-Executive Directors do not participate in any bonus plans, are not eligible to participate 
in any long-term incentive plans and no pension contributions are made on their behalf. 

The annual rates of Non-Executive Director fees, which have not changed since the merger of MyTravel Group plc and Thomas Cook AG in June 2007, 
are shown in the table below. 

Position 
Chairman 
Deputy Chairman and Senior Independent Director 
Non-Executive Director 
Additional fee for the Chair of Audit & Risk Management Committee 

Annual fees 
£000
250
250
60
20

The fees paid to the Chairman and the Non-Executive Directors in respect of the Financial Period are set out in the audited section of this report. 

Non-Executive Directors, including the Chairman, do not hold service contracts. Each of the Non-Executive Directors has been appointed pursuant to a 
letter of appointment. The appointments under these letters continue until the expiry dates set out below unless terminated for cause or on the period 
of notice stated below: 

Name 
Thomas Middelhoff 
Michael Beckett 
David Allvey 
Roger Burnell 
Peter Diesch 
Hemjö Klein 
Bo Lerenius 
Nigel Northridge 

Date of letter of appointment 
18 June 2007 
13 June 2007 
18 June 2007 
18 June 2007 
18 June 2007 
1 July 2007 
1 July 2007 
1 August 2008 

Expiry date 
See note 
See note 
18 June 2010  
18 June 2010 
See note 
30 July 2010 
30 June 2010 
31 July 2011 

Notice period 
See note 
6 months 
6 months 
6 months 
See note 
6 months 
6 months 
6 months 

Thomas Middelhoff and Peter Diesch’s appointments shall continue until terminated by Arcandor AG by notice to the Company. The Company has received notice from Arcandor AG 
that Peter Diesch’s appointment to the Board will terminate on 22 December 2008. Michael Beckett’s appointment continues until terminated by either party on six months’ notice.   

Thomas Cook Group plc Annual Report & Accounts 2008 

63

 
 
 
 
Remuneration report continued 

Performance graph 
The graph below shows the total shareholder return for holders of Thomas Cook Group plc €0.10 ordinary shares for the period since listing on 19 June 2007, 
measured against the FTSE 100 Index and the FTSE Travel & Leisure Index. These indices were chosen as comparators because the Company has been  
a constituent of the FTSE 100 for the majority of the Financial Period and a member of the FTSE Travel & Leisure Index throughout the period since 
listing. The calculation of total shareholder return follows the provisions of the Regulations and is broadly the change in market price together with 
reinvestment of dividend income. 

110

100

90

80

70

60

50

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Thomas Cook

FTSE 100

FTSE Travel & Leisure

19/06/07

19/09/07

19/12/07

19/03/08

19/06/08

19/09/08

Information subject to audit 
Directors’ interests in shares 
The following table shows the beneficial interests of the Directors who held office at the end of the Financial Period in the €0.10 ordinary shares  
of the Company: 

Directors as at 30 September 2008 
Executive Directors 
Manny Fontenla-Novoa1 
Jürgen Büser1 
Non-Executive Directors 
Thomas Middelhoff 
Michael Beckett 
David Allvey 
Roger Burnell 
Peter Diesch 
Hemjö Klein 
Bo Lerenius 
Nigel Northridge 

Ordinary shares  
at 30 September 
2008 

Ordinary shares at 
1 November 2007 
or on appointment

239,653 
21,126 

70,000 
24,999 
 –  
3,692 
 –  
 –  
10,000 
 –  

70,643
21,126

70,000
24,999
 – 
3,692
 – 
 – 
10,000
 – 

1  The holdings of the Executive Directors include shares held as Lodged Shares under the COIP: 169,010 held by Manny Fontenla-Novoa, 21,126 held by Jürgen Büser. 

None of the Directors of the Company held any interest in any other securities of Thomas Cook Group plc during the Financial Period. In the period 
between 30 September 2008 and 19 December 2008 there were no changes in the Directors’ interests referred to above. 

64 

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Details of the remuneration of the Directors for services to the Company for the Financial Period are disclosed below.  

Base  
salary/fees 
£000 

Annual  
bonus  
payments1
£000  

Secured Synergy 
Bonus payment
£000

Compensation 
for loss of office
£000

Pay in lieu 
of pension
£000

Benefits3 
£000  

Total 
emoluments 
2008
£000

Total 
emoluments 
2007
£000

Name 
Executive Directors 
Manny Fontenla-Novoa 
Jürgen Büser2 

Non-Executive Directors 
Thomas Middelhoff 
Michael Beckett 
David Allvey 
Roger Burnell 
Peter Diesch 
Hemjö Klein 
Bo Lerenius 
Nigel Northridge 

Past Non-Executive Director5 
Angus Porter 

Past Executive Directors5 
Ludger Heuberg4 
Peter McHugh 
John Bloodworth 

633 
106 

229 
229 
73 
55 
55 
55 
55 
10 

30 

283 
105 
75 

1,364 
159 

5,000
1,275

– 
– 
– 
– 
– 
– 
– 
– 

– 

–
–
–
–
–
–
–
–

–

–
–

–
–
–
–
–
–
–
–

–

406 
– 
– 

800
–
–

–
1,000
769

–
21

–
–
–
–
–
–
–
–

–

–
26
32

79 

40  
11  

7,037
1,572

2,888
–

–  
–  
–  
–  
–  
–  
–  
–  

–  

20  
6  
158  

235  

229
229
73
55
55
55
55
10

30

92
92
29
22
22
20
20
–

22

1,509 
1,137
1,034

1,173
2,536
1,924

13,080

8,840 

Total  

1,993 

1,929 

7,075

1,769

1  Annual bonus entitlement: Up to 175% and 150% of salary for the Chief Executive Officer and Chief Financial Officer respectively, with 75% paid by reference to financial targets and 

25% payable by reference to personal objectives. All targets and objectives for Executive Directors were satisfied in full under the terms of the bonus scheme. Part of the annual bonus 
paid to the Executive Directors must be invested in Lodged Shares under the COIP – see page 61 for details. 

2  Jürgen Büser was paid a total of £1,275,000 under the Secured Synergy Bonus Plan. A significant proportion of that amount is in respect of synergies secured during the Financial 

Period when he was CFO for the UK & Ireland Business Segment, prior to his appointment as CFO of the Group on 1 July 2008. The amounts disclosed for base salary, annual bonus 
pay in lieu of pension and benefits paid to Jürgen Büser relate specifically to the period when he was CFO of the Group. 

3  Benefits received by the Executive Directors include a car allowance, petrol and private medical insurance and, in respect of John Bloodworth, a payment under a tax  

equalisation agreement. 

4  Ludger Heuberg received £800,000 as a Synergy Bonus payment under the Scheme agreed at the time of the merger between Thomas Cook AG and MyTravel Group plc.  

5  The following Directors left office during the year on the dates shown: Ludger Heuberg left the Board to become Chief Financial Officer of Continental Europe having decided  
to return to Germany for personal and family reasons (1 July 2008), John Bloodworth (31 December 2007), Peter McHugh (31 December 2007) and Angus Porter (25 April 2008). 

Thomas Cook Group plc Annual Report & Accounts 2008 

65

 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remuneration report continued 

Directors’ pensions 
The Company contributes each year into a pension scheme or other arrangement for each of the Executive Directors to an amount equivalent to 25%  
of their annual base salary. The Executive Directors are active members of the Thomas Cook Pension Plan, a defined benefit pension scheme. For salary 
above that which is pensionable in the UK defined benefit scheme, contributions to a UK based tax approved money purchase pension scheme are 
made on behalf of Manny Fontenla-Novoa; Jürgen Büser receives a salary supplement of the balance. The pay in lieu of pension salary supplement  
paid to Jürgen Büser is disclosed in the emoluments table on page 65. 

Accrued pension  
at 30 Sep 2008 
£ pa 

Increase in 
accrued pension 
during 2008
£ pa

Increase in 
accrued pension 
during 2008 
(net of inflation)
£ pa

Transfer value of 
accrued pension at 
30 Sep 2008
£

Transfer value of  
accrued pension at 
1 Nov 2007 
£ 

Director’s 
contributions 
during 2008
£

Manny Fontenla-Novoa 

Jürgen Büser 

19,470 

4,455 

2,350

1,895

1,682

1,795

214,408

22,785

207,160 

17,672 

5,594

5,594

Increase in 
transfer value 
during 2008 net 
of director’s 
contributions
£

12,932

3,588

An amount of £152,406 was paid into Manny Fontenla-Novoa’s UK based tax approved money purchase pension scheme. An amount of £87,352 was 
paid into Ludger Heuberg’s private pension. 

Share options and long-term incentive plans 
The following tables show in respect of each person who served as a Director at any time during the Financial Period the number of ordinary shares  
of €0.10 each that were the subject of a share option or a share award at the start of the Financial Period (or the date of appointment if later) and  
at the end of the Financial Period (or the cessation of appointment if earlier). The Non-Executive Directors did not hold any options or share awards 
during the period. Holdings relate to the COIP and PSP.  

The following table gives details of PSP awards held by Executive Directors who served during the year: 

Date of award 
Manny Fontenla-Novoa 
Jürgen Büser 
Ludger Heuberg1 
John Bloodworth2 
Market price at award date (pence) 
End of performance period 

Total held at 
30 September 2008 
or at date of 
resignation
673,360
144,645
352,893
168,919

12 July 2007 
283,784
56,306
127,628
168,919
333
12 July 2010

11 March 2008 
389,576 
88,339 
225,265 
– 
283 
11 March 2011  

1  On leaving the Board, Ludger Heuberg retained his PSP awards, subject to performance over the relevant three-year performance periods. 

2  On leaving the Company, the Board exercised its discretion and agreed that 50% of John Bloodworth’s PSP award would vest. Consequently, he received 84,460 ordinary shares in the 

Company. The remainder of his award lapsed.   

Vesting of awards made under the PSP is dependent on 50% total shareholder return ranked against the comparator group and 50% growth in Earnings 
Per Share. Further information on the performance conditions is detailed on page 62. 

The following table gives details of the Lodged Shares purchased under the COIP and the maximum number of Matching Shares each Executive Director 
can receive if the performance conditions are met in full: 

Manny Fontenla-Novoa 
Jürgen Büser 
Ludger Heuberg 
Market price at award date (pence) 
End of performance period 

Total number of 
Lodged Shares held at 
1 November 2007 
or on appointment 
–
21,126
–

Total number of 
Matching Shares held at 
1 November 2007 
or on appointment 
–
73,941
–

Number of 
Lodged Shares 
purchased
169,010
–
–
237
25 June 2011

Maximum  
number of  
Matching Shares 
591,535 
– 
– 
237 
25 June 2011 

Total held at 
30 September 2008
or at date of 
resignation
760,545
95,067
–

Vesting of Matching Shares awarded under the COIP is dependent on growth in Earnings Per Share and Return on Invested Capital achievement. Further 
information on the performance conditions is detailed on page 62. 

The mid-market price of the Company’s ordinary shares at the close of business on 30 September 2008 was 221.5p and the range during the Financial 
Period was 174p to 318p. These mid-market prices are as quoted on the London Stock Exchange. 

On behalf of the Board 

Michael Beckett 
Chairman of the Management Development & Remuneration Committee 
19 December 2008 

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Independent auditors’ report to the members of Thomas Cook Group plc 

Basis of audit opinion 
We conducted our audit in accordance with International Standards on 
Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit 
includes examination, on a test basis, of evidence relevant to the amounts 
and disclosures in the financial statements and the part of the Remuneration 
report to be audited. It also includes an assessment of the significant 
estimates and judgements made by the Directors in the preparation  
of the financial statements, and of whether the accounting policies are 
appropriate to the Group’s and Company’s circumstances, consistently 
applied and adequately disclosed. 

We planned and performed our audit so as to obtain all the information 
and explanations which we considered necessary in order to provide us 
with sufficient evidence to give reasonable assurance that the financial 
statements and the part of the Remuneration report to be audited are free 
from material misstatement, whether caused by fraud or other irregularity  
or error. In forming our opinion we also evaluated the overall adequacy 
of the presentation of information in the financial statements and the 
part of the Remuneration report to be audited. 

Opinion 
In our opinion: 

•  the Group financial statements give a true and fair view, in accordance 
with IFRSs as adopted by the European Union, of the state of the Group’s 
affairs as at 30 September 2008 and of its profit and cash flows for the 
eleven months then ended; 

•  the Company financial statements give a true and fair view, in accordance 
with IFRSs as adopted by the European Union as applied in accordance 
with the provisions of the Companies Act 1985, of the state of the parent 
company’s affairs as at 30 September 2008 and cash flows for the eleven 
months then ended; 

•  the financial statements and the part of the Remuneration report to be 
audited have been properly prepared in accordance with the Companies 
Act 1985 and, as regards the Group financial statements, Article 4 of the 
IAS Regulation; and 

•  the information given in the Directors’ report – Business review and 
Directors’ Report – Corporate governance is consistent with the 
financial statements. 

PricewaterhouseCoopers LLP 
Chartered Accountants and Registered Auditors 
London 
19 December 2008 

We have audited the Group and Parent Company financial statements  
(the ‘‘financial statements’’) of Thomas Cook Group plc for the eleven 
months ended 30 September 2008, which comprise the Group income 
statement, the Group and Company balance sheets, the Group and 
Company cash flow statements, the Group and Company statements of 
recognised income and expense and the related notes. These financial 
statements have been prepared under the accounting policies set out 
therein. We have also audited the information in the Remuneration 
report that is described as having been audited. 

Respective responsibilities of Directors and auditors 
The Directors’ responsibilities for preparing the Annual Report, the 
Remuneration report and the financial statements in accordance with 
applicable law and International Financial Reporting Standards (IFRSs)  
as adopted by the European Union are set out in the Statement of 
Directors’ responsibilities. 

Our responsibility is to audit the financial statements and the part of the 
Remuneration report to be audited in accordance with relevant legal and 
regulatory requirements and International Standards on Auditing (UK and 
Ireland). This report, including the opinion, has been prepared for, and 
only for, the Company’s members as a body in accordance with Section 
235 of the Companies Act 1985 and for no other purpose. We do not, in 
giving this opinion, accept or assume responsibility for any other purpose 
or to any other person to whom this report is shown or into whose hands 
it may come save where expressly agreed by our prior consent in writing. 

We report to you our opinion as to whether the financial statements give 
a true and fair view and whether the financial statements and the part  
of the Remuneration report to be audited have been properly prepared  
in accordance with the Companies Act 1985 and, as regards the Group 
financial statements, Article 4 of the IAS Regulation. We also report to  
you whether in our opinion the information given in the Directors’ report 
is consistent with the financial statements. The information given in the 
Directors’ report comprises the information supplied in the Directors’ 
report – Business review and Directors’ report – Corporate governance.  

In addition we report to you if, in our opinion, the Company has not kept 
proper accounting records, if we have not received all the information 
and explanations we require for our audit, or if information specified  
by law regarding Directors’ remuneration and other transactions is  
not disclosed. 

We review whether the Corporate governance statement reflects the 
Company’s compliance with the nine provisions of the Combined Code 
(2006) specified for our review by the Listing Rules of the Financial 
Services Authority, and we report if it does not. We are not required to 
consider whether the Board’s statements on internal control cover all 
risks and controls, or form an opinion on the effectiveness of the Group’s 
corporate governance procedures or its risk and control procedures. 

We read other information contained in the Annual Report and consider 
whether it is consistent with the audited financial statements. The other 
information comprises only the Directors’ report – Business review and 
the Directors’ report – Corporate governance including the unaudited part 
of the Remuneration report. We consider the implications for our report if 
we become aware of any apparent misstatements or material inconsistencies 
with the financial statements. Our responsibilities do not extend to any 
other information. 

Thomas Cook Group plc Annual Report & Accounts 2008 

67

 
 
 
 
Group income statement 

For the eleven months ended 30 September 2008 

11 months ended 30 September 2008 

Year ended 31 October 2007 

Pre-exceptional
items and
amortisation
of business
combination
intangibles
£m
8,167.1
(6,282.5)
1,884.6
39.3
(849.3)
(127.6)

notes 
3 

4 
14/15 

Exceptional
items and
amortisation
of business
combination
intangibles
(notes 6,14)
£m
 – 
(13.0)
(13.0)
3.4
(47.0)
(0.4)

Pre-exceptional 
items and 
amortisation 
of business 
combination 
intangibles 
£m 
6,404.5 
(4,879.1) 
1,525.4  
37.8  
(670.7) 
(103.3) 

Exceptional
items and
amortisation
of business
combination
intangibles
(notes 6,14)
£m
 – 
(11.1)
(11.1)
0.6 
(66.7)
(1.2)

Total
£m
8,167.1
(6,295.5)
1,871.6
42.7
(896.3) 
(128.0)

 –  
(480.3) 

 –  

 –  
308.9  

1.8 
– 
1.7 
74.1 
(74.7) 
311.8 

(30.1)
(60.7)

2.0 

10.1 
(157.1)

–
35.5
–
–
–
(121.6)

14 
5 

6 

 6 
 3 

16 
6 
7 
8 
9 
10 
11 

13 
13 

 – 
(583.6)

(48.0)
(120.9)

(48.0) 
(704.5) 

 – 

(1.7)

(1.7) 

 – 
 363.4

(1.6)
 – 
0.5
68.4
 (126.8)
303.9

 – 
(227.6) 

 – 
135.8

 – 
 – 
 – 
 – 
(26.8)
(254.4)

(1.6)
 – 
0.5
68.4
 (153.6)
49.5
(5.1)
 44.4 

44.7
(0.3)
 44.4

 4.7
 4.7

Total
£m
6,404.5 
(4,890.2)
1,514.3 
38.4 
(737.4)
(104.5)

(30.1)
(541.0)

2.0 

10.1 
151.8 

1.8 
35.5 
1.7 
74.1 
(74.7)
190.2 
(39.5)
150.7 

149.8 
0.9 
150.7 

22.0
22.0

Revenue 
Cost of providing tourism services 
Gross profit 
Other operating income 
Personnel expenses 
Depreciation and amortisation 
Amortisation of business combination 
intangibles 
Other operating expenses 
(Loss)/profit on disposal of businesses  
and property, plant and equipment 
Profit on disposal of non-current assets 
held for sale  
Profit from operations  

Share of results of associates and joint 
ventures 
Profit on disposal of associates 
Net investment income 
Finance income 
Finance costs  
Profit before tax 
Tax  
Profit for the period 

Attributable to: 
Equity holders of the parent 
Minority interests 

Earnings per share (pence) 
Basic 
Diluted 

All revenue and results arose from continuing operations. 

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Group statement of recognised income and expense 

For the eleven months ended 30 September 2008 

Gains/(losses) on cash flow hedges 
(Losses)/gains on available-for-sale investments 
Exchange differences on translation of overseas operations 
Actuarial (losses)/gains on defined benefit pension schemes 
Tax on items taken directly to equity 
Net income recognised directly in equity 

Transfers 
Transferred to profit or loss on cash flow hedges 
Transfer of translation losses to profit or loss on disposal 
Transfer of losses on available-for-sale investments to profit or loss on disposal 
Tax on items transferred from equity 

Profit for the period 

Total recognised income and expense for the period 

Attributable to: 
Equity holders of the parent 
Minority interests 

11 months ended 
30 September 
2008
£m
281.4
(0.9)
121.6
(16.3)
(74.5)
 311.3 

notes 
32 
32 
32 
38 
11 

Year ended
 31 October
 2007
£m
(62.7)
0.4 
43.9 
99.8 
(22.2)
59.2 

32 
32 
32 
11 

30 

30 
30 

(177.8)
 – 
 – 
53.3
 (124.5) 

44.4

 231.2 

231.5
(0.3)
 231.2 

63.5 
(0.5)
(0.5)
(19.3)
43.2 

150.7 

253.1 

251.7 
1.4 
253.1 

Thomas Cook Group plc Annual Report & Accounts 2008 

69

 
  
 
 
 
  
  
 
 
 
 
 
 
 
 
  
  
30 September
2008

notes 

£m

31 October
2007
Restated
£m

14 
15 
15 
15 
16 
16 
27 

19 
38 
24 

18 

19 
24 
20 

29 

38 
21 
22 
23 

28 
24 

29 

3,432.4
584.8
15.7
312.8
42.7
29.4
328.6
9.9
126.4
0.4
 55.6
 4,938.7 

24.2
15.1
1,017.5
261.6
761.3
 2,079.7 
 – 
7,018.4

(9.0)
(1,855.7)
(356.0)
(182.6)
(69.4)
(917.5)
(183.9)
(174.3)
 (3,748.4) 
 – 

2,883.5
567.1 
 – 
268.2 
35.7 
26.6 
294.5 
3.7 
98.8 
0.3 
20.8 
4,199.2

19.1 
20.4 
864.4 
79.3 
622.3 
1,605.5 
12.7 
5,817.4

(3.3)
(1,435.9)
(52.1)
(81.0)
(76.2)
(664.7)
(184.9)
(117.2)
(2,615.3)
(6.8)

Group balance sheet 

At 30 September 2008 

Non-current assets 
Intangible assets 
Property, plant and equipment  – aircraft and aircraft spares 

– investment property 
– other 

Investments in associates and joint ventures 
Other investments 
Deferred tax assets 
Tax assets 
Trade and other receivables 
Pension assets 
Derivative financial instruments 

Current assets 
Inventories 
Tax assets 
Trade and other receivables 
Derivative financial instruments 
Cash and cash equivalents 

Non-current assets held for sale 
Total assets 

Current liabilities 
Retirement benefit obligations 
Trade and other payables 
Borrowings 
Obligations under finance leases 
Tax liabilities 
Revenue received in advance 
Short-term provisions 
Derivative financial instruments 

Liabilities related to assets held for sale 

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2008

notes 

£m

31 October
2007
Restated
£m

38 
21 
22 
23 

27 
28 
24 

30/31 
30 
30 
30 
30/32 
30 
30 

30 
 30 

(181.6)
(36.9)
(416.1)
(228.3)
 – 
(0.9)
(97.8)
(232.3)
(66.9)
 (1,260.8) 
 (5,009.2) 
 2,009.2 

59.8
8.9
1,984.2
6.4
214.8
(264.6)
 (13.0)
 1,996.5 
12.7
 2,009.2 

(172.2)
(124.0)
(130.4)
(359.2)
(2.1)
(0.5)
(83.8)
(179.8)
(22.7)
(1,074.7)
(3,696.8)
2,120.6

66.1 
6.8 
1,984.2 
 – 
15.9 
44.2 
(4.9)
2,112.3 
8.3 
2,120.6 

Non-current liabilities 
Retirement benefit obligations 
Trade and other payables 
Long-term borrowings 
Obligations under finance leases 
Tax liabilities 
Revenue received in advance 
Deferred tax liabilities 
Long-term provisions 
Derivative financial instruments 

Total liabilities 
Net assets 

Equity 
Called-up share capital 
Share premium account 
Merger reserve 
Capital redemption reserve 
Translation and hedging reserves 
Retained earnings (deficit)/surplus 
Investment in own shares 
Equity attributable to equity holders of the parent 
Minority interests 
Total equity 

These financial statements were approved by the Board of Directors on 19 December 2008. 

Signed on behalf of the Board 

Manny Fontenla-Novoa  
Director 

Dr Jürgen Büser 
Director 

Thomas Cook Group plc Annual Report & Accounts 2008 

71

 
 
 
 
 
 
 
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
11 months ended
30 September
2008
£m

Year ended
31 October
2007
£m

420.9
(63.7)
 357.2 

 – 
 – 
13.2
 – 
(296.4)
(82.2)
(60.2)
 – 
134.1
 (291.5) 

(55.2)
(78.2)
(1.9)
732.3
(221.7)
(91.3)
(247.8)
2.2
 – 
38.4

 104.1 
596.0
47.4
 747.5 

761.3
(13.8)
 747.5 

190.4 
(29.8)
160.6 

31.3 
37.8 
31.3 
22.2 
180.2 
(24.7)
(39.8)
(4.9)
(199.2)
34.2 

(32.1)
 – 
 – 
 – 
(15.2)
(46.3)
(5.0)
7.2 
(12.2)
(103.6)

91.2 
491.0 
13.8 
596.0 

622.3 
(26.3)
596.0 

notes 

33 
33 
33 

17 

20 
22 

Group cash flow statement 

For the eleven months ended 30 September 2008 

Cash flows from operating activities 
Cash generated by operations 
Income taxes paid 
Net cash from operating activities 

Investing activities 
Proceeds on disposal of subsidiaries (net of cash sold) 
Proceeds on disposal of associated undertakings 
Proceeds on disposal of property, plant and equipment 
Proceeds of sale of non-current assets held for sale 
Purchase of subsidiaries (net of cash acquired) 
Purchase of tangible and financial assets 
Purchase of intangible assets 
Purchase of non-current financial assets 
Disposal/(purchase) of short-term securities 
Net cash from investing activities 

Financing activities 
Interest paid 
Dividends paid 
Dividends paid to minority shareholders 
Draw down of borrowings 
Repayment of borrowings 
Repayment of finance lease obligations 
Purchase of own shares 
Proceeds from issue of ordinary shares 
Expenses of issue of ordinary shares 
Net cash used in financing activities 

Net increase in cash and cash equivalents 
Cash and cash equivalents at beginning of period 
Effect of foreign exchange rate changes 
Cash and cash equivalents at end of period 

Liquid assets 
Bank overdrafts 
Cash and cash equivalents at end of period  

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Notes to the financial statements 

1.  General information 
Thomas Cook Group plc is a limited liability company incorporated and domiciled in England and Wales under the Companies Act 1985 and listed on 
the London Stock Exchange. The address of the registered office is The Thomas Cook Business Park, Coningsby Road, Peterborough, Cambridgeshire,  
PE3 8SB. The principal activities of the Group are discussed in the Business review on pages 2 to 47. 

These consolidated financial statements were approved for issue by the Board of Directors on 19 December 2008. 

The Directors consider that Arcandor AG is the Company’s ultimate controlling party. The largest and smallest group of undertakings for which consolidated 
financial statements are prepared and which include the financial statements of the Thomas Cook Group is that headed by Arcandor AG.  
Arcandor AG is incorporated in Germany and copies of its financial statements, which are publicly available, may be obtained from Arcandor AG, 
Theodor-Althoff-Str. 2, D-45133 Essen, Germany. 

At the date of authorisation of these financial statements, the following Standards and Interpretations that are expected to impact on the Group but 
which have not been applied in these financial statements, were in issue but not yet effective.  

IAS 1 (Revised) 

‘Presentation of financial statements’, revised version issued in January 2008, effective for annual periods beginning on or after  
1 January 2009. This changes the presentation requirements for other comprehensive income and transactions with shareholders, 
and requires increased disclosures when there is a restatement of comparatives. Adopting this standard will not affect the 
recognition, measurement or disclosure of any transactions or events. 

IAS 23 (Amendment)  ‘Borrowing costs’, revised version issued in March 2007, effective for annual periods beginning on or after 1 January 2009. This 
eliminates the option of expensing all borrowing costs when they are incurred and is not expected to have a material impact  
on the Group. 

IAS 32 (Amendment)  ‘Financial instruments: Presentation’, issued in February 2008, effective for annual periods beginning on or after 1 January 2009. 
This clarifies the treatment of puttable financial instruments. The adoption of this amendment is not expected to have a material 
impact on the Group. 

IAS 27 (Revised)   

‘Consolidated and separate financial statements’, issued January 2008, effective for annual periods beginning on or after 1 July 2009.  
This will require a different accounting treatment for minority interest but it is not expected to affect the Group’s financial results 
or position materially. 

IFRS 2 (Amendment)  ‘Share based payments’, issued January 2008, effective for annual periods beginning on or after 1 January 2009. This provides a 

definition of vesting conditions and specifies the accounting treatment for non-vesting conditions. It is not expected to materially 
affect the share-based payment charge recognised in the Group accounts. 

IFRS 3 (Revised)   

‘Business combinations’, issued January 2008, effective for annual periods beginning on or after 1 July 2009. This will significantly 
change the recognition of goodwill, acquisition costs and contingent consideration relating to acquisitions. However, it only applies to 
acquisitions made after it has been adopted. 

IFRS 8 

IFRIC 12 

IFRIC 13 

IFRIC 14 

IFRIC 16 

‘Operating segments’, issued in November 2006, effective for periods beginning on or after 1 January 2009. This may change the 
way in which we report operating segments. A detailed review of the impact of this standard is currently in progress. 

‘Service concession arrangements’, issued in December 2006, effective for annual periods beginning on or after 1 January 2008.  
A detailed review of the impact of this interpretation is in progress. 

‘Customer loyalty programmes’, issued in June 2007, effective for annual periods beginning on or after 1 July 2008. A detailed 
review of the impact of this interpretation is currently in progress. 

‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’, issued in July 2007, effective 
for annual periods beginning on or after 1 January 2008. A detailed review of the impact of this interpretation is currently in progress. 

‘Hedges of a net investment in a foreign operation’, issued July 2007, effective for annual periods beginning on or after 1 October 
2008. A detailed review of the impact of this interpretation is in progress. 

The Group will also perform a detailed review of the annual improvements project published by the International Accounting Standards Board in May 2008. 

2.  Accounting policies 
These financial statements have been prepared in accordance with IFRS and IFRIC interpretations and with those parts of the Companies Act 1985 
applicable to groups reporting under IFRS. The financial statements have also been prepared in accordance with IFRS adopted for use in the European 
Union and therefore comply with Article 4 of the EU IAS Regulation. 

The accounting policies adopted are consistent with those of the previous financial period except that the Group has adopted ‘IFRS 7: Financial 
instruments: Disclosures’ and the amendment to ‘IAS 1: Presentation of financial statements’. Adoption of these standards has required additional 
disclosures on the credit quality of trade receivables, financial risks and capital management. ‘IFRIC 11: Group and treasury share transactions’ came 
into effect in the current period, however the interpretation had no impact on the Group. 

The financial statements have been prepared under the historical cost convention, except for revaluation of certain financial instruments and 
investment property.  

The principal accounting policies applied in the preparation of the financial information presented in this document are set out below. These policies 
have been applied consistently to the periods presented. 

Thomas Cook Group plc Annual Report & Accounts 2008 

73

 
 
 
 
 
 
 
Notes to the financial statements continued 

2.  Accounting policies continued 
Basis of preparation 
During the period, we changed the presentational currency for the Group to sterling as we now expect to generate the majority of our profits in  
non-euro countries, with the UK being by far the largest. Accordingly, the prior period comparatives are re-presented in sterling. The prior period 
comparatives for assets and liabilities were translated at the sterling to euro period end exchange rate (1.4346). The prior period comparatives for 
equity and income statement items were translated at the sterling to euro exchange rate on the date of the transactions.  

During the period, the prior year was restated for fair value adjustments related to the MyTravel Group plc acquisition. The determination of fair  
values related to the MyTravel Group plc acquisition has now been concluded. Refer to note 17 of the Group financial statements for further details. 

During the period, the year end of the Group was changed from 31 October to 30 September. As a result, the current financial period results are for 
eleven months and are not comparable with the prior year numbers. 

The Group’s financial statements consolidate those of the Company and its subsidiary undertakings. The results of subsidiaries acquired or disposed of 
are consolidated for the periods from or to the date on which control passed. Subsidiaries are entities controlled by the Company. Control is achieved 
where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. 

Acquisitions are accounted for under the purchase method.  

Where a transaction is a business combination amongst entities under common control, the requirements of IFRS 3 are applied. The purchase method 
of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured at fair value of the assets given, 
equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable 
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition 
date. The excess of the cost of acquisition over the fair value of the Group’s share of identifiable net assets acquired is recorded as goodwill. 

Where audited financial accounts are not coterminous with those of the Group, the financial information has been derived from the last audited 
accounts available and unaudited management accounts for the period up to the Company’s balance sheet date.  

All intra-group transactions, balances, income and expenses are eliminated on consolidation. 

Interpretation guidance included within ‘SIC Interpretation 12: Consolidation – special purpose entities’ indicates that certain special purpose entities 
(SPEs), which are involved in aircraft leasing and other arrangements with the Group, should be interpreted as controlled by the Group, and therefore 
subject to consolidation, even though the Group has no direct or indirect equity interest in those entities. As a consequence, the Group has consolidated 
twelve SPEs. 

Associates and joint ventures 
Entities, other than subsidiaries, over which the Group exerts significant influence, 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 in the Group income statement using the equity accounting method. 
Investments in associates and joint ventures are included in the Group balance sheet at cost as adjusted for post-acquisition changes in the Group’s 
share of the net assets of the entity, and including any goodwill identified on acquisition, net of any accumulated impairment loss. When the Group’s 
share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, 
the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised 
gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are 
also eliminated unless the transaction provided evidence of an impairment of the asset transferred. 

Other non-current asset investments 
The fair value of investments in equity instruments that do not have a quoted market price in an active market are measured using an appropriate 
valuation technique. Where a fair value cannot be reliably measured, the investment is measured at cost. Loans and receivables are initially recognised 
at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method. Any 
impairment losses are recognised in the income statement. 

Intangible assets – goodwill 
Goodwill arising on an acquisition represents any excess of the fair value of the consideration given over the fair value of the identifiable assets and 
liabilities acquired. Goodwill is recognised as an asset, and is reviewed for impairment at least annually. Any impairment is recognised immediately  
in the Group’s income statement and is not subsequently reversed. For the purposes of assessing impairment, assets are grouped at the lowest levels for 
which there are separately identifiable cash flows (cash-generating units). The allocation of goodwill is made to those cash-generating units that are 
expected to benefit from the business combination in which the goodwill arose. The Group allocates goodwill to each segment in which it operates. 
On disposal of a subsidiary, joint venture or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 

Intangible assets – other 
Intangible assets, other than goodwill, are carried on the Group’s balance sheet at cost less accumulated amortisation. Intangible assets with indefinite 
useful lives are not amortised. For all other intangible assets, amortisation is charged on a straight line basis over the asset’s useful life, as follows: 

Brands 

10 years to indefinite life 

Customer relationship 

Computer software 

1 to 12 years 

3 to 10 years 

Other acquired intangible assets are assessed separately and useful lives established according to the particular circumstances. 

Indefinite-lived intangible assets principally comprise those trademarks for which there is no foreseeable limit to the period over which they are expected to 
generate net cash inflows. These are considered to have an indefinite life given the strength and durability of our brands and the level of marketing support. 
The nature of the industry we operate in is such that brand obsolescence is not common, if appropriately supported by advertising and marketing spend. 

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Intangible assets with indefinite useful lives are tested for impairment at least annually by comparing their carrying amount to their recoverable amount. 
All other intangible assets are assessed at each reporting date for indications of impairment. If such indications exist, the recoverable amount is 
estimated and compared to the carrying amount. If the recoverable amount is less than the carrying amount, the carrying amount is reduced to  
the recoverable amount and the impairment loss is recognised immediately in the income statement. 

Property, plant and equipment  
Except for investment property, property, plant and equipment is stated at cost, net of straight line depreciation and any provision for impairment.  

Where costs are incurred as part of the start-up or commissioning of an item of property, plant or equipment, and that item is available for use but 
incapable of operating in the manner intended by management without such a start-up or commissioning period, then such costs are included within 
the cost of the item. Costs that are not directly attributable to bringing an asset to the location and condition necessary for it to be capable of operating 
in the manner intended by management are charged to the income statement as incurred.  

Depreciation on property, plant and equipment, other than freehold land and investment property, upon which no depreciation is provided, is 
calculated on a straight line basis and aims to write down their cost to their estimated residual value over their expected useful lives as follows:  

Freehold buildings 

40 to 50 years  

Leasehold properties 

Shorter of remaining lease period and 40 years  

New aircraft 

Aircraft spares 

12 to 20 years (or remaining lease period if shorter)  

5 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. 

Investment property comprises land and buildings which are held for long-term rental yields and capital growth. It is carried at fair value, with changes 
in fair value recognised in the income statement. Investment property is valued annually by external qualified professional valuers in the countries 
concerned. In the event of a material change in market conditions between the valuation date and balance sheet date, an internal valuation is 
performed and adjustments made to reflect any material changes in fair value. 

Non-current assets held for sale 
The Group classifies non-current assets as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through 
continuing use. To be classified as held for sale, the assets must be available for immediate sale in their present condition, subject only to terms that are usual 
and customary for the sale of such assets, and their sale must be highly probable. Sale is considered to be highly probable when management are committed  
to a plan to sell the assets and an active programme to locate a buyer and complete the plan has been initiated, at a price that is reasonable in relation to their 
current fair value, and there is an expectation that the sale will be completed within one year from the date of classification. 

Non-current assets classified as held for sale are carried on the Group’s balance sheet at the lower of their carrying amount and fair value less costs to sell.  

Aircraft overhaul and maintenance costs 
The cost of major overhauls of owned and finance leased engines, auxiliary power units and airframes is capitalised and then amortised over between 
two and ten years until the next scheduled major overhaul, except where the maintenance of engines and auxiliary power units is carried out under 
fixed rate contracts, in which case the cost is spread over the period of the contract. Provision is made for the future costs of major overhauls of leased 
engines, auxiliary power units and airframes by making appropriate charges to the income statement, calculated by reference to hours flown and/or 
the expired lease period, as a consequence of obligations placed upon the Group under the terms of certain of the operating leases.  

Inventories 
Inventories are stated at the lower of cost and net realisable value. Cost represents purchase price. Net realisable value represents the estimated selling 
price less all costs to be incurred in marketing, selling and distribution. 

Revenue recognition and associated costs  
Revenue represents the aggregate amount of gross revenue receivable from inclusive tours, travel agency commissions receivable and other services 
supplied to customers in the ordinary course of business. Revenue and direct expenses relating to inclusive tours arranged by the Group’s leisure travel 
providers, including travel agency commission, insurance and other incentives, are taken to the income statement on holiday departure. Revenue 
relating to travel agency commission on third-party leisure travel products is also recognised on holiday departure. Other revenue and associated 
expenses are taken to the income statement as earned or incurred. Revenue and expenses exclude intra-group transactions.  

Income statement presentation 
Profit or loss from operations includes the results from operating activities of the Group, before its share of the results of associates and joint ventures. 

Exceptional items are items that are unusual because of their size, nature or incidence and which the Group’s management consider should be 
disclosed separately to enable a full understanding of the Group’s results. 

Material business combination intangible assets were acquired as a result of the merger between Thomas Cook AG and MyTravel Group plc and the 
subsequent acquisitions made in the current year. The amortisation of these intangible assets is significant and the Group’s management consider  
that it should be disclosed separately to enable a full understanding of the Group’s results.  

Tax 
Tax represents the sum of tax currently payable and deferred tax. Tax is recognised in the income statement unless it relates to an item recognised 
directly in equity, in which case the associated tax is also recognised directly in equity. 

Tax currently payable is provided on taxable profits based on the tax rates and laws that have been enacted or substantively enacted at the balance 
sheet date. Provision is made for deferred tax so as to recognise all temporary differences which have originated but not reversed at the balance sheet 
date that result in an obligation to pay more tax, or a right to pay less tax, in the future, except as 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. The deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other 
than a business combination that at the time of the transaction does not affect either accounting or taxable profit or loss. 

Thomas Cook Group plc Annual Report & Accounts 2008 

75

 
 
 
 
Notes to the financial statements continued 

2.  Accounting policies continued 
Deferred tax assets are assessed at each balance sheet date and are only recognised to the extent that their recovery against future taxable profits is 
probable. Deferred tax liabilities are recognised for the temporary differences of overseas subsidiaries, joint ventures and associates unless the Group  
is able to control the timing of the distribution of those earnings and it is probable that they will not be distributed in the foreseeable future.  

Pensions 
Pension costs charged against profits in respect of the Group’s defined contribution 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 pension liabilities recognised on the balance sheet in respect of these schemes 
represent the difference between the present value of the Group’s obligations (calculated using the projected unit credit method) 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 statement of recognised 
income and expense. Other movements in the pension liability are recognised in the income statement. Past service costs are recognised immediately 
in the income statement. 

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 
sterling. The balance sheets of such entities are translated at period end exchange rates. 

The resulting exchange differences are recorded through a separate component of equity.  

Transactions in currencies other than the functional currency of an entity are translated at the exchange rate at the date of the transaction. Foreign 
currency monetary assets and liabilities held at the period end are translated at period end exchange rates. The resulting exchange gain or loss is 
recorded in the income statement.  

When a foreign entity is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as  
part of the gain or loss on sale. 

Leases 
Leases under which substantially all of the risks and rewards of ownership are transferred to the Group are finance leases. All other leases are operating leases. 

Assets held under finance leases are recognised at the lower of the fair value of the asset and the present value of minimum lease payments within 
property, plant and equipment 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 and is charged to the income statement  
over the period of the lease.  

Operating lease rentals are charged to the income statement on a straight line basis over the lease term. 

Derivative financial instruments 
Derivatives are recognised at their fair value. When a derivative does not qualify for hedge accounting as a cash flow hedge, 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 of the change in fair value is recognised 
immediately in the income statement.  

If a hedged transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated cumulative gain or loss 
is removed from the hedging reserve and is included in the initial cost or other 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 forecast transaction affects profit or loss.  

When a derivative qualifies for hedge accounting as a fair value hedge, changes in the fair value of the derivative are recognised in the income 
statement when the offsetting changes in the fair value of the hedged asset or liability, attributable to the hedged risk, occur. 

Non-derivative financial instruments 
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets  
are derecognised when the Group transfers the financial asset or when the contractual rights expire. Financial liabilities are derecognised when  
the obligation is discharged, cancelled or expires. The measurement of particular financial assets and liabilities is set out below. 

Trade receivables 
Trade receivables are recognised at their fair value and subsequently recorded at amortised cost using the effective interest method as reduced by 
allowances for estimated irrecoverable amounts. An allowance for irrecoverable amounts is established when there is objective evidence that the Group 
will not be able to collect all amounts due according to the original terms of the receivables. The amount of allowance is the difference between the 
asset’s carrying amount and the present value of estimated future cash flows. 

Available-for-sale financial assets 
Available-for-sale financial assets are recognised and subsequently recorded at their fair value. Gains or losses (except for impairment losses and foreign 
exchange gains and losses) are recognised directly in equity until the financial asset is derecognised. At this point, the cumulative gain or loss previously 
recognised in equity is recognised in the income statement. Any impairment losses, foreign exchange gains or losses or dividends receivable are 
recognised in the income statement. 

Held-for-trading investments 
Short-term investments are classified as held-for-trading and are recognised and subsequently recorded at their fair value. Gains or losses are 
recognised in the income statement. 

Trade payables 
Trade payables are recognised at their fair value and subsequently recorded at amortised cost using the effective interest method. 

Borrowings 
Interest bearing borrowings are recognised at their fair value net of any directly attributable transaction costs. They are subsequently recorded at 
amortised cost using the effective interest method. 

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Provisions 
Provisions are recognised when the Group has a present obligation as a result of a past event, if it is probable that an outflow of resources will be 
required to settle the obligation and a reliable estimate of the amount of the obligation can be made.  

Provisions are recognised and subsequently recorded at the Directors’ best estimate of the expenditure required to settle the obligation at the  
balance sheet date. Where the effect of the time value of money is material, the provision is discounted to its present value. 

Termination benefits  
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee  
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to  
either terminating the employment of current employees, according to a detailed formal plan without possibility of withdrawal, or providing 
termination benefits as a result of an offer made to encourage voluntary redundancy. 

Share-based payments  
The Group issues equity settled share options to certain employees as part of their total remuneration. The fair values of the share options are 
calculated at the date of grant, 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.  

Insurance contracts and reinsurance contracts 
Premiums written relate to business incepted during the year, together with any differences 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 on the estimated liability for compensation owed to policyholders or 
third parties damaged by policyholders. The Group does not discount its liabilities for unpaid claims. 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 is compensated for losses on one or more contracts issued by the Group  
and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. 

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as receivables from reinsurers. The Group assesses its 
reinsurance assets for impairment on an annual basis. 

Receivables and payables are recognised when due. These include amounts due to and from insurance policyholders. 

Critical judgements in applying the Group’s accounting policies 
In the process of applying the Group’s accounting policies, described above, management has made the following judgements that have the most 
significant effect on the amounts recognised in the financial statements. 

Residual values of tangible fixed assets 
Judgements have been made in respect of the residual values of aircraft included in property, plant and equipment. Those judgements determine  
the amount of depreciation charged in the income statement. 

Recoverable amounts of goodwill and intangible assets with an indefinite life 
Judgements have been made in respect of the amounts of future operating cash flows to be generated by certain of the Group’s businesses in order to 
assess whether there has been any impairment of the amounts included in the balance sheet for goodwill or intangible assets with an indefinite life in 
relation to those businesses. 

Special purpose entities 
The nature of the relationship with certain special purpose entities involved in leasing aircraft to the Group shows that they should be interpreted  
as controlled by the Group, and therefore consolidated, even though the Group has no direct or indirect equity interest in those entities. 

Key sources of estimation uncertainty 
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk  
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 

Impairment of goodwill and intangible assets with an indefinite life 
Determining whether goodwill or intangible assets with an indefinite life are impaired requires an estimation of the value in use of the cash-generating 
units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the 
cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amounts of goodwill and intangible assets with an 
indefinite life at the balance sheet date were £2,951.8m and £210.9m respectively (2007: £2,481.4m; £196.9m). No impairment losses were recorded 
during the year. 

Recoverable amounts of deposits and prepayments 
Estimates have been made in respect of the volumes of future trading with hoteliers and the credit-worthiness of those hoteliers in order to assess  
the recoverable amounts of deposits and prepayments made to those hoteliers. 

Aircraft maintenance provisions 
Provisions for the cost of maintaining leased aircraft and spares are based on forecast aircraft utilisation, estimates of future maintenance costs  
and planned rollover and renewal of the aircraft fleet. 

Tax 
The Group operates in many tax regimes and the tax implications of its operations are complex. It can take several years for tax liabilities to be agreed 
with the relevant authorities. Tax assets and liabilities represent management’s estimate of tax that will be payable or recoverable in the future and 
may be dependent on estimates of future profitability. 

In addition, estimates have been made in respect of the probable future utilisation of tax losses and deferred tax assets have been recognised. The 
recoverability of these assets is dependent on the agreement of the losses with the relevant authorities and the estimates of future profitability. 

Thomas Cook Group plc Annual Report & Accounts 2008 

77

 
 
Notes to the financial statements continued 

3.  Segmental information 
For management purposes, the Group is currently organised into five geographic operating divisions: UK and Ireland, Continental Europe, Northern 
Europe, North America and Airlines Germany. These divisions are the basis on which the Group reports its primary segment information. Certain 
residual businesses and corporate functions are not allocated to these divisions and are shown separately as Corporate.  

The primary business of all of these operating divisions is the provision of leisure travel services and, accordingly, no separate secondary segmental 
information is provided. 

Segmental information for these activities is presented below: 

Primary segments – management structure 

Eleven months ended 30 September 2008 
Revenue 
Segment sales 
Inter-segment sales 
Total revenue 

Result 
Profit/(loss) from operations before exceptional items  
and amortisation of business combination intangibles 
Exceptional items 
Amortisation of business combination intangibles 
Segment result 
Share of results of associates and joint ventures 
Net investment income 
Finance income 
Finance costs 
Profit before tax 
Tax 
Profit for the period 

Other information 
Capital additions 
Depreciation 
Amortisation of intangible assets 
Impairment of property, plant and equipment 
Reversal of impairment of property, plant and equipment 
Impairment of intangible assets 
Impairment of non-current investments 

UK and
Ireland
£m

Continental
Europe
£m

Northern
Europe
£m

North  
America 
£m 

Airlines 
Germany 
£m 

Corporate
£m

Total
£m

2,836.6
(6.3)
 2,830.3 

3,403.4
(25.6)
 3,377.8 

910.0
(2.7)
 907.3 

420.8 
 –  
420.8 

896.1 
(265.2) 
 630.9  

 – 
 – 
 – 

8,466.9

(299.8) 
 8,167.1 

144.3
(114.7)
 (14.2)
 15.4 

103.1
(33.1)
 (0.1)
 69.9 

79.8
(0.2)
 (27.8)
 51.8 

14.7 
(5.2) 
 (5.9) 
 3.6  

40.1 
(2.6) 
 –  
37.5 

(18.6)
(23.8)
 – 
(42.4)

47.9
28.3
21.6
 – 
 – 
3.5
–

26.4
9.1
3.9
1.3
 – 
1.0
–

8.3
6.9
28.2
 – 
 – 
 – 
–

3.9 
0.4 
6.3 
 –  
 –  
 –  
– 

32.5 
65.0 
0.1 
 –  
 –  
 –  
– 

24.3
1.0
5.2
 – 
 – 
1.0
–

363.4
(179.6) 
(48.0) 
 135.8 
(1.6)
0.5
68.4
 (153.6)
 49.5
(5.1)
 44.4 

143.3
 110.7 
65.3
1.3
 – 
5.5
 – 

78 

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Primary segments – management structure 

Eleven months ended 30 September 2008 
Balance sheet 
Assets 
Segment assets 
Inter-segment eliminations 

Investments in associates and joint ventures 
Tax and deferred tax assets 
Total assets 
Liabilities 
Segment liabilities 
Inter-segment eliminations 

Tax and deferred tax liabilities 
Borrowings and obligations under finance leases 
Total liabilities 

Inter-segment sales are charged at prevailing market prices. 

UK and
Ireland
£m

Continental
Europe
£m

Northern
Europe
£m

North  
America 
£m 

Airlines 
Germany 
£m 

Corporate
£m

Total
£m

3,661.9

1,681.5

1,486.1

316.1 

1,029.4 

2,944.2

2,243.9

1,206.2

816.6

255.5 

613.7 

3,020.2

11,119.2
(4,497.1)
6,622.1
42.7
353.6
7,018.4

8,156.1
(4,497.1)
3,659.0
167.2
1,183.0
5,009.2

Segment assets consist primarily of goodwill, other intangible assets, property, plant and equipment, trade and other receivables and cash and cash equivalents. 

Segment liabilities comprise trade and other payables, revenue received in advance and provisions. 

Tax and deferred tax assets include £nil (2007: £1.5m) within non-current assets held for sale. Tax and deferred tax liabilities include £nil (2007: £0.3m) 
within liabilities related to assets held for sale. Borrowings also include £nil (2007: £6.5m) within liabilities related to assets held for sale (see note 29). 

Capital additions comprise additions to property, plant and equipment (note 15) and other intangible assets (note 14). 

Thomas Cook Group plc Annual Report & Accounts 2008 

79

 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
  
  
 
Notes to the financial statements continued 

3.  Segmental information continued 

Year ended 31 October 2007 
Revenue 
Segment sales 
Inter-segment sales 
Total revenue 

Result 
Profit/(loss) from operations before exceptional items  
and amortisation of business combination intangibles 
Exceptional items 
Amortisation of business combination intangibles 
Segment result 
Share of results of associates and joint ventures 
Profit on disposal of associates 
Net investment income 
Finance income 
Finance costs 
Profit before tax 
Tax 
Profit for the year 

Other information 
Capital additions 
Depreciation 
Amortisation of intangible assets 
Impairment of property, plant and equipment 
Reversal of impairment of property, plant and equipment 
Impairment of intangible assets 
Impairment of non-current investments 

Balance sheet 
Assets 
Segment assets 
Inter-segment eliminations 

Investments in associates and joint ventures 
Tax and deferred tax assets 
Total assets 
Liabilities 
Segment liabilities 
Inter-segment eliminations 

Tax and deferred tax liabilities 
Borrowings and obligations under finance leases 
Total liabilities 

UK and 
Ireland
£m

Continental
Europe
£m

Northern
Europe
£m

North 
America 
£m 

Airlines 
Germany 
£m 

Corporate
£m

Total
£m

2,468.1 
(4.3)
2,463.8 

3,038.0 
(3.9)
3,034.1 

304.6 
(2.4)
302.2 

83.7  
 –  
83.7  

855.6  
(335.2) 
520.4  

0.3 
 – 
0.3 

6,750.3 
(345.8)
6,404.5 

169.8 
(108.6)
(11.9)
49.3 

67.4 
2.6 
 – 
70.0 

43.5 
(2.2)
(18.5)
22.8 

(2.4) 
(0.1) 
0.3  
(2.2) 

46.2  
0.1  
 –  
46.3  

(15.6)
(18.8)
 – 
(34.4)

24.5 
17.0 
19.0 
3.1 
 – 
0.7 
 – 

11.8 
9.7 
3.7 
0.2 
(0.2)
2.1 
1.6 

3.6 
2.2 
18.5 
 – 
 – 
 – 
 – 

1.1  
0.1  
 –  
 –  
 –  
 –  
 –  

1.8  
56.2  
 –  
 –  
 –  
 –  
 –  

22.1 
0.8 
7.4 
 – 
 – 
 – 
 – 

2,955.4 

1,148.3 

1,339.9 

248.2  

962.8  

1,442.8 

1,653.6 

745.8 

417.0 

212.3  

559.0  

1,953.3 

308.9 
(127.0)
(30.1)
151.8 
1.8
35.5 
1.7 
74.1 
(74.7)
190.2 
(39.5)
150.7 

64.9 
86.0 
48.6 
3.3 
(0.2)
2.8 
1.6 

8,097.4
(2,635.8)
5,461.6 
35.7 
320.1 
5,817.4 

5,541.0 
(2,635.8)
2,905.2 
162.4 
629.2
3,696.8

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4.  Personnel expenses 

Wages and salaries 
Social security costs 
Share-based payments – equity settled 
Defined benefit pension costs (see note 38) 
Other pension costs (see note 38) 

The average number of employees of the Group during the period was: 
UK and Ireland 
Continental Europe 
Northern Europe 
North America 
Airlines Germany 
Corporate 

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2008
£m
759.9
96.8
3.1
20.0
16.5
 896.3 

2008
Number
16,738
7,186
2,744
1,432
2,179
170
30,449

2007
£m
612.6 
86.0 
0.6
28.1
10.1 
737.4 

2007
Number
11,953 
6,121 
1,000 
341 
2,300 
386 
22,101 

Disclosures of Directors’ remuneration, share options, long-term incentive schemes, pension contributions and pension entitlements required by the 
Companies Act 1985 and specified for audit by the Financial Services Authority are on pages 64 to 66 within the Remuneration report and form part of 
these audited financial statements. Disclosures in respect of remuneration of key management personnel are included in note 39. 

5.  Other operating expenses 

Advertising expenses 
Rents and expenses for building maintenance 
Information technology costs 
Travel expenses and ancillary personnel expenses 
Telecommunications costs 
Legal and consultancy fees 
Impairment of current and non-current assets 
Insurance 
Training expenses 
Other taxes 
Other operating expenses 

2008
£m
159.7
120.2
100.1
66.6
38.3
41.6
26.1
15.5
12.1
8.5
115.8
 704.5 

2007
£m
118.5 
130.4 
75.8 
49.7 
29.0 
33.0 
19.9 
11.5 
10.5 
4.6 
58.1 
541.0 

Thomas Cook Group plc Annual Report & Accounts 2008 

81

 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

6.  Exceptional items 

Property costs, redundancy and other costs incurred in integrating the Thomas Cook and MyTravel businesses 
Property costs, redundancy and other costs incurred in other business integrations and reorganisations 
Disposal of property, plant and equipment 
Disposal of non-current assets held for sale 
Impairment of assets 
Other expenses incurred as a result of the merger 
Other exceptional operating items 
Exceptional items included within profit from operations  

Exceptional items have been included in the income statement as follows: 
Cost of providing tourism services 
Other operating income 
Personnel expenses 
Depreciation and amortisation 
Other operating expenses 
(Loss)/profit on disposal of businesses and property, plant and equipment 
Profit on disposal of non-current assets held for sale 

Share of associates’ exceptional items 
Profit on disposal of associates 

Exceptional finance costs 
Loss on revaluation of trading securities 
Impact of financial market volatility 

Total exceptional items  

2008
£m
(106.7)
(46.4)
(1.7)
 – 
(2.5)
(14.8)
(7.5)
(179.6)

(13.0)
3.4
(47.0)
(0.4)
(120.9)
(1.7)
 – 
(179.6)

 – 
 – 

(13.9)
(12.9)
(26.8)
(206.4)

2007
£m
(91.7)
(13.4)
2.0 
10.1 
(8.9) 
(11.6)
(13.5)
(127.0)

(11.1)
0.6 
(66.7)
(1.2)
(60.7)
2.0 
10.1 
(127.0)

35.5 
35.5 

 – 
 – 
 – 
(91.5)

The £12.9m included in exceptional finance costs relates to the exceptional element of the phasing effect of marking to market the forward points on 
our foreign currency hedging, which arose in September as a result of the global banking crisis. 

The 2007 profit on disposal of associates of £35.5m principally relates to the disposal of the Group’s 50% interest in SunExpress, an airline based in 
Turkey, to Arcandor on an arm’s length basis. The proceeds from the sale amounted to £36.6m in cash and resulted in a profit on disposal of £34.0m. 

In addition, during 2007, the Group disposed of its interests in Falstacen S.L., Thomas Cook Thailand and Troll Tours Reisen GmbH, realising further 
profits of £1.5m.  

2008 
£m 
 – 
0.5 
 0.5 

2008 
£m 
 1.0 
23.3 
41.9 
2.2 
68.4 

2007
£m
1.2 
0.5 
1.7 

2007
£m
0.9
33.7
38.9
0.6
74.1

7.  Net investment income 

Dividends received from other investments 
Interest on fixed asset investments 

8.  Finance income 

Income from loans included in financial assets 
Other interest and similar income 
Expected return on pension plan assets 
Fair value gains on derivative financial instruments 

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9.  Finance costs 

Interest payable 
Finance costs in respect of finance leases 
Interest cost on pension plan liabilities 
Forward points on future hedging contracts 
Interest on overdue tax 
Other finance costs (including discounting charges) 

Loss on revaluation of trading securities 
Impact of financial market volatility 

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2007
£m
20.6 
12.9 
37.9 
 – 
0.3 
3.0 
74.7 

 – 
 – 
74.7

2008
£m
40.9
22.2
41.9
12.8
 – 
9.0
 126.8 

13.9
12.9
153.6

The forward points on future hedging contracts of £12.8m (2007: £3.5m) was included within “Cost of providing tourism services” in the prior year.  
The Directors believe it is more relevant to include this cost within finance costs. The prior year has not been restated and there is no net impact  
on earnings per share or profit before tax of this change. 

10. Profit before tax 

 Profit before tax for the period has been arrived at after charging/(crediting): 
 Net foreign exchange gains 
 Depreciation of property, plant and equipment  – owned assets 

– held under finance leases 

 Amortisation of intangible assets 
 Amortisation of business combination intangibles 
 Cost of inventories recognised as expense 
 Profit on disposal of associates 
 Operating lease rentals payable – hire of aircraft and aircraft spares 

– other 
 Exceptional operating items (see note 6) 
 Including:  Impairment of property, plant and equipment 

Impairment of non-current investments 
Impairment of intangible assets 

 Personnel expenses (see note 4) 
 Auditors’ remuneration (see below) 

A more detailed analysis of auditors’ remuneration on a worldwide basis is as follows: 

PricewaterhouseCoopers LLP 
Fees payable to the Company’s auditors for the audit of the Company’s financial statements 
Fees payable to the Company’s auditors and their associates for other services: 
The audit of the Company’s subsidiaries pursuant to legislation 
Total audit fees 

 Other services pursuant to legislation 
 Tax services 
 Information technology services 
 Valuation and actuarial services 
 Recruitment and remuneration services 
 Services relating to corporate finance transactions 
 All other services 
Total non-audit fees 

Total fees 

In addition to the above, £56,000 (2007: £57,000) has been incurred in respect of the audits of the Group pension schemes. 

2008
£m

(10.8)
76.5
34.2
17.3
48.0
36.9
 – 
97.6
67.1
179.6
 1.3
 – 
5.5
896.3
 4.5

2008
£m
0.2

1.4
 1.6 

0.5
0.7
0.2
0.1
1.3
 – 
0.1
 2.9 

 4.5 

2007
£m

(28.7)
51.8 
34.2 
18.5 
30.1 
39.7 
(35.5)
80.2 
102.9 
127.0 
3.3 
1.6 
2.8 
737.4 
9.5 

2007
£m
0.4 

1.2 
1.6 

0.1 
0.3 
0.3 
0.1 
0.5 
2.4 
0.3 
4.0 

5.6 

Thomas Cook Group plc Annual Report & Accounts 2008 

83

 
 
 
  
 
 
  
  
  
  
  
 
 
 
Notes to the financial statements continued 

10. Profit before tax continued 

Deloitte & Touche LLP 
Fees payable to the Company’s auditors for the audit of the Company’s financial statements 
Fees payable to the Company’s auditors and their associates for other services: 
 The audit of the Company’s subsidiaries pursuant to legislation 
Total audit fees  

 Other services pursuant to legislation 
 Tax services 
 Information technology services 
 Services relating to corporate finance transactions 
Total non-audit fees 

Total fees 

2008
£m
 – 

 – 
 – 

 – 
 – 
 – 
 – 
 – 

 – 

2007
£m
0.2 

0.8 
1.0 

0.1 
0.7 
0.2 
1.9 
2.9 

3.9 

£2.0m of the 2007 non-audit fees paid to Deloitte & Touche LLP were earned before the date of the merger of MyTravel Group plc and Thomas Cook AG. 

Fees paid to the Company’s auditors and their associates for services other than the statutory audit of the Company are not disclosed in subsidiaries’ accounts 
since the consolidated accounts of the subsidiaries’ parent, Thomas Cook Group plc, are required to disclose non-audit fees on a consolidated basis. 

A description of the work of the Audit and Risk Management Committee is set out in the Corporate governance report on pages 53 and 54 and includes  
an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors. 

11. Tax 

Analysis of tax charge in the period 
Current tax 
UK 

corporation tax charge for the period 
income/reimbursements in respect of prior periods 

Overseas 

corporation tax charge for the period 
income/reimbursements in respect of prior periods 

Total current tax 
Deferred tax 

tax (credit)/charge for the period 
adjustments in respect of prior periods 

Total deferred tax 
Total tax charge 

Tax reconciliation 
Profit before tax 
Expected tax charge at the UK corporation tax rate of 28.91% (2007: 30%) 
Impact of changes in tax rates 
Income not liable for tax 
Expenses not deductible for tax purposes 
Losses for which tax relief is not available 
Difference in rates of tax suffered on overseas earnings 
Utilisation of tax losses not previously recognised 
Recognition of timing differences not previously recognised 
Income tax charges in respect of prior periods 
Other 
Tax charge 

2008
£m

2.7
(1.2)
 1.5 
41.1
4.5
 45.6 
 47.1 

(25.6)
(16.4)
(42.0)
5.1 

49.5
 14.3 
0.9
(6.7)
6.9
4.4
(6.7)
(1.5)
2.7
(13.1)
3.9
 5.1 

2007
£m

 – 
(0.3)
(0.3)
24.9 
(16.1)
8.8 
8.5 

32.3 
(1.3)
31.0 
39.5 

190.2 
57.1 
6.6 
(14.5)
9.4 
 – 
2.5 
(2.8)
 – 
(17.7)
(1.1)
39.5 

In addition to the amount charged to the income statement, deferred tax relating to actuarial losses on pension schemes and the fair value of derivative 
financial instruments of £21.2m has been charged directly in equity (2007: £41.5m). 

UK corporation tax is calculated at 28.91% (2007: 30%) of the estimated assessable profit for the period. Taxation for other jurisdictions is calculated  
at the rates prevailing in the respective jurisdictions. 

Surplus losses not recognised in deferred tax of £531.0m (2007: £558.0m) are available in the UK and Germany for offset against future profits. 

84 

www.thomascookgroup.com 

 
 
 
 
 
 
 
 
 
 
 
12. Dividends 

Interim dividend paid of 3.25 pence per share (2007: nil) 
Proposed final dividend for the period of 6.5 pence per share (2007: 5.0 pence) 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

2008
£m
29.4
55.8
85.2

2007
£m
 – 
48.8 
48.8 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these 
financial statements. 

13. Earnings per share 
The calculations for earnings per share, based on the weighted average number of shares, are shown in the table below. The weighted average number 
of shares shown excludes 2.6m shares held by the employee share ownership trusts (2007: 0.5m). 

Basic and diluted earnings per share 
Net profit attributable to equity holders of the parent 

Weighted average number of shares for basic earnings per share 
Effect of dilutive potential ordinary shares – share options* 
Weighted average number of shares for diluted earnings per share 

2008
£m
44.7

millions
947.6
0.5
948.1 

2007
£m
149.8 

millions
681.1 
0.8 
681.9 

*   Awards of shares under the Thomas Cook Performance Share Plan and Buy As You Earn Scheme will be satisfied by shares held in trust and therefore are potentially dilutive.  

The remainder of the share schemes will be satisfied by the purchase of existing shares in the market and will therefore not result in any dilution of earnings per share. 

Basic earnings per share 
Diluted earnings per share 

14. Intangible assets 

Goodwill 
Business combination intangibles 
Other intangible assets 

Goodwill 

Cost 
At 1 November 2006 
Additions – restated (see note 17) 
Disposals 
Exchange differences 
At 31 October 2007 
Additions (see note 17) 
Exchange differences 
At 30 September 2008 

Accumulated impairment losses 
At 1 November 2006 
Exchange differences 
At 31 October 2007 
Exchange differences 
At 30 September 2008  

Carrying amount 
At 30 September 2008 
At 31 October 2007 – restated 

pence
4.7
 4.7

2008

£m
2,951.8
345.0 
135.6 
3,432.4 

pence
22.0 
22.0 

2007
Restated
£m
2,481.4 
321.2 
80.9 
2,883.5 

£m

849.4 
1,665.0 
(0.1)
55.1 
2,569.4
322.6
161.1
3,053.1 

84.5 
3.5 
88.0 
13.3
101.3

2,951.8 
2,481.4 

Thomas Cook Group plc Annual Report & Accounts 2008 

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

14.  Intangible assets continued 
The carrying value of goodwill analysed by business segment is as follows: 

UK and Ireland 
Continental Europe 
Northern Europe 
North America 
Airlines Germany 

2008

£m
1,954.6
194.6
627.8
154.8
20.0
2,951.8

2007
Restated
£m
1,667.1 
119.6 
584.1 
93.1 
17.5 
2,481.4 

In accordance with accounting standards, the Group annually tests the carrying value of goodwill for impairment. At 30 September 2008, the review  
was undertaken on a value in use basis, assessing whether the carrying value of goodwill was supported by the net present value of future cash flows 
derived from those assets, using cash flow projections discounted at a pre-tax rate of 10% to 13% (2007: 10% to 11%) reflecting specific risks relating  
to the relevant segments. 

The key assumptions used in the value in use calculations are those regarding the discount rates, revenue and cost growth rates and the level of capital 
expenditure required during the period. The Group prepares cash flow forecasts derived from the most recently approved annual budgets and three 
year plans of the relevant businesses. The cash flow forecasts reflect the risk associated with each asset. Cash flow forecasts for years beyond the three 
year plan period are extrapolated based on estimated growth rates which do not exceed the average long-term growth rates for the relevant markets. 

There were no impairment losses for the period (2007: £nil) and no reasonable change to the assumptions would lead to an impairment. 

Business combination intangibles 

Cost 
At 1 November 2006 
Additions 
Exchange differences 
At 31 October 2007 
Additions (note 17) 
Exchange differences 
At 30 September 2008 

Amortisation 
At 1 November 2006 
Charge for the year 
At 31 October 2007 
Charge for the period 
Impairment losses 
Exchange differences 
At 30 September 2008 

Carrying amount 
At 30 September 2008 
At 31 October 2007 

Brands and
customer
relationships
£m

Order
backlog
£m

Computer 
software 
£m 

 – 
296.3 
8.5 
304.8 
55.5
13.4
373.7 

 – 
9.5 
9.5 
28.6
3.5
0.6
42.2

331.5
295.3 

 – 
33.4 
0.6 
34.0 
2.4
3.0
39.4 

 – 
19.6 
19.6 
16.3
–
2.3
38.2

1.2
14.4 

 –  
12.1  
0.4  
12.5  
– 
0.9 
13.4  

 –  
1.0  
1.0  
3.1 
– 
0.1 
4.2  

9.2 
11.5  

Other
£m

 – 
 – 
 – 
 – 
3.3
(0.2)
3.1

 – 
 – 
–
–
–
–
–

3.1
–

Total
£m

 – 
341.8 
9.5 
351.3 
61.2
17.1
429.6 

 – 
30.1 
30.1 
48.0
3.5
3.0
84.6

345.0
321.2 

The initial valuation of business combination intangibles is based on applicable projected future cash flows discounted at an appropriate discount rate. 
Customer relationships are being amortised over periods of one to 15 years and computer software over a period of four years. Order backlog has been 
amortised over the period from acquisition to departure. Other includes the fair value attributed to a foreign exchange licence from the acquisition of 
Thomas Cook India, which is being amortised over 25 years.  

Indefinite-lived intangible assets principally comprise those trademarks for which there is no foreseeable limit to the period over which they are expected  
to generate net cash inflows. These are considered to have an indefinite life, given the strength and durability of our brands and the level of marketing 
support. The nature of the industry we operate in is such that brand obsolescence is not common, if appropriately supported by advertising and marketing 
spend. The Group annually tests the carrying value of indefinite-lived intangibles for impairment on a value in use basis consistent with that disclosed 
for goodwill above. 

The carrying value of brands with an indefinite life analysed by business segment is as follows: 

UK and Ireland 
Northern Europe 
North America 

86 

www.thomascookgroup.com 

2008
£m
70.6
115.5
24.8
210.9

2007
£m
68.2 
107.5 
21.2 
196.9 

 
 
 
 
 
 
 
 
 
 
 
 
Other intangible assets 

Cost 
At 1 November 2006 
Additions 
Acquisitions 
Exchange differences 
Reclassification  
Transfer from non-current assets held for sale 
Disposals 
At 31 October 2007 
Additions 
Acquisitions (note 17) 
Exchange differences 
Reclassification 
Disposals 
At 30 September 2008 

Amortisation 
At 1 November 2006 
Charge for the year 
Impairment losses 
Exchange differences 
Transfer from non-current assets held for sale 
Disposals 
At 31 October 2007 
Charge for the period 
Impairment losses 
Exchange differences 
Reclassification 
Disposals 
At 30 September 2008 

Carrying amount 
At 30 September 2008 
At 31 October 2007 

              Concessions and 
               computer software 

Purchased
£m

Internally 
generated 
£m 

Other 

Purchased
£m

115.7 
36.9 
8.5 
5.3 
(0.3)
0.1 
(2.0)
164.2
44.8
8.8
15.7
(54.8)
(1.4)
177.3 

80.1
13.2
2.8 
2.8 
0.1 
(2.0)
97.0
6.9
1.0
10.9
(36.3)
(0.9)
78.6

98.7
67.2

23.0   
2.9   
2.8    
1.1    
0.3    
 –    
(0.2)   
29.9   
15.4   
1.1   
4.1   
54.8   
(3.5)   
101.8    

10.9   
5.2    
 –    
0.6    
 –    
 –    
16.7   
10.0   
1.0   
2.6   
36.3   
(1.5)   
65.1   

36.7   
13.2   

 – 
 – 
0.6 
 – 
 – 
 – 
 – 
0.6 
–
0.1
–
–
–
0.7 

–
0.1 
 – 
 – 
 – 
 – 
0.1 
0.4
–
–
–
–
0.5

0.2
0.5 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Total
£m

138.7 
39.8 
11.9 
6.4 
 – 
0.1 
(2.2)
194.7 
60.2
 10.0 
 19.8 
–
(4.9)
279.8 

91.0 
18.5 
2.8 
3.4 
0.1 
(2.0)
113.8 
17.3
2.0
13.5
–
(2.4)
144.2

135.6
80.9 

Computer software is amortised on a straight line basis over its estimated useful life of between three and ten years. 

As a result of the integration of Thomas Cook and MyTravel, the Directors have reviewed the classification of intangible fixed assets and as a consequence 
certain reclassifications have been made to more appropriately reflect the nature of the asset. 

Concessions include the value of licences granted to the Group, as well as copyrights and trademarks and similar items. Licences are amortised over  
the period of the licence, up to a maximum of ten years, and other items over their estimated useful lives of between three and five years. 

Thomas Cook Group plc Annual Report & Accounts 2008 

87

 
 
 
 
 
 
   
 
   
   
 
   
   
Notes to the financial statements continued 

15. Property, plant and equipment 

Cost 
At 1 November 2006 
Additions 
Acquisitions 
Exchange differences 
Transfer from non-current assets held for sale 
Reclassification 
Disposals 
At 31 October 2007 
Additions 
Acquisitions (note 17) 
Exchange differences 
Transfer from non-current assets held for sale 
Reclassification 
Disposals 
At 30 September 2008 

Accumulated depreciation and impairment 
At 1 November 2006 
Charge for the year 
Provision for impairment 
Reversal of impairment provision 
Exchange differences 
Transfer from non-current assets held for sale 
Disposals 
At 31 October 2007 
Charge for the period 
Provision for impairment 
Exchange differences 
Reclassification 
Disposals 
At 30 September 2008 

Carrying amount 
At 30 September 2008 
At 31 October 2007 

Aircraft and
aircraft spares
£m

Investment 
property
£m

Freehold land
and buildings
£m

Short 
leaseholds 
£m 

Other
fixed assets
£m

      Other property, plant and equipment 

1,032.4 
4.3 
196.5 
40.8 
 – 
 – 
(26.9)
1,247.1 
42.2
 – 
165.7
 – 
8.8 
(22.1)
1,441.7 

607.5 
62.5 
0.4 
 – 
26.3 
 – 
(16.7)
680.0 
78.8
 – 
105.0
7.1
(14.0)
856.9 

584.8 
567.1 

 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
1.6
14.1
 – 
 – 
15.7

 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 
 – 

126.0 
2.3 
52.3 
6.6 
 – 
0.4 
(0.3)
187.3 
1.0
4.1
25.4
 – 
(4.5)
(0.1)
213.2

40.0 
3.7 
 – 
(0.2)
1.5 
 – 
(0.3)
44.7 
5.9
 – 
7.5
(3.3)
 – 
54.8 

15.7
 – 

158.4 
142.6 

112.3  
5.8  
13.8  
1.9  
2.3  
(0.1) 
(5.5) 
130.5  
10.0 
1.8 
7.4 
 –  
35.0 
(12.1) 
172.6  

69.7  
7.9  
1.3  
 –  
0.6  
1.2  
(5.3) 
75.4  
8.8 
 –  
3.1 
30.1 
(9.6) 
107.8  

64.8  
55.1  

146.9 
12.7 
37.3 
4.0 
5.2 
(0.4)
(3.2)
202.5 
29.9
8.3
23.9
 – 
(39.3)
(7.4)
217.9 

114.6 
11.9 
1.6 
 – 
2.6 
3.9 
(2.6)
132.0 
17.2
1.3
17.4
(33.9)
(5.7)
128.3 

89.6 
70.5 

Total
£m

385.2 
20.8 
103.4 
12.5 
7.5 
(0.1)
(9.0)
520.3 
40.9
 14.2 
 56.7 
 – 
(8.8) 
(19.6) 

603.7

224.3 
23.5 
 2.9
(0.2) 
4.7 
5.1 
(8.2)
252.1 
 31.9 
 1.3 
 28.0 
(7.1) 
(15.3) 
290.9 

312.8 
268.2 

Freehold land with a cost of £34.7m (2007: £31.4m) has not been depreciated.  

The cost of property, plant and equipment stated above does not include capitalised interest.  

As a result of the integration of Thomas Cook and MyTravel, the Directors have reviewed the classification of tangible fixed assets and as a consequence 
certain reclassifications have been made to more appropriately reflect the nature of the assets.  

The net book value of aircraft and aircraft spares includes £267.3m (2007: £302.1m) in respect of assets held under finance leases. 

The net book value of other property, plant and equipment includes £13.0m (2007: £11.8m) in respect of assets held under finance leases. 

Capital commitments 
Capital expenditure contracted but not provided for in the accounts 

2008
£m
53.4

2007
£m
8.9

88 

www.thomascookgroup.com 

 
 
 
 
 
 
 
 
 
 
 
16. Non-current asset investments 

Cost 
At 1 November 2007 
Acquisitions (note 17)  
Disposals 
Share of result of associates and joint ventures after tax 
Additional loan investment 
Exchange differences 
At 30 September 2008 

Amounts written off or provided 
At 1 November 2007 
Acquisitions (note 17) 
Disposals 
Exchange differences 
At 30 September 2008  

Carrying amount 
At 30 September 2008 
At 31 October 2007 

Other investments 

Associates and 
joint ventures
£m

Available-  
for-sale 
financial assets 
£m 

Loans &
receivables
£m

60.0 
(1.2)
(0.4)
(1.6)
3.9
9.6
70.3

24.3 
0.3
(0.4)
3.4
27.6

42.7 
35.7 

15.3  
 –  
(0.3) 
 –  
 –  
2.0 
17.0 

2.2  
 –  
(0.1) 
0.1 
2.2  

14.8 
13.1  

13.5 
 – 
 – 
 – 
1.1
 – 
14.6

 – 
 – 
 – 
 – 
 – 

14.6
13.5 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Total
£m

28.8 
 – 
(0.3)
 – 
1.1
2.0
31.6

2.2 
 – 
(0.1)
0.1 
2.2 

29.4
26.6 

Associates 
Investments in associated undertakings at 30 September 2008 included a 40% interest in Activos Turisticos S.A., an incoming agency and hotel company, and 
Hispano Alemana de Management Hotelero S.A., a hotel management company. Both companies are based in Palma de Mallorca, Spain. Investments 
also include a 25.1% interest in Oasis Company SAE, a hotel company in Egypt, as well as a number of other smaller associated undertakings. 

The investment in associated undertakings acquired with MyTravel represents a 19.99% interest in Aqua Sol Hotels Limited, a quoted hotel group  
based in Cyprus. The interest consists of 51,574,200 of the existing shares of Aqua Sol. This investment is regarded as an associated undertaking and is 
accounted for under the equity method as the Group is represented on the Board of Directors of Aqua Sol and, therefore, has significant influence over 
that undertaking. The market value of the Group’s investment in Aqua Sol at 30 September 2008 was £5.3m (2007: £11.1m) compared with a carrying 
amount of £12.1m (2007: £9.5m). The Directors do not consider the investment to be impaired due to its value in use. 

Joint venture 
The joint venture is Thomas Cook Personal Finance Limited. This is a joint venture arrangement with Barclays Bank, the Group’s share being 50%. 

Summarised financial information in respect of the associates and joint ventures is as follows: 

Total assets 
Total liabilities 
Net assets 
Group’s share of net assets 
Revenue 
(Loss)/profit for the period 
Group’s share of associates’ and joint venture’s (loss)/profit for the period 

Joint
venture
2008
£m
86.1
(98.3)
(12.2)
(6.1)
(0.8)
(7.8)
(3.9)

Associates 
2008 
£m 
267.8 
(115.6) 
152.2 
44.6 
146.8 
5.8 
2.3 

Joint
venture
2007
£m
29.1
(33.5)
(4.4)
(2.2)
(0.4)
(4.4)
(2.1)

Associates
2007
£m
373.4
(176.4)
197.0
51.4
237.6
14.0
3.9

The financial statements of Activos Turisticos S.A. are made up to 31 October each year. The financial statements of the other associated undertakings 
are made up to 31 December each year, being their financial reporting date. For the purposes of applying the equity method of accounting for 2008, 
the financial statements of these undertakings for the year ended 31 December 2007 have been used together with management accounts for the 
period from 1 January 2007 to 30 September 2008. 

Other investments 
Loans and receivables include £14.6m in respect of the Group’s investment, as a member of the Airline Group, in the UK National Air Traffic Services 
(NATS). The investment comprises ordinary shares and loan notes carrying interest at 8% and 11% in the Airline Group. 

Available-for-sale financial assets include £8.3m in respect of a 10% interest in L’Tur Tourismus AG, a German package tour operator, and £5.1m  
in respect of a 24.9% interest in Aldiana GmbH, a German tour operator. Aldiana is not accounted for under the equity method as the Group does  
not have significant influence over its activities.  

There is no active market for the available-for-sale financial assets, consequently they are recorded at cost. 

Thomas Cook Group plc Annual Report & Accounts 2008 

89

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

17. Subsidiaries and acquisitions 
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest, is given in note 
15 to the Company’s separate financial statements. All of the subsidiary undertakings have been consolidated in the Group accounts. 

Interpretation guidance included within ‘SIC Interpretation 12: Consolidation – special purpose entities’ indicates that certain special purpose entities 
(SPEs), which are involved in aircraft leasing arrangements with the Group, should be interpreted as being controlled by the Group, and therefore subject  
to consolidation, even though the Group has no direct or indirect equity interest in those entities. As a consequence, the Group has consolidated twelve 
SPEs that own eleven aircraft operated by the Group on operating leases. 

Acquisitions 
MyTravel Group plc 
On 19 June 2007, the Group acquired 100% of the share capital of MyTravel Group plc. Provisional details of the net assets acquired were disclosed in 
note 18 to the 2007 Financial Statements. The determination of the fair values has now been concluded and an additional provision of £9.5m in respect 
of off-market contracts and related deferred tax asset of £2.7m have been recognised with a consequent £6.8m increase in goodwill. In accordance with 
IFRS 3, the final fair values have been recognised from the date of acquisition and the comparative figures have been restated. 

Hotels4U.com 
On 14 February 2008, the Group acquired the business of Hotels4U.com Limited, an online retailer of hotel accommodation and resort transfers. 
Hotels4U.com Limited owns the subsidiaries Transfers4U.com Limited (100%) and Trust Accommodation.com Limited (100%). The purchase price  
was £39.0m of which £21.8m has been paid in cash and an estimated balance of £17.2m has been recognised in relation to an earn out based on 
profitability up to 2013.  

Details of the net assets acquired are set out in the table below:  

Net assets acquired 
Intangible assets 
Property, plant and equipment 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Short-term borrowings 
Deferred tax liability 

Goodwill 
Total consideration 
Satisfied by: cash and attributable costs 

contingent consideration 

Carrying amount 
before business 
combination 
£m 

Fair value 
adjustment
£m

Amount 
recognised at 
acquisition date
£m

– 
0.1 
29.2 
0.7 
(28.1) 
(1.5) 
– 
0.4 

14.1
–
(28.0)
–
22.0
–
(3.9)
4.2

14.1
0.1
1.2
0.7
(6.1)
(1.5)
(3.9)
4.6
35.0
39.6
22.4
17.2
39.6

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management’s best estimates. 

The acquired business contributed revenue of £12.3m and net loss of £0.6m to the Group for the period from acquisition to 30 September 2008. 

90 

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Thomas Cook India 
On 27 March 2008, the Group acquired 54.4% of Thomas Cook (India) Limited, a foreign exchange and travel company in India. On 20 June and 4 July 
2008 the Group acquired a further 1.4% and 19.08% respectively. Thomas Cook (India) Limited owns a number of subsidiaries incorporated in India, 
Mauritius and Sri Lanka. The purchase price was Rs.12,885.6m (£159.1m) cash less £2.2m contingent refund.  

Details of the net assets acquired are set out in the table below: 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Net assets acquired 
Intangible assets 
Property, plant and equipment 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Short-term borrowings* 
Retirement benefit obligation 
Provisions for liabilities 
Deferred tax liability 

Less: minority interest 

Goodwill 
Total consideration 
Satisfied by: cash and attributable costs 

contingent refund 

Carrying amount 
before business 
combination 
£m 

Fair value 
adjustment
£m

Amount 
recognised at 
acquisition date
£m

1.4 
7.4 
37.7 
21.6 
(19.3) 
(53.4) 
(0.4) 
(0.1) 
(0.3) 
(5.4) 

30.6
1.6
 – 
 – 
 – 
 – 
 – 
 – 
(9.0)
23.2

32.0
9.0
37.7
21.6
(19.3)
(53.4)
(0.4)
(0.1)
(9.3)
17.8
(4.4)
13.4
146.9
160.3
162.5
(2.2)
160.3

*  Short-term borrowings include £36.8m commercial paper and bank loans, £12.9m preference share capital and £3.7m bank overdraft. 

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management’s best estimates. 
The acquired business contributed revenue of £20.2m and net profit after minority interest of £1.0m to the Group for the period from acquisition  
to 30 September 2008. 

TriWest Travel Holdings 
On 1 August 2008, the Group acquired TriWest Travel Holdings Limited. TriWest Travel Holdings is a Canadian independent travel wholesaler, which 
holds 70% of Skylink Voyages Inc. The purchase price was C$121.4m (£59.6m) of which C$114.7m (£56.3m) has been paid in cash and the balance of 
C$6.7m (£3.3m) is subject to earn out based on profitability up to 2010. 

Details of the net assets acquired are set out in the table below:  

Net assets acquired 
Intangible assets 
Property, plant and equipment 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Deferred tax liability 

Less: minority interest 

Goodwill 
Total consideration 
Satisfied by: cash and attributable costs 

contingent consideration 

Carrying amount 
before business 
combination 
£m 

Fair value 
adjustment
£m

Amount 
recognised at 
acquisition date
£m

 –  
0.9 
6.9 
18.5 
(21.4) 
(5.4) 
(0.5) 

3.0
(0.3)
 – 
 – 
 – 
4.6
7.3

3.0
0.6
6.9
18.5
(21.4)
(0.8)
6.8
(0.1)
6.7
53.8
60.5
57.2
3.3
60.5

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management’s best estimates. 

The acquired business contributed revenue of £45.5m and net profit of £1.4m to the Group for the period from acquisition to 30 September 2008.  

Thomas Cook Group plc Annual Report & Accounts 2008 

91

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

17.  Subsidiaries and acquisitions continued 
Jet Tours 
On 4 August 2008, the Group acquired Jet Tours S.A., a premium tour operator based in Paris, France. Jet Tours owns a number of subsidiaries 
incorporated in France, Morocco and Tunisia. The purchase price was €70.0m (£55.1m), all of which was paid in cash.  

Details of the net assets acquired are set out in the table below:  

Net assets acquired 
Intangible assets 
Property, plant and equipment 
Inventory 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Short-term borrowings 
Retirement obligation 
Provisions  
Deferred tax asset 

Goodwill 
Total consideration 
Satisfied by: cash and attributable costs 

Carrying amount 
before business 
combination 
£m 

Fair value 
adjustment
£m

Amount 
recognised at 
acquisition date
£m

4.0 
1.6 
0.1 
37.2 
10.0 
(49.4) 
(4.6) 
(0.7) 
(0.7) 
6.1 
3.6 

(2.1)
–
–
–
–
(0.3)
–
–
–
–
(2.4)

1.9
1.6
0.1
37.2
10.0
(49.7)
(4.6)
(0.7)
(0.7)
6.1
1.2
55.2
56.4
56.4

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management’s best estimates. 

The acquired business contributed revenue of £52.1m and net loss of £2.1m to the Group for the period from acquisition to 30 September 2008. 

Other 
During the period the Group concluded a number of smaller acquisitions, namely: 

•  1 November 2007, 100% of Urlaub.de.GmbH (Urlaubshop GmbH); 
•  3 April 2008, 100% of Elegant Resorts Limited; 
•  4 April 2008, 100% of Thomas Cook Egypt (Thomas Cook Overseas Limited) and Lebanon (Thomas Cook Lebanon S.A.L.); 
•  1 May 2008, 100% of Neckermann Urlaubswelten GmbH & Co.KG; and 
•  1 May 2008, 65% of Viajes Iberoservice Espana S.L. 

92 

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Details of the net assets acquired are set out in the table below:  

Net assets acquired 
Intangible assets 
Property, plant and equipment 
Inventory 
Deferred tax asset 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Short-term borrowings 
Provisions  
Deferred tax liability 

Less: minority interest 

Goodwill 
Total consideration 
Satisfied by: cash and attributable costs 
                     loan payable 
                     contingent consideration 
                     decrease in associate* 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Carrying amount 
before business 
combination 
£m 

Fair value 
adjustment
£m

Amount 
recognised at 
acquisition date
£m

0.9 
2.9 
0.2 
0.2 
63.1 
20.6 
(65.9) 
(3.4) 
(2.0) 
– 
16.6 

19.3
–
–
–
–
–
(0.3)
–
–
(3.3)
15.7

20.2
2.9
0.2
0.2
63.1
20.6
(66.2)
(3.4)
(2.0)
(3.3)
32.3
(1.7)
30.6
31.7
62.3
57.8
2.0
1.0
1.5
62.3

*   As part of the Viajes Iberoservice Espana S.L. acquisition, the Group contributed a portion of its 40% stake in an existing associate, Activos Turisticos S.A. 

The purchase price of each asset component of the acquisition represents its provisional fair value, based on management’s best estimates. 

The acquired businesses contributed revenue of £69.1m and net profit of £2.3m to the Group for the period from acquisition to 30 September 2008. 

Pro forma revenue and net profit 
If all of the acquisitions, excluding Neckermann Urlaubswelten GmbH & Co.KG and Viajes Iberoservice Espana S.L., had occurred on 1 November 2007, 
for the eleven months ended 30 September 2008 they would have contributed £646.9m to consolidated revenue and £3.3m to consolidated net profit, 
before accounting for £3.8m of amortisation of business combination intangibles. Pro forma revenue and net profit are based on available management 
information. Neckermann Urlaubswelten GmbH & Co.KG and Viajes Iberoservice Espana S.L. are excluded as pre-acquisition revenue and net profit 
information is not available. 

Net cash outflow from acquisitions  

Net cash outflow from acquisitions: 
Cash consideration for shares 
(including acquisition costs) 
Cash and cash equivalents (net of overdraft) acquired 

Hotels4U
£m

Thomas Cook 
India
£m

TriWest
£m

Jet Tours 
£m 

(22.4)
(0.8)
(23.2)

(162.1)
17.9
(144.2)

(56.8)
18.5
(38.3)

(56.4) 
5.4 
(51.0) 

18. Inventories 

Goods held for resale 
Raw materials and supplies 

Other
£m

(56.9)
17.2
(39.7)

2008
£m
19.5
4.7
24.2

Total
£m

(354.6)
58.2
(296.4)

2007
£m
12.8 
6.3 
19.1 

Thomas Cook Group plc Annual Report & Accounts 2008 

93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

19. Trade and other receivables 

Non-current assets 
Trade receivables 
Amounts owed by parent undertaking 
Amounts owed by associates, participations and joint ventures 
Deposits and prepayments 
Loans 
Securities 
Other receivables 

Current assets 
Trade receivables 
Amounts owed by parent undertaking 
Amounts owed by associates and joint ventures 
Deposits and prepayments 
Loans 
Securities 
Other taxes 
Other receivables 

2008
£m

0.1
 – 
2.1
87.2
10.1
3.8
23.1
126.4

325.0
11.7
10.4
349.5
19.9
129.2
40.2
131.6
 1,017.5 

2007
£m

0.1 
3.3 
1.8
69.7 
13.0 
4.3 
6.6 
98.8 

211.1 
3.4 
10.7 
281.2 
2.4 
255.6 
33.8 
66.2 
864.4 

The average credit period taken on invoicing of leisure travel services is eleven days (2007: nine days). No interest is charged on the receivables. The credit risk in 
respect of direct receivables from customers is limited as payment is required in full before the services are provided. In the case of travel services sold by third-
party agents, the credit risk depends on the credit-worthiness of those third parties, but this risk is also limited because of the relatively short period of credit. 

Deposits and prepayments include amounts paid in advance to suppliers of hotel and other services in order to guarantee the provision of those supplies and 
historically have covered periods from 1 to 24 months in advance. The Group’s current policy is that deposits and prepayments will normally only be made for 
periods of up to twelve months in advance. There is a credit risk in respect of the continued operation of those suppliers during those periods. Deposits and 
prepayments also include £63.3m (2007: £54.7m) of deposits on aircraft lease arrangements which are primarily attributable to the UK Airline.  

Securities include money market securities amounting to £3.7m (2007: £3.8m) purchased as collateral against liabilities arising from part-time 
retirement contracts at Thomas Cook AG, which are classified as available-for-sale financial assets. 

Current asset securities of £129.2m (2007: £255.6m) include £129.2m (2007: £203.8m) in relation to a managed investment fund established to optimise the 
utilisation of the Group’s surplus liquidity. The fund is classified as held-for-trading investments and includes corporate and government bonds of £129.2m  
(2007: £166.9m). In the prior year there was also £7.1m quoted securities, £26.2m unquoted securities and £3.6m other assets. Securities in the prior year also 
included money market deposits with a maturity of greater than three months of £51.8m, classified as held-for-trading investments. 

Loans include advances of £2.1m (2007: £1.8m) to two hotel companies in which the Group has a participating interest. These loans are interest  
bearing at rates based on Euribor and are unsecured. 

The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an 
identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. 

Allowances for doubtful debts in respect of trade receivable balances are managed in the business units where the debts arise and are based on  
local management experience. Factors that are considered include the age of the debt, previous experience with the counterparty and local trading 
conditions. Trade receivables arise from individual customers as well as businesses in the travel sector. The Directors do not consider there to be 
significant concentration of credit risk relating to trade and other receivables. 

Movement in allowances for doubtful receivables 
At beginning of period 
Additional provision 
Exchange differences 
Acquisitions 
Receivables written off 
Unused amounts released 
At end of period 

At the period end, trade and other receivables of £182.0m (2007: £79.7m) were past due but not impaired. 

The analysis of the age of these financial assets is set out below: 

Ageing analysis of overdue trade and other receivables 
Less than one month overdue 
Between one and three months overdue 
Between three and twelve months overdue 
More than twelve months overdue 

94 

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2008
£m
51.0 
11.8
4.8
1.6
(16.7)
(4.2)
48.3 

2008
£m
89.4
33.6
42.8
16.2
182.0

2007
£m
36.2 
12.9
1.0
14.0
(9.4)
(3.7)
51.0 

2007
£m
32.1
12.5
20.3
14.8
79.7

 
 
 
 
 
Trade and other receivables are not subject to restrictions on title and no collateral is held as security. 

The Directors consider that the carrying amounts of trade and other receivables approximates their fair values. 

20. Cash and cash equivalents 

Cash at bank and in hand 
Term deposits with a maturity of less than three months 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

2008
£m
472.3
289.0
761.3

2007
£m
556.8 
65.5 
622.3 

Included within the above balances is an amount of £56.4m (2007: £59.7m) held within escrow accounts in the United States and Canada in respect of 
local regulatory requirements. Also included within the above balances is an amount of £55.0m (2007: £56.5m) of cash held by White Horse Insurance 
Ireland Limited, the Group’s captive insurance company, and £15.7m held in other securities. These balances are considered to be restricted. 

Cash and cash equivalents largely comprise bank balances denominated in both euro and other currencies for the purpose of settling current liabilities 
as well as balances arising from agency collection on the part of the Group’s travel agencies. 

At the balance sheet date, surplus cash was placed on deposit at interest rates of up to 4.25% per annum (2007: up to 5.8%). 

The Directors consider that the carrying amount of these assets approximates to their fair value. 

21. Trade and other payables 

Current liabilities 
Trade payables 
Amounts owed to associates and participations 
Amounts owed to parent undertaking 
Social security and other taxes 
Accruals and deferred income 
Other payables 

Non-current liabilities 
Accruals and deferred income 
Other payables 

The Directors consider that the carrying amount of trade and other payables approximates their fair value. 

The average credit period taken for trade purchases is 45 days (2007: 34 days). 

22. Borrowings 

Short-term borrowings 
Unsecured bank loans and other borrowings 
Unsecured bank overdrafts 

Current-portion of long-term borrowings 

Long-term borrowings 
Bank loans – repayable within one year 
                   – repayable between one and five years 
                   – repayable after five years 

Less: amounts due for settlement within one year shown under current liabilities 
Amount due for settlement after one year 

The currency analysis of borrowings is: 

US dollar 
Euro 
Danish krone 
Indian rupee 
Sterling 

2008
£m

850.1
3.9
1.5
40.2
769.4
190.6
 1,855.7 

29.8
7.1
36.9

2008
£m

198.8
 13.8
212.6
143.4
356.0

143.4
399.1
 17.0
559.5
(143.4)
416.1

65.0
503.7
1.2
42.8
159.4
772.1

2007
£m

674.4 
6.1 
1.9 
78.9 
597.0 
77.6 
1,435.9 

39.5 
84.5 
124.0 

2007
£m

2.7
26.3
29.0
23.1
52.1

23.1
109.9
20.5
153.5
(23.1)
130.4

65.0
116.4
1.1
–
–
182.5

The liabilities to banks primarily relate to the refinancing of purchased aircraft, administrative buildings and hotel and club complexes. The useful lives 
of the financed items and the maturities of the respective liabilities to banks are congruent. 

Thomas Cook Group plc Annual Report & Accounts 2008 

95

 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
Notes to the financial statements continued 

22.  Borrowings continued 
In May 2008, the Group replaced its existing bonding facility with a new combined credit and bonding facility amounting to €1.8bn (£1.4bn at period 
end exchange rates). The facility incorporates three year revolving credit and term facilities, each at a margin of 175bps above EURIBOR/LIBOR, and a 
bonding facility. The term facility may be drawn in a range of currencies and is repayable in four equal six monthly instalments commencing in 
September 2009 and a final bullet repayment in May 2011. The revolving credit facility and bonding facilities are repayable in May 2011. 

For the eleven months ended 30 September 2008, the average effective borrowing rate was 6.38% (2007: 4.86%). Interest rates on £117.3m (2007: £79.6m)  
of borrowings are fixed at an average weighted interest rate of 6.51% (2007: 4.56%). Interest rates on the balance of the borrowings are floating with an 
average reference interest rate of 5.43% (2007: 5.08%). 

Bank loans include £113.8m (2007: £112.8m) relating to the financing of aircraft included in property, plant and equipment which is secured via 
aircraft mortgages. 

US dollar bank loans include £41.7m (2007: £45.7m) relating to the financing of two aircraft owned by special purpose entities consolidated in the 
Group’s financial statements in accordance with SIC 12 (see note 17). The loans are secured by a charge on those aircraft. The loans carry interest at  
a rate of 0.55% over US 6 month LIBOR, fixed at six monthly intervals. The average effective interest rate for the eleven months to 30 September 2008 
approximates 5.09% (2007: 6.05%). The loans are repayable in instalments by the end of June 2009. 

The Danish krone loan represents a mortgage loan to finance a building extension. The loan was taken out for a period of 15 years in August 2006  
at a fixed rate of interest of 4.98% per annum and is secured on the property in Denmark. 

In the currency analysis of borrowings, the sterling loan represents utilisation of the term facility. The interest and repayment terms are detailed in the 
description of the term facility above. 

The euro-denominated borrowings include a £238.0m term loan and £159.0m revolving credit facility loan advance. The interest and repayment terms 
of the term loan are detailed in the description of the term facility above. The revolving credit facility loan advance is due to be repaid in January 2009.  

Included in the Indian rupee bank loans is £12.2m redeemable preference shares repayable in January 2009. The preference shares were issued by 
Thomas Cook (India) Limited and have an effective interest rate of 14.48%. 

The Directors consider that the fair value of the Group’s borrowings with a carrying value of £772.1m is £770.0m. (2007: carrying value £182.5m; fair 
value £184.7m). The fair values quoted were determined on the basis of the interest rates for the corresponding terms to maturity/repayment as at the 
period end. 

Borrowing facilities 
As at 30 September 2008, the Group had undrawn committed debt, guarantee and bonding facilities of £558.7m (2007: £152.7m). 

23. Obligations under finance leases 

Amounts payable under finance leases: 
Within one year 
Between one and five years 
After five years 

Less: future finance charges 
Present value of lease obligations 

Less: amount due for settlement within one year  
(shown under current liabilities) 
Amount due for settlement after one year 

The currency analysis of amounts payable under finance leases is: 
Euro 
US dollar 

Finance leases principally relate to aircraft and aircraft spares.  

Minimum lease payments 

     Present value of  
     minimum lease payments 

2008
£m

197.7
229.1
 22.6
449.4
(38.5)
410.9

2007 
£m 

104.8   
371.3   
33.8   
509.9   
(69.7)   
440.2   

2008
£m

182.6
215.1
 13.2
410.9
– 
410.9

(182.6)
228.3

2008
£m
302.5
108.4
410.9

2007
£m

81.0
335.1
24.1
440.2
–
440.2

(81.0)
359.2

2007
£m
319.3
120.9
440.2

The average lease term at inception was 11.5 years (2007: 11.1 years) and the average remaining lease term is 2.5 years (2007: 2.8 years). For the eleven 
months ended 30 September 2008, the average effective borrowing rate was 5.73 % (2007: 5.76 %). Interest rates on £320.2m of lease obligations are fixed  
at 5.59% (2007: £342.3m at 5.41%). Interest rates on the balance of the finance lease obligations are floating and are fixed quarterly or six-monthly in 
advance based on US LIBOR. No arrangements have been entered into for contingent rental payments.  

The Directors consider that the fair value of the Group’s finance lease obligations with a carrying value of £410.9m was £409.1m at 30 September 2008 
(2007: carrying value £440.2m; fair value £455.0m). The fair values quoted were determined on the basis of the interest rates for the corresponding 
terms to maturity/repayment as at the period end. 

The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets. 

Sub-lease rentals receivable 
During the period, two aircraft (2007: two aircraft) held under finance leases were sub-let on operating leases for the whole or part of the period. 
Details of income receivable under operating sub-leases are provided in note 35. 

96 

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F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

24.  Financial instruments 
Carrying values of financial assets and liabilities 
The carrying values of the Group’s financial assets and liabilities as at 30 September 2008 and 31 October 2007 are as set out below: 

At 30 September 2008 
Non-current asset investments 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Borrowings 
Obligations under finance leases 
Derivative financial instruments 

At 31 October 2007 
Non-current asset investments 
Trade and other receivables 
Cash and cash equivalents 
Trade and other payables 
Borrowings 
Obligations under finance leases 
Derivative financial instruments 

Derivative 
instruments 
in designated 
hedging 
relationships
£m
–
–
–
–
–
–
68.8 
68.8 

Derivative 
instruments 
in designated 
hedging 
relationships
£m
–
–
–
–
–
–
(27.6)
(27.6)

Held for
trading
£m 
–
128.8 
–
–
–
–
7.2 
136.0 

Held for
trading
£m 
–
255.6 
–
–
–
–
(12.2)
243.4 

Loans & 
receivables 
£m  
14.6  
615.2  
761.3  
– 
– 
– 
– 
1,391.1  

Loans & 
receivables 
£m  
13.5  
381.0  
622.3  
– 
– 
– 
– 
1,016.8  

Available-
for-sale
£m 
14.8 
3.8 
–
–
–
–
–
18.6 

Available-
for-sale
£m 
13.1 
4.3 
–
–
–
–
–
17.4 

Financial
 liabilities at 
amortised cost
 £m
–
–
–
(1,733.5)
(772.1)
(410.9)
–
(2,916.5)

Financial
 liabilities at 
amortised cost
 £m 
–
–
–
(1,342.9)
(182.5)
(440.2)
–
(1,965.6)

Derivative financial instruments 
At the balance sheet date, total notional amounts of outstanding forward contracts and other derivative instruments that the Group has committed to  
are as below: 

Foreign exchange 
Interest rate swaps 
Total 

Fuel 

The fair values of derivative financial instruments at 30 September 2008 were: 

At 1 November 2006 
Fair values of derivatives at acquisition 
Movement in fair value during the year 
At 1 November 2007 
Fair value of derivatives at acquisition 
Movement in fair value during the period 
At 30 September 2008 

Non-current assets 
Current assets 
Current liabilities 
Non-current liabilities 

Interest
rate swaps
£m
(2.4)
 – 
(1.7)
(4.1)
 – 
(1.1)
(5.2)

Currency 
contracts  
£m 
(25.0) 
(23.9) 
(41.6) 
(90.5) 
(0.5) 
211.2 
120.2 

2008
£m
3,365.4
523.5
3,888.9

2007
£m
2,690.3
69.1
2,759.4

metric tonnes
1,880,870

metric tonnes
1,675,555

Fuel
contracts
£m
12.0 
(2.8)
45.6 
54.8 
 – 
(93.8)
(39.0)

2008
£m
55.6
261.6
(174.3)
(66.9)
76.0

Total
£m
(15.4)
(26.7)
2.3 
(39.8)
(0.5)
116.3
76.0

2007
£m
20.8 
79.3 
(117.2)
(22.7)
(39.8)

Thomas Cook Group plc Annual Report & Accounts 2008 

97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

24.  Financial instruments continued 
The Group uses derivative instruments to hedge against significant future transactions and cash flows. The Group enters into a variety of foreign 
currency forward contracts and options in the management of its exchange rate exposures. The instruments used are primarily denominated in the 
currencies of the Group’s principal markets and the currency exposures in those markets, predominantly euro, US dollar and sterling, and are typically 
established for periods of 12 to 24 months in advance of a season to which the expected cash exposures pertain. 

The Group undertakes hedging transactions to limit the risk of unfavourable changes in the jet fuel prices and to reduce the weighted average cost  
of fuel. The Group’s hedging policy aims to hedge up to 95 % of the Group’s fuel requirements. As at 30 September 2008, the Group had put in place 
hedging transactions for fuel volumes of 1,880,870 metric tonnes (2007:1,675,555 metric tonnes) with terms running up until September 2010 at the 
latest (three future seasons). The Group uses combination of fixed price forward or swap contracts in either crude oil, gas oil and kerosene and net 
purchased collars in crude oil to hedge against its fuel price risk. 

The Group is also subject to risks arising from interest rate movements in connection with the financing of aircraft and other assets. Interest rate swaps and 
cross currency swaps are designated as cash flow hedges of the interest rate and the US dollar/euro/sterling currency risk on such borrowings. Interest rate 
currency swaps are reported within interest rate derivatives. The maturities of interest rate derivatives extend out to May 2011 at the latest. 

The fair values of the Group’s derivative financial instruments set out before have been determined by reference to prices available from the markets in 
which the instruments are traded. 

Fair value of derivatives designated and effective as cash flow hedges deferred in equity at period end 

2008
£m
68.8

2007
£m
(27.6)

During the period a gain of £177.8m (2007: £63.5m loss) was transferred from the hedging reserve to the income statement following recognition of the 
hedged transactions. The amount included in each line item in the income statement is shown below. In addition, a loss of £25.7m was recognised in 
the income statement in respect of the ineffective portion of cash flow hedges (2007: £3.7m loss). 

Cost of providing tourism services 
Finance costs 

2008
£m
177.8
(25.7)
152.1

2007
£m
(67.2)
 – 
(67.2)

25. Financial risk 
The Group is subject to risks related to changes in interest rates, exchange rates, fuel prices, counterparty credit and liquidity within the framework of 
its business operations. Details of the nature of these risks and the policies and processes that the Group operates to manage them and mitigate any 
financial impact are set out in the Financial review on pages 44 and 45.  

The market risks that the Group is subject to have been identified as interest rate risk, exchange rate risk and fuel price risk. The impact of reasonably 
possible changes in these risk variables on the Group, based on the period end holdings of financial instruments have been calculated and are set out 
in the tables below. In each case it has been assumed that all other variables remain constant. As explained in note 24, fuel price risk is hedged through 
the use of a combination of derivative instruments. For the purpose of illustrating sensitivity, the price of the underlying commodity in each instrument 
has been assumed to change by 20%. 

Interest rate risk 

1% increase in interest rates 
1% decrease in interest rates 

Exchange rate risk 

5% strengthening of euro 
5% weakening of euro 
5% strengthening of US dollar 
5% weakening of US dollar 

Fuel price risk 

20% increase in fuel price 
20% decrease in fuel price 

98 

www.thomascookgroup.com 

             2008 

           2007 

Impact on
profit
before tax
£m 
0.7
 (0.7)

Impact on 
equity 
£m  
 –    
 –    

Impact on
profit
before tax
£m 
0.5
 (0.5)

             2008 

           2007 

Impact on
profit
before tax
£m 
(1.4)
(2.6)
(7.4)
2.3

Impact on 
equity 
£m  
37.2 
(28.8)   
75.2 
 (67.7)   

Impact on
profit
before tax
£m 
(1.1)
0.1
(7.4)
 6.1

             2008 

           2007 

Impact on
profit
before tax
£m 
 – 
 – 

Impact on 
equity 
£m  
150.0   
 (138.1)   

Impact on
profit
before tax
£m 
 – 
 – 

Impact on
equity
£m 
 – 
 – 

Impact on
equity
£m 
25.3
(21.7)
61.0
 (55.2)

Impact on
equity
£m 
34.6
 (43.5)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Liquidity risk 
Financial liabilities are analysed below based on the time between the period end and their contractual maturity. The amounts shown are estimates of 
the undiscounted future cash flows and will differ from both carrying value and fair value. 

At 30 September 2008 
Trade and other payables 
Borrowings 
Obligations under finance leases 
Derivative financial instruments – payable 

 – receivable 

At 31 October 2007 
Trade and other payables 
Borrowings 
Obligations under finance leases 
Derivative financial instruments – payable 

 – receivable 

Amount due 

in less than
3 months
£m
1,641.4
50.4
69.7
366.1
(222.2)
1,905.4

between
3 and 12 months
£m
80.8
345.6
128.0
442.9
(386.9)
610.4

between 
1 and 5 years 
£m 
8.8 
441.8 
229.1 
176.3 
(137.0) 
719.0 

Amount due 

in less than
3 months
£m
1,257.1
29.4
18.3
604.6
(541.8)
1,367.6

between
3 and 12 months
£m
–
29.3
86.5
1,151.5
(1,089.1)
178.2

between 
1 and 5 years 
£m 
85.8 
116.6 
371.3 
363.7 
(347.9) 
589.5 

in more than
5 years
£m
–
18.1
22.6
–
–
40.7

in more than
5 years
£m
–
21.7
33.8
–
–
55.5

Total
£m
1,731.0
855.9
449.4
985.3
(746.1)
3,275.5

Total
£m
1,342.9
197.0
509.9
2,119.8
(1,978.8)
2,190.8

Estimated undiscounted future cash flows are disclosed above in respect of derivatives with a negative fair value at the period end. These cash flows 
include amounts in respect of fuel derivatives which are based on the period end fair values. Estimated cash flows relating to fuel option derivatives 
have all been reported in the “Amount due in less than 3 months” category. Trade and other payables includes non-financial liabilities of £161.6m 
(2007: £217.0m) which have not been analysed above. 

The Group’s management of liquidity risk is addressed in the Financial review on page 45. 

Counterparty credit risk 
The Group is exposed to credit risk in relation to deposits, derivatives with a positive fair value and trade and other receivables. The maximum exposure 
in respect of each of these items at the balance sheet date is their carrying value. The Group’s approach to credit risk from deposits and derivatives with 
a positive fair value is explained in the Financial review on page 45. The Group’s approach to credit risk in respect of trade and other receivables is 
explained in note 19. 

26. Insurance 
Management of insurance risk 
Incidental to its main business, the Group, through its subsidiary White Horse Insurance Ireland Limited, issues contracts that transfer significant 
insurance risk and that are classified as insurance contracts. As a general guideline, the Group defines as significant insurance risk the possibility  
of having to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. 

Business written includes standard commercial risks for the Group and travel insurance for both Group and non-Group customers. 

The principal nature of travel insurance risks is one of short-term, low value and high volume. Underwriting performance is monitored on an ongoing 
basis and pricing reviewed annually for each individual contract. Exposure is capped by specific limits within the insurance policy and by using reinsurance 
contracts for any claims in excess of these retention limits. Commercial policies with the Group are subject to policy excesses and single event and 
aggregate limits. 

Insurance risk is spread across several European countries where the Group operates including the UK, Ireland and Scandinavia. 

When estimating the cost of claims outstanding at the period end, the principal assumption underlying the estimates is the Group’s past development 
pattern. This includes assumptions in respect of historic claims costs, average claims handling expenses and market developments. The Group also uses 
an independent actuary to review its liabilities to ensure that the carrying values are adequate. Any changes to these variables are not expected to have 
a material effect on the Group financial statements. 

The Group operates a reinsurance policy approved by the Board which ensures that reinsurers have a financial stability rating of B+ (A M Best) or above. 
The Group has assessed these credit ratings as being satisfactory in diminishing the Group’s exposure to the credit risk of its insurance receivables. 

Income and expenses arising directly from insurance contracts 

Revenue 
Net earned premium income 
Deposit interest 

Expenses 
Claims incurred 
Other operating expenses 

2008
£m

7.8
2.5
10.3

14.4
2.0
16.4

2007
£m

5.5
1.1
6.6

8.8
–
8.8

Thomas Cook Group plc Annual Report & Accounts 2008 

99

 
 
 
 
 
 
  
 
 
 
 
  
 
 
 
 
Notes to the financial statements continued 

26. Insurance continued 
Assets and liabilities arising directly from insurance contracts 

Assets 
Receivables arising out of direct insurance operations 
Prepayments 

Liabilities 
Deferred income arising from unearned premiums 
Claims accruals 
Insurance premium tax payable 
Other creditors 
Accruals and deferred income 

Reconciliation of movement in insurance liabilities 

At 1 November 2007 
Net earned premium income 
Premiums written 
Claims incurred 
Claims paid 
At 30 September 2008 

2008
£m

1.8
0.1
1.9

1.7
10.4
0.3
0.4
0.7
13.5

Deferred income 
arising from 
unearned 
premiums
£m
2.7
(7.8)
6.8
–
–
1.7

2007
£m

4.8
0.3
5.1

2.7
12.9
0.9
–
1.3
17.8

Claims 
accruals
£m
12.9
–
–
14.4
(16.9)
10.4

27. Deferred tax 
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting periods: 

At 1 November 2006 
(Charge)/credit to income 
Credit to equity 
Acquisitions (restated) 
Exchange differences 
At 31 October 2007 (restated) 
IFRS 5 transfer 
(Charge)/credit to income 
Charge/(credit) to equity 
Acquisitions 
Exchange differences 
At 30 September 2008 

Aircraft
finance
leases
£m
38.5 
(0.3)
 – 
 – 
1.5 
39.7 
 – 
(12.1)
 – 
 – 
9.9
37.5 

Retirement
benefit
obligations
£m
85.3 
(26.5)
(34.0)
1.4 
1.7 
27.9 
 – 
(4.6)
4.2
 – 
3.4
30.9

Fair value
of financial
instruments
£m
9.0 
0.3 
(7.5)
 – 
0.2 
2.0 
 – 
(0.3)
(25.4)
 – 
0.8
(22.9)

Other 
temporary 
differences 
£m 
(31.6) 
15.0  
 –  
(32.8) 
(1.8) 
(51.2) 
1.6 
41.0 
 –  
(11.0) 
(7.8) 
(27.4) 

Tax
losses
£m
72.7 
(19.5)
 – 
138.1 
1.0 
192.3 
 – 
18.0
 – 
 – 
2.4
212.7

Total
£m
173.9 
(31.0)
(41.5)
106.7 
2.6 
210.7 
1.6
42.0
(21.2) 
(11.0) 
8.7
230.8

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes: 

Deferred tax assets 
Deferred tax liabilities 

2008
£m
328.6
(97.8)
230.8

2007
£m
294.5
(83.8)
210.7

At the balance sheet date, the Group had unused tax losses of £1,327.9m (2007: £1,255.0m) available for offset against future profits. Deferred tax assets 
have only been recognised where there is sufficient probability that there will be future taxable profits against which the assets may be recovered. The 
increase in recognised tax losses in the period relates to non-recurring exceptional costs. The UK and German business generated taxable profits before 
exceptional items which support the recognition of losses in these territories. No deferred tax asset has been recognised in respect of tax losses of 
£531.0m (2007: £558.0m) due to the unpredictability of future profit streams. 

Other temporary differences, on which deferred tax has been provided, primarily relate to the difference in book to tax value on qualifying tax assets, 
provisions for which tax relief was not originally available and fair value accounting on properties acquired as part of the merger.  

In addition, the Group had unused other short-term timing differences in respect of which no deferred tax asset has been recognised amounting to 
£34.0m (2007: £47.0m), also due to the unpredictability of future profit streams.  

Deferred tax liabilities were offset against the corresponding deferred tax assets where both items fell within the responsibility of the same tax authority.  

100 

www.thomascookgroup.com 

 
 
 
 
 
 
 
 
The deferred tax assets and liabilities at the period end, without taking into consideration the offsetting balances within the same jurisdiction are £476.5m 
and £245.5m respectively.  

At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which no deferred tax 
liabilities have been recognised was £295.2m (2007: £269.0m). No liability has been recognised in respect of these differences because the Group is in a 
position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

28. Provisions 

At 1 November 2007  
Additional provisions in period 
Unused amounts released in period 
Unwinding of discount 
Utilisation of provisions 
Acquisitions 
Exchange differences 
At 30 September 2008 

Included in current liabilities 
Included in non-current liabilities 
At 30 September 2008 

Included in current liabilities 
Included in non-current liabilities 
At 31 October 2007 

Aircraft 
maintenance 
provisions 
£m 
131.0  
44.1 
(8.7) 
 –  
(9.6) 
 –  
7.3 
164.1  

65.2 
98.9 
164.1 

50.6 
80.4 
131.0 

Other
provisions
£m
233.7
67.8
(13.5)
9.0
(61.5)
2.7
13.9
252.1

118.7
133.4
252.1

134.3
99.4
233.7

Total
£m
364.7
 111.9 
(22.2)
9.0
(71.1)
2.7
21.2
416.2 

 183.9 
232.3
 416.2 

184.9
179.8
364.7

The aircraft maintenance provisions relate to maintenance on leased aircraft and spares used by the Group’s airlines in respect of leases which include 
contractual return conditions. This expenditure arises at different times over the life of the aircraft with major overhauls typically occurring between 
two and ten years (see note 2). 

Other provisions relate to provisions for onerous contracts and future obligations, including those arising as a result of reorganisation and restructuring 
plans that are irrevocably committed and include severance payments and provisions for social security compensation plans. 

Provisions included in non-current liabilities are principally in respect of onerous contracts and are expected to be utilised over the term of those 
contracts which extend up to ten years from the balance sheet date. 

29. Non-current assets classified as held for sale 

Assets 
Property, plant and equipment – land and building 
Deferred tax assets 

Liabilities 
Deferred tax liabilities 
Borrowings of companies held for sale 

2008
£m

–
–
 – 

–
–
 – 

2007
£m

11.2 
1.5 
12.7 

0.3 
6.5 
6.8 

The non-current assets and liabilities held for sale in 2007 relate to land and a building owned by Thomas Cook Nederland BV. In the current period the 
land and building has been reclassified as an investment property. Prior to being reclassified the property was revalued to £14.1m. 

Thomas Cook Group plc Annual Report & Accounts 2008  101

 
 
 
 
 
 
 
  
 
  
 
Notes to the financial statements continued 

30. Consolidated statement of changes in equity 

Share 
capital 
£m 
205.5  

Share 
premium 
£m 
365.2  

Merger
reserve
£m
 – 

Capital 
redemption 
reserve
£m
 – 

Hedging
and
translation
reserves
£m
(20.7)

Retained 
earnings/ 
(deficit) 
£m 
(171.5) 

Attributable 
to equity 
holders of 
the parent 
£m 
378.5  

Own
shares
£m
 – 

Minority
interest
£m
21.8 

Total
£m
400.3 

 –  

 –  
 –  

0.4  

 –  

 –  
0.4  

6.8  

 – 

 – 
 – 

(12.5)

(171.1) 
31.3  

(365.6) 
 –  

536.7 
1,460.0 

 –  
 –  
 –  

 –  
 –  
 –  

 – 
 – 
 – 

(139.4) 
(139.4) 
66.1  

(358.4) 
(358.4) 
6.8  

1,984.2 
1,984.2 
1,984.2 

– 

– 

0.1 

– 

– 
(6.4) 
– 
– 
– 

(6.3) 
(6.3) 
59.8 

– 

– 

2.1 

– 

– 
– 
– 
– 
– 

–

–

–

–

–
–
–
–
–

2.1  
2.1  
8.9  

 – 
 – 
1,984.2 

 – 

 – 
 – 

 – 

 – 
 – 

 – 
 – 
–

 – 
 – 
 – 

–

–

–

–

–
6.4
–
–
–

6.4
6.4
6.4 

 – 

 – 
 – 

 – 

 – 
 – 

 – 
(4.9)
 – 

(4.9)
(4.9)
(4.9)

–

–

–

–

–
–
(8.3)
0.2
–

(8.1)
(8.1)
(13.0)

36.6 

215.1  

251.7  

1.4 

253.1 

 – 
 – 

 – 

 – 
 – 

 – 
 – 
 – 

0.6  
 –  

 –  

 –  
 –  

 –  
 –  
 –  

0.6  
0.4  

(5.3) 

 –  
1,491.3  

 –  
(4.9) 
 –  

 – 
36.6 
15.9 

0.6  
215.7  
44.2  

1,482.1  
1,733.8  
2,112.3  

 – 
 – 

 – 

 – 
0.1 

(12.5)
 – 
(2.5)

(14.9)
(13.5)
8.3 

0.6 
0.4 

(5.3)

 – 
1,491.4 

(12.5)
(4.9)
(2.5)

1,467.2 
1,720.3 
2,120.6 

198.9

32.6 

231.5  

(0.3)

231.2 

–

–

–

–
–
–
–
–

3.1 

– 

– 

– 
(266.3) 
– 
– 
(78.2) 

3.1 

2.2  

 –  

– 
(266.3) 
(8.3) 
0.2 
(78.2) 

–

–

6.2

0.4
–
–
–
(1.9)

3.1

2.2

6.2

0.4
(266.3)
(8.3)
0.2
(80.1)

 – 
198.9
214.8 

(341.4) 
(308.8) 
(264.6) 

(347.3) 
(115.8) 
1,996.5 

4.7
4.4
12.7

(342.6)
(111.4)
2,009.2 

At 1 November 2006 
Total recognised income 
and expense for the year 
Equity credit in respect 
of share-based payments 
Capital increase 
Issue of equity shares  
net of expenses 
Reclassification to 
Thomas Cook Group plc 
Acquisition of MyTravel 
Acquisition of  
minority interests 
Purchase of own shares 
Dividends paid 
Net change directly  
in equity 
Total movements 
At 31 October 2007 

Total recognised  
income and expense  
for the period 
Equity credit in respect 
of share-based payments 
Issue of equity shares  
net of expenses 
Acquisition of  
minority interests 
Exchange difference  
on minority interest  
Share buyback 
Purchase of own shares 
Disposal of own shares 
Dividends paid 
Net change directly  
in equity 
Total movements 
At 30 September 2008 

The merger reserve arose on the reverse acquisition of Thomas Cook Group plc and MyTravel Group plc by Thomas Cook AG. In the case of Thomas Cook 
Group plc, the merger reserve represents the difference between the existing share capital and share premium of Thomas Cook AG and the share capital 
of Thomas Cook Group plc issued in exchange, and in the case of MyTravel Group plc, the merger reserve represents the difference between the fair 
value and the nominal value of the share capital issued by Thomas Cook Group plc.  

The capital redemption reserve was created as a consequence of the share buyback, further details of the share buyback are included in notes 31 and 39. 

Details of changes in hedging and translation reserves are set out in note 32. 

102 

www.thomascookgroup.com 

 
 
 
 
 
 
31. Called-up share capital 

Authorised 
50,000 deferred shares of £1 each (2007: 50,000) 
2,000,000,000 ordinary shares of €0.10 each (2007: 2,000,000,000) 
Allotted, called-up and fully paid 
879,541,536* ordinary shares of €0.10 each (2007: 976,841,152) 
Allotted, called-up and partly paid 
50,000 deferred shares of £1 each, £0.25 paid (2007: 50,000) 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

2008
£m

0.1
 135.2

 59.8

–

2007
£m

0.1
135.2

66.1

–

*  Excludes 25,565,969 shares which were repurchased by the Group in accordance with the share buyback programme but had not been cancelled as at 30 September 2008. 

Contingent rights to the allotment of shares 
At 30 September 2008, options to subscribe to ordinary shares were outstanding with respect to the Thomas Cook Group plc 2007 Performance Share 
Plan, the Thomas Cook Group plc 2008 Co-Investment Plan and the Thomas Cook Group plc 2008 Save As You Earn Scheme. For further details refer to 
note 37. On exercise, the awards of shares under the plans will be satisfied by purchases in the market of existing shares. 

Own shares held in trust 
Shares of the Company are held under trust by Halifax EES Trustees International (Jersey) Limited and Equiniti Corporate Nominees Limited in connection 
with the Thomas Cook Group plc 2007 Performance Share Plan and Buy As You Earn Scheme respectively. In accordance with IFRS, these are treated  
as Treasury Shares and are included in other reserves in the balance sheet. 

The number of shares held at 30 September 2008 by Halifax EES Trustees International (Jersey) Limited and Equiniti Corporate Nominees Limited was 
5,049,795 (2007: 1,670,104) and 4,506 (2007: nil) respectively. The cost of acquisition of these shares was £8.3m (2007: £4.9m) and the market value at 
30 September 2008 was £11.2m (2007: £5.0m). Shares held by the trust have been excluded from the weighted average number of shares used in the 
calculation of earnings per share. 

Share buyback 
During the period the Group had purchased a total of 107,124,730 shares for cancellation, at a total cost of £263.5m, excluding commission and other 
related costs. 

Capital management 
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders 
and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. 

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, 
sell assets to reduce debt or issue new shares (subject to the terms of the Relationship Agreement with Arcandor). 

The capital structure of the Group consists of debt, cash and cash equivalents and short-term trading securities (as shown in note 34), together with 
equity attributable to equity holders of the parent (as shown in the Group balance sheet). At the balance sheet date, the Group had total capital of 
£2,289.0m (2007: £1,863.6m). 

32. Hedging and translation reserves 

At 1 November 2006 
Exchange differences on translation of overseas operations 
Valuation (losses)/gains taken to equity 
Transfer to profit or loss 
Tax relating to valuation losses and transfers 
At 31 October 2007 
Exchange differences on translation of overseas operations 
Valuation gains/(losses) taken to equity 
Transfer to profit or loss 
Tax relating to valuation losses and transfers 
At 30 September 2008 

Hedging
reserve
£m
(17.9)
 – 
(62.7)
63.5 
(7.5)
(24.6)
 – 
281.4
(177.8)
(25.4)
53.6

Available-for-sale 
investments 
£m 
(0.1) 
 –  
0.4  
(0.5) 
 –  
(0.2) 
 –  
(0.9) 
 –  
 –  
(1.1) 

Translation
reserve
£m
(2.7)
43.9 
 – 
(0.5)
 – 
40.7 
121.6
 – 
 – 
 – 
162.3

Total
£m
(20.7)
43.9 
(62.3)
62.5 
(7.5)
15.9 
121.6 
280.5
(177.8)
(25.4)
214.8

Thomas Cook Group plc Annual Report & Accounts 2008  103

 
 
 
 
Notes to the financial statements continued 

33. Notes to the cash flow statement 

Profit before tax 
Adjustments for: 
Finance income 
Finance costs 
Net investment income 
Share of results of associates and joint ventures 
Depreciation of property, plant and equipment 
Impairment of property, plant and equipment 
Amortisation of intangible assets 
Impairment of intangible assets 
Amortisation of business combination intangibles 
Impairment of non-current investments 
Loan write offs, impairment of trade receivables and other assets 
Loss/(profit) on disposal of businesses and property, plant and equipment 
Profit on disposal of non-current assets held for sale 
Profit on disposal of associates 
Share-based payments 
Other non-cash items 
Increase in provisions 
Income received from other non-current investments 
Interest received 
Operating cash flows before movements in working capital 
Increase in inventories 
(Increase)/decrease in receivables 
Increase/(decrease) in payables 
Cash generated by operations 
Income taxes paid 
Net cash from operating activities 

2008
£m
49.5

(68.4)
153.6
(0.5)
1.6
110.7
1.3
17.3
5.5
48.0
–
–
1.7
–
–
3.1
(32.7)
0.5
0.4
 27.2
 318.8
(4.7)
(121.6)
228.4
 420.9 
(63.7)
357.2

2007
£m
190.2 

(74.1)
74.7
(1.7)
(1.8)
86.0 
3.3 
18.5 
2.8 
30.1 
1.6 
1.2
(2.0)
(10.1)
(35.5)
0.6 
(12.2)
46.5 
1.2 
29.7 
349.0 
(2.7)
84.0 
(239.9)
190.4 
(29.8)
160.6 

Cash and cash equivalents, which are presented as a single class of assets on the face of the balance sheet, comprise cash at bank and other short-term 
highly liquid investments with a maturity of three months or less. 

34. Net debt 

Liquidity 
Cash and cash equivalents 
Trading securities 

Current debt 
Bank overdrafts 
Short-term borrowings 
Current portion of long-term borrowing 
Borrowings classified as held for sale 
Obligations under finance leases 

Non-current debt 
Long-term borrowings 
Obligations under finance leases 

Total debt 
Net funds/(debt) 

At
1 November
2007
£m

622.3 
255.6 
877.9 

(26.3)
(2.7)
(23.1)
(6.5)
(81.0)
(139.6)

(130.4)
(359.2)
(489.6)
(629.2)
248.7 

Cash
flow
£m

88.4
(134.1)
(45.7)

15.7
(144.7)
(37.2)
–
91.3
(74.9)

(328.7)
 – 
(328.7)
(403.6)
(449.3)

Other
non-cash
changes
£m

Acquisitions/ 
disposals 
£m 

Exchange
movements
£m

At
30 September
2008
£m

 – 
(23.0)
(23.0)

 – 
0.9
(72.2)
7.9
(178.9)
(242.3) 

63.4
178.9
242.3
 – 
(23.0)

 –  
– 
 –  

 –  
(49.6) 
 –  
 –  
(0.1) 
(49.7) 

 –  
 –  
 –  
(49.7) 
(49.7) 

50.6
30.7
81.3

(3.2)
(2.7)
(10.9)
(1.4)
(13.9)
(32.1)

(20.4)
(48.0)
(68.4)
(100.5)
(19.2)

761.3 
129.2 
890.5

(13.8)
(198.8)
(143.4)
–
(182.6)
(538.6)

(416.1)
(228.3)
(644.4)
(1,183.0)
(292.5)

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35. Operating lease arrangements 
The Group as lessee 
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which 
fall due as follows: 

Within one year 
Later than one and less than five years 
After five years 

Property
and other
2008
£m
72.8
180.7
139.6
 393.1 

Aircraft and
aircraft 
spares
2008
£m
117.3
302.3
31.5
 451.1 

Total
2008
£m
190.1
 483.0 
171.1
 844.2 

Property 
and other 
2007 
£m 
96.7  
298.8  
231.4  
626.9  

Aircraft and
aircraft
spares
2007
£m
105.1 
247.4 
20.7 
373.2 

Total
2007
£m
201.8 
546.2 
252.1 
1,000.1 

Operating lease payments principally relate to rentals payable for the Group’s retail shop properties and for aircraft and aircraft spares used by the 
Group’s airlines. Shop leases are typically negotiated for an average term of five years and aircraft leases for an average term of ten years. 

The Group as lessor 
At the balance sheet date, the Group had contracted with tenants for future minimum lease payments under non-cancellable operating leases which 
fall due as follows: 

Within one year 
Later than one and less than five years 
After five years 

Property
2008
£m
0.3
1.2
 – 
1.5

Aircraft
2008
£m
3.8
1.5
 – 
 5.3 

Rental income earned during the period was: 

1.6

 7.2

Total
2008
£m
4.1
 2.7 
 – 
 6.8 

 8.8 

Property 
2007 
£m 
1.0  
2.0  
0.3  
3.3  

Aircraft
2007
£m
4.1 
3.5 
 – 
7.6 

0.3  

3.1 

Total
2007
£m
5.1 
5.5 
0.3 
10.9 

3.4 

Certain of the Group’s retail and other properties and aircraft that are not being used in the Group’s businesses are sub-let on the best terms available in the 
market for varying periods, with an average future committed period of 2.6 years for property (2007: 3.4 years) and 12 months for aircraft (2007: 13 months). 

Two of the aircraft sub-let are held by the Group on finance leases. At 30 September 2008, these aircraft had an aggregate cost and a carrying amount  
of £20.3m (2007: £20.4m). There were no impairment provisions relating to these aircraft and the depreciation charge for the period was £0.1m  
(2007: £nil). 

36. Contingent liabilities 

Contingent liabilities 

2008
£m
116.0

2007
£m
119.3

Contingent liabilities primarily comprise counter-guarantees for bank funding, letters of credit, uncommitted facilities and other contingent liabilities 
relating to structured aircraft leases, all of which arise in the ordinary course of business. The amounts disclosed above represent the Group’s 
contractual exposure. 

The Group complies with all the standards relevant to consumer protection and formal requirements in respect of package tour contracts and has  
all the necessary licences for the various sales markets. The customer’s right to reimbursement of the return travel costs and amounts paid in case of 
insolvency or bankruptcy on the part of the tour operator or travel agency is guaranteed in all Thomas Cook sales markets in line with local legislation 
and within the various guarantee systems applied. In the United Kingdom, under the former process, the Group was required to arrange for guarantees 
to be provided to the regulatory body. The regulatory body has now introduced a fund mechanism whereby travel companies are required to collect 
and remit a small charge for each protected customer upon booking. Customer rights in relation to Thomas Cook Group in Germany, Belgium and 
Austria are guaranteed via an insolvency insurance system, in Ireland, Scandinavia and France via guarantees provided by banks and insurance companies, 
and in the Netherlands via a guaranteed fund. In North America, customer payments are held in escrow accounts until the obligations of the tour operator 
or travel agent have been completed. 

Thomas Cook Group plc Annual Report & Accounts 2008  105

 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

37. Share-based payments 
The Company operates four equity-settled share-based payment schemes, as outlined below. The total expense recognised during the period in respect 
of equity-settled share-based payment transactions was £3.1m (2007: £0.6m). 

The Thomas Cook Group plc 2007 Performance Share Plan (PSP) 
Executive Directors and senior executives of the Company and its subsidiaries are granted options to acquire, or contingent share awards of, the 
ordinary shares of the Company. The awards will vest if performance targets for Earnings Per Share (EPS) and Total Shareholder Return (TSR) are met 
during the three years following the date of grant. Subject to vesting conditions, the options are exercisable up to ten years after the date of grant. 

The Thomas Cook Group plc 2008 Co-Investment Plan (COIP) 
Executive Directors and senior executives may be required to purchase the Company’s shares using a proportion of their net bonus (Lodged Shares). For each 
Lodged Share purchased participants may receive up to 3.5 Matching Shares if performance targets for EPS and Return On Invested Capital (ROIC) are met during 
the three years following the date of grant. Subject to vesting conditions, the options are exercisable up to ten years after the date of grant. 

The Thomas Cook Group plc 2008 Save As You Earn Scheme (SAYE) 
In May 2008, all eligible employees were offered options to purchase shares in the Company by entering into a three year savings contract. The option 
exercise price was set at a 20% discount to the market price at the offer date. Options are exercisable between three years and three years and six 
months after the start of the savings contract. 

The Thomas Cook Group plc 2008 HM Revenue & Customs Approved Buy As You Earn Scheme (BAYE) 
In May 2008, all eligible UK tax paying employees were offered the opportunity to purchase shares in the Company by deduction from their gross pay. 
For every ten shares an employee buys in this way, the Company will purchase one Matching Share on their behalf. At 30 September 2008, 4,506 
Matching Shares had been purchased. 

The movements in options and awards during the period were: 

Outstanding at beginning of period 
Granted 
Exercised 
Forfeited 
Outstanding at end of period 
Exercisable at end of period 
Exercise price (£) 
Average remaining contractual life (years) 

PSP
2,869,648
4,304,331 
(83,333)
(516,460)
6,574,186
–
nil
9.2

          2008 

COIP 
– 
985,046 
–  
– 
985,046  
– 
nil 
9.8 

SAYE 
– 
3,349,444 
 –  
(22,294) 
3,327,150 
– 
2.15 
3.3 

2007
PSP
–
2,869,648
–
–
2,869,648
–
nil
9.7

The weighted average share price at the date of exercise for the options exercised during the period was £2.40. 

The fair value of options and awards subject to EPS and ROIC performance targets was determined by the use of Black-Scholes models and the fair value 
of options subject to TSR performance targets was determined by the use of Monte Carlo simulations. For options and awards granted during the period 
the key inputs to the models were: 

Share price at measurement date (£) 
Exercise price (£) 
Expected volatility (%) 
Expected volatility of comparator group (%) 
Expected correlation with comparator group (%) 
Option life (years) 
Risk free rate (%) 
Expected dividend yield (%) 
Weighted average fair value at date of grant (£) 

PSP
2.80
nil
34
16-55
25
3
3.9
5
1.91

           2008 

COIP 
2.37 
nil 
34 
n/a 
n/a 
3 
5.2 
5 
2.04 

SAYE 
2.41 
2.15 
34  
n/a 
n/a 
3.3 
5.5 
5 
0.59 

2007
PSP
2.97
nil
32
13-43
14
3
5.7
3
2.14

Expected volatility has been based on the historic volatility of the Company’s shares and the shares of other companies in the same or related sectors. 

38. Retirement benefit schemes 
Pension schemes for the employees of the Thomas Cook Group consist of defined contribution plans and defined benefit plans, with the defined benefit 
plans being both funded and unfunded. The obligations arising from defined contribution plans are satisfied by contribution payments to both private 
and state-run insurance providers. 

Unfunded defined benefit pension obligations 
Unfunded defined benefit pension obligations primarily relate to the Group’s employees in the German businesses of Thomas Cook AG and the Condor 
Group. Provisions are established on the basis of commitments made to those employees for old-age and transitional pensions based on the legal, tax 
and economic circumstances of the individual countries and on the period of employment and level of remuneration of the respective employees. 

Provisions for pensions and similar obligations totalling £138.9m (2007: £140.9m) were attributable to the pension commitments of Condor Group (Condor 
Flugdienst GmbH and Condor Berlin GmbH). For employees who joined a Condor Group company prior to 1995, the total pension commitment of the 
pensions authority of the German federal government and regional states was adjusted and maintained in the form of a company pension scheme. 

106 

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The flight crews were additionally entitled to a transitional provision for the period between the termination of their in-flight employment and the time 
they became eligible for a state-run or company pension. In both cases, the benefit commitment depended on the final salaries of the employees 
concerned prior to the termination of their in-flight employment (final salary plan). 

Employees who joined a Condor Group company after 1994 participate in a company pension scheme under which the pension entitlements are based 
on the average salaries of those employees (average salary plan). Condor Group also has retirement obligations arising from individual commitments 
and transitional provisions. 

In accordance with IAS 19, all these commitments are classified as unfunded defined benefit obligations and classified as such in these financial statements. 

The Condor Group defined benefit plans have been closed to new entrants (with the exception of pilots) since 2004. 

There are additional unfunded defined benefit obligations comprising individual commitments to executive staff at Thomas Cook Group and 
obligations in respect of past service for employees in Sweden. 

The unfunded pension benefits are accounted for as part of liabilities for retirement benefit obligations in the balance sheet. 

The following weighted average actuarial assumptions were made for the purpose of determining the unfunded defined benefit obligations: 

Discount rate for scheme liabilities 
Expected rate of salary increases 
Future pension increases 

2008
%
6.16%
2.98%
2.34%

2007
%
5.50%
2.80%
2.00%

The mortality tables 2005 G drawn up by Prof. Dr Klaus Heubeck were used as the basis for the mortality assumptions used in arriving at the present 
value of the pension obligations at 30 September 2008. These assume a life expectancy for members currently aged 60 of 22.35 years for men and 26.98 
years for women. 

Amounts recognised in income in respect of these defined benefit schemes are as follows: 

Current service cost 
Past service cost 
Curtailment gain 
Interest cost on scheme liabilities 
Total included in income statement 

2008
£m
7.3
(0.3)
(1.3)
8.5
 14.2 

2007
£m
10.2 
 – 
–
7.9 
18.1 

Service costs have been included in personnel expenses in the income statement and the unwinding of the discount rate of the expected retirement benefit 
obligations has been included in finance costs. Actuarial gains and losses have been reported in the statement of recognised income and expense. 

Changes in the present value of unfunded pension obligations were as follows: 

At beginning of period 
Current service cost 
Past service cost 
Interest cost 
Benefits paid 
Settlements 
Curtailments 
Actuarial gains 
Acquisitions 
Exchange difference 
At end of period 

2008
£m
162.3 
7.3
(0.3)
8.5
(3.5)
(7.8)
(1.3)
(23.6)
0.7
21.5
163.8

2007
£m
185.8 
10.2 
 – 
7.9 
(8.3)
(3.3)
–
(42.4)
5.5 
6.9 
162.3 

Thomas Cook Group plc Annual Report & Accounts 2008  107

 
 
 
 
 
 
Notes to the financial statements continued 

38.  Retirement benefit schemes continued 
Funded defined benefit pension obligations 
The pension entitlements of employees of Thomas Cook UK, the Group’s Dutch companies and employees in Norway are provided through funded 
defined benefit schemes where pension contributions are paid over to the schemes and the assets of the schemes are held separately from those of  
the Group in funds under the control of trustees. Pension costs are assessed in accordance with the advice of qualified actuaries in each country. The 
fair value of the pension assets in each scheme at the period end is compared with the present value of the retirement benefit obligations and the net 
difference reported as a pension asset or retirement benefit obligation as appropriate. Pension assets are only recognised to the extent that they will 
result in reimbursements being made or future payments being reduced. 

Funded defined benefit pension obligations have been determined on the basis of assumptions relevant to each country and the weighted averages of 
these were: 

Discount rate for scheme liabilities 
Inflation rate 
Expected return on scheme assets 
Expected rate of salary increases 
Future pension increases 

2008
%
6.40
3.40
6.98
4.33
3.40

2007
%
5.70
3.25
7.10
4.50
3.25

The Thomas Cook UK Pension Plan accounts for approximately 90% of the total funded defined benefit obligations and the mortality assumptions used 
in arriving at the present value of those obligations at 30 September 2008 are based on a life expectancy for members currently aged 60 of 25.2 years 
for men and 28.3 years for women. 

The Thomas Cook UK Pension Plan has been closed to new entrants since April 2003. Employees who have joined since that date participate in a new 
defined contribution scheme. 

Amounts recognised in income in respect of these defined benefit schemes are as follows: 

Current service cost 
Past service cost 
Gain on settlements 
Expected return on scheme assets 
Interest cost on scheme liabilities 
Total included in income statement 

2008
£m
14.3
–
–
(41.9)
33.4
5.8

2007
£m
17.9 
0.2 
(0.2)
(38.9)
30.0 
9.0 

Service costs have been included in personnel expenses in the income statement and the unwinding of the discount rate of the expected retirement 
benefit obligations has been included in finance costs. The expected return on scheme assets has been included in finance income. 

The actual return on scheme assets was £(75.1)m (2007: £49.0m). 

Actuarial gains and losses have been reported in the statement of recognised income and expense. 

Changes in the present value of funded defined benefit obligations were as follows: 

2008
£m
648.1 
14.3
–
–
33.4
(14.5)
1.2
3.6
(77.1)
(1.6)
607.4 

2007
£m
605.2 
17.9 
0.2 
(0.2)
30.0 
(12.3)
7.5 
3.7 
(14.9)
11.0 
648.1 

At beginning of period 
Current service cost 
Past service cost 
Settlements 
Interest cost 
Benefits paid 
Acquisitions 
Contributions paid by plan participants 
Actuarial gains 
Exchange difference 
At end of period 

108 

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Changes in the fair value of scheme assets were as follows: 

At beginning of period 
Expected return on scheme assets 
Contributions from the sponsoring companies 
Contributions paid by plan participants 
Actuarial (losses)/gains 
Benefits paid 
Acquisitions 
Exchange difference 
At end of period 

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2008
£m
635.2 
41.9
33.0
3.6
(117.0)
(14.5)
0.7
(1.2)
581.7 

2007
£m
513.0 
38.9 
36.5 
3.7 
42.5 
(12.3)
7.4 
5.5 
635.2 

During 2006, a special one-off contribution payment was made by Thomas Cook UK to the pension fund amounting to £85.0m in order to offset 
actuarial losses. In the subsequent five years, an amount totalling £4.35m is to be paid to the pension fund on a quarterly basis. The Group is expected 
to make aggregate contributions to its funded defined benefit schemes of £34.3m during the year commencing 1 October 2008. 

The fair value of scheme assets at the balance sheet date is analysed as follows: 

Equities 
Property 
Fixed interest gilts 
Hedge funds 
Other 
At end of period 

2008
Long-term
rate of return
%
7.4
6.3
5.2
7.4
7.4

2007 
Long-term 
rate of return 
% 
8.2 
6.6 
5.6 
8.2 
8.2 

2008 
£m 
246.8 
72.0 
173.1 
52.0 
37.8 
581.7 

2007
£m
302.7
80.5
153.7
56.5
41.8
635.2

The scheme assets do not include any of the Group’s own financial instruments, nor any property occupied by, or other assets used by, the Group.  

The expected rates of return on scheme assets have been calculated as the weighted average rate of return on each asset class. The return on each  
asset class is taken as the market rate of return. 

The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit pension schemes is as follows: 

Present value of funded defined benefit obligations 
Fair value of scheme assets 
Asset cap 
Deficit on funded retirement benefit obligations 
Present value of unfunded defined benefit obligations 
Scheme deficits recognised in the balance sheet 
This amount is presented as follows: 
Non-current assets 
Current liabilities 
Non-current liabilities 

2008
£m
607.4
 (581.7)
0.7
26.4
163.8
190.2

(0.4)
9.0
181.6
 190.2 

2007
£m
648.1 
(635.2)
–
12.9 
162.3 
175.2 

(0.3)
3.3 
172.2 
175.2 

The cumulative net actuarial losses recognised in the statement of recognised income and expense at 30 September 2008 were £135.6m (2007: £119.3m). 

The history of the experience gains and losses of the schemes is as follows: 

Present value of defined benefit obligations 
Fair value of scheme assets 
Scheme deficits 

Experience adjustments on scheme liabilities 
Experience adjustments on scheme assets 

2008
£m
771.2
(581.7)
 189.5 

 2.7
 (116.6)

2007 
£m 
810.4  
(635.2) 
175.2  

2.0 
11.2 

2006
£m
791.0 
(513.0)
278.0 

(34.0)
21.8 

2005
£m
729.9 
(368.7)
361.2 

(101.8)
25.0 

Thomas Cook Group plc Annual Report & Accounts 2008  109

 
 
 
 
 
  
 
  
 
 
 
 
Notes to the financial statements continued 

38. Retirement benefit schemes continued 
Defined contribution schemes 
There are a number of defined contribution schemes in the Group, the principal ones being the MyTravel UK Group scheme which relates to employees 
of MyTravel Group plc and various of its UK subsidiary companies and the new scheme for Thomas Cook UK employees joining since April 2003. 

The total charge for the period in respect of these and other defined contribution schemes, including liabilities in respect of insured benefits relating to 
workers’ compensation arrangements, amounted to £16.5m (2007: £10.1m). 

The assets of these schemes are held separately from those of the Group in funds under the control of trustees. 

39. Related party transactions 
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this 
note. Transactions between the Group and its associates and joint ventures are disclosed below. Transactions between the Company and its subsidiaries 
and associates are disclosed in the Company’s separate financial statements. 

During the period, the Group acquired several assets from the Arcandor Group, these transactions were undertaken at arm’s length. The intangible 
assets and acquired businesses were:  

•  Neckermann websites in Eastern and Western markets for £5.5m; 
•  right to place Thomas Cook link on neckermann.de website for £6.0m; and 
•  Neckermann Urlaubswelten (two companies owning a chain of 57 retail outlets) for £0.8m. 

During the period the Group also bought back 48,595,331 shares for £116.2m from Arcandor. This transaction is part of the share buyback programme 
and was at arm’s length. As a result Arcandor now owns 52.817% of the ordinary share capital of the Company. 

Until 2 April 2007, Thomas Cook AG was jointly owned by Arcandor and Lufthansa and both were regarded as related parties. On 2 April 2007, Arcandor 
acquired Lufthansa’s interest in Thomas Cook AG and on 19 June 2007 contributed Thomas Cook AG to Thomas Cook Group plc in exchange for shares 
in the Company. As a result, Arcandor controlled 52% of the ordinary share capital of the company and is therefore regarded as a related party. 
Transactions with Arcandor for the period and the prior year, and with Lufthansa up to 2 April 2007, are included in the disclosures below as 
transactions with the parent company. 

Trading transactions 
During the period, Group companies entered into the following transactions with related parties who are not members of the Group: 

Sale of goods and services 
Purchases of goods and services 
Interest receivable 
Interest payable 
Other income 
Management fees and other expenses 
Amounts owed by related parties 
Provisions against amounts owed by related parties 
Amounts owed to related parties 

               Associates, joint ventures 
              and participations* 

    Parent company 

2008 
£m 
34.2    
(30.2) 
0.1  
 –   
5.6  
(1.5) 
23.0***
(4.4) 
(3.9)   

2007 
£m 
1.2    
(23.0)   
0.1    
 –    
0.2    
 –    
15.8    
(3.2)   
(6.1)   

2008 
£m 
0.8  
(14.4) 
0.6  
(0.1) 
2.6  
 –   
11.7  
 –    
(17.9) **

2007
£m
5.4 
(47.0) 
 – 
(0.3) 
0.5 
(1.1) 
6.7 
 – 
(1.9) 

All transactions are considered to have been made at market prices. Outstanding amounts will normally be settled by cash payment. 

*  Participations are equity investments where the Group has a significant equity participation but which are not considered to be associates or joint ventures. 

**  £16.4m of the amount owed to parent undertaking is included within borrowings (£0.4m short-term and £16.0m long-term). 

***  Amounts owed by related parties includes £6.1m which, for statutory purposes, is reported as part of the associate investments.  

Remuneration of key management personnel 
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified 
in ‘IAS 24: Related party disclosures’. Further information about the remuneration of individual Directors is provided in the audited part of the 
Remuneration report on pages 64 to 66. 

Short-term employee benefits 
Post-employment benefits 
Share-based payments 

2008
£m
13.1
0.2
0.6
 13.9 

2007
£m
16.1 
0.5 
0.2 
16.8 

The above amounts for 2007 include the Thomas Cook AG key management for the full year and the Thomas Cook Group plc key management for the 
period from 19 June 2007 to 31 October 2007. The 2007 amounts include £6.8m related to payments made to key management as compensation in 
respect of the transactions that led to the formation of Thomas Cook Group plc. These amounts were reimbursed by Arcandor AG. 

40. Subsequent events 
On 18 December 2008, the Group announced the acquisition of 50.01% of Gold Medal International Limited, a leading UK independent travel company 
for £24.9m (including £21.1m of net cash). 

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Company balance sheet 

At 30 September 2008 

Non-current assets 
Investments in subsidiaries 

Current assets 
Trade and other receivables 
Cash and cash equivalents 

Total assets 

Current liabilities 
Trade and other payables 
Total liabilities 
Net assets 

Equity 
Called-up share capital 
Share premium account 
Merger reserve 
Capital redemption reserve 
Translation reserve 
Retained earnings surplus 
Investment in own shares 
Total equity 

These financial statements were approved by the Board of Directors on 19 December 2008. 

Signed on behalf of the Board 

Manny Fontenla-Novoa  
Director 

Dr Jürgen Büser 
Director 

Notes 1 to 15 form part of these financial statements.  

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30 September
2008
£m

notes 

31 October
2007
£m

5 

6 
7 

8 

10/11 
11 
11 
11 
11 
11 
11 

3,730.8
3,730.8

161.9
1.7
163.6
3,894.4

(173.8)
(173.8)
3,720.6

59.8
8.9
3,051.3
6.4
564.8
42.4
(13.0)
3,720.6

3,265.5
3,265.5

83.8
–
83.8
3,349.3

(64.3)
(64.3)
3,285.0

66.1
6.8
3,051.3
–
97.8
67.9
(4.9)
3,285.0

Thomas Cook Group plc Annual Report & Accounts 2008  111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company statement of recognised income and expense 

notes 

11 months ended
30 September
2008
£m
467.0
–
467.0

315.9

782.9

11 

Period ended
31 October
2007
£m
97.8
–
97.8

67.9

165.7

11 months ended
30 September
2008
£m 

Period ended
31 October
2007
£m 

307.5
(339.4)
(3.9)
1.6
3.1
(3.2)
36.0
1.7 

247.8 
247.8 

(247.8)
(247.8)

1.7 
–
–
1.7 

1.7 
1.7 

61.7
(70.0)
–
–
–
(7.5)
15.8
–

–
–

–
–

–
–
–
–

–
–

For the eleven months ended 30 September 2008 

Exchange differences from translating accounts into sterling 
Tax on items taken directly to equity 
Net income recognised directly in equity 

Profit for the period 

Total recognised income and expense for the period 

Company cash flow statement 

For the eleven months ended 30 September 2008 

Cash flows from operating activities 
Profit before tax 
Dividend received 
Finance income 
Finance expense 
Share-based payments 
Change in debtors 
Change in creditors 
Net cash from operating activities 

Investing activities 
Dividends received 
Net cash flow from investing activities 

Financing activities 
Share buyback 
Net cash used in financing activities 

Net increase in cash and cash equivalents 
Cash and cash equivalents at beginning of period 
Effect of foreign exchange rate changes 
Cash and cash equivalents at end of period 

Liquid assets 
Cash and cash equivalents at end of period 

112 

www.thomascookgroup.com 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements 

1.  Accounting policies 
The accounting policies applied in the preparation of these Company financial statements are the same as those set out in note 2 to the Group financial 
statements with the addition of the following: 

Investments 
Investments in subsidiaries are stated at cost less provision for impairment. 

These policies have been applied consistently to the periods presented. 

The functional currency of the Company is euro, however the Directors have decided to adopt sterling as the presentational currency to be in line  
with the consolidated accounts. 

During the period, the Company adopted International Financial Reporting Standards (IFRS) as of its date of incorporation, 8 February 2007. The Company 
did not take advantage of the optional exemptions for the first time adoption of IFRS as set out in ‘IFRS 1: First-time adoption of International Financial 
Reporting Standards’ requirements. 

The adoption of IFRS has had no impact on current or prior period results. 

2.  Profit for the period 
As permitted by section 230 of the Companies Act 1985, the Company has elected not to present its own income statement for the period.  
The profit after tax of the Company amounted to £315.9m (2007: £67.9m). 

The auditors’ remuneration for audit services to the Company was £0.2m (2007: £0.6m).  

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

3.  Personnel expenses 

Wages and salaries 
Social security costs 
Share-based payments – equity settled 

The average number of employees of the Company during the period was: 

Employees are based in the United Kingdom and Germany. 

2008
£m
22.0
1.3
1.0
24.3

2008
Number
92

2007
£m
5.1
0.6
–
5.7

2007
Number
1

Disclosures of individual Directors’ remuneration, share options, long-term incentive schemes, pension contributions and pension entitlements required by 
the Companies Act 1985 and specified for audit by the Financial Services Authority are on pages 64 to 66 within the Remuneration report and form part 
of these audited accounts. 

The employees of the Company are members of the Group pension schemes as detailed in note 38 of the Group financial statements. 

4.  Dividends 
The details of the Company’s dividend are disclosed in note 12 to the Group financial statements. 

Thomas Cook Group plc Annual Report & Accounts 2008  113

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements continued 

5.  Investments in subsidiaries 

Cost and net book value 
Additions 
At 31 October 2007 
Additions 
Disposals – intra group 
Exchange difference 
At 30 September 2008 

£m

3,265.5
3,265.5
1,678.2
(1,673.8)
460.9
3,730.8

A list of the Company’s principal subsidiary undertakings is shown in note 15 to the financial statements. 

During the period, the Company acquired a further 1,510,914 ordinary shares of MyTravel which had been issued by MyTravel pursuant to the exercise 
of MyTravel executive share options. The consideration was satisfied by the issue of an equal number of new ordinary shares of the Company. 

On 30 January 2008, the Company transferred its investment in MyTravel Group plc to Thomas Cook Investments (2) Limited at book value in exchange 
for newly issued fully paid shares in that company. 

6.  Trade and other receivables 

Amounts owed by subsidiary undertakings 
Other receivables 
Deposits and prepayments 

2008
£m
160.5
0.8
0.6
161.9

2007
£m
81.0
0.3
2.5
83.8

Amounts owed by subsidiary undertakings are repayable on demand. The average interest on overdue amounts owed by subsidiary undertakings is 
5.8% (2007: 5.8%). The Directors consider the fair value to be equal to the book value. 

7.  Cash and cash equivalents 

Cash at bank and in hand 

8.  Trade and other payables 

Amounts owed to subsidiary undertakings 
Accruals 

2008
£m
1.7

2008
£m
136.4
37.4
173.8

2007
£m
–

2007
£m
49.4
14.9
64.3

Accruals include £17.6m for shares repurchased as part of the share buyback programme which is due to be paid within one month.  

The average interest on overdue amounts owed to subsidiary undertakings is 5.8% (2007: 0.0%). 

Amounts owing to subsidiary undertakings are repayable on demand. The Directors consider the fair value to be equal to the book value. 

9.  Financial risk 
The Company’s financial instruments comprise amounts due to/from subsidiary undertakings, cash and cash equivalents, and other payables and 
receivables. The Company’s approach to the management of financial risks is discussed in the Financial review on pages 44 and 45. The Company 
believes the value of its financial assets to be fully recoverable. 

The carrying value of the Company’s financial instruments is exposed to movements in foreign currency exchange rates (primarily sterling). The 
Company estimates that a 5% strengthening in sterling would increase profit before tax by £2.2m, while a 5% decrease in the value of sterling  
would decrease profit before tax by £2.2m.  

The maturity of contracted cash flows on the Company’s trade and other payables are as follows: 

No later than one year 

No later than one year 

2008 
£m 

Sterling 
(108.3) 

Euro
(71.2)

Total
(179.5)

2007 
£m 

Sterling 
(60.3) 

Euro
(4.1)

Total
(64.4)

All cash flow projections shown above are on an undiscounted basis. Any cash flows based on a floating rate are calculated using interest rates as at 
the date of the last rate reset. 

114 

www.thomascookgroup.com 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

10. Called-up share capital 
The details of the Company’s share capital are the same as those of the Group, and are disclosed in note 31 to the Group financial statements. 

Details of share options granted by the Company are set out in note 37 to the Group financial statements. 

11. Statement of changes in equity 

Total recognised income and expense for the period 
Premium on allotments during the period 
Acquisition of Thomas Cook AG 
Acquisition of MyTravel Group plc 
Expenses of issue of shares 
Purchase of own shares 
At 31 October 2007 

Total recognised income and expense for the period 
Issue of equity shares net of expenses 
Equity credit in respect of share-based payments 
Share buyback 
Purchase of own shares 
Disposal of own shares 
Dividends paid 
At 30 September 2008 

Share
capital
£m
–
–
34.4 
31.3 
0.4 
–
66.1 

–
0.1 
–
(6.4)
–
–
–
59.8 

Share
premium
£m
–
6.8 
–
–
–
–
6.8 

–
2.1 
–
–
–
–
–
8.9 

Merger
reserve
£m
–
–
1,603.8 
1,460.0 
(12.5)
–
 3,051.3 

–
–
–
–
–
–
–
3,051.3 

Capital
redemption
reserve
£m
–
–
–
–
–
–
–

–
–
–
6.4 
–
–
–
6.4 

Own 
shares 
£m 
– 
– 
– 
– 
– 
(4.9) 
(4.9) 

– 
– 
– 
– 
(8.3) 
0.2  
– 
(13.0) 

Translation 
reserve 
£m 
97.8  
– 
– 
– 
– 
– 
97.8  

467.0  
– 
– 
– 
– 
– 
– 
564.8  

Retained
earnings
£m
67.9 
–
–
–
–
–
67.9 

315.9 
–
3.1 
(266.3)
–
–
(78.2)
42.4 

Total
£m
165.7 
6.8 
1,638.2 
1,491.3 
(12.1)
(4.9)
3,285.0 

782.9 
2.2 
3.1 
(266.3)
(8.3)
0.2 
(78.2)
3,720.6 

The merger reserve arose on the issue of shares of the Company in connection with the acquisition of the entire share capital of Thomas Cook AG  
and MyTravel Group plc on 19 June 2007. 

The share premium arises in connection with the issue of ordinary shares of the Company following the exercise of MyTravel executive share options. 

At 30 September 2008, the Company had distributable reserves of £42.4m (2007: £67.9m). 

Details of the own shares held are set out in note 31 to the Group financial statements. 

12. Operating lease arrangements 
At the balance sheet date, the Company had outstanding commitments for future minimum lease payments, related to property under non-cancellable 
operating leases, which fall due as follows: 

Within one year 
Later than one year and less than five years 
After five years 

2008
£m
1.0
2.4
3.1
6.5

2007
£m
–
–
–
–

13. Contingent liabilities 
At 30 September 2008, the Company had contingent liabilities in respect of counter-guarantees for bank funding, letters of credit and guarantees of 
amounts owed by subsidiaries amounting to £766.2m (2007: £108.9m). This predominantly relates to a guarantee on the drawn down portion of the  
new credit facility (detailed in note 22 to the Group financial statements). Also included are guarantees related to aircraft finance lease commitments, 
estimated based on the current book value of the finance lease liabilities (£56.1m). 

The Company complies with all the standards relevant to consumer protection and formal requirements in respect of package tour contracts and  
has all the necessary licences. In the UK the customer’s right to reimbursement of the return travel costs and amounts paid in case of insolvency or 
bankruptcy on the part of the tour operator or travel agency is guaranteed in line with legislation in the UK via a fund mechanism, whereby travel 
companies are required to collect and remit a small charge for each protected customer upon booking. 

Thomas Cook Group plc Annual Report & Accounts 2008  115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements continued 

14. Related party transactions 
Subsidiaries 
The Company transacts and has outstanding balances with its subsidiaries. The Company enters into loans with its subsidiaries at both fixed and 
floating rates of interest on a commercial basis. Hence, the Company incurs interest expense and earns interest income on these loans. The Company 
also received dividend income from its subsidiaries during the year. 

Transactions with subsidiaries 
Interest receivable 
Interest payable 
Management fees and other expenses 
Dividend income received 

Period end balances arising on transactions with subsidiaries 
Loans receivable 
Interest receivable 
Other receivables 
Loans payable 
Other payables 

2008
£m

3.9
(0.5)
8.1
339.4

135.7
0.8
24.0
(10.9)
(125.5)

2007
£m

–
–
2.7
70.0

70.8
–
10.2
(5.3)
(44.1)

Parent Company 
During the period, the Company incurred expenses of £0.2m (2007: £nil) in respect of goods and services provided by Arcandor.  

At the period end, the Company had amounts payable to the parent of £0.2m (2007: £nil).  

During the period, the Group bought back 48,595,331 shares for £116.2m from Arcandor. This transaction is part of the share buyback programme  
and was at arm’s length. As a result, Arcandor now owns 52.817% of the ordinary share capital of the Company. 

All transactions are considered to have been made at market prices. Outstanding amounts will normally be settled by cash payment. 

Remuneration of key management personnel 
The remuneration of the Directors, who are the key management personnel of the Company, is set out in note 39 to the Group financial statements. 

116 

www.thomascookgroup.com 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15. Principal subsidiaries, associates and joint ventures 

Direct subsidiaries 
Thomas Cook Investments (2) Limited 
Thomas Cook AG 

Indirect subsidiaries 
Continental Europe 
Bucher Reisen GmbH 
CHB AG 
Dos Delfi nos-Sociedade Immob. Tourist Lda. 
Gesellschaft fur Reise-Vetriebssysteme mbH 
GFT Gesellschaft fur Touristic AG 
Golf Novo Sancti Petri S.A. 
Hotel Investment Sarigerme Turizm Ticaret L.S. 
Hoteles y Clubs de Vacaciones S.A. 
Jet Tours SA 
Neckermann Polska BP Sp. z.o.o. 
Neckermann Reisen d.o.o.  
Neckermann Reisen s.r.o.  
Neckermann Slovakia s.r.o.  
Neckermann Urlaubswelten GmbH & Co.KG 
NUR Neckermann Utazas Szolgas Szolgaltato Kft  
Reisburo Neckermann Nederland BV  
SATEE GmbH  
TC Touristik GmbH  
Thomas Cook Austria AG  
Thomas Cook Belgium NV  
Thomas Cook Air Services SA 
Thomas Cook Airlines Belgium NV  
Thomas Cook Destinations GmbH  
Thomas Cook France SAS  
Thomas Cook France Hoteliere Holding SARL  
Thomas Cook Interservices NV  
Thomas Cook Nederland BV  
Thomas Cook Service AG  
Thomas Cook Service Centre Belgium NV  
Thomas Cook Retail Belgium NV  
Thomas Cook Vertriebs GmbH  
Thomas Cook Voyages S.A. 
T.K. Touristik GmbH 
travel plus s.r.o.  

Germany Airlines 
Condor Berlin GmbH 
Condor Flugdienst GmbH 
Lufthansa Leasing GmbH & Co. Fox-Juliett OHG  
Lufthansa Leasing GmbH & Co. Fox-Kilo OHG  
Lufthansa Leasing GmbH & Co. Fox-Lima OHG  
Lufthansa Leasing GmbH & Co. Fox-Mike OHG  
Lufthansa Leasing GmbH & Co. Fox-November OHG  
Lufthansa Leasing GmbH & Co. Fox-Oscar OHG  
Lufthansa Leasing GmbH & Co. Fox-Papa OHG  
Lufthansa Leasing GmbH & Co. Fox-Zulu OHG  
LLG Nord GmbH & Co. Delta OHG  
TC Delta GmbH 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Proportion
held by
Company (%)

Proportion
held by
Group (%)

100
100

100
100

100
100
100
100
100
80.75
100
51
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
75.1
100
100
100
100
100
100
100
100
100
100

Country of 
incorporation 
and operation 

England 
Germany 

Germany 
Switzerland 
Portugal 
Germany 
Switzerland 
Spain 
Turkey 
Spain 
France 
Poland 
Slovenia 
Czech Republic 
Slovakia 
Germany 
Hungary 
Netherlands 
Germany 
Germany 
Austria 
Belgium 
France 
Belgium 
Germany 
France 
France 
Belgium 
Netherlands 
Switzerland 
Belgium 
Belgium 
Germany 
France 
Germany 
Czech Republic 

Germany 
Germany 
Germany 
Germany 
Germany 
Germany 
Germany 
Germany 
Germany 
Germany 
Germany 
Germany 

Thomas Cook Group plc Annual Report & Accounts 2008  117

 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements continued 

15. Principal subsidiaries, associates and joint ventures continued 

Country of 
incorporation 
and operation 

Proportion
held by
Company (%)

Proportion
held by
Group (%)

UK and Ireland 
Airtours Holidays Transport Limited  
Cresta Holidays Limited 
Capitol Holdings Limited  
Elegant Resorts Limited 
Falcon Istioploiki Hellas S.A.  
Jeropatur-Viagens e Turismo Ltda  
Thomas Cook Aircraft Engineering Limited  
Hotels4U.com Limited 
MyTravel UK Limited  
MyTravel 330 Leasing Limited  
Neilson Active Holidays Limited  
Neilson Hellas A.E. 
Neilsen Turizm Danismanlik VE Ticaret Ltd STI  
O.A. Yacht Charter S.A. 
Praznik D.O.O. ZA Turizam  
Resorts Mallorca Hotels International S.L. 
Thomas Cook Airlines Limited 
thomascook.com Limited  
Thomas Cook (India) Limited 
Thomas Cook Overseas Limited 
Thomas Cook Retail Limited  
Thomas Cook Tour Operations Limited  
Thomas Cook USA Travel Services Limited  
Thomas Cook TV Limited  
White Horse Insurance Ireland Limited 

Northern Europe 
Hoteles Sunwing S.A.  
Thomas Cook Airlines Scandinavia A/S  
MyTravel Denmark A/S 
Thomas Cook Northern Europe AB  
Ving Norge A/S  
Ving Sverige AB  
Oy Tjareborg AB  
Sunwing Ekerum AB 

North America 
Thomas Cook Canada Inc.  
Thomas Cook USA Holdings Inc.  
TriWest Travel Holdings Limited 
NALG Ireland  

Corporate 
Airtours Channel Islands Limited  
Airtours Finance Limited  
Thomas Cook Group UK Limited 
Blue Sea Overseas Investments Limited  
“Eurocenter” Beteiligungs-und Reisevermittlung GmbH  
GUT Reisen GmbH  
MyTravel Group plc 
Sandbrook UK Investments Limited 
Sandbrook Overseas Investments Limited  
Parkway Limited Partnership (No. 1) L.P.  
Thomas Cook Continental Holdings Limited 
Thomas Cook Group Treasury Limited 
Thomas Cook Investments (1) Limited 
Thomas Cook Treasury Limited  

118 

www.thomascookgroup.com 

England 
England 
Ireland 
England 
Greece 
Portugal 
England 
England 
England 
Cayman Islands   
England 
Greece 
Turkey 
Greece 
Croatia 
Spain 
England 
England 
India 
England 
England 
England 
England 
England 
Ireland 

Spain 
Denmark 
Denmark 
Sweden 
Norway 
Sweden 
Finland 
Sweden 

Canada 
USA 
Canada 
Ireland 

Channel Islands   
Channel Islands   
England 
England 
Germany 
Germany 
England 
England 
England 
Channel Islands   
England 
England 
England 
England 

100
100
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
100
100
100

100
100
100
100
100
100
100

100
100
100
100

100
100
100
100
100
100
100
100
100
100
100
100
100
100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Associates 
Aqua Sol Hotels Limited  
Activos Turisticos S.A. 
COPLAY 95 S.L.  
Hispano Alemana de Management Hotelero S.A.  
Hotelera Adeje, S.A.  
Oasis Company SAE  

Joint venture 
Thomas Cook Personal Finance Limited  

Country of 
incorporation 
and operation 

Proportion
held by
Company (%)

Proportion
held by
Group (%)

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

Cyprus 
Spain 
Spain 
Spain 
Spain 
Egypt 

England 

19.99
40
25
40
25
25.1

50

Thomas Cook Group plc Annual Report & Accounts 2008  119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appendix 1 – Unaudited pro forma financial information 
Unaudited pro forma Group income statement 

For the twelve months ended 30 September 2008 

 Revenue  
 Cost of providing tourism services 
 Gross profit 
 Other operating income 
 Personnel expenses 
 Depreciation and amortisation 
 Impairment of goodwill 
 Other operating expenses 
 Profit on disposal of businesses and property, plant and equipment 
 Profit from operations 

 Analysed between: 
 Profit from operations before exceptional items 
 Exceptional items 

 Share of results of associates and joint ventures 
 Profit on disposal of associates 
 Net investment income 
 Net finance costs 
 Exceptional finance costs 
 Profit before tax 
 Tax 
 Profit for the period 

 Attributable to: 
 Equity holders of the parent 
 Minority interests 

 Pre-exceptional earnings per share (pence) 
 Basic 
 Diluted 

All revenue and results arose from continuing operations 

note 
2 

2 
3 

4 
3 

2008 
£m 
8,809.8 
(6,779.9)
2,029.9 
49.7 
(999.1)
(140.5)
– 
(778.3)
(1.1)
160.6 

365.9 
(205.3)
160.6 

0.2 
– 
1.4 
(58.2)
(26.8)
77.2 
(13.4)
63.8 

64.0 
(0.2)
63.8 

24.1 
24.1 

2007
£m
7,878.5
(6,115.4)
1,763.1
32.7
(938.3)
(126.6)
(9.1)
(663.9)
15.1
73.0

244.2
(171.2)
73.0

(2.6)
37.0
0.7
(7.9)
–
100.2
(28.0)
72.2

70.3
1.9
72.2

17.1
17.1

120 

www.thomascookgroup.com 

  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
 
Unaudited pro forma Group statement of net assets 

At 30 September 2008 

Non-current assets 
Intangible assets 
Property, plant and equipment  – aircraft and aircraft spares 

  – investment property 
  – other 

Investment in associates and joint ventures 
Other investments 
Deferred tax assets 
Tax assets 
Trade and other receivables 
Pension assets 
Derivative financial instruments 

Current assets 
Inventories 
Tax assets 
Trade and other receivables 
Derivative financial instruments 
Cash and cash equivalents 

Non-current assets held for sale 
Total assets 

Current liabilities 
Retirement benefit obligations 
Trade and other payables 
Borrowings 
Obligations under finance leases 
Tax liabilities 
Revenue received in advance 
Short-term provisions 
Derivative financial instruments 

Liabilities related to assets held for sale 

Non-current liabilities 
Retirement benefit obligations 
Trade and other payables 
Long-term borrowings 
Obligations under finance leases 
Revenue received in advance 
Deferred tax liabilities 
Long-term provisions 
Derivative financial instruments 

Total liabilities 
Net assets 

F
I
N
A
N
C
I
A
L

S
T
A
T
E
M
E
N
T
S

2008
£m

3,432.4
584.8
15.7
312.8
42.7
29.4
328.6
9.9
126.4
0.4
55.6
4,938.7

24.2
15.1
1,017.5
261.6
761.3
2,079.7
–
7,018.4

(9.0)
(1,855.7)
(356.0)
(182.6)
(69.4)
(917.5)
(183.9)
(174.3)
(3,748.4)
–

(181.6)
(36.9)
(416.1)
(228.3)
(0.9)
(97.8)
(232.3)
(66.9)
(1,260.8)
(5,009.2)
2,009.2

2007
£m

2,905.7
580.6
–
218.1
33.5
26.7
332.6
0.1
105.7
0.3
13.2
4,216.5

18.6
18.0
892.7
48.2
856.0
1,833.5
75.0
6,125.0

(2.3)
(1,657.7)
(71.0)
(78.4)
(86.3)
(730.3)
(183.3)
(86.8)
(2,896.1)
(41.3)

(189.0)
(127.5)
(116.0)
(364.1)
(0.3)
(93.5)
(193.4)
(16.6)
(1,100.4)
(4,037.8)
2,087.2

Thomas Cook Group plc Annual Report & Accounts 2008  121

 
 
 
 
 
 
 
 
 
 
 
 
 
notes 
5 

2008
£m

293.9
(73.7)
220.2

–
–
–
18.6
–
(296.4)
(90.5)
(69.0)
75.9
(361.4)

(58.1)
(78.2)
(1.9)
732.2
(228.6)
(91.8)
(247.8)
2.3
28.1

(113.1)
813.2
47.4
747.5

761.3
(13.8)
747.5

2007
£m

273.8
(58.5)
215.3

4.1
25.8
51.4
33.0
22.2
(27.2)
(44.5)
(44.2)
(142.8)
(122.2)

(30.4)
–
(0.5)
29.9
(51.8)
(58.9)
–
8.2
(103.5)

(10.4)
813.0
10.6
813.2

856.0
(42.8)
813.2

Unaudited pro forma Group cash flow statement  

For the twelve months ended 30 September 2008 

Cash flows from operating activities 
Cash generated by operations 
Income taxes paid 
Net cash from operating activities 

Investing activities 
Dividends received from associates 
Proceeds on disposal of subsidiaries (net of cash sold) 
Proceeds on disposal of associated undertakings 
Proceeds on disposal of property, plant and equipment 
Proceeds on sale of non-current assets held for sale 
Purchase of subsidiaries (net of cash acquired) 
Purchase of tangible and financial assets 
Purchase of intangible assets 
Disposal/(purchase) of short-term securities 
Net cash from investing activities 

Financing activities 
Interest paid 
Dividends paid 
Dividends paid to minority shareholders 
Draw down of borrowings 
Repayment of borrowings 
Repayment of finance lease obligations 
Purchase of own shares 
Proceeds from issue of ordinary shares 
Net cash used in financing activities 

Net decrease in cash and cash equivalents 
Cash and cash equivalents at beginning of period 
Effect of foreign exchange rate changes 
Cash and cash equivalents at end of period 

Liquid assets 
Bank overdrafts 
Cash and cash equivalents at end of period 

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Notes to the pro forma financial information 

1.  Basis of preparation 
The financial information contained in this appendix is pro forma and unaudited and does not constitute full statutory accounts within the meaning  
of section 240 of the Companies Act 1985. The information has been prepared using the accounting policies and basis of preparation set out in note 2 
to the Group financial statements, except that, for comparison purposes, the amortisation of business combination intangibles has been excluded from 
the pro forma information. 

2.  Segmental analysis 

Twelve months to 30 September 2008 
Revenue 
Segment sales 
Inter-segment sales 
Total revenue 

UK and 
Ireland
£m

Continental 
Europe
£m

Northern 
Europe
£m

North  
America 
£m 

Airlines  
Germany 
£m 

Corporate
£m

Total
£m

3,104.4
(7.1)
3,097.3

3,646.9
(26.5)
3,620.4

974.9
(3.3)
971.6

439.8 
– 
439.8 

978.2 
(297.5) 
680.7 

–
–
–

9,144.2
(334.4)
8,809.8

Profit/(loss) from operations before exceptional items 

143.4

106.3

86.2

6.0 

45.4 

(21.4)

365.9

Twelve months to 30 September 2007 
Revenue 
Segment sales 
Inter-segment sales 
Total revenue 

UK and 
Ireland
£m

Continental 
Europe
£m

Northern 
Europe
£m

North  
America 
£m 

Airlines  
Germany 
£m 

Corporate
£m

Total
£m

3,138.7
(6.9)
3,131.8

3,052.9
(3.9)
3,049.0

811.9
(5.3)
806.6

379.1 
– 
379.1 

855.8 
(344.1) 
511.7 

0.3
–
0.3

8,238.7
(360.2)
7,878.5

Profit/(loss) from operations before exceptional items 

73.6

67.5

73.5

4.9 

46.2 

(21.5)

244.2

Inter-segment sales are charged at prevailing market prices. 

3.  Exceptional items 

Property costs, redundancy and other costs incurred in integrating the Thomas Cook and MyTravel businesses 
Property costs, redundancy and other costs incurred in other business integrations and reorganisations 
Disposal of property, plant and equipment and other assets 
Impairment of assets 
Other expenses incurred as a result of the merger 
Other exceptional operating items 
Exceptional items included within profit from operations 

Share of associates’ exceptional items 
Profit on disposal of associates  

Exceptional finance costs 
Loss on revaluation of trading securities 
Impact of financial market volatility 

2008 
£m
(116.3)
(47.1)
(1.1)
(7.7)
(21.7)
(11.4)
(205.3)

–
–

(13.9)
(12.9)
(26.8)

2007
£m
(82.1)
(60.4)
15.1
(21.8)
(4.7)
(17.3)
(171.2)

37.0
37.0

–
–
–

Total exceptional items 

(232.1)

(134.2)

The exceptional finance costs consist of £13.9m of revaluation losses on trading securities and £12.9m relating to the exceptional element of the phasing 
effect of marking to market the forward points on our foreign currency hedging, which arose in September as a result of the global banking crisis. 

Thomas Cook Group plc Annual Report & Accounts 2008  123

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the pro forma financial information continued 

4.  Net finance costs 

Finance income 
Income from loans included in financial assets 
Other interest and similar income 
Expected return on pension plan assets 
Fair value gains on derivative financial instruments 

Finance costs 
Interest payable 
Finance costs in respect of finance leases  
Interest cost on pension plan liabilities 
Forward points on future hedging contracts 
Interest on overdue tax 
Other finance costs (including discounting charges) 

Exceptional finance costs 
Loss on revaluation of trading securities 
Impact of financial market volatility 

5.  Notes to the cash flow statement 

Profit before tax 
Adjustments for: 
Net finance costs 
Net investment income 
Share of results of associates and joint ventures 
Depreciation of property, plant and equipment and intangibles 
Impairment of assets 
Loss/(profit) on disposal of businesses and property, plant and equipment and intangible assets 
Profit on disposal of associates 
Share-based payments 
Other non-cash items 
(Decrease)/increase in provisions 
Income received from other non-current investments 
Interest received 
Operating cash flows before movements in working capital 
Movement in working capital 
Cash generated by operations 
Income taxes paid 
Net cash from operating activities 

2008
£m

1.0
32.1
45.3
2.2
80.6

(48.4)
(23.7)
(44.9)
(12.8)
–
(9.0)
(138.8)

(13.9)
(12.9)
(26.8)
(165.6)
(85.0)

2008
£m
77.2

85.0
(1.4)
(0.2)
140.5
7.7
1.1
–
3.1
(0.8)
(7.6)
0.4
27.2
332.2
(38.3)
293.9
(73.7)
220.2

2007
£m

0.9
36.7
38.2
0.6
76.4

(24.3)
(16.9)
(38.8)
–
(0.3)
(4.0)
(84.3)

–
–
–
(84.3)
(7.9)

2007
£m
100.2

7.9
(0.7)
2.6
126.6
21.8
(15.1)
(37.0)
–
5.9
58.5
–
26.4
297.1
(23.3)
273.8
(58.5)
215.3

Cash and cash equivalents, which are presented as a single class of assets on the face of the balance sheet, comprise cash at bank and other short-term 
highly liquid investments with a maturity of three months or less. 

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6.  Net debt 

Liquidity 
Cash and cash equivalents 
Trading securities 

Current debt 
Bank overdrafts  
Short-term borrowings 
Current portion of long-term borrowing 
Borrowings classified as held for sale 
Obligations under finance leases 

Non-current debt 
Long-term borrowings 
Obligations under finance leases 

Total debt 
Net funds/(debt) 

At 
1 October
2007
£m

856.0
197.3
1,053.3

(42.8)
(2.7)
(25.5)
(30.2)
(78.4)
(179.6)

(116.0)
(364.1)
(480.1)
(659.7)
393.6

Cash flow 
£m

Other 
non-cash 
changes 
£m

Acquisitions/ 
disposals 
£m 

Exchange
movements
£m

At
30 September
2008
£m

(145.3)
(75.9)
(221.2)

32.2
(144.7)
(30.2)
–
91.8
(50.9)

(328.7)
–
(328.7)
(379.6)
(600.8)

–
(23.0)
(23.0)

–
0.9
(78.0)
31.6
(182.8)
(228.3)

45.5
182.8
228.3
–
(23.0)

– 
– 
– 

– 
(49.6) 
– 
– 
(0.1) 
(49.7) 

– 
– 
– 
(49.7) 
(49.7) 

50.6
30.8
81.4

(3.2)
(2.7)
(9.7)
(1.4)
(13.1)
(30.1)

(16.9)
(47.0)
(63.9)
(94.0)
(12.6)

761.3
129.2
890.5

(13.8)
(198.8)
(143.4)
–
(182.6)
(538.6)

(416.1)
(228.3)
(644.4)
(1,183.0)
(292.5)

Thomas Cook Group plc Annual Report & Accounts 2008  125

 
 
 
 
 
 
 
 
 
 
Appendix 2 – Key performance indicators definitions 

* 

** 

*** 

Revenue for the Group and segmental analysis represents external 
revenue only, except in the case of the Airlines Germany pro forma 
segmental key performance analysis where revenue of £297.5m 
(2007: £344.1m), largely to the Continental Europe division, has 
been included.  

Profit from operations is defined as earnings before interest  
and tax, and has been adjusted to exclude exceptional items  
and amortisation of business combination intangibles. It also 
excludes our share of the results of associates and joint ventures. 

The operating profit margin is the profit from operations (as defined 
above) divided by the external revenue, except in the case of the 
Airlines Germany segmental key performance analysis where total 
revenue has been used as the denominator to more accurately 
reflect the trading performance.  

Adjusted earnings per share for 2008 is calculated as pro forma net 
profit after tax, but before exceptional items and amortisation of 
business combination intangibles, divided by the weighted average 
number of shares in issue during the twelve months to September. 
For 2007, the number of shares outstanding at 30 September 2007 
has been used as an approximation to the weighted average number  
of shares in the period. Profit after tax has been calculated using  
a notional tax rate of 26.1% for 2008 and 28.0% for 2007.  

Adjusted dividend cover for 2008 is calculated by dividing the 
adjusted earnings per share (see above) by the pro forma full year 
paid and proposed dividends. Adjusted dividend cover for 2007 is 
as stated in the 2007 Annual Report and is calculated by dividing 
the adjusted earnings per share for the pro forma twelve months to 
October 2007 by the pro forma dividend (assuming an interim 
dividend of one-third had been applicable). 

In the case of pro forma figures, the figures reflect the normalised 
results for the twelve months to 30 September 2008 and the twelve 
months to 30 September 2007, and have been compiled as if the 
merger of Thomas Cook AG and MyTravel Group plc had taken 
place prior to 1 October 2006 (the first day of the comparative 
period presented) and as if the Group had always had a September 
year end.  

‡ 

‹ 

› 

† 

†† 

Capacity for UK, Northern Europe and North America represents 
the total number of holidays available to sell. This is calculated by 
reference to committed airline seats (both in-house and third party). 

In the case of Airlines Germany, capacity represents the total 
number of available seat kilometres (ASK). ASK is a measure of an 
airline’s passenger carrying capacity and is calculated as available 
seats multiplied by distance flown. 

†††  For UK, Northern Europe and North America, load factor is a 

measure of how successful the mainstream businesses were at 
selling the available capacity. This is calculated by dividing the 
departed mainstream passengers in the period (excluding 
accommodation only) by the capacity in the period. 

For Airlines Germany, seat load factor is a measure of how successful 
the airline was at selling the available capacity. This is calculated 
by dividing the revenue passenger kilometres (RPK) by the available 
seat kilometres (ASK – see capacity definition above) and is the 
recognised IATA definition of load factor used for airlines. RPK is  
a measure of the volume of passengers carried by an airline.  
One RPK is flown when a passenger is carried one kilometre. 

#  

Average selling price for UK, Northern Europe and North America 
represents the average selling price (after discounts) achieved  
per mainstream passenger departed in the period (excluding 
accommodation only passengers). For Continental Europe,  
average selling price represents the average selling price (after 
discounts) achieved per passenger departed in the period. 

##  Brochure mix is defined as the number of mainstream holidays 

(excluding accommodation only) sold at brochure prices divided  
by the total number of holidays sold (excluding seat only) and is  
a measure of how successful a business was at selling holidays 
early. Holidays are generally discounted closer to departure. 

Controlled distribution is defined as the proportion of passengers 
booking through our in-house retail shops, call centres and websites. 
Internet distribution is a sub-set of controlled distribution and is 
defined as the proportion of passengers booking through in-house 
websites. Both performance indicators are calculated on departed 
passengers in the period. 

Passengers in the case of UK, Northern Europe and North America 
represents the total number of passengers (in thousands) that 
departed on a Thomas Cook Group plc holiday in the period. It 
excludes customers who booked third party tour operator products 
through Thomas Cook retail channels. For Continental Europe 
passengers represents all tour operator passengers departed in  
the period, excluding those on which only commission is earned. 

Mass Market Risk passengers in UK, Northern Europe and North 
America represent those holidays sold where the business has 
financial commitment to the product (flights and accommodation) 
before the customer books. The analysis excludes accommodation 
only passengers. 

‡‡ 

Sold seats in Airlines Germany represents the total number of one-
way seats sold on aircraft (in thousands) that departed in the period. 

###  Yield in Airlines Germany represents the average price achieved per 

seat departed in the period. 

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Shareholder information 

Thomas Cook AG / MyTravel Group plc merger 
Thomas Cook Group plc was formed in June 2007 upon the merger  
of Thomas Cook AG and MyTravel Group plc.  

MyTravel Group plc shareholders received one Thomas Cook Group plc 
ordinary share for every one MyTravel Group plc share previously held. 
MyTravel Group plc share certificates are no longer valid and can be 
destroyed. Replacement Thomas Cook Group plc share certificates  
were sent to shareholders, who held shares in certificated form,  
on or around 19 June 2007. 

Electronic communications 
At the Annual General Meeting (“AGM”) on 10 April 2008, the Company 
passed a resolution allowing the Thomas Cook Group plc website to be 
used as the primary means of communication with its shareholders. A 
consultation card was sent to shareholders enabling them to choose 
either to:  

• 

• 

receive notification by email when shareholder documentation  
is available on the website; 
continue to receive shareholder documentation in hard copy. 

Shareholders who did not respond were deemed, in accordance  
with the Companies Act 2006, to have agreed to receive shareholder 
documentation via the Thomas Cook Group plc website. The new 
arrangements for electronic shareholder communications provide 
shareholders with the opportunity to access information in a timely 
manner and help Thomas Cook Group plc to reduce both its costs  
and environmental impact. 

Website 
The Company’s website, www.thomascookgroup.com, provides 
information including: 

•  news, updates, press releases and regulatory announcements; 
investor information, including the Annual Report, investor 
• 
presentations and share price information; 

•  biographies of the Board of Directors and the senior executive team; 
•  details of the Company’s governance framework; 
• 

corporate responsibility reporting. 

Holiday booking discount 
Shareholders, subject to the restrictions set out below, are entitled to 
receive a discount of 10% off the latest retail high street price of any 
holiday booked under the following brands: Airtours, Aspro, Club 18-30, 
Cresta, Manos, Neilson, Panorama, Style, Sunset, Sunworld Holidays 
Ireland, Swiss Travel Service, Thomas Cook, Thomas Cook Signature and 
Thomas Cook Tours. In order to benefit from this service, shareholders 
should call the telephone number detailed below: 

Shareholder booking line: 0844 800 7003 
Opening times: 9:00am to 5:30pm Monday – Saturday 

Please note it is not possible to claim the discount through  
Thomas Cook stores, other travel agents, Thomas Cook websites  
or other telephone numbers. 

To qualify, shareholders must hold a minimum of 500 shares, held for a 
period of six months prior to making the booking and will need to quote 
their shareholder number shown on their share certificate when booking 
their holiday. Shareholders who hold shares through a nominee can claim 
this discount, but will be required to show proof of ownership from that 
nominee and that those shares continue to be held at the date of booking. 

It is not possible to use this discount against “flight-only” bookings  
and it does not apply to “Air Passenger Duty”, fuel charges or any other 
supplements. This discount may not be used in conjunction with  
any other offer. 

Preferential foreign exchange rates 
In addition to these travel benefits, when buying foreign currency or travellers 
cheques in any Thomas Cook or Going Places store, shareholders are entitled 
to a commission free transaction and a preferential exchange rate, subject 
to the confirmation that they meet the shareholding criteria set out above.  

Shareview 
To be able to access information about their shares and other investments 
online, shareholders can register with Shareview (www.shareview.co.uk) 
where they can view details of recent movements in their shareholding 
and change their address and bank mandate details online. Once 
registered, shareholders will also receive emails when shareholder 
documentation is available on the Thomas Cook Group plc website 
(www.thomascookgroup.com) and be able to register their vote for  
the AGM online. 

Dividends  
An interim dividend payment of 3.25 pence per share was paid on  
5 September 2008, to all ordinary shareholders on the register at 5.00pm  
on 1 August 2008. The directors recommend the payment of a final 
dividend of 6.5 pence per share, to be paid on 27 March 2009 to all 
shareholders on the register at 5.00pm on 6 March 2009.  

As an alternative to having dividends paid by cheque, shareholders can, if 
they wish, have them credited directly into their bank or building society 
account on the dividend payment date. Having dividends paid in this way 
avoids the risk of cheques being lost or intercepted in the post and is more 
convenient as payment is credited automatically on the payment date. 
Shareholders wishing to set up a dividend mandate can do so by completing 
the dividend mandate form attached to the dividend cheque or by 
contacting the Registrar.  

Share register and shareholder enquiries 
The Company’s share register is maintained by Equiniti. Queries relating 
to Thomas Cook Group plc shares, should be addressed to: 

The Registrar 
Equiniti  
Aspect House 
Spencer Road 
Lancing  
West Sussex BN99 6DA 
Tel: 0871 384 2154 (international telephone number: +44 (0)121 415 7047) 

Shareholders should quote the Company reference number 3174 and 
their account number (which can be found on their share certificates), 
when contacting the Registrar.  

Unsolicited telephone calls and correspondence 
Shareholders are advised to be wary of any unsolicited advice, offers to 
buy shares at a discount, or offers of free reports about the Company. 
Details of any share dealing facilities that the Company endorses will  
be included in Company mailings or on our website.  

Sharegift 
Shareholders with a small number of shares, the value of which make it 
uneconomical to sell, may wish to consider donating them to the charity 
ShareGift (Registered Charity Number 1052686). Find out more about 
ShareGift at www.sharegift.org or by telephoning +44 (0)20 7930 3737. 

Shareview dealing 
A telephone and internet dealing service has been arranged through the 
Registrar to provide a simple way of buying and selling Thomas Cook 
Group plc shares for existing and prospective UK based shareholders. For 
telephone sales call 08456 037 037 between 8.00am and 4.30pm, Monday to 
Friday, or visit the website: www.shareview.co.uk/dealing. Shareholders will 
need the shareholder reference number shown on their share certificate(s).  

Thomas Cook Group plc Annual Report & Accounts 2008  127

 
Shareholder information continued 

Financial calendar 
Interim management statement 
Ex-dividend date for 2007/08 final dividend 
Final dividend record date 
Last date for AGM proxy votes to be received by  
the Registrar 
AGM  
Final dividend payment date 
2008/09 half-year results announcement 
Ex-dividend date for 2008/09 interim dividend 
Interim dividend record date 
Interim management statement 
Interim dividend payment date 
Year end 

12 February 2009 
4 March 2009 
6 March 2009 

17 March 2009 
19 March 2009 
27 March 2009 
14 May 2009 
5 August 2009 
7 August 2009 
13 August 2009 
4 September 2009 
30 September 2009

Analysis of shareholders as at 30 September 2008 
Number of 

Distribution of shares by the type of shareholder 
Nominees and institutional investors 
Individuals 
Total 

holdings   Number of shares
901,726,630
3,380,875
905,107,505

1,110 
15,662 
16,772 

Size of shareholding 
1-100 
101-500 
501-1,000 
1,001-5,000 
5,001-10,000 
10,001-100,000 
100,001-500,000 
500,000 and above 
Total 

Number of holdings 
11,455 
3,613 
669 
449 
89 
230 
141 
126 
16,772 

Number of shares
363,813
817,502
479,785
950,433
643,261
8,553,698
33,807,639
859,491,374
905,107,505

Registered office 
The Thomas Cook Business Park, Coningsby Road, Peterborough PE3 8SB 
Registered Number: 6091951 

Shareholder contacts 
Shareholder helpline: 0871 384 2154  
(international telephone number: +44 (0) 121 415 7047) 
Website: www.thomascookgroup.com 
Registrar’s website: www.shareview.co.uk 

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Celebrating 200 years
Thomas Cook 1808 – 1892

2008 marks 200 years since the
birth of Thomas Cook, regarded as
the founder of popular tourism.
As a company we continue to
be inspired by his vision and
pioneering spirit ‘to make travel
simple, easy and a pleasure.’
Thomas Cook once described
himself as ‘the willing and devoted
servant of the travelling public’ and
we believe that today, across our
company, we maintain many of his
original ideas and inspirations by
keeping the customer at the heart
of everything we do.

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1808
Thomas Cook is born on 22 November
in Melbourne, Derbyshire. He is the
son of a labourer and the grandson
of a Baptist minister.
1828
On the completion of his apprenticeship
as a wood-turner and cabinet-maker,
Thomas decides instead to pursue his
religious interests and becomes a
wandering Baptist missionary.

1841
Thomas conducts his ﬁrst excursion,
a 12-mile rail journey from Leicester to
a temperance gala in Loughborough, on
Monday 5 July 1841. Some 500 passengers
pay a shilling each for the experience. The
day is a great success and Thomas is soon
being asked to organise similar outings
for other local temperance societies and
Sunday schools.

1845
Thomas conducts his ﬁrst trip for proﬁt.
It is a railway journey to Liverpool from
Leicester, Nottingham and Derby.
1855
Thomas successfully escorts his ﬁrst
‘package tourists’ to Europe during the
summer of 1855. The ‘grand circular tour’
includes Brussels, Cologne, the Rhine,
Heidelberg, Strasbourg and Paris. Thomas
arranges hotels and meals in addition to
travel tickets. He also deals with ‘foreign
exchange’ for his customers.

1865
To cope with the number of tourists who
wish to visit the Continent, Thomas opens
an ofﬁce in London – at 98 Fleet Street – in
April 1865. This is Thomas Cook’s ﬁrst high
street shop and it is to be managed by his
son, John Mason Cook, who joined the
family business only a few months before.

1872/73
The climax of Thomas’ travelling career
comes in September 1872 when, at the age
of 63, he departs from Liverpool (with eight
companions) on a 25,000-mile tour of the
world that will keep him away from home
for 222 days. It has long been his ambition
to travel to ‘Egypt via China’ but such a trip
only becomes practicable following the
opening of the Suez Canal in 1869.

1874
Cook’s circular note, an early form of the
travellers cheque, is launched in New York.
1892
John Mason Cook takes over the
business on the death of his father.

1
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9
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Design and production:
Black Sun Plc (London)
+44 (0) 20 7736 0011

Photos: Thomas Cook, Getty

Printed by Park Communications on Hello Silk, FSC certiﬁed
paper, and Tauro, from veriﬁed sustainable sources.

Thom Cook_Cover.qxd:Layout 1  26/1/09  14:39  Page 1

T
h
o
m
a
s

C
o
o
k
G
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o
u
p
p
l
c
A
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n
u
a
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R
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p
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&
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We are one of the world’s leading leisure travel groups, with a focused
strategy, a ﬂexible business model and a portfolio of market-leading
travel brands. Across our group we are committed to our vision of
going further to make dreams come true – exceeding our customers’
expectations, offering fulﬁlling careers to the best team of people in
the industry, and delivering sustainable value to our shareholders.
With a heritage of more than 167 years in travel we understand the
importance of thinking beyond the short term. We are focused on
building a stronger business today – to ensure we remain market
leaders tomorrow.

Contents

D
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R
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P
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T
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B
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V
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W

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www.thomascookgroup.com

Thomas Cook Group plc
Annual Report & Accounts 2008

Board of Directors
Group Executive Board
Corporate governance report
Other disclosures
Remuneration report

48
50
51
57
59

Chairman’s statement
Business at a glance
Where we operate
Chief Executive Ofﬁcer’s statement
Our marketplace
Our strategy
Our strategy in action
Operational review
Corporate social responsibility
Financial review
Principal risks and uncertainties

2
4
6
8
12
14
17
28
38
41
46

D
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C
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R
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P
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C
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P
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67
68

Independent auditors’ report
Group income statement
Group statement of recognised income
and expense
Group balance sheet
Group cash ﬂow statement
Notes to the Group ﬁnancial statements
Company balance sheet
Company statement of recognised income
112
and expense
112
Company cash ﬂow statement
Notes to the Company ﬁnancial statements
113
Appendix 1 – Unaudited pro forma ﬁnancial information 120
Appendix 2 – Key performance indicators deﬁnitions 126
127
Shareholder information

69
70
72
73
111