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Thomas Cook Group plc
Annual Report & Accounts 2011
Taking action to strengthen our business.
Thomas Cook Group is one of the world’s leading leisure travel groups, with sales of
£9.8bn and 23.6m customers. We operate under six geographic segments in 22 countries
and are number one or two in our core markets.
2011 has been a challenging year for Thomas Cook, largely due to the disappointing
performance of our UK business and the impact caused by the disruption in the MENA region,
particularly on our French business.
Our 2011 Annual Report is our platform to present to you the strength inherent in the scope
of our business, together with the changes we have made and our plans to better position
the Group for the future.
Contents
Directors’ Report: Business Review
The Group’s financial and operational performance,
our business model, strategy and key risks
Financial Statements
Audited financial information for the Group and
key information for shareholders
Independent auditors’ report
73
74 Group income statement
75 Group statement of comprehensive income
76 Group cash flow statement
77 Group balance sheet
79 Group statement of changes in equity
80
Notes to the financial statements
128 Company balance sheet
129 Company cash flow statement
130 Company statement of changes in equity
131 Notes to the Company financial statements
137
138 Shareholder information
Appendix 1 – Key performance indicators definitions
Joint statement from the Group Chief Executive Officer
01
Financial summary
02 Chairman’s statement
04 Where we operate
06
and Group Chief Financial Officer
12 Market review
13 Our business model
14 Our strategy
16 Operating review
28 Risk management
31
Financial review
35 Our sustainability
Directors’ Report: Corporate Governance
The members of the Board and the Group Executive Board
and reports on governance and remuneration
40 Board of Directors
42 Group Executive Board
43 Corporate governance report
56 Remuneration report
70 Other disclosures
Thomas Cook Group plc Annual Report & Accounts 2011 Financial summary1
Revenue
£9,808.9m
Underlying profit
from operations2
£303.6m
Underlying operating
profit margin %3
3.1%
9
,
8
0
8
.
9
8
,
8
9
0
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1
10,000
8,000
6,000
4,000
2,000
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400
300
200
100
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6
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6
5
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3
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1
2010
2011
2010
2011
2010
2011
• The statutory loss
from operations,
stated after
separately disclosed
items affecting
profit from
operations was
£267.0m (2010:
£167.0m profit)
1
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Dividend per share
3.75p
Underlying EPS4
11.7p
Free cash flow5
£17.9m
15
12
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2010
2011
2010
2011
2010
2011
1 The Group statutory financial statements for the year ended 30 September 2011 and prior year comparatives are set out on pages 74 to 127.
2
Underlying profit from operations is defined as earnings before interest and tax, excluding all separately disclosed items. It also excludes our share of the results of associates and joint venture
and net investment income.
3 The underlying operating profit margin is the underlying profit from operations (as above) divided by the external revenue.
4
5
Underlying basic earnings per share is calculated as net profit after tax, but before all separately disclosed items divided by the weighted average number of shares in issue during the period.
Free cash flow includes cash from operating activities, purchase and proceeds of disposal of tangible and intangible fixed assets and interest paid.
2
Chairman’s statement
Dear ShareholDer
This is my first report to shareholders following my
appointment as Chairman on 1 December 2011. Since joining
the Board at the beginning of October, I have spent my time
meeting the members of the Group Executive Board and
their management teams to gain a clear understanding of our
operations, brands, management strength and opportunities.
My initial observations are as follows:
• we have strong key brands in our respective markets:
Ving, Neckermann, Thomas Cook and the corporate brand
of Thomas Cook;
• there are opportunities to increase the sharing of best
practices across the Group;
• we need a determined approach on cost and cash
management on one side and the development of business
opportunities on the other, which requires the making
of strategic choices after proper consideration;
• we need to refresh and further strengthen the Board’s
composition; and
• we need to install a ‘proper pay for proper performance’
approach in respect of executive and senior management
remuneration.
My initial observations will be further explored as I lead
the Board in the conduct of a strategic review to secure our
long-term future.
by the disruptions in the Middle East and North Africa region
(‘MENA’), particularly on our French business. These events
contributed to the Group requiring an additional £200m loan
facility to help us through the seasonal cash low point at the
end of December. This additional facility was secured at the end
of November and the Board would like to extend its thanks to
Paul Hollingworth and the Finance Team for their efforts.
The Board and the Group Executive Board are taking action
to strengthen our business. We are focused on implementing
a turnaround plan to create a stronger UK business and taking
a number of decisive steps to substantially strengthen the
Group’s balance sheet. These priorities are fully described in
the joint statement from the Group Chief Executive Officer
and Group Chief Financial Officer on pages 6 to 11.
During the year, the Board was disappointed that management
performance in certain areas fell short of the standards that
we demand. Decisive action was taken, with changes at the
Group Executive Board level as well as placing new senior
management teams into both the UK and French operations.
The Board is pleased that Sam Weihagen, who previously
headed our successful Northern Europe Segment, was able to
step into the role of Group Chief Executive Officer. The Group
Executive Board under Sam’s leadership has the full support
of the Board. Together, we will take all the actions necessary
to improve performance and embed the right culture, values
and behaviours across the Group.
To say that 2011 was a challenging year for our Group is an
understatement. Whilst our Northern Europe, Central Europe
and Airlines Germany operating segments performed very
well, the Group’s result has been adversely affected by a
disappointing performance in the UK and the impact caused
DIVIDeND
The Group paid an interim dividend of 3.75p per share on
7 October 2011. As previously announced, the Board will
not declare any further dividend payments whilst the Group
re-builds its balance sheet.
Directors’ Report: Business ReviewTaking action to strengthen our business. 3
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The BoarD
As referred to above, I joined the Board as Chairman Designate
on 1 October 2011 and, following Michael Beckett’s retirement,
became Chairman on 1 December 2011. I would like to thank
Michael for his contribution to the Group.
During the year, a number of other changes were made to
the composition of the Board:
• the Board was strengthened with the appointment of
Martine Verluyten and Peter Marks as Non-Executive
Directors on 9 May and 1 October 2011 respectively;
• Manny Fontenla-Novoa stood down from his role as Group
Chief Executive Officer and resigned from the Board on
2 August 2011; and
• Sam Weihagen was appointed Group Chief Executive Officer
on 2 August 2011, until a permanent successor can be found.
Sam is a highly experienced and successful executive, who is
greatly respected within the industry and our organisation.
A search for a new Group Chief Executive Officer is underway
(see page 51).
Together, these appointments bring a wealth of operational
and financial experience across many markets and build on the
diverse composition of the Board. I am currently conducting
a review of the Board and expect to make changes to refresh
and further strengthen its composition in the near-term.
eMPloYeeS
It has not been an easy year for our employees, with
significant change brought about by business transformations,
cost reduction programmes, and the disappointment of
poor performance in parts of our business. Once again,
our employees have demonstrated their utmost dedication
to customer service, in particular when responding to the
challenges brought about by the disruption in the MENA
region. We continue to believe that our employees are our key
differentiator in the competitive travel industry and the Board
has confidence that they will deal with the challenges that we
will undoubtedly face in the future. On behalf of the Board
I would like to thank them for their dedication and
high standards.
The FUTUre
The uncertain economic environment, continued disruption
in the MENA region and higher input costs, particularly
fuel, will contribute to another challenging year. The Board
and the Executive team will conduct a strategic review,
whilst remaining focused on the implementation of the
UK turnaround plan, cost management, cash flow and
strengthening the balance sheet.
Frank Meysman
Chairman
13 December 2011
4
Where we operate
Leveraging the diverse geographic spread of our business
While it is well documented that the UK segment has under-performed this year,
Thomas Cook has some excellent businesses in other regions that performed
well and grew customers and profits.
The chart opposite illustrates the balance of profits from across our operations.
Each operating segment is an important contributor to the Group profit. This
year, Northern Europe, together with our Central Europe and Airlines Germany
segments delivered strong growth, providing support to the Group result.
UK including Ireland, India and Middle East:
UK performance was poor and a new management team has reviewed operations and developed a turnaround
plan to rebuild profitability.
Financial highlights
Revenue*
£3,255.0m
2010: £3,143.4m
Key facts
Underlying profit
from operations**
£34.1m
2010: £107.5m
Underlying operating
profit margin***
1.0%
2010: 3.4%
• 7.8m1 passengers
• 73.8% controlled
• 1,1032 retail outlets
distribution
• 40 aircraft
• 30.1% internet
distribution
Central Europe:
Another year of solid progress, boosted by a strong economic backdrop and the successful integration of newly
acquired, Turkish tour operating specialist Öger.
Financial highlights
Revenue*
£2,348.8m
2010: £1,973.4m
Underlying profit
from operations**
£69.8m
2010: £58.6m
Underlying operating
profit margin***
3.0%
2010: 3.0%
Key facts
• 4.1m passengers
• 22.5% controlled
• 1,348 retail outlets
distribution
• 6.9% internet
distribution
West & East Europe:
Impacted by performance of the French business, where results were hit heavily by lower demand for holidays
to the important French-speaking North African destinations.
Financial highlights
Revenue*
£1,901.6m
2010: £1,698.4m
Key facts
Underlying profit
from operations**
£40.4m
2010: £82.0m
Underlying operating
profit margin***
2.1%
2010: 4.8%
• 3.2m passengers
• 59.9% controlled
• 1,076 retail outlets
• 5 aircraft
distribution
• 23.8% internet
distribution
See Appendix 1 on page 137 for key
Key facts: figures as at 30 September 2011
1
2
Includes 1.2m passengers in India and Egypt.
Includes 326 retail outlets in India and Egypt.
3
4
Includes independent travel bookings.
Includes in-house passengers of 2.1m.
Directors’ Report: Business Review 5
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Northern Europe:
A consistent performer, Northern Europe achieved further growth in sales and profits by attracting more customers to
its strong brands and popular holiday concepts.
Financial highlights
Revenue*
£1,152.7m
2010: £1,014.0m
Key facts
Underlying profit
from operations**
£106.3m
2010: £91.7m
Underlying operating
profit margin***
9.2%
2010: 9.0%
• 1.5m passengers
• 85.7% controlled
• 11 retail outlets
• 12 aircraft
distribution
• 65.6% internet
distribution
North America:
Volume growth in independent travel and overhead cost savings delivered improved profit on prior year.
Financial highlights
Revenue*
£349.2m
2010: £352.5m
Underlying profit
from operations**
£10.5m
2010: £9.1m
Underlying operating
profit margin***
3.0%
2010: 2.6%
Key facts
• 1.1m passengers
• 16.9% controlled
• 246 retail outlets
distribution
• 36.4% internet
distribution3
Airlines Germany:
Delivering its seventh successive year of profit growth, Condor increased capacity and successfully expanded
its long haul routes.
Financial highlights
Revenue*
£1,120.3m
2010: £996.2m
Underlying profit
from operations**
£69.3m
2010: £51.1m
Underlying operating
profit margin***
6.2%
2010: 5.1%
Key facts
• 6.0m passengers4
• 35 aircraft
• Approximately one-third
of seats sold in-house
5
Group underlying profit from operations is defined as earnings before
interest and tax, excluding all separately disclosed items, our share of
the results of associates and joint venture and net investment income.
6
The contribution of the Group has been based on the underlying
profit from operations, including corporate costs of £26.8m.
Group underlying profit from operations5 £303.6m2010: £362.2mGroup revenue £9,808.9m2010: £8,890.1mContribution to Group underlying profit from operations61. UK £34.1m 2. Central Europe £69.8m 3. West & East Europe £40.4m 4. Northern Europe £106.3m 5. North America £10.5m 6. Airlines Germany £69.3m
6
Joint statement from the Group Chief Executive Officer
and Group Chief Financial Officer
Sam Weihagen
Group Chief Executive Officer
Paul Hollingworth
Group Chief Financial Officer
In this section
Revenue and underlying results
UK turnaround
Strengthening our Group Executive Board
Strengthening the balance sheet
p7
p7
p8
p10
Thomas Cook has faced a second successive year of exceptional
challenges. In 2010, we had to deal with the disruption caused
by the volcanic ash cloud and, this year, the Arab Spring
resulted in a dramatic fall-off in travel to the important MENA
destinations. In addition, within the UK our customers have
been faced with declining real incomes and, in many cases,
employment uncertainty. Against this difficult backdrop, we
have taken action to develop and embed a turnaround
programme in our underperforming UK operating segment
with the intention of significantly improving profitability
through stabilising the business whilst focusing on value for our
customers. In spite of these difficulties, many of our operating
segments such as Northern and Central Europe and Airlines
Germany delivered good results. We are also taking steps to
substantially strengthen our balance sheet.
Whilst we have been faced with challenging external
circumstances, our performance in the UK and France has
fallen well below our own expectations. We have taken
action and put in place new management teams in both
these markets.
We have also completed a review of our balance sheet which
has resulted in £428m of impairments and write-downs, the
majority of which are non-cash and relate to impairment of
goodwill in our UK and Canadian businesses and a write-down
of IT assets.
Directors’ Report: Business Review 7
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Despite the challenging economic environment, there
remain significant opportunities to improve our performance.
Many of these opportunities for improved performance are
within the UK and we are in the process of implementing
a significant turnaround plan, designed to substantially
improve our profitability and deliver £110m of fully annualised
improvement to profitability, with a phased build-up over
the next three years.
As announced on 25 November 2011, the Group agreed a new
£200m bank facility and a further relaxation of the financial
covenants to provide additional headroom. The Board is
aligned on the need to achieve a substantial reduction in the
Group’s net debt and as previously announced, we have
already undertaken several steps to improve our balance
sheet, including:
• implementing a £200m non-core asset disposal programme
in July, which has already realised £35m of net proceeds
with a disposal agreed which will result in a further circa
£81m net debt reduction; and
• suspending further dividend payments until the balance
sheet is re-built.
The Group will be commencing a strategic review which
will consider further actions to accelerate the rate of
debt reduction.
Revenue and undeRlyIng Results
Group revenue for the twelve months to 30 September 2011
was £9,809m (2010: £8,890m), up 10% (8% on a constant
currency basis). Revenue benefited from a modest volume
uplift and price increases in part due to change in mix. In
addition, the acquisition of Öger Tours by Central Europe
and Intourist by West & East towards the end of the year
added circa £341m to revenues during the period.
Group underlying profit from operations was £304m, a
decrease of £58m on the prior year. The Group achieved
improved underlying profits from operations in Northern
Europe of £106m (up £15m), in Central Europe of £70m (up
£11m) and in Airlines Germany of £69m (up £18m). However,
disruption to our important MENA destinations adversely
impacted Group underlying profit from operations by an
estimated £80m, and of that impact, circa £32m was incurred
in France where 40% of bookings are typically to North Africa.
As a result, underlying profit from operations for West & East
Europe was £42m lower than prior year at £40m. Underlying
profit from operations in the UK segment was £73m down on
prior year at £34m as a result of both the MENA impact and a
squeeze on margins. Having completed a thorough review of
the UK business, a turnaround plan to improve performance
is now being implemented and is set out below.
The Group’s underlying net interest charge for the year
was £122m, reflecting higher average debt following the
refinancing of the Group’s original bank facility in 2010
with a combination of bonds and bank debt with longer
and varied maturities.
sepaRately dIsclosed Items
Included within separately disclosed items of £573m is a
£428m charge as a result of a balance sheet review. Whilst
clearly a substantial sum, this amount is largely of a non-cash
nature. As part of our year end review process and given the
reduction in Group profitability, we undertook a review of
the carrying value of goodwill and certain other assets.
Full details of all separately disclosed items can be found in
the Financial Review on page 32 and note 5 to the accounts.
Cash exceptional costs were £90m, £68m lower than prior year.
eaRnIngs
Taking account of the lower underlying operating profit
and the separately disclosed items, the Group recorded
a statutory loss before tax of £398m compared with a
profit of £42m last year and the reported loss after tax
was £518m (2010: £3m profit).
The underlying basic earnings per share was 11.7p
(2010: 20.4p) and the basic loss per share was 60.7p (2010: 0.3p).
cash flow and balance sheet
The Group continued to focus on improving its cash
management, delivering a £50m improvement in free
cash flow to £18m. This was ahead of prior year despite
increased losses, largely driven by lower capital expenditure.
The Group cash outflow (before changes in debt) was £80m,
as the payment of dividends and acquisition spend was
greater than the free cash inflow. Net debt at 30 September
2011 was £891m (2010: £804m).
uK tuRnaRound
Background and overview
Within the UK business in FY11, 74% of the revenue came
from the mainstream segment, but all the underlying profit
was generated by the independent business. Following the
deterioration in the financial performance and outlook for the
UK operating segment during the year, the Board changed the UK
management and initiated a thorough review of the business with
the aim of substantially improving performance.
Despite the erosion of merger benefits and the input cost inflation
the business has faced, the new management team sees
a significant opportunity for Thomas Cook to operate more
profitably in the UK overseas holiday market. The market is
large, mainstream package travel continues to be an important
component and independent travel is forecast to grow. The UK
business has significant capabilities across both mainstream
and independent travel. However, the business has become overly
complex and too volume driven.
To stabilise the business and re-build profitability, the UK
management team has begun implementation of a turnaround
plan. The plan is intended to optimise the UK airline, refocus
product strategy, improve yield management, rationalise
distribution and improve operational efficiency. In addition,
the business will take action to deliver higher growth and better
returns from its independent operations which accounted for
26% of UK revenues.
8
Joint statement from the Group Chief Executive Officer
and Group Chief Financial Officer continued
estImated ImpRovements and costs of ouR uK tuRnaRound plan
The table below shows the anticipated annual improvement in profitability and the outlay in costs of our UK turnaround plan:
£m
uK turnaround
– Cumulative improvements
– Costs to achieve
FY 12
FY 13
FY 14
35
30
70
20
100
10
annualised
run rate
110
Estimated improvements and costs
The UK turnaround plan is expected to deliver a fully annualised
improvement in profitability of £110m, with a phased build-up
over the next three years for a total estimated cost of circa £60m.
The actions expected to deliver the largest cumulative
improvement to profitability are those associated with
refocusing product strategy, improving yield management
and rationalising distribution.
On a fully annualised basis, management estimate that
approximately 60% of the improvement to profitability will come
from cost actions and 40% from actions focused on managing
revenue and margin more effectively.
The achievability of the improvements and the estimated costs
of achieving such improvements, relate to future actions and
circumstances which, by their nature, involve risks, uncertainties
and other factors and may be different than anticipated.
Actions to deliver the UK turnaround plan
The initial steps taken to deliver the UK turnaround plan
have included simplifying the UK organisational structure,
facilitating faster decision making and establishing
a transformation team to lead and track the approved
changes. To deliver the turnaround plan, management have
highlighted the following key aims and action points:
1. Optimise the UK airline (£10m improvement)
The expectation is to reduce Winter season losses, increase
flexibility in Summer season flying and better manage seat-only
volumes by reducing the size of the UK’s integrated airline. Overall,
the aim is to reduce the amount of in-house flying and for Summer
12 we are targeting around 85% vs 93% for Summer 11.
To achieve this, a consultation is underway to implement a
proposed reduction in the UK fleet from 41 to 35 aircraft
and a realignment of cabin crew grades which will reduce fixed
strengthening our group executive board
Sam Weihagen has led the Group Executive Board since
August 2011, after stepping into the role of Group Chief
Executive Officer until a permanent successor to the former
Group Chief Executive Officer is found. Sam is hugely
experienced both in the travel industry and within the Group,
having been Deputy Group Chief Executive Officer since 2010
and, prior to that, having led our successful Northern Europe
segment from 2001.
Since taking up his new position, Sam has worked closely
with Ian Ailles and Phil Aird-Mash, who joined the Group
Executive Board during the year as UK Chief Executive Officer
for Mainstream Travel and Independent Travel respectively.
Together, they have undertaken a thorough review of our UK
segment and set out a turnaround plan to re-build
profitability.
From 1 January 2012, it has also been decided that
management and reporting of the West & East operating
segment will be split. Susan Duinhoven, who is currently
Chief Executive Officer of Thomas Cook Netherlands, will join
the Group Executive Board as Chief Executive Officer of a new
West Europe operating segment, comprising France, Belgium
and the Netherlands. In addition, management of our
operations in Russia, Poland, the Czech Republic and
Hungary will transfer to the leadership of Peter Fankhauser,
Chief Executive Officer of our Central Europe segment.
Following these changes, Thomas Döring, formerly Chief
Executive Officer of the West & East segment, who started
building the Group Online Travel Agency (OTA) function a
year ago, will turn his full attention to Group e-commerce
and hotel-only business.
Anne Billson-Ross also joined the Group Executive Board
during the year, following her promotion to Group & UK
Human Resources Director. Anne replaced Paul Wood, our
former Group HR Director, who resigned from the Group
Executive Board to take on the challenge of an operational
role within the UK business. Jürgen Büser, Group Strategy
Director, and Ian Derbyshire, Chief Executive Officer, UK
also resigned from the Group Executive Board to pursue
opportunities outside Thomas Cook.
The Group Executive Board has continued to show strong
leadership throughout the year and we would like to thank
them for their energy and resolve.
Directors’ Report: Business ReviewTo be a successful business today, we need leadership from the top. 9
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lease and maintenance costs by £22m. The proposed aircraft cuts
are focused in long haul which has a disproportionate risk profile.
2. Refocus the product strategy in mainstream package holidays
(£15m improvement)
The UK business will consolidate its hotel portfolio and seek
to build upon its successful exclusive and differentiated
product concepts.
The business has cut over 500 under-performing hotels for Summer
12 from a portfolio of over 2,200 hotels in Summer 11. We have
boosted this by adding 90 hotels, almost half of which are exclusive
to the UK or offer differentiated features. The hotel portfolio will
be further reduced to circa 1,500 hotels over the next three years,
with the aim of concentrating customers into fewer, higher
performing hotels to drive stronger supplier relationships,
higher customer satisfaction rates and efficiency benefits.
The aim is to increase the share of differentiated product
from the current 31% to 50% of mainstream holiday sales
over the next three years, which we believe should deliver an
incremental margin of circa £25 per customer compared to
non-differentiated product, vs £18 per customer in FY11.
The intention is to build upon the UK’s successful concepts,
including Style, Aquamania and SunStar, which grew in
aggregate by 39% to 800,000 passengers during 2011 and
generate significantly higher customer satisfaction.
3. Improve yield management (£35m improvement)
Yield management has not been effective, with high frequency
price changes driven by volume coupled with high discounting
at the point of sale which resulted in margin erosion. Going
forward, the focus will be on increasing margins by improving
central yield management capabilities and by implementing
clear parameters in retail discounting.
To drive yield management improvement, the business is
extending its existing yield management system across all
UK tour operator products and implementing a new system
for seat-only flight products. In addition, the business is
strengthening its control processes, management information
and yield tools to bolster its trading strategy and gain
more benefit from better yields on its early season sales
and in the lates market, closer to customer departure.
Retail discounting has not been adequately linked to yield
management. As a result, management estimate the business
has lost considerable margin opportunity, for example, by
unnecessary retail discounting on high demand product.
To remedy this, retail discounting policies and incentives will
be closely aligned with central yield decisions and focused on
products where it is clear consumers need incentives to buy.
from left to right:
back row: Michael Friisdahl, Thomas Döring, Pete Constanti, Phil Aird-Mash, Ralf Teckentrup,
Anne Billson-Ross, Ian Ailles, Peter Fankhauser, Lars Löfgren, Derek Woodward, Susan Duinhoven.
front row: Sam Weihagen, Paul Hollingworth.
See page 42 for full biographies
10
Joint statement from the Group Chief Executive Officer
and Group Chief Financial Officer continued
4. Rationalise distribution (£25m improvement
in the Joint Venture)
Increasing the proportion of in-house distribution is
strategically important as it reduces external commission costs,
provides better yield control and drives higher repeat business.
The UK business high street retail shops are particularly
important for package holiday sales, with 48% of package
holiday sales made through this channel in 2011. Given the
importance of high street retail, the UK business recently sought
to bolster its position through its retail joint venture with The
Co-operatives which completed on 4 October. This is expected
to increase controlled distribution to 84% for mainstream. To
realise cost synergies from the joint venture, we have begun
the process of consolidating our back offices and systems.
A thorough review of the profitability of the UK business’
combined retail estate of 1,300 shops shows the current need
for a phased closure of circa 200 under-performing shops where
leases expire within the next two years. We will continue to
review the performance of the remaining portfolio as leases
come up for expiry and more customers move online. In
addition, we will continue with the modernisation programme
of our remaining stores to ensure that the brand retains
customer appeal.
We are continuing to invest in our online offering and are in
the process of upgrading and re-launching our websites in time
for peak trading. We also expect to see the current 25% share
of total UK online bookings increase to between 40% and 50%
over time. Improvements made to our UK websites are
intended to help to achieve this.
5. Operational excellence (£25m improvement)
Reviewing the performance of the business highlighted
significant operational inefficiencies, driven by a siloed
structure combined with overlapping, manual processes.
We are now focused on operational excellence and are seeking
to improve productivity, remove manual processes where
appropriate and focusing on cost effectiveness.
In total, the UK management has identified 20 projects across
the business where they believe they can improve operational
effectiveness, spanning retail and call centre staff rostering, the
introduction of paperless ticketing and a reduction in brochure
wastage. Most of these projects are expected to complete within
the next 12 months, with a £10m benefit in FY12.
“To stabilise the business and rebuild
profitability, the UK management
team has begun implementation
of a turnaround plan.”
6. Independent business
The independent business has grown substantially in recent
years, largely through acquisitions. This has led to a collection
of businesses which are not well coordinated and, in some
cases have been significant underperformers. The focus
now is on improving the management of these businesses
and better integrating them in order to leverage off each
other and achieve the growth that is forecast for this market.
There are two distinct operating models, risk and non-risk,
and in total they carried 2.9m passengers in the financial
year ended 30 September 2011. The risk model has many
similarities to the mainstream business, with niche concept
products across the activity, youth and sport brands. The
non-risk model, which includes accommodation only, dynamic
and scheduled packages, has been driving the growth in
recent years and is expected to continue to do so.
We are taking further action in the niche specialist businesses,
targeting an increase in passenger volumes and improvement
in margin. Neilson, for example, is expecting to increase the
number of its activity holiday properties from 8 to 10 and
expects to drive a 22% increase in passengers as a result. The
youth brand Club 18-30 has been expanding its concepts and
now includes music festival formats such as NOMUD and
the Big Reunion, which are expected to continue to grow.
Growth in the non-risk business is supported by growth in the
market environment. The management team is targeting an
increase in market share through better leveraging the UK’s
distribution platform and increasing awareness of the breadth
of products available under the umbrella Thomas Cook brand.
Our bed banks, Hotels4U and Medhotels, which have grown
strongly are currently mainly wholesale and have performed
well. There is also a significant opportunity to sell direct to the
consumer and better allow customers to create dynamic
packages with Gold Medal, our flight consolidator and
ancillary business providers.
stRengthenIng the balance sheet
Since early 2010, Thomas Cook has been subject to a number
of external shocks, most notably the closure of European
airspace due to volcanic ash clouds in April 2010, and
more recently the political and civil unrest in the important
MENA region destinations, the combination of which have
significantly reduced the Group’s financial flexibility.
We have also seen a more recent deterioration in trading
as concerns over the Eurozone economy start to impact
consumer confidence.
Against this backdrop, the Board is undertaking a strategic
review with the objective of delivering a substantial reduction
in net debt over the next 18 months.
The Board has already taken the following steps to improve
the Group’s liquidity position and reduce its net debt:
Directors’ Report: Business Review 11
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outlooK
The first half of the current financial year and in particular
the first quarter is expected to be adversely impacted by
the uncertain economic environment across Europe, input cost
inflation and the ongoing disruption in MENA. In addition, the
acquisition of The Co-operatives and Intourist will add to
seasonal losses in the first half given that these businesses earn
all their profit over the summer months. We have taken action
to cut capacity and costs where appropriate. In the second half
results should begin to see the benefits of the UK turnaround
plan. Overall, we expect it to be another challenging year given
the economic backdrop and we will focus hard on
strengthening the balance sheet and improving the
performance of our UK business.
Sam Weihagen
Group Chief Executive Officer
13 December 2011
Paul Hollingworth
Group Chief Financial Officer
13 December 2011
Amendment of the Group’s existing bank facilities
On 25 November 2011, we announced that we had reached
agreement with our banking group to amend the terms of our
existing bank facilities to widen our financial covenants and
increase financial flexibility for the Group until March 2013.
In addition, we agreed a new £200m facility to provide
additional headroom. This replaces the £100m short-term
facility announced on 21 October 2011 and is available until
April 2013.
Non-core asset disposal programme
On 12 July 2011, the Group announced its intention to
dispose of certain hotel and surplus assets, which are expected
to generate net proceeds of up to £200m over a six to eighteen
month period. To date, the Group has completed four
disposals. These include its share of the sale of certain hotel
assets in Spain; its minority stake in Jacaranda, a hotel in
Tenerife; Moranda, a vacant hotel in Mexico and its Dutch
retail business. These four transactions will reduce the Group’s
net debt by £35m.
In addition, on 12 December, the Group signed a binding
agreement for the sale of its interest in HCV, the indirect
owner of five hotels and a golf course in Spain. This transaction
is expected to reduce the Group’s net debt by a further circa
£81m. The transaction is subject to shareholder approval and
is expected to complete in the first quarter of 2012.
The Group continues to review options for the sale of other
non-core assets.
Suspension of dividends
On 29 September 2011, the Board announced its decision
not to declare any further dividend payments whilst the Group
re-builds its balance sheet. In the 2010/11 financial year the
Group paid out dividends of £92m.
people
We are immensely grateful to all our people for their efforts
this year, particularly those within our operating segments and
markets who have improved their results and achieved a better
performance even in spite of the significant disruption from
the MENA situation.
The implementation of the UK turnaround plan will inevitably
affect our people and while it will offer new opportunities for
many, it is expected to result in an overall reduction of our UK
workforce. We appreciate how unsettling change can be and
will work to minimise both the uncertainty and the negative
impact for those adversely affected.
12
Market review
despite restrained growth in recent years, the long-term outlook for
the international tourism industry remains attractive.
oveRall tRavel maRKet 2010:
coRe maRKet1 tRends
There are two distinct segments in the leisure travel market:
direct suppliers and travel intermediaries. Direct suppliers are
the airlines, hotels and cruise companies that sell directly to
the customer. Thomas Cook operates in the travel intermediary
segment, made up of travel agents and tour operators.
maInstReam
v Independent
The mainstream travel market
will continue to grow in real
Figure 5:
terms; however, independent
travel will drive the majority
Mainstream v independent
of growth.
onlIne gRowth
Online growth is predicted
to be faster than offline
Figure 6:
growth in mainstream
and independent.
Online growth
£4bn
Travel
intermediaries
£96bn
£178bn
Total
£274bn
£63bn
£29bn
Direct suppliers
Financial services
Independent travel
Mainstream travel
110
£5bn (+1.1%)2
110
£5bn (+1.1%)2
£34bn
(+7.3%)2
£4bn
£24bn
£68bn
£72bn
(+1.1%)2
£73bn
(+3.2%)2
£4bn
£63bn
£29bn
£32bn
(+2.1%)2
90
70
50
30
10
90
70
50
30
10
2009
2014
2009
2014
Financial services
Independent travel
Mainstream travel
Financial services
Online
Offline
Source: Euromonitor
source: euromonitor
1
2 Real Compound Annual Growth Rate 2009 to 2014.
Thomas Cook top ten source markets comprising UK, Germany, France, Belgium, the Netherlands, the four Nordic countries and Canada.
Growth in international tourism is closely correlated to
economic growth and has enjoyed strong and sustained
growth for most of the last three decades. The long-term
trend has been for international leisure travel to outpace the
general economy. While the global financial crisis in 2008
and subsequent contraction in gross domestic product and
employment across many Western economies, combined
with fuel and currency volatility, have restrained growth
in recent years, the long-term outlook for the industry
remains attractive.
In relation to the Group’s top 10 source markets of the UK,
Germany, France, Belgium, the Netherlands, the four Nordic
countries and Canada, it is estimated by Euromonitor that:
• the intermediary travel market, which totalled
approximately £96bn in 2009, is expected to grow
by 2.8% each year from 2009 in real terms to reach
approximately £110bn by 2014;
• the market for mainstream package holidays, which
comprised approximately £29bn of the total intermediary
market in 2009, is expected to show modest but further real
growth of approximately 2.1% each year from 2009 to
approximately £32bn in 2014;
• independent travel, comprising approximately £63bn of the
total intermediary market in 2009, is forecast to grow by
3.2% each year from 2009 in real terms to approximately
£73bn in 2014; and
• internet distribution is estimated to increase its share of
intermediary sales from approximately 25% in 2009 to
approximately 31% in 2014.
Alongside our more established markets, leisure travel demand
is increasing rapidly in the fast-growing economies of Russia,
India and China, offering good opportunities for further growth.
Our strategy is designed to capture value and growth from
each of these key areas.
Directors’ Report: Business Review
13
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Our business model
Our products
Our multi-channel distribution
Retail
In most of the Group’s operating segments, retail stores
remain a significant distribution channel for mainstream
package holidays and, in the UK, Thomas Cook and The
Co-operatives have recently merged their travel retail
networks to create the UK’s largest travel retailer.
Online
Online is an increasingly important channel for the
distribution of both mainstream package holidays and
independent travel products. During 2010, Thomas Cook
brought together its existing online activities in the UK,
Germany, France, the Netherlands and Belgium into
a pan-European Online Travel Agency (OTA), based
in London.
Mainstream
Our core product category is mainstream charter packages
where two or more components of travel, such as flights,
hotels and transfers, are bundled together and offered
for sale as a single product through various distribution
channels. For mainstream package holidays, the customer
pays the holiday deposit and balance to Thomas Cook
before departure. Thomas Cook then typically pays its
airline partner close to departure and the hotel
accommodation provider after the holiday is complete.
Independent
Independent travel products encompass holiday
components, dynamic packaging and scheduled tours and
give customers greater flexibility to tailor their holiday
to meet their own requirements in terms of destination,
duration, variety and quality. Thomas Cook aggregates
holiday or component content from a wide range of
suppliers and sells this either to other travel agents on a
business-to-business basis or direct to consumers. Thomas
Cook does not own the inventory but is paid a commission
by the holiday or component provider based on the price
of the booking.
Travel-related financial services
Our travel-related financial services include foreign
exchange and travel assurance and are bought by
customers alongside their holiday purchases.
Adapting our business model in our individual markets
The Group operates different business models within each of its major markets.
In the UK, Northern Europe, and in
Belgium in the West & East Europe
operating segment, the primary
business model is that of a vertically
integrated charter tour operator, based
on use of the Group’s own airlines, and
distribution of products principally
through in-house retail, internet and
call centres.
In most other Continental European
markets, where the Group has either a
smaller volume of customers or a
lower market share, the vertically
integrated business model is less
effective and ownership of an airline
is not considered a prerequisite for
successful tour operations.
In Germany, the Condor airline
provides aircraft seats to Thomas
Cook’s German tour operator on an
arms-length basis, and also sells
directly to other tour operators and
seat-only customers.
We offer a wide range of mainstream and independent holiday options, together with a selection of travel-related financial services. We adapt our business model to the characteristics of individual markets. Our scale provides opportunity to drive economies in sourcing and operations.HOW We create valueWe create value by selling three product categories which are distributed through multiple channels, both in-house and through third-parties. Additionally we sell third-party products for which we receive a commission.
14
Our strategy
This strategy is supported by a multi-channel distribution
approach and, within this, the Group has placed a strong
emphasis on both in-house retail operations and growing
e-commerce through development of a central OTA.
Our focus is to drive growth organically and reduce net
borrowings by improving operating and free cash flow
generation, with an emphasis on protecting margin rather than
market share. Where appropriate to advance our strategy, we
have entered into mergers and acquisitions that have offered
value-creating consolidation opportunities in existing markets
or growth opportunities in new product areas or markets.
MainstreaM package travel
Our key objectives in mainstream package travel are to
improve product mix and reduce costs, thus driving an
improvement in margin.
Product mix
Product mix is a key factor in attracting and retaining
mainstream customers and in driving higher margins. Within
each of our operating segments, we are focused on optimising
the proportion of exclusive hotels, differentiated and unique-
concept holidays and replicating successful formats across a
range of destinations. As these products are developed and
offered exclusively by the Group, they do not lend themselves
to direct price comparison. To the extent that customers value
their unique features, these products also tend to encourage
earlier booking and higher loyalty. As a result, exclusive and
differentiated products attract a higher average selling price
and margin than our more standard packages.
• This year, we have expanded exclusive and differentiated
bookings as a proportion of total package holiday bookings
from 35% to 45% in the UK; and from 45% to 47% in West &
East Europe. The exclusive and differentiated proportion has
remained constant at 28% and 90% in Central Europe and
Northern Europe respectively.
Cost management
Cost management is another important element in a successful
mainstream package holiday operation. Accommodation and
non-fuel aviation costs were approximately £3.3bn and £2.8bn
respectively in the financial year ended 30 September 2011,
so a relatively modest movement can have a significant impact
on performance. In these areas, the Group has taken action to
coordinate purchasing across its segments, leveraging its
combined scale.
• This year, working together across the Group, we agreed
a replacement and harmonisation programme for our
narrow body aircraft fleet onto the Airbus 320 family. The
programme will run between 2012 and 2017. It will improve
fuel efficiency and reduce maintenance costs, increase
interoperability and improve customer experience. It
delivers optimum flexibility by sourcing new aircraft
through a combination of firm and flexible orders with
the manufacturer and through accessing the aircraft
leasing market.
• In addition, we successfully completed our airline synergy
project, delivering a further £19m of incremental annualised
savings in our fleet running costs. This project included a
wide range of measures such as implementation of best
practice in fuel efficiency.
independent travel
Our principal objective with independent travel has been to
grow revenues and profits by expanding the product range to
include accommodation and flight components that customers
can buy separately, by growing scheduled packages and by
investing in dynamic packaging capabilities that enable travel
agents or individual customers to combine their chosen
components into a package at the point of sale.
As part of this strategy, we have made a number of important
acquisitions in recent years, including the acquisition of
accommodation and flight consolidators Hotels4U.com,
Med Hotels and Gold Medal in the United Kingdom, and
TriWest in Canada.
distribution
The Group operates a multi-channel distribution strategy,
selling through its own and third-party channels. The Group’s
own distribution channels comprise retail stores, online
via various Group websites and call centres.
In-house distribution gives the Group greater control over the
volume and cost of distributing its products and, over the last
Directors’ Report: Business ReviewOur strategy is to maximise value from our more mature mainstream package travel operations and to capitalise on our scale by continuing to seek a leading position in the growing independent travel segment. 15
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three years, the Group has increased in-house distribution
of package holidays from 51% to 53% of bookings.
In most of the Group’s operating segments, retail stores
remain a significant distribution channel for mainstream
package holidays. However, over time, the Group’s strategy
is to increase the share of mainstream package holidays
sold online; the internet is now the primary channel for the
distribution of Thomas Cook’s mainstream package holidays
in Northern Europe.
Immediately following the financial year end, Thomas Cook
and The Co-operatives merged their high street networks
to create the UK’s largest high street travel retailer.
To expand online sales of both mainstream and independent
products, during 2010 we brought our existing online activities
in the UK, Germany, France, the Netherlands and Belgium
together into a central organisation, the OTA, which is based in
London. With approximately 256 employees, the OTA brings
together specialists from within the Group with new talent
from across the online industry. Since its inception in 2010,
the OTA has improved online sales and delivered a number of
important developments:
• online distribution of the Group’s mainstream package
holidays has increased from 22% of total bookings in 2009
to 25% in 2011;
• gross transaction value of OTA bookings has grown 35%
from approximately £857m in 2009 to approximately
£1,155m in 2011;
• a common technology platform which is being rolled out
across the Group’s key websites will consolidate the previous
17 platforms on to one to improve functionality, stability
and efficiency; and
• significant improvements to the graphical user interface,
including better search functionality and more
comprehensive product and price information, will be
deployed across all sites in the coming months to drive
better customer experience and conversion rates.
group key performance indicators
in order to measure progress against
our strategy, the board and senior
management team monitor a range
of key performance indicators.
airline synergies
aim Deliver £35m annualised
savings in Group aviation costs
(non-fuel) and ongoing efficiency
progress £19.4m incremental
annualised savings achieved in
the year ended 30 September 2011
independent travel*
Annualised savings £m
2
2009
2010
2011
21
aim Increase independent
travel sales as a proportion
of Group revenue
progress Independent travel sales were
lower at 25% of Group revenue
Group revenue %
2009
2010
2011
controlled distribution
aim Increase in-house distribution
of mainstream travel products
progress In-house sales of
mainstream travel products
increased to 53%
online travel agency (ota)
Share of in-house
distribution %
2009
2010
2011
40
24
26
25
51
52
53
aim Develop a top three position in
the European OTA market, targeting
gross bookings with a value of
around £3.5bn
progress 10% year-on-year increase
in OTA gross bookings value to £1,155m
Gross bookings value £m
2009
2010
2011
857
1,046
1,155
group underlying operating profit margin
aim Increase Group operating profit
margin over the medium-term
progress Margin fell to 3.1%, principally
as a result of difficult trading in the
UK and the impact of disruption in the
MENA region, particularly in France
Group operating
profit margin %
2009
2010
2011
4.5
4.1
3.1
*
Independent travel has been redefined to exclude UK seat-only sales and to include
Club 18-30 and Neilson.
16
Operating review:
UK
UK performance was poor and a
new management team has reviewed
operations and developed a turnaround
plan to rebuild profitability.
Brands
Mainstream
Independent
Distribution
Directors’ Report: Business Review 17
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The results of our UK segment reflect significant underperformance
during a very difficult year. Underlying profit from operations was
reduced to £34.1m (2010: £107.5m) and the underlying operating
profit margin reduced to 1.0% (2010: 3.4%). Within the overall UK
segment, operations in the UK generated £3,199m revenue and
underlying operating profit of £19.5m with operations in India
and Egypt generating the balance. The adverse impact of political
unrest in the MENA region on the UK business’ profit from
operations for the year was £15.2m.
External trading conditions were tough as consumer sentiment
deteriorated and we faced significant input cost increases but these
external factors were exacerbated by internal operating inefficiency
and a lack of responsiveness. As described in more detail elsewhere
in this report a new management team was appointed during the
year and a thorough review of the business undertaken. This has
identified significant opportunities to improve performance
through actions including optimising distribution, improving
yield management and product strategy.
Our tour operators suffered most from increased input costs and
were unsuccessful in passing these on to customers due to price
sensitivity resulting from a combination of low consumer
confidence and increased competitive pressure. However, our
UK airline delivered a strong operational performance with good
on-time statistics and significant operating cost savings. Following
the overall deterioration in trading and the management changes,
we undertook a review of the UK balance sheet and have identified
several areas where recovery of the carrying value of assets at the
previous year end was no longer considered achievable or where
recognition of additional liabilities was considered appropriate.
The overall impact of this reassessment was £49.7m and given
its size and impact, it has been disclosed separately within the
Group results.
The increase in mainstream passengers of 1.5% to 3.7m and
capacity of 1.9% was principally in short haul as passengers
moved away from medium haul travel due to the MENA disruption.
Similarly it was in short haul and long haul that we saw the largest
increases in average selling price, although this was insufficient
to cover the effect of the higher input costs.
Controlled distribution of our mass market holidays rose to 73.8%
(2010: 71.8%), primarily due to increased call centre and controlled
retail bookings. Internet distribution of mass market products
continued to grow in absolute terms but following higher growth in
other channels it represented 30.1% of departed passengers, down
from 31.1% in the previous year. The Co-op transaction completed
on 4 October 2011, adding further to our network of controlled
distribution. Although the transaction has been anticipated for
a considerable period of time, exchange of detailed operating
information was necessarily restricted prior to completion and our
plans to integrate the additional outlets and maximise efficiency
and synergies are now being fully developed and implemented.
Our Independent businesses had a mixed year with good growth
in Hotels4U and our Essentials businesses but margin and volume
pressure in Gold Medal. Gold Medal faced aggressive competition
in its markets and a decline in the effectiveness of key third party
agents which was exacerbated by poor systems which made
recognition of the underlying margin performance difficult.
Our Indian and Egyptian businesses, which are included in the UK
segment for reporting purposes, reported underlying profit from
operations broadly in line with the prior year. Thomas Cook India is
benefiting from improving economic conditions with passenger and
foreign exchange transactions both ahead. Egypt has seen declining
activity which has affected gross profit but good cost management
has mitigated the impact on its profit from operations.
UK at a glance
FInancIal hIghlIghts1
Key performance indicators
Mass market risk
Passengers†
Capacity††
Average selling price#
Load factor†††
Brochure mix##
Controlled distribution‡‡
Internet distribution‡‡
FY11
FY10
Change
+1.5%
+1.9%
+2.4%
-0.1%
+1.7%
+2.8%
-3.2%
73.8%
30.1%
71.8%
31.1%
Product mix
Medium haul
4 and 5 star
All inclusive
Exclusive and
differentiated
Revenue*
£3,255.0m
+3.6%
FY11
74%
50%
54%
FY10
75%
47%
50%
FY09
72%
44%
41%
FY08
65%
41%
31%
45%
35%
32%
–
Underlying profit
from operations**
£34.1m
-68.3%
Underlying operating
profit margin***
1.0%
-70.6%
5
3500
2800
2100
1400
700
0
3
,
2
5
5
.
0
3
,
1
4
3
.
4
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50
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1
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7
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5
4
3
2
1
0
3
4
.
1
3
.
4
1
.
0
2010
2011
2010
2011
2010
2011
1
The Group statutory financial statements for the year ended 30 September 2011
and prior year comparators are set out on pages 74 to 127.
See Appendix 1 on page 137 for key
Ian Ailles – Chief Executive Officer, Mainstream, UK Phil Aird-Mash – Chief Executive Officer, Independent, UK
18
Operating review:
Central
Europe
another year of solid progress,
boosted by a strong economic backdrop
and the successful integration of newly
acquired turkish tour operating
specialist, Öger.
Directors’ Report: Business Review 19
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central eUrope at a glance
FInancIal hIghlIghts1
Key performance indicators
Mass market
Passengers†
Flight inclusive
Non-flight inclusive
Average selling price#
Controlled distribution‡‡
Internet distribution‡‡
FY11
FY10
Change
+14.0%
+16.5%
+8.3%
+3.3%
-5.1%
-4.2%
22.5%
6.9%
23.7%
7.2%
Revenue*
£2,348.8m
+19.0%
Underlying profit
from operations**
£69.8m
+19.1%
Underlying operating
profit margin***
3.0%
2500
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1000
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2
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3
4
8
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7
3
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4
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60
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6
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5
8
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5
4
3
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1
0
3
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0
3
.
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2010
2011
2010
2011
2010
2011
1
The Group statutory financial statements for the year ended 30 September 2011
and prior year comparators are set out on pages 74 to 127.
See Appendix 1 on page 137 for key
Brands
Our Central Europe segment delivered another good result
this year with underlying profit from operations up 19.1% to
£69.8m (2010: £58.6m) and an underlying operating margin
of 3.0% maintained. The adverse impact of disruption due
to the unrest in the MENA region on underlying profit from
operations was £4.9m and the benefit from exchange
translation was £4.1m. The overall margin we achieved
in Germany (including Airlines Germany) improved from
4.1% to 4.4%.
Currency-adjusted revenue growth was 16.9% and the
acquisition of Öger Tours at the start of this financial year
drove the largest element of this increase, comprising 12.1%.
The integration of the Turkish specialist tour operator has been
successfully managed and the business added £8.6m to profit
from operations for the segment. Revenue growth was also
driven by a move towards flight inclusive products causing
a mix effect on the average selling price. Underlying average
selling prices of both flight inclusive and non-flight inclusive
were also increased as cost increases were passed on
to customers.
The segment continued to see growth in dynamic packaging,
adding further to the existing flexibility of the business model
which has enabled it to perform well despite the disruption
arising from MENA and the competitive price pressure in
the German market.
The reported proportion of departed passenger bookings
through controlled and internet distribution has fallen in
the year as a result of the inclusion of Öger Tours, which will
increase bookings through our controlled distribution networks
in the future. Excluding Öger Tours, controlled and internet
bookings were ahead of the prior year by 0.8% and
4.1% respectively.
Dr Peter Fankhauser – Chief Executive Officer, Central Europe“ Our Central Europe segment delivered another good result this year, with continued growth in dynamic packaging.”
20
Operating review:
West &
East Europe
Impacted by the performance of
the French business, where results
were hit heavily by lower demand
for holidays to the important French-
speaking, north african destinations.
Directors’ Report: Business Review 21
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West & east eUrope at a glance
FInancIal hIghlIghts1
Key performance indicators
Mass market
Passengers†
Flight inclusive
Non-flight inclusive
Average selling price#
Controlled distribution‡‡
Internet distribution‡‡
FY11
FY10
Change
+2.0%
+3.7%
-0.5%
+0.2%
56.9%
+5.3%
21.4% +11.2%
59.9%
23.8%
Revenue*
£1,901.6m
+12.0%
Underlying profit
from operations**
£40.4m
-50.7%
Underlying operating
profit margin***
2.1%
-56.3%
2000
1600
1200
800
400
0
1
,
9
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1
.
6
1
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6
9
8
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80
60
40
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0
4
0
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5
4
3
2
1
0
4
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8
2
.
1
2010
2011
2010
2011
2010
2011
1
The Group statutory financial statements for the year ended 30 September 2011
and prior year comparators are set out on pages 74 to 127.
See Appendix 1 on page 137 for key
Brands
DE JET TOURS
Our West & East Europe segment has been particularly affected
by the political unrest in the MENA region as it is an important
destination for these source markets, making up around a
quarter of the Mainstream programme for the segment overall
and 40% of the Mainstream programme for France. West & East
underlying profit from operations was £40.4m (2010: £82.0m)
and the impact on this result of the MENA disruption is
estimated at £43.5m and the benefit from exchange translation
was £4.7m. Within this, France recorded an underlying loss
from operations of £11.3m (2010: £34.4m profit), with MENA
estimated to have reduced French profits by £32m. The
underlying operating profit margin for the segment fell
to 2.1% (2010: 4.8%).
Currency-adjusted revenue in West & East Europe increased
by 9.5% year on year, in part due to the impact of the Russian
acquisition as well as increases in most markets, driven by an
increase in passenger numbers and changes in product mix
towards higher priced, flight-inclusive holidays and away from
non-flight inclusive tours. The acquisition of Intourist’s tour
operating and retail network in Russia was completed on
12 July 2011 and that business’ summer trading has added
£98.9m to revenue and £2.3m to the underlying profit from
operations for the year. The segment has driven increased
volumes through e-commerce channels during the year with
consequent increases in related IT and marketing expenses.
These increased costs together with general inflationary
pressures have been partially offset by the reassessment
of certain aircraft related liabilities.
Following the deterioration in trading and a change of
management in our French business, the carrying value of
certain assets and liabilities that had been recognised at the
previous year end has been reassessed. It is now considered
that certain accounting judgements regarding collectability of
assets and recognition of liabilities were incorrect. Revision of
these accounting judgements and a generally more cautious
approach in light of current trading conditions has resulted
in a charge totalling £13.4m in the year and the more cautious
approach has been maintained in the judgements made
at 30 September 2011. Due to the one-off nature of the
£13.4m additional charge this year, it has been included
within separately disclosed items.
Dr Thomas Döring – Chief Executive Officer, e-Commerce and West & East Europe“ Our West & East segment has been particularly affected by the political unrest in the MENA region.”
22
Operating review:
Northern
Europe
a consistent performer, northern
europe achieved further growth in
sales and profits by attracting more
customers to its strong brands and
popular holiday concepts.
Directors’ Report: Business Review 23
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Our Northern Europe segment delivered its best ever results
with underlying profit from operations of £106.3m (2010:
£91.7m) almost 16% ahead of the prior year and underlying
operating margin further improved to 9.2% (2010: 9.0%).
This success was driven by the continued focus on providing
exclusive and differentiated products and on operational
efficiency and cost control; enabling the business to continue
to improve its performance despite strong competition.
Currency-adjusted revenue was up 4.2% on the prior year,
driven by volume growth, with average selling prices remaining
broadly in line with the prior year. The negative impact of the
political unrest in the MENA region on the underlying profit
from operations was £4.9m and the benefit from exchange
translation was £8.9m.
Northern Europe’s industry-leading operating margin
is in part due to the high proportion of its bookings taken
through controlled and internet distribution and it has again
experienced strong growth in this area. Controlled distribution
through owned websites, shops and call centres accounted for
85.7% (2010: 84.4%) of departed passengers and, within that
amount, internet sales grew to 65.6% in the year.
northern eUrope at a glance
FInancIal hIghlIghts1
Key performance indicators
Mass market risk
Passengers†
Capacity††
Average selling price#
Load factor†††
Brochure mix##
Controlled distribution‡‡
Internet distribution‡‡
FY11
FY10
Change
+7.0%
+6.3%
+0.4%
+0.7%
+2.5%
+1.5%
+8.1%
85.7%
65.6%
84.4%
60.7%
Revenue*
£1,152.7m
+13.7%
Underlying profit
from operations**
£106.3m
+15.9%
Underlying operating
profit margin***
9.2%
+2.2%
1500
1200
900
600
300
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2
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4
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10
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6
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9
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2010
2011
2010
2011
2010
2011
1
The Group statutory financial statements for the year ended 30 September 2011
and prior year comparators are set out on pages 74 to 127.
See Appendix 1 on page 137 for key
Brands
Lars Löfgren – Chief Executive Officer, Northern Europe“ Our Northern Europe segment delivered its best ever results, and has industry-leading operating margins.”
24
Operating review:
North
America
Volume growth in independent
travel and overhead cost
savings delivered improved
profit on prior year.
Brands
Mainstream
Independent
Distribution
Directors’ Report: Business Review 25
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north aMerIca at a glance
FInancIal hIghlIghts1
Key performance indicators
Mass market risk
Passengers†
Capacity††
Average selling price#
Load factor†††
Brochure mix##
Controlled distribution‡‡
Internet distribution‡‡
FY11
FY10
Change
-4.4%
-6.4%
-9.0%
+2.2%
-3.0%
14.3% +18.2%
-0.8%
36.7%
16.9%
36.4%
Revenue*
£349.2m
-0.9%
Underlying profit
from operations**
£10.5m
+15.4%
Underlying operating
profit margin***
3.0%
+15.4%
500
400
300
200
100
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3
4
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12.5
10.0
7.5
5.0
2.5
0.0
1
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4
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3
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2011
2010
2011
2010
2011
1
The Group statutory financial statements for the year ended 30 September 2011
and prior year comparators are set out on pages 74 to 127.
See Appendix 1 on page 137 for key
Note: Internet and controlled distribution percentages include independent
travel bookings.
Our North American segment performed ahead of the prior
year helped by an exchange translation benefit of £0.9m,
with underlying profit from operations of £10.5m (2010: £9.1m)
despite the continuing difficult market conditions for its
Mainstream business. This business continues to experience
lower margins due to the strong price competition resulting
from overcapacity and to address this we have focused on
growing the sales of our exclusive and differentiated products
and cost reduction. The start of our new flying arrangements
with Jazz, following the collapse of our principal seat provider
in the previous year, has provided significant savings in flying
costs and substantial improvements in customer satisfaction.
Revenue in North America fell, on a currency-adjusted basis,
by 4.6% with passenger volumes and average selling prices
down. In our mass market tour operator we focused on
maximising sales of available seats and saw a consequent
increase in load factors.
Our Independent operation has continued to grow passenger
volumes and has seen improved average selling prices and
margins such that it now contributes more than 70% of the
North American passenger volumes. Within this business our
dynamic booking engine, Travelgenie, has continued to
perform well and now accounts for 17% of our Independent
land sales.
Controlled distribution rose to 42.6% following the start in
January of our licensing agreement to operate Sears Travel.
The integration of this operation is on track and delivering
significant benefits. Later in the year we signed an agreement
with the Advantage consortium of independent travel agencies,
which has added 90 stores to our franchise network. 2011
is the first year we have been able to use the Thomas Cook
brand in Canada and we are confident that its strength will
benefit our products in this competitive market.
Overhead cost reductions of approximately £5m were delivered
during the year to help keep our cost base low. Efficiency was
improved by further adoption of technology-based solutions.
Michael Friisdahl – Chief Executive Officer, North America“ Our North American segment performed ahead of the prior year, and our Independent operation has continued to grow passenger volumes.”
26
Operating review:
Airlines
Germany
Delivering its seventh successive
year of profit growth, condor
increased capacity and successfully
expanded its long haul routes.
Directors’ Report: Business Review 27
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Our Airlines Germany segment delivered another strong set
of results with underlying profit from operations up 35.6%
to £69.3m (2010: £51.1m) and underlying operating margin
growing from 5.1% to 6.2%. This improvement was achieved
despite the introduction of a new German air passenger tax
and strong competition in Germany.
Total revenue was 12.5% higher at £1,120.3m, with currency-
adjusted total revenue 11.6% ahead following the expansion
of long haul capacity. The profitable growth to long haul
destinations drove the 18.5% increase in seat only sales and the
3.8% increase in average yield, which excludes the effect of the
new air passenger tax. The adverse impact of the disruption in
the MENA region on profits was estimated at £11.7m and the
benefit from exchange translation was £3.7m.
Increased maintenance, landing and training costs were
offset by cost savings from the segment’s ongoing efficiency
programme and a refund of overcharged security fees. In
addition, the segment result benefited from lower depreciation
(£6m) and participation in the Group wide airline synergies
project which delivered savings of £9.5m.
aIrlInes gerManY at a glance
FInancIal hIghlIghts1
Key performance indicators
FY11
801.6
318.7
1,120.3
FY10
Change
708.4 +13.2%
287.8 +10.8%
996.2 +12.5%
+3.7%
-3.9%
+18.5%
+5.7%
+3.6%
+15.5%
+5.7%
+7.5%
+3.8%
+0.5%
Revenue – external*
Revenue – internal*
Total revenue*
Sold seats‡‡‡
Thomas Cook tour operators
3rd party tour operators
External seat only
Total sold seats
Sold seats‡‡‡
Europe (excl. cities)
Long haul
Total sold seats
Capacity††
Yield###
Seat load factor†††
Revenue*
£1,120.3m
+12.5%
Underlying profit/(loss)
from operations**
£69.3m
+35.6%
Underlying operating
profit margin***
6.2%
+21.6%
1250
1000
750
500
250
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2
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9
6
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80
60
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10
8
6
4
2
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6
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2
5
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2010
2011
2010
2011
2010
2011
1
The Group statutory financial statements for the year ended 30 September 2011
and prior year comparators are set out on pages 74 to 127.
See Appendix 1 on page 137 for key
Brands
Ralf Teckentrup – Chief Executive Officer, Airlines Germany“ Our Airlines Germany segment delivered another strong set of results, and cost savings were achieved in our ongoing efficiency programme.”
28
Risk management
key Risks in 2011
• Liquidity risk
• Global economic downturn
• Market and competitive pressures
• Turnaround plan for the UK business
• Security and political unrest in tourist destinations
PRinciPal OPeRatiOnal and stRategic Risks
Risks
imPact
mitigatiOn
downturn in the global economy and
in the economies of our source markets
leading to a reduction in demand for
our products and services
For further information see pages 6 to 27
Pressure on volumes
and margins
Flexible and asset-light business model:
• Aircraft operating leases with staggered
Fall in demand for traditional package
tours and competition from internet
distributors and low-cost airlines
For further information see pages 6 to 27
Reduction of revenue
and pressure on margins
Failure to implement the Uk
turnaround plan
For further information see pages 7 to 11
Projected cost savings and
profitability improvements
not realised
maturity profiles
• Committed hotel capacity is minimised
• Changes in capacity can be made late into
the booking season
• Tight cost discipline with ability to cut costs
further if necessary
Strategy:
• Maximise value from mainstream packages
(improved product mix, increased margins,
reduced costs)
• Become a leading provider of independent travel
• Increase online distribution (as part of a multi-
channel approach)
• Ensure our own in-house airlines remain
cost competitive
• Board review of progress and implementation
timescales for projects on key focus areas of airline,
product strategy, yield, distribution, operational
excellence, independent business
• Initiatives planned to generate £110m annualised
improvement to profitability following a phased
build-up over three years
Directors’ Report: Business ReviewWe 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 54. 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.During the year the focus has been on the key risks of liquidity, the management of capacity in response to difficult trading conditions (particularly in the UK and in France), the consequences from the civil and political unrest in the MENA region and the need to refresh much of the Group’s information technology infrastructure.Over the year we have significantly improved the mitigation of certain risks including the closure of the UK final salary pension scheme, further development of business continuity plans and the renegotiation of banking facilities.The focus next year is expected to remain on market-related risks and on delivering the initial actions of the turnaround plan for the UK business.Thomas Cook Group plc, like all businesses, faces risks and uncertainties as we conduct our operations and execute our strategy. 29
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PRinciPal OPeRatiOnal and stRategic Risks cOntinUed
Risks
imPact
mitigatiOn
any significant damage to the group’s
reputation or brands
Loss of trust, reduced
sales and loss of profits
• Regular review of the risks within propositions
and destinations
For further information see pages 6 to 27
environmental risks and regulations
For further information see pages 35 to 39 and
in the full online Sustainability Report which
can be found, from February 2012, at
www.thomascookgroup.com/sustainability
a major health and safety incident
For further information see pages 35 to 39 and
in the full online Sustainability Report which
can be found, from February 2012, at
www.thomascookgroup.com/sustainability
loss of, or difficulty in replacing,
senior talent
For further information see pages 38 to 39
• Checks that supplier performance meets brand
requirements
• Checks on accuracy of brochures, marketing materials
and prices
• Review of customer satisfaction statistics and
complaint handling
• Board review of significant issues
• Full sustainability programme as detailed in the
Sustainability Report
• Health and safety management
embedded in each business with central
coordinating function complemented by
destination audits
• Group Health & Safety strategy in place, which
is regularly reviewed by the Health, Safety &
Environmental Committee
Change in travel patterns
and potential damage
to the Group’s reputation
or brands
Loss of trust, reduced sales
and loss of profits
Unplanned loss of critical
talent from key positions
adversely impacting
business performance
both in the short and
medium-term
• Regular succession and talent reviews
within each business segment
• Succession planning established for senior
roles – periodic review by the Board
• Competitive package and career development
opportunities with key roles identified
natural catastrophe including closure
of airspace
Loss of business and risk
of loss of life or injury
• Tried and tested emergency procedures in place
to react quickly, including evacuation if necessary
disruption to information technology
systems or infrastructure, premises or
business processes
• Ability to switch to other markets and change
capacity at short notice
Business disruption and
loss of profits
• Close management of service levels and
change processes
• Vulnerability reviews of systems and infrastructure
• Business continuity management and disaster
recovery arrangements
• Contract with Accenture provides one point
of contact and control for the majority of the
Group’s information technology infrastructure
Performance failure by outsourced
partners and third-party suppliers
Business disruption and
loss of profits
• Service level agreements and service issue
management in place
• Confirmation of key supplier business
continuity arrangements
30
Risk management continued
PRinciPal Financial Risks
Risks
imPact
mitigatiOn
liquidity and counterparty credit risks
For further information see pages 31 to 34 and
in Note 23 to the Financial Statements
Difficulty in meeting financial
commitments as they fall due
• Actively managed Board-approved
counterparty and treasury policies
• High focus on cash management
throughout the organisation
• Short and medium-term cash flow
forecasting and headroom tracking
extent of borrowings
For further information see pages 31 to 34 and
in Note 20 to the Financial Statements
Operational restrictions due to size
of debt service obligations
• Refinancing and reduction of net
borrowing levels
commodity risk: fuel, foreign currency
and interest rate risks
Costs incurred may not be recovered
from customers
• Selling price flexibility (surcharges)
and scenario planning
For further information see pages 31 to 34 and
in Note 23 to the Financial Statements
Breakdown in internal controls
For further information see the Corporate
Governance Report on pages 43 to 55
tax risk
For further information see Note 25 to the
Financial Statements
Pension liabilities
For further information see Note 35 to the
Financial Statements
PRinciPal OtheR Risks
Increase in currency denominated
costs (i.e. jet fuel and hotels)
• Actively managed Board-approved
hedging and treasury policies
Increase or uncertainty in
financing costs
Financial loss, accounting errors
or fraud
• System of internal control in place,
which is continually monitored
• Internal audit activity
Inability to utilise prior year losses
resulting in higher taxation charge
• Regular monitoring of forecasts and
high risk areas that may affect the value
of deferred tax assets
Additional funding for retirement
schemes may restrict investment
within the business
• Monitoring of pension scheme assets
and liabilities and agreed timescales
for funding any deficit
Risks
imPact
mitigatiOn
security, political or terrorist risks in
key tourist destination markets
Potential loss of bookings,
increased costs
legal and regulatory risks (in particular
relating to licences and regulations
for airlines, package holidays and
consumer protection)
Inability to trade due to
loss of licence
Substantial fines and damage
to reputation
• Ongoing monitoring by management
• Flexible and asset-light business model
providing ability to switch to other
markets and change capacity at
short notice
• Active legal and regulatory management
programme in place
competition law and anti-trust
Substantial fines and loss
of reputation
• Specific training programme on
competition law across the Group
with monitoring of compliance
Directors’ Report: Business Review Financial review
Financial Results and PeRFoRmance Review
£m (unless otherwise stated)
Revenue
Underlying profit from operations1
Share of results of associates and joint venture
Net investment loss
Finance charges
Underlying profit before tax
Separately disclosed items
(Loss)/profit before tax
Underlying earnings per share (p)
Basic loss per share (p)
Dividend per share (p)
Free cash flow2
Net debt
31
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Year ended
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9,808.9
Year ended
30 september
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8,890.1
Year-on-year
change
+918.8
303.6
(2.3)
(4.8)
(121.9)
174.6
(572.8)
(398.2)
11.7
(60.7)
3.75
17.9
890.9
362.2
3.2
(1.5)
(116.1)
247.8
(206.1)
41.7
20.4
(0.3)
10.75
(31.8)
803.6
-58.6
-5.5
-3.3
-5.8
-73.2
-366.7
-439.9
-8.7
-60.4
-7.0
+49.7
87.3
1
2
Underlying profit from operations is defined as earnings before interest and tax, and has been adjusted to exclude all separately disclosed items. It also excludes our share of the results of
associates and joint venture and net investment income.
Free cash flow includes cash from operating activities, purchase and proceeds of disposal of tangible and intangible fixed assets and interest paid.
income statement
Revenue and underlying profit from operations
Group results were heavily impacted by the disruption caused by
the Arab Spring on our important MENA destinations, particularly
in our French source market, and a poor performance from our
UK business.
Group revenue for the year increased by 10.3% to £9,808.9m (8.1%
at constant currency). Revenue benefited from a modest volume
uplift and price increases in part due to change in mix. In addition,
the acquisition of Öger Tours by Central Europe and Intourist by
West & East Europe towards the end of the year added circa £341m
to the Group’s revenues during the period. Group revenue was
derived 74% from mainstream travel, 25% from independent travel
and 1% from financial services. 52% of passengers bought
mainstream travel products and 48% of passengers bought
independent travel products.
Group underlying profit from operations was £303.6m, a decrease
of £58.6m on the prior year. We estimate that disruption to our
important MENA destinations adversely impacted underlying profit
from operations by circa £80m and of that impact, around £32m
was incurred in France where around 40% of sales are typically to
North Africa in a given financial year. Underlying profit from
operations in the UK segment was £73m down on the prior year as
a result of both the MENA impact and a squeeze on margins. UK
margins were down as a result of rising input costs and price
competition as customers’ disposable incomes were squeezed by
tough economic conditions. As commented on elsewhere in this
report, we are currently implementing a UK turnaround plan.
Offsetting these adverse results were improved underlying profits
from operations in Northern and Central Europe and Condor, our
German airline.
The main drivers of the year on year fall in underlying profit were:
£m
2010 Group underlying profit from operations
Trading
Increase in fuel and accommodation costs
Cost and lost margin impact of MENA disruption
Lost margin impact of Volcanic Ash Cloud disruption in FY10
Cost savings
Inflation, depreciation, exchange translation and other
2011 Group underlying profit from operations
362.2
(30.1)
(18.5)
(80.2)
29.2
84.0
(43.0)
303.6
It is estimated that exchange translation has positively impacted the translation of our overseas operations results into Sterling
by circa £22m.
Against a very difficult trading backdrop, the Group achieved a £49.7m improvement in free cash flow and going forward we are fully focused on strengthening the balance sheet.
32
Financial review continued
sePaRatelY disclosed items
affecting profit from operations
Exceptional operating items (excluding balance sheet review and impairment)
IAS 39 fair value re-measurement
Amortisation of business combination intangibles
Balance sheet review and impairment
affecting income from associates and Jvs
Profit on disposal of associates
affecting net finance costs
Exceptional finance charges
IAS 39 fair value re-measurement
total
Separately disclosed items
Separately disclosed items consist of exceptional operating and
finance items (including the impact of a review of balance sheet
carrying values), IAS 39 fair value re-measurement, profit or
loss on disposal of associates and the amortisation of business
combination intangibles. These are costs or profits that have arisen
in the year which management believes are not the result of
normal operating performance. They are therefore disclosed
separately to give a more comparable view of the year-on-year
underlying trading performance.
The table above summarises the separately disclosed items,
which have been included in the full year accounts. Further
details are provided in note 5 to the accounts.
Exceptional operating items
Exceptional operating items (excluding balance sheet review
and impairment) were £101.9m (2010: £166.3m), of which
£57.3m relates to restructuring programmes mainly in the
UK (£28.8m) and West & East Europe (£16.6m) operating
segments. £37.6m is provision in relation to a disagreement
with HM Revenue & Customs regarding place of business.
A breakdown of the remaining balance of £7.0m is set out
in note 5 to the accounts.
As part of our year end review process and given the reduction
in Group profitability, we have undertaken a review of the
carrying value of goodwill and certain other assets. In total,
the write-down is £428.1m and is largely of a non-cash nature.
Year ended
30 september
2011
£m
Year ended
30 september
2010
£m
Year-on-year
reduction/
(increase)
£m
(101.9)
(5.9)
(34.3)
(142.1)
(428.1)
(570.2)
(166.3)
2.0
(30.9)
(195.2)
–
(195.2)
64.4
(7.9)
(3.4)
53.1
(428.1)
(375.0)
10.3
–
10.3
(3.8)
(9.1)
(12.9)
(18.2)
7.3
(10.9)
14.4
(16.4)
(2.0)
(572.8)
(206.1)
(366.7)
£278.7m is impairment of goodwill, mainly in relation to
our UK and Canadian businesses and reflects a decrease in
management’s estimates of the likely future profitability
and cash flows of those businesses. £86.3m relates to other
intangible assets, principally in respect of the historic costs
associated with a long-running major IT project that has yet to
be fully commissioned by the Group’s incumbent provider and
which management believe to carry increased costs, execution
risk and timeframe to delivery which exceed the previously
anticipated benefits. Following the management changes in
our UK business and the substantial deterioration in trading
within our French operation, we have carried out a balance
sheet review of those businesses, which has resulted in net
balance sheet write-downs of £63.1m.
IAS 39 fair value re-measurement
IAS 39 (as amended) requires the time value element of
options used for hedging the Group’s fuel and foreign currency
exposure to be written off to the income statement as incurred.
As this is purely a timing issue but can give rise to significant,
unpredictable gains and losses in the income statement,
management has decided to separately disclose the impact
in the income statement to assist readers of the accounts in
better understanding the underlying business development.
For consistency, we also separately disclose the timing effect
within net finance charges of marking to market the forward
points on our foreign currency hedging. We have therefore
separately disclosed a loss of £5.9m in the operating result
(2010: gain of £2.0m) and a loss of £9.1m in net finance
costs (2010: gain of £7.3m).
Directors’ Report: Financial review 33
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Year ended
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£m
288.6
Year ended
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£m
299.4
Year-on-year
reduction /
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(10.8)
(172.4)
(98.3)
(266.1)
(65.1)
93.7
(33.2)
17.9
(31.8)
49.7
(19.2)
3.2
5.9
(92.0)
4.1
(27.2)
–
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(59.7)
2.2
8.0
3.2
5.9
(32.3)
1.9
(80.1)
(116.5)
36.4
cash and liquiditY
£m
Net cash from operating activities
Capital expenditure (net of disposals)
Interest paid
Free cash flow
Acquisition of businesses
Disposal of businesses
Dividends received
Dividends paid
Other items (net)
net cash outflow
Amortisation of business combination intangibles
During the year, we incurred non-cash costs of £34.3m
(2010: £30.9m) in relation to the amortisation of business
combination intangibles. £22.2m of the amortisation relates to
the merger of Thomas Cook and MyTravel and represents the
amortisation of brand names, customer relationships and
computer software. The remaining £12.1m relates to other
acquisitions made post-merger.
Income from associates and joint ventures
Our share of the results of associates and joint ventures, which
comprises mainly hotel participations, was a loss of £2.3m
(2010: profit of £3.2m). This result largely reflects deteriorating
trading in a business that has now been sold. The prior year
result included the £2.0m reversal of a previous impairment.
Net investment loss
The net investment loss in the year was £4.8m (2010: £1.5m)
and mainly comprised a £3.8m impairment of an investment
in a German tour operator, Aldiana.
Net finance costs
Net finance costs (excluding separately disclosed items)
amounted to £121.9m, an increase of £5.8m on the prior year.
The increase reflects higher levels of average borrowings and
a rise in the level of fixed interest charges following the bond
issues in April 2010. These increases have been partly offset
by a reduction in other interest, including, in relation to the
Group’s defined benefit pension schemes.
Tax
The tax charge for the year was £119.8m (2010: £38.9m). Excluding
the effect of separately disclosed items, change in tax rates and the
impairment of a deferred tax asset, this represents an effective tax
rate of 41.0% (2010: 27.6%) on the underlying profit for the year. An
impairment to the deferred tax asset has arisen in the year
reflecting the reduced likelihood of utilising UK taxable losses
within an acceptable time period.
Total taxable losses available to carry forward in the
Group at 30 September 2011 were £2.1bn and as at
30 September 2011 deferred tax assets were recognised
with respect to £0.7bn of this amount.
Earnings per share and dividends
The underlying basic earnings per share was 11.7p
(2010: 20.4p). The basic loss per share was 60.7p (2010: 0.3p).
The interim dividend for the year of 3.75p per share was paid
on 7 October 2011. As previously announced, the Board has
decided not to declare any further dividend payments whilst
the Group rebuilds the balance sheet. The total dividend per
share for the year is therefore 3.75p (2010: 10.75p).
cash and liquiditY
Despite the decline in profitability, the Group recorded a
substantial cash inflow from operating activities of £288.6m
and a £49.7m increase in free cash flow during the period. The
improvement in free cash flow was the result of significantly
lower capital expenditure mainly because the prior year
included payments of £66.2m to acquire two aircraft, which
were previously on operating leases. The increase in interest
paid of £33.2m mainly reflects the first annual interest
payment due on the Group’s Euro and Sterling bonds, which
were launched in April 2010. Acquisition of businesses outflow
of £19.2m follows the acquisition of Öger Tours a Turkish
specialist operating out of Germany, our joint venture stake
in Intourist in Russia and deferred consideration on prior
year acquisitions, Gold Medal and Hotels4U. The increase in
dividends is a result of timing of payments with only the final
dividend for 2009 being paid out in 2010, whereas for 2011
the cash flow includes payment of both the 2010 interim and
final dividend. Following the payment of the recent interim
dividend in October 2011, the Group has announced a
suspension of dividend payments until it has rebuilt the
balance sheet.
34
Financial review continued
Net debt (being cash less borrowings, overdrafts and finance
leases) at the year end was £890.9m (2010: £803.6m). Headroom
under the banking facilities as at 30 September 2011 was £821m
compared to £890m as at 30 September 2010. It should be
noted that £50m was repaid under the term loan agreement just
after the year end, during October 2011.
seGmental PeRFoRmance Review
Segmental performance presented in the Operating
Review on pages 16 to 27 is based on underlying
financial performance before separately disclosed items.
tReasuRY activities
The Group’s Treasury Department has primary responsibility
for treasury activities and these are reported regularly to the
Board. The Group Treasury function is subject to periodic
independent reviews and audits, which are then presented
to the Audit Committee.
Treasury policies
The Group is subject to financial risks in respect of changes
in fuel prices, foreign exchange rates and interest rates. It is
also exposed to counterparty credit risk and availability of
credit facilities within its business operations. To manage these
risks, the Board has approved clearly defined treasury policies
covering hedging activities, responsibilities and controls. The
policies are reviewed regularly to ensure that they remain
appropriate for the underlying commercial risks. The policies
also define which financial instruments can be used by the
Group to hedge these risks. The use of derivative financial
instruments for speculative purposes is strictly prohibited.
Management of liquidity risk and financing
Group Treasury’s primary objective is to ensure that the Group
is able to meet its financial commitments as they fall due. This
involves preparing a medium-term cashflow forecast using the
annual budget and three-year plan and ensuring that the
Group has sufficient available cash and headroom under
its committed facilities. In addition, a rolling 13-week cashflow
forecast is used to manage the Group’s short-term cash and
borrowing positions.
Borrowing facilities
The Group’s funding arrangements include a €400m bond
maturing in June 2015 and a £300m bond maturing in June
2017, both issued in April 2010. In addition, the Group has
committed bank credit facilities totalling £1.2bn provided by a
syndicate of banks. These comprise a £150m amortising term
loan, a revolving credit facility of £850m and, as announced on
25 November 2011, a new £200m facility agreed with a
syndicate of banks to provide additional liquidity around the
seasonal cash low points in December this year and next. During
the year the amortising term loan and revolving credit facilities
were extended by one year and now mature in May 2014. The
new £200m facility matures in April 2013 and replaces the
£100m short-term facility announced on 21 October 2011. In
addition, certain amendments to the terms of its committed
bank facilities have been agreed, principally to provide greater
financial flexibility for the Group by increasing the headroom
under its financial covenants. As at 30 September 2011, the
average remaining term of the bonds and committed bank
credit facilities was 3.2 years (2010: 3.7 years).
Guarantee facilities
In addition to debt facilities, the Group has a requirement
for bonding and guarantee facilities, principally for consumer
protection guarantees. The Group has £200m of committed
bonding and guarantee facilities provided by seven of the
syndicate banks. During the year, these guarantee facilities
were extended and now mature in May 2013.
Counterparty credit risk
The Group enters into fuel, foreign exchange and interest rate
derivative contracts and deposits surplus cash with approved
banks and financial institutions with strong credit ratings. Each
counterparty has a credit limit authorised by the Board and
credit risk is reduced by spreading the deposits and derivative
contracts across a number of counterparties.
Directors’ Report: Financial review Our Sustainability
“ to be a successful business, we
need to be sustainable. that means
embedding sustainability within
our company and everything we do.
We are committed to building on our
progress so far and continuing on our
sustainability journey.”
Sam Weihagen
Group Chief Executive Officer
Our grOup visiOn
• To ensure the longevity of our business by delivering
sustainable and profitable growth.
• To integrate sustainability into everything that we
do – every product we sell, every customer’s holiday
experience, every employee’s role.
• To make dreams come true for everyone involved
in our business, today and for the future.
Key achievements in 2011
• Our UK airline worked closely with all our base airports
to gain their commitment to recycling and establish
the necessary infrastructure to maximise in-flight
waste recycling.
• We launched networks of sustainability and
environmental champions across the Group to promote
and engage our people in sustainability.
• We developed a Group-wide child protection policy.
• We developed a Group-wide vision and strategy along
with some stretching 2020 targets.
• We became the first global tour operator to subscribe
to Travelife.
Our sustainability strategy
We believe that the success of our business rests on our
commitment to be economically, environmentally and socially
sustainable. Our approach is to maximise the benefits that
our business brings, while minimising the adverse impacts
of our operations.
Our sustainability strategy is centred on the key areas which
we believe contribute to a sustainable business model: people,
marketplace (encompassing customers and suppliers),
environment and communities.
Our strategy diagram shows how these four areas are
interlinked and together create a truly sustainable business.
Within each of these four areas are a number of material
issues. Many of these are managed by our sustainability team,
while some, such as customer health and safety, are managed
within other areas of the business.
35
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managing sustainability
The Board, through the Health, Safety & Environmental Committee
and Group Executive Board, sets the Group’s sustainability
strategy. Robust management systems and policies support
the implementation of our sustainability strategy.
Over 2010/11, we made good progress in embedding
sustainability further into the business and continued to refine
our key issues within the four strategic areas listed below.
We set up our Group Working Party on Sustainability (‘GWPS’),
in 2010 for strategic decision-making. Over 2011, we made
progress in developing a global approach to sustainability,
encouraging sustainability leadership across the Group and
sharing best practice across our operations internationally.
Across the Group, we communicate on sustainability to our
people using the intranet, emails, employee magazines and
newsletters. We also have networks of sustainability champions
across the Group, who take a leadership role in shaping the
sustainability focus of their business.
OuR enviROnment
• conservation of
natural assets
• emissions
• Aircraft efficiencies
• energy efficiency and security
• Resource use
• Waste prevention and recycling
• Business travel
OuR mARketPlAce
cuStOmeRS
• Awareness raising
• education of children
• Product differentiation
• Brand enhancement
• Health and safety
• Satisfaction
SuPPlieRS
• Supply chain management
– travelife awards
• Water management
• education
• Animal welfare
If we successfully
address these issues,
we will be
a sustainable
business
OuR cOmmunitieS
• Protecting local cultures and
environments
• improving local livelihoods
• child protection
• charitable giving
• employee volunteering
• improving places where
we live and work
OuR PeOPle
• engaging employees
in sustainability
• A better place to work
• integration into values and culture
• encouraging innovation
in sustainability
• employee welfare
36
Our sustainability continued
staKehOlder engagement
Engaging with stakeholders enables us to understand their
interests and concerns, and to discuss and explain our position.
This informs our sustainability strategy and ensures we
are focusing on the most important issues and driving
our performance.
We held a formal stakeholder consultation in 2011 where
we asked for opinions on our strategy, our reporting and
our key issues. Stakeholders from UK-based and international
sustainability and tourism associations, environmental and
wildlife charities, and governmental and academic
organisations took part. Topics discussed included:
• tackling human rights issues in supply chains through
greater collaboration within the tourism sector;
• the accountability of senior management for delivering
the Group’s sustainability strategy and targets; and
• the need for clearer and more accessible results of the
Group’s sustainability performance.
The discussions with stakeholders have informed our
sustainability strategy and we will look to conduct more
stakeholder consultations in the future.
Our perfOrmance
The following table shows our performance to date against our 2011 Group targets.
target
marketplace – customers
• To include sustainability messages on all Group
consumer websites
prOgress
Achieved – UK, Central Europe, Northern Europe,
Belgium and North America
marketplace – suppliers
• To subscribe to a Group-wide supply chain management tool
Achieved – Travelife
environment – emissions and energy
• To establish a baseline for Group energy use
• Airlines to reduce CO2 emissions by 0.5% on FY2009/10
environment – resource use and waste
• To implement a recycling programme within all Group
corporate offices
Achieved
Achieved
Partially achieved
• All Group business segments to measure and report
Partially achieved
waste produced
• To engage with base airports to implement recycling
Achieved
of in-flight waste
• To reduce water consumption by 2% per guest night in
not achieved
Group owned/controlled hotels
• Business mileage travelled by car to be measured and
reported across all business segments
communities
• To develop a Group policy on child protection
On track
Achieved
• Each business segment to develop a charitable strategy
for home communities
Agreement made on types of charitable giving
but strategy not fully developed in all segments
people
• Each business segment to have a network of environmental
ambassadors/an environmental committee
Achieved – UK, North America, Northern Europe,
Belgium, Central Europe
• To include sustainability in the business objectives of
In Quality Assurance Manager job description
key overseas staff
Overall we have made good progress against our 2011 targets. The direction set by the GWPS has led to improved performance,
which has resulted in meeting more of our Group targets. In the coming year we will continue to address those targets which
we did not meet.
We have improved data collection processes across the business this year, which will help us to continue to set challenging targets
going forward.
Further details on progress, including towards segment-specific targets and our Group-wide 2020 targets, will be included in
the full online Sustainability Report 2011 www.thomascookgroup.com/sustainability, which will be published in February 2012.
Directors’ Report: Business Review 37
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Our Marketplace
Our Environment
environmental management
We manage our environmental performance through our Group
Environmental Policy. Some of our operating companies have
formal environmental management systems such as ISO 14001
to which the UK and Scandinavian airlines are accredited.
In 2010/11, we improved data collection processes around the
Group and set up a temporary database for better analysis and
reporting. We have researched and analysed various options
for the sustainability database best suited to our business,
and will confirm this in the coming year.
emissions and energy
Most of our carbon emissions are from aircraft although our
airlines are among the most efficient worldwide due to our
high load factors. We continually implement carbon reduction
initiatives such as equipping planes with winglets to create
substantial fuel savings.
Our energy consumption includes electricity and gas used
in our buildings and vehicle fuel used in business travel.
We installed smart meters in our UK retail stores to show
energy use. This instant access to data has already led to
implementation of energy-saving measures, for example,
resetting the heating timers to match occupancy levels in
one store saved an estimated 30 tonnes of CO2 a year thus
demonstrating the link between sustainable operations
and financial efficiency.
Resource use and waste
While our priority is to avoid waste, where waste is inevitable,
our aim is to reuse or recycle. Our airlines have engaged
with our base airports to arrange the necessary recycling
infrastructure thereby maximising our in-flight waste recycling
and diverting a significant amount of waste from landfill.
Read more in our Sustainability Report 2011.
www.thomascookgroup.com/sustainability
customers
Every area of our business is fully committed to providing
the highest levels of customer service. We engage with our
customers and deal with them honestly, transparently and
fairly. We measure our success through customer satisfaction
surveys and use this invaluable feedback to help us
continually improve.
Customer health and safety is our priority. All our operations
are tightly regulated and we aim to minimise risk and improve
our processes wherever possible, for example through our:
• ISO 9001 quality management standard; and
• Thomas Cook Group Preferred Practice programme,
which focuses on improving health and safety by globally
coordinating information and reporting systems with local
policies and decision making. Suppliers must sign up to
the programme standards and are audited against them.
We aim to raise awareness of sustainability with our customers
by using Travelife logos in our brochures and marketing
material, so our customers can easily recognise those hotels
that actively protect and support their local environment
and communities.
Suppliers
It is important to manage our supply chain sustainably to
build trust, increase efficiency and reduce costs and risks.
In 2011, the whole Group subscribed to Travelife, an industry-
wide initiative which audits properties against social and
environmental criteria and offers awards. This allows us
to have a consistent approach to encouraging best
practice worldwide.
Around the Group, 135 hotels hold Travelife awards. We have
been working to improve our own hotels so that we can lead
by example:
• All ten of our Sunwing hotels have Travelife gold awards.
Before moving to the Travelife system, Sunwing was the
first company to receive EU Ecolabels in every country
of operation.
• Our SENTIDO brand launched an ambitious programme to
have all hotels (33 at present) at a Travelife award level by
2013. In addition, we will train managers of hotels with
gold awards to achieve even more and set best practice
standards. SENTIDO subscribed to Travelife in June 2011
and already has seven hotels at award level.
• Hi! Hotels have subscribed to Travelife and are working
towards achieving awards on audit.
38
Our sustainability continued
Our Communities
Our business longevity depends on the health and prosperity
of the communities in which we work. We are developing a
Group-wide community strategy which will cover source
markets and destination communities. Key focus areas will
include children and education, health and the environment,
as well as attributing resources for disaster and emergency
relief. Full details of our community contributions including
charitable giving, volunteering and gifts in-kind will be
disclosed in the full online Sustainability Report which will be
published in February 2012. The Group-wide cash charitable
donations for the year totalled £128,000.
In destination communities in particular, it is our responsibility
to promote and safeguard children’s welfare. We must raise
awareness among our people, customers, suppliers and other
stakeholders, ensuring they are suitably informed and trained
to identify and react effectively when child safety may
be at risk.
In 2011 a Group-wide child protection policy was developed
and approved. Further to the policy, the Group will also sign
up to ‘The Code’ – an industry-driven code of conduct for
the protection of children from sexual exploitation in travel
and tourism.
Our People
Our emplOyees and values
Our business depends on our people offering our customers
great service every day. We have 31,000 employees across
22 countries. Working within a single Group culture they are
focused around a common set of values, which guide how
we do business and work together.
Our vision ‘we go further to make dreams come true’ is
embedded amongst our people through the promotion of the
PROUD values, a set of five values which are the cornerstone of
the actions of our people. These values are reinforced through
all of our people processes and through PROUD awards, which
recognise individuals and teams who have gone further to
make dreams come true for our customers.
engagement and invOlvement
Whilst current business performance creates uncertainty and
change for many of our people, we are committed to ensuring
that Thomas Cook is a great place to work and is able to attract
and retain the people who will deliver business success.
Nobody is better placed to tell us how we are doing than
our people. A fifth annual Group-wide employee engagement
survey run by an independent specialist third-party has
recently been conducted and the results are being analysed
by management at Group and segment level.
The survey gives all employees the opportunity to share their
open and honest views on how they feel about working for the
Company, what we are doing well and how they believe we
could improve. In 2010, we recorded a response rate of 77%
which is our highest yet and indicates the value our employees
place on providing their feedback. The level of engagement
increased again this year remaining significantly higher than
internationally recognised benchmarks. As important,
employees’ understanding of our Values, the ‘how we
do business’ was rated as ‘Excellent’.
Within segments, actions are developed in response to survey
results. In Northern Europe, leaders’ reward is directly linked
to the outcome of the engagement survey for their area and
all managers are targeted on an 80%+ score, with clear support
and development in place to support those who have yet to
meet the target.
Regular communication with our employees is key to ensuring
that everyone remains focused on the Group’s agenda. The
Company commits to using a range of communication and
feedback channels.
In Condor, regular ‘webchat’ sessions are available for the
employees to engage directly with the segment Chief Executive
Officer and his leadership team. In Central Europe, a key focus
has also been improving leaders’ skills in actively seeking and
receiving direct feedback from their teams.
As our business evolves, there will be developments that
directly impact our people and we are committed to consulting
on these via our internal consultation forums, through
discussion with our European Works Council and local
representative groups.
diversity and inclusiOn
A key strength of our organisation is our diversity – we believe
it is an essential part of how we do business and we continue
to ensure that we meet the needs of our equally diverse
customer base.
We operate in 22 countries, employing people from a wide
range of backgrounds and countries. Recent appointments to
the Board and to the Group Executive Board have increased
diversity, in terms of skills and experience, internationality
and gender, in line with the recommendations of the Davies
Report, entitled ‘Women on Boards’. The leadership teams and
segment boards are also diverse, which improves the sharing
of best practice and insight from different countries across the
Group. With new appointments we seek to further increase the
breadth and depth of knowledge.
The underlying principle of our approach to diversity is that we
do not tolerate any form of unlawful discrimination, and aim
to reflect the diversity of the communities in which we operate.
We are committed to treating people fairly and ensuring that
our employment policies are free from any form of unlawful
discrimination against existing or potential employees.
Directors’ Report: Business Review 39
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incorporates the Product Academy which offers up-to-the-
minute information on our products, so our people can
better serve our customers.
• In India, the Centre of Learning has been established to
build a talent pool for Thomas Cook, as well as the wider
leisure industry. Acting as an additional revenue stream, the
organisation offers development programmes in a variety of
travel-related subjects and through the open courses offered
enables the business to strengthen links across the sector
as well as the opportunity to spot and acquire rising talent.
• As well as formal development programmes, we offer
work placements and secondments to broaden people’s
knowledge base and provide further stretch. As an official
supporter of the London 2012 Olympics and Paralympic
Games, we have the unique opportunity of being able to
offer a number of our people exciting secondments to
critical roles involved in the organisation of the Olympics
through our partnership with LOCOG, and around 300
opportunities as ‘Games Time’ staff where they can actually
work as part of the Thomas Cook team supporting
our customers.
perfOrmance and reWard
Effective performance management is central to developing
our high-performance culture, and is a core responsibility of
our leaders. Our managers have a vital role to play in coaching,
motivating and inspiring their teams through clear objective
setting and regular feedback. All of our segments run well-
established annual performance review programmes, with
more regular feedback sessions throughout the year where
line managers provide feedback and coaching to help people
develop the right skills and address any challenges they may
face in meeting performance standards. These processes are
underpinned by our values, and guide how we coach our
people to get the best from themselves and others.
Many of our employees have an element of their reward
directly linked to their personal performance through
Company bonus programmes, further reinforcing the
link between achievement of their personal objectives,
performance of the business and their reward. Share
ownership is encouraged and although share price
performance has been disappointing during the year, the
Company remains committed to operating share plans across
the Group to drive greater alignment between employees’ and
shareholders’ interests. The Company also operates Sharesave
on an international basis which it believes is a responsible
way to facilitate employee share ownership across the whole
employee base, whilst providing security from downside
exposure for those less financially able to withstand share
price volatility.
The Equality and Human Rights Commission positively
acknowledged the work done by our UK segment to further
develop a culture based on equality and diversity, clearly
aligned to our business strategy. A key part of this has been
the diversity e-learning programme that has been delivered
to segment leaders, and which will be further rolled out to
all UK employees in the coming months.
To support our employees with young families our
German business has developed an innovative public/private
partnership with local government to establish a crèche on the
Thomas Cook campus. This successful initiative provides great
facilities for families in the area, with 30% of places available
to Thomas Cook employees at a subsidised rate.
building the talent pipeline –
attractiOn, develOpment and retentiOn
Continuing to develop our colleagues and plan succession
is vital to being able to deliver our business goals.
Our talent management and succession plans are continually
reviewed and updated, and each year the Board and Group
Executive Board evaluate succession coverage and strength
in our key leadership positions across the Group.
In 2011, we commenced a programme to benchmark our
senior talent against international standards and put in place
targeted development plans for each individual. This will
ensure that we have the best possible talent leading the
business now, whilst ensuring that our rising talent is
developed to meet our future capability requirements.
During the year we have strengthened the pipeline by
appointing talented external hires at senior levels and have
promoted internal talent into key roles. Our Online Travel
Agency (‘OTA’) strategic initiative has recruited well over 100
talented individuals, many of whom are industry experts from
leading online organisations. Leadership development has
high priority at all levels and across all segments. Development
is supported through a broad range of activities including
secondments, coaching, mentoring and international business
school programmes. For example:
• Both Thomas Cook Central Europe and Condor have
well established relationships with universities across
Germany, and offer sandwich courses and apprenticeship
opportunities to rising talent. Condor has a partnership with
the University of Applied Sciences Frankfurt. The Bachelor of
Arts (B.A.) Aviation Management was launched in September
2011 providing an opportunity for talented students to
combine academic study at university with an equal amount
of on-the-job development at Condor sites across Europe
and North America.
• The UK is investing heavily in developing its senior
management population and has a well-established
partnership with Loughborough University who deliver the
Thomas Cook Diploma in Leadership and Management for
our senior leadership population. Accessibility to training
programmes has increased with the launch in the UK of L&D
online this year which enables our people to access learning
and development 24 hours a day, every day of the year. The
web-based system provides online learning programmes,
reading material, links to informative websites and
40
Board of Directors
Frank meySman (59)
Title: Non-Executive Chairman
Appointment: October 2011
Committee memberships: Chairman
of Nominations Committee
Skills & experience: Frank Meysman was
appointed Chairman Designate of the Company
on 1 October 2011 and became Chairman on
1 December 2011. He has had a successful
executive career in dynamic global brand
companies, including Procter & Gamble between
1977 and 1986, Douwe Egberts between 1986
and 1990 and the Sara Lee Corporation between
1990 and 2003, where, from 1997, he was
Executive Vice President and a member of the
Board of Directors. Since leaving Sara Lee, Frank
has been a Non-Executive Director, including
Chairman, of a number of public and private
international companies.
External appointments: Chairman of
Betafence and JBC N.V. (Belgium). He is also an
Independent Representative Director of Picanol
N.V., Warehouses De Pauw (WDP) and Spadel S.A.
roger Burnell (61)
Title: Senior Independent Director
Appointment: March 2007
Committee memberships: Chairman of Health,
Safety & Environmental Committee, Member
of Audit Committee, Nominations Committee
and Remuneration Committee
Skills & experience: Roger Burnell was appointed
Senior Independent Director of the Company
on 4 August 2010, after joining the Company as
a Non-Executive Director in March 2007. He was
also 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.
External appointments: Non-Executive Director
of Coventry Building Society.
Sam Weihagen (61)
Title: Group Chief Executive Officer
Appointment: November 2009
Committee memberships: Chairman of Group
Executive Board, Member of Health, Safety
& Environmental Committee
Skills & experience: Sam Weihagen was
appointed as Group Chief Executive Officer in
August 2011, prior to which he was Deputy to
the Group Chief Executive Officer since 2009. He
was appointed Chairman, Northern Europe and
Chairman of the Thomas Cook AG Board in
January 2011. Sam was Chief Executive Officer,
Northern Europe between 2001 and 2010 and
he was an Executive Director of MyTravel
Group plc for three years prior to the merger.
Sam has 36 years’ experience in the
travel industry.
External appointments: None
Paul hollingWorth (51)
Title: Group Chief Financial Officer
Appointment: January 2010
Committee memberships: Member of
Group Executive Board
Skills & experience: Prior to joining the
Company as Group Chief Financial Officer,
Paul Hollingworth was Chief Financial Officer
of Mondi Group. He was previously Group
Finance Director of BPB plc and prior to that
Group Finance Director of De La Rue plc and
Ransomes plc.
External appointments: Non-Executive Director
of Electrocomponents plc.
Committee memBerShiPS
Audit Committee
David Allvey (Chairman)
Roger Burnell
Bo Lerenius
RemuneRAtion Committee
Peter Middleton (Chairman)
Roger Burnell
Bo Lerenius
HeAltH, SAfety &
enviRonmentAl Committee
Roger Burnell (Chairman)
Dawn Airey
David Allvey
Sam Weihagen
nominAtionS Committee
Frank Meysman (Chairman)
Dawn Airey
David Allvey
Roger Burnell
Bo Lerenius
Peter Marks
Peter Middleton
Martine Verluyten
Directors’ Report: GovernanceBOARD COMPOSITION Chairman Independent Non-Executive Directors Non-Executive Director Executive DirectorsBOARD TENURE < 1 year 1-4 years > 4 years 41
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DaWn airey (51)
Title: Independent Non-Executive Director
Appointment: April 2010
Committee memberships: Member of
Nominations Committee and Health, Safety
& Environmental Committee
Skills & experience: Dawn Airey has over 26 years’
experience in the media industry and has held
senior positions at some of the UK’s leading
media companies. She is currently President of
CLT-UFA UK Television Limited within the RTL
Group. Until August 2010, she was the Chair and
Chief Executive Officer of Five TV, after joining
the company from her role as Managing Director,
Global Content at ITV plc. Between 2004
and 2008, she was also an Independent
Non-Executive Director of easyJet plc.
External appointments: Chair of the Grierson
Trust. Dawn also sits on the Board of the
British Library.
DaviD allvey (66)
Title: Independent Non-Executive Director
Appointment: March 2007
Committee memberships: Chairman of Audit
Committee, Member of Nominations Committee
and Health, Safety & Environmental Committee
Skills & experience: David Allvey was a
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 Chief Operating
Officer of Zurich Financial Services AG.
External appointments: Chairman of Costain
Group PLC and Arena Coventry Limited. He is
also Senior Independent Director of Intertek
Group plc and Friends Life Group plc.
Bo lereniuS (65)
Title: Independent Non-Executive Director
Appointment: July 2007
Committee memberships: Member of Audit
Committee, Nominations Committee and
Remuneration Committee
Skills & experience: Between 1985 and 1992,
Bo Lerenius was Group President and Chief
Executive of Swedish listed building materials
group, Ernstromgruppen. From 1992 to 1999,
he was Chief Executive and subsequently Vice
Chairman of Stena Line, following which he was
Group Chief Executive of Associated British Ports
Holdings plc until 2007.
External appointments: Non-Executive Chairman
of Koole Tanktransport BV and Brunswick Rail
and Non-Executive Director of G4S plc. He is also
Honorary Vice President of the Swedish Chamber
of Commerce for the UK and is an adviser to the
infrastructure fund of Swedish venture capital
group, EQT.
Peter markS (62)
Title: Non-Executive Director
Appointment: October 2011
Committee memberships: Member of
Nominations Committee
Skills & experience: Peter Marks has over 44
years’ experience in the retail industry and has
managed a broad range of businesses and
functions. He was appointed to his current role
as Group Chief Executive, The Co-operative
Group in 2007, prior to which he held a number
of senior positions, including Chief Executive,
United Co-operatives between 2002 and 2007
and Chief Executive, Yorkshire Co-operatives
from 2000 to 2002.
External appointments: He is on the Board of
a number of Co-operative Group companies,
including The Co-operative Bank plc.
Peter miDDleton (71)
Title: Independent Non-Executive Director
Appointment: November 2009
Committee memberships: Chairman of
Remuneration Committee, Member of
Nominations Committee
Skills & experience: Peter Middleton has
extensive experience across the global travel and
finance industries, having been CEO of Thomas
Cook between 1987 and 1992, CEO of Lloyd’s of
London between 1992 and 1995 and CEO of
Salomon Brothers International Limited between
1995 and 1998. Since 2000, Peter has been
Chairman of a number of small listed and
private companies in a range of industries.
External appointments: None.
martine verluyten (60)
Title: Independent Non-Executive Director
Appointment: May 2011
Committee memberships: Member of
Nominations Committee
Skills & experience: Martine Verluyten has held
a number of senior finance positions across the
telecommunications, electronics and materials
sectors and has significant international financial
and IT expertise. Until November 2011, she was the
Chief Financial Officer of Umicore, a Brussels-based
materials technology group, a position she held
since 2006. Prior to joining Umicore, she was
Group Controller and subsequently Chief Financial
Officer of the mobile telephone operator Mobistar,
after joining the company in 2000 from Raychem,
a material science company.
External appointments: Board member of Incofin
cvso. Martine also chairs the Audit Committee
of the Flemish Region in Belgium.
42
Group Executive Board
Sam Weihagen (61)
Title: Group Chief Executive Officer
Skills & experience: Please see Directors’
biographies on pages 40 and 41.
Paul hollingWorth (51)
Title: Group Chief Financial Officer
Skills & experience: Please see Directors’
biographies on pages 40 and 41.
ian ailleS (46)
Title: Chief Executive Officer,
Mainstream, UK
Skills & experience: Ian Ailles joined the
Company in his current role in January
2011. Between 2007 and 2010, he held a
number of senior positions at Wyndham
Exchange and Rentals, formerly as Chief
Finance & Operations Officer, EMEAI and
latterly as Managing Director, European
Rentals. Prior to that, Ian worked for
Thomas Cook UK & Ireland for nine
years in a variety of senior roles.
He is Chairman of the Federation of
Tour Operators and also serves as the
Treasurer of the Travel Foundation.
Ian has over 14 years’ experience in
the travel industry.
Phil airD-maSh (36)
Title: Chief Executive Officer,
Independent, UK
Skills & experience: Phil Aird-Mash
joined the Company in his current role
in April 2011. Prior to that, he completed
his MBA and held a number of senior
positions at Airtours plc (2004 to 2005),
MyTravel Group plc (2005 to 2008) and
XL Leisure Group plc (2008 to 2009),
where he gained considerable
experience in corporate restructuring.
Phil has over 15 years’ experience
in the travel industry.
anne BillSon-roSS (43)
Title: Group & UK Human
Resources Director
Skills & experience: Anne joined the
Company in 2004 and was appointed to
her current role in April 2011. Prior to
that, she held a number of senior HR roles
within the UK HR department, including
HR Director, UK & Ireland from September
2008. Before joining Thomas Cook, Anne
worked for British Sky Broadcasting
as Head of Human Resources &
Development from 1997 to 2003; she
also spent five years at Natwest Bank plc
from 1992 to 1997.
Pete ConStanti (45)
Title: Chief Executive Officer,
Group Destination Management
miChael FriiSDahl (49)
Title: Chief Executive Officer,
North America
Skills & experience: Michael Friisdahl
joined the Company in 2000 and was
appointed to his current role in 2005. Prior
to that, he held a number of senior roles
in the Company and was previously a
partner and Chief Executive Officer of The
Holiday Network, which was acquired by
Airtours International in 2000. Michael
has over 28 years’ experience in the
travel industry.
larS löFgren (53)
Title: Chief Executive Officer,
Northern Europe
Skills & experience: Lars Löfgren
joined the Company in 1986 and was
appointed to his current role in January
2011. Prior to that, he held a number of
senior roles within the Group, formerly
as Chief Operating Officer, Thomas Cook
Northern Europe from 2010. Lars
has over 25 years’ experience in the
travel industry.
ralF teCkentruP (54)
Title: Chief Executive Officer,
Airlines Germany
Skills & experience: Ralf Teckentrup
joined the Company in his current role
in 2004. Prior to that, he held a number
of senior positions with Lufthansa AG.
Derek WooDWarD (53)
Title: Group Company Secretary
Skills & experience: Derek joined the
Company in his current role 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.
Skills & experience: Pete Constanti joined
the Company in 1996 and was appointed
to his current role in November 2009.
Prior to that, he held a number of senior
roles within the Group, including Chief
Executive Officer, Mainstream Travel,
UK & Ireland between 2008 and 2009.
Pete has over 28 years’ experience in the
travel industry, previously working for
ILG and Sunworld, where he was Human
Resources Director.
Dr thomaS Döring (42)
Title: Chief Executive Officer,
e-Commerce and West & East Europe
Skills & experience: Thomas Döring
joined the Company in 2001 and has
been responsible for the Western and
Eastern European markets since 2006.
In addition, Thomas was appointed Chief
Executive Officer, e-Commerce in May
2010 to lead the development of the
OTA. Prior to that, he held a number
of senior positions within the Group
and before joining the Company,
Thomas spent seven years with Roland
Berger Strategy Consultants, latterly
as a partner.
SuSan Duinhoven (46)
Title: Chief Executive Officer, Netherlands
Skills & experience: Susan Duinhoven
joined the Company in 2010 as Chief
Executive Officer, Netherlands. From
January 2012, Susan will join the Group
Executive Board as Chief Executive
Officer of a new West Europe operating
segment, comprising France, Belgium
and the Netherlands. Prior to joining
Thomas Cook she worked for Unilever,
McKinsey & Company, European
Directories and Readers Digest.
Dr Peter FankhauSer (51)
Title: Chief Executive Officer,
Central Europe
Skills & experience: Peter Fankhauser
joined the Company in 2001 and was
appointed to his current role in 2007.
Prior to that, he held a number of senior
executive roles within the Group and
before joining Thomas Cook, he was
an Executive Board member of Kuoni
Reisen Holding AG in Zürich and
Chief Executive Officer of LTU Group
in Düsseldorf.
Directors’ Report: Governance 43
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Corporate governance report
Dear ShareholDer
I am pleased to take this opportunity, as your newly appointed Chairman, to confirm my strong belief in the importance of applying
the highest standards of corporate governance in the conduct of our business. Clear lines of responsibility, accountability for decision
making and overall performance, with both internal and external transparency, are the essential features of a quality system of
governance. It is for the Board to show leadership and to set the tone, so that by our example we guide our management and
employees in the way they carry out their roles on an ongoing basis.
Under my leadership, the Board and its Committees will continue to apply the principles of corporate governance in the UK Corporate
Governance Code (‘the Code’).
During the year and prior to my appointment, the Board made sound progress in a number of important areas of governance as
highlighted below. The Board believes these developments will stand the Group in good stead as it addresses the challenges ahead.
• Roger Burnell, our Senior Independent Director, led a Chairman Succession process, which resulted in my appointment as Chairman
from 1 December 2011, upon the retirement of Michael Beckett.
• The Board took further steps to refresh and strengthen its composition with the appointment of Martine Verluyten and Peter Marks
as Non-Executive Directors.
• The Board took immediate action to appoint Sam Weihagen as Group Chief Executive Officer, upon the departure of Manny
Fontenla-Novoa.
• We have strengthened our Group Executive Board and new senior management teams have been appointed in the UK and France.
• The Board refreshed its appointments policy, a copy of which can be found on our website at www.thomascookgroup.com and
described on page 51. Appointments made during the year have been made in line with that policy and have further strengthened
the diverse composition of the Board. The Board endorses the aims of the Davies’ Report entitled ‘Women on Boards’ and, when
considering appointments in the future, will aim to build on its current firm foundations.
• The Board made progress in respect of the actions agreed following its 2010 Board and Committee evaluation, particularly in respect
of Board composition as described above and Talent Management and Succession Planning in respect of the Executive Directors,
the members of the Group Executive Board and their direct reports. In line with these plans, we have appointed from within the
organisation a new Chief Executive Officer in the Northern Europe segment, a new Group Human Resources Director and, with effect
from 1 January 2012, a Chief Executive Officer for the new West Europe segment.
As the new Chairman, I have embarked upon a number of initiatives to build on the above:
• I am conducting a review of the Board and expect to make changes to refresh and further strengthen its composition in the near-term;
• I am leading a process to identify and appoint a permanent Group Chief Executive Officer with the assistance of an international
search and selection firm;
• I have reviewed the output from the Summer 2011 Board evaluation and intend to lead a Board discussion at the beginning
of 2012 to address the issues raised;
• Our 2012 Board and Committee evaluation exercise will be conducted with the assistance of external facilitators; and
• The Board has agreed to introduce deferral and claw-back in respect of future senior executive bonus payments.
Throughout the year, Michael Beckett and some of the Non-Executive Directors had significant engagement with our major
shareholders on a range of issues, which the Board found both helpful and productive. I have already started to meet with some
shareholders and I can confirm that under my leadership, our practice of engagement will continue in the future.
Frank Meysman
Chairman
13 December 2011
44
Corporate governance report continued
This report sets out how the Company applied the principles of the Code and the extent to which the Company complied with
the provisions of the Code in the year to 30 September 2011. During the year, the Company fully complied with the provisions
of the Code, except for Provision B6.3, which requires the Non-Executive Directors to carry out a performance evaluation of
the Chairman, and Provision B7.1, which requires all the directors of FTSE 350 companies to be subject to annual election by
shareholders. The Board is committed to complying with these two provisions in the current financial year.
The Group’S buSineSS moDel anD STraTeGy
The Group’s business model and strategy are summarised on pages 13 to 15 of this Report.
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, 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:
• development and 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, subject
to shareholder approval, the appointment and remuneration of the external auditors;
• approval of interim, and recommendation of final, dividends;
• changes to the Group’s capital structure and the issue of any securities;
• establishing and maintaining the Group’s risk appetite, system of internal control, governance and approval authorities;
• monitoring executive performance and succession planning; and
• determining standards of ethics and policy in relation to health, safety, environment, social and community responsibilities.
At its meetings during the year, the Board discharged its responsibilities as listed above. In particular, the Board reviewed:
• the operational performance of each of the Group’s segments. Performance and strategy are continually monitored and
reviewed by the Board and periodic updates are presented by the segment Chief Executive Officers and their senior
management teams;
• the UK segment transformation plan;
• financial performance and treasury metrics, including cash flow and net debt forecasts;
• the Group’s financing arrangements, leading to the establishment of a Euro commercial paper funding programme and,
in the current financial year, the amendment of the Group’s banking agreements;
• the Group’s annual budget and three-year plan;
• the backdrop to the 12 July 2011 update to the market;
• external financial and narrative reporting, and investor feedback;
• the Group-wide airline fleet replacement programme;
• the requirements of the EU Trading Emissions scheme and the Group’s exposure and compliance approach;
• the Group’s governance arrangements in response to developing legal and governance proposals and requirements;
• the requirements of the new UK Bribery Act and the approval of a new anti-bribery policy and associated procedures;
• M&A opportunities and proposals and the financial performance of acquisitions;
• the Group’s IT strategy and transformation programme and other major IT projects including IT security;
• the Group’s fuel hedging strategy and policy and other treasury policies;
• the structure and process for identifying, managing and monitoring risks across the Group and the effectiveness of the Group’s
system of internal control;
• the Group’s health & safety and environmental policies;
• the Group’s anti-fraud policy;
• succession plans in respect of the Chairman, Executive Directors, members of the Group Executive Board and their
direct reports;
• the Group’s policy in respect of Board appointments; and
• the Directors’ conflicts of interest register.
Directors’ Report: Governance 45
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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 nine scheduled and 10 unscheduled supplementary meetings during the year. A table detailing individual
Director attendance at scheduled Board and Committee meetings during the year is set out below. The Chairman and each
Non-Executive Director have 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.
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 year.
Current Directors
Name
Sam Weihagen
Paul Hollingworth
Dawn Airey
David Allvey
Roger Burnell
Bo Lerenius
Peter Middleton
Martine Verluyten2
Board
8/9
9/9
7/9
9/9
9/9
9/9
9/9
3/3
Nominations
Committee1
–
–
1/3
3/3
3/3
3/3
3/3
1/1
Audit
Committee
–
–
–
4/4
4/4
4/4
–
–
Remuneration
Committee
–
–
–
–
6/6
6/6
6/6
–
Health, Safety &
Environmental
Committee
–
–
3/5
5/5
5/5
–
–
–
notes
Frank Meysman and Peter Marks joined the Board post year-end on 1 October 2011 and have therefore not been included in the attendance table above.
1
In addition to the three meetings of the Nominations Committee referred to above, there were a further eight meetings of the Nominations Committee that dealt with Chairman Succession.
These eight meetings were chaired by Roger Burnell, the Senior Independent Director and were not attended by Michael Beckett.
Martine Verluyten joined the Board on 9 May 2011 and was appointed to the Nominations Committee on the same day.
2
Former Directors who served during the year
Name
Manny Fontenla-Novoa1
Michael Beckett2
notes
1 Manny Fontenla-Novoa resigned on 2 August 2011.
2 Michael Beckett retired on 30 November 2011.
Board
7/7
9/9
Nominations
Committee
–
3/3
Audit
Committee
–
–
Remuneration
Committee
–
–
Health, Safety &
Environmental
Committee
4/5
–
boarD compoSiTion
As at 30 September 2011, the Board comprised the Chairman, two Executive Directors and six Independent Non-Executive
Directors. Biographical details of all Directors can be found on pages 40 and 41 and on the Company’s corporate website
at www.thomascookgroup.com.
The chairman
Michael Beckett was Chairman of the Company throughout the year. Frank Meysman was appointed Chairman Designate with
effect from 1 October 2011. He assumed the role of Chairman from 1 December 2011, following Michael Beckett’s retirement
from the Board.
The roles of the Chairman and Group Chief Executive Officer are separate and distinct and each has a written statement
of his respective responsibilities, a summary of which can be found on the Company’s corporate website at
www.thomascookgroup.com.
The Senior inDepenDenT DirecTor
Roger Burnell was the Senior Independent Director throughout the year and, as such, is available to shareholders should they
have concerns that cannot be resolved through the normal channels involving the Executive Directors or the Chairman.
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Corporate governance report continued
chanGeS To The boarD
Changes to the Board during the year were as follows:
As part of an orderly succession and retirement programme, Sam Weihagen, formerly Chief Executive Officer, Northern Europe
and Deputy to the Group Chief Executive Officer, relinquished his role as Chief Executive Officer, Northern Europe and reduced
his time commitment to two and a half days per week from 1 January 2011. He was appointed Group Chief Executive Officer
and reverted back to full-time working upon the resignation of Manny Fontenla-Novoa on 2 August 2011.
Martine Verluyten was appointed to the Board on 9 May 2011 as an Independent Non-Executive Director. Frank Meysman and
Peter Marks were appointed to the Board as Chairman Designate and a Non-Executive Director respectively, on 1 October 2011.
The search, selection and appointment process in respect of the above and the search for a new Group Chief Executive Officer
is fully described in the section on the Nominations Committee on page 51.
DirecTor inDepenDence
At its September 2011 Board meeting, as part of its annual review of corporate governance against the Code, the Board
considered the independence of the Non-Executive Directors against the criteria specified in the Code and determined that
Dawn Airey, David Allvey, Roger Burnell, Bo Lerenius, Peter Middleton and Martine Verluyten were independent.
The Board reached its determination of independence in respect of Peter Middleton, notwithstanding the receipt by him of a
pension of £60,523 per year from the Thomas Cook Pension Plan, a defined benefit pension scheme. This pension is fully funded
and accrued in the period 1987 to 1992 when he was CEO of Thomas Cook. The Board recognises that being in receipt of a
pension from the Group’s pension scheme gives rise to a potential conflict, which it has authorised as permitted by the Company’s
Articles of Association, subject to the condition that he does not participate in any discussion or decision regarding any of the
Group’s pension schemes. The Board believes that Peter Middleton is independent in all other respects and also believes that
this condition is sufficient to maintain his independence.
The Board recognises that Peter Marks as Group Chief Executive of The Co-operative Group, which is a partner in the UK retail
joint venture, is not independent. Frank Meysman was independent on appointment.
re-appoinTmenT of DirecTorS
In accordance with the Code and the Company’s Articles of Association, all Directors are subject to election by shareholders.
Non-Executive Directors are initially appointed for a three-year term and, subject to rigorous review by the Nominations
Committee and re-election by shareholders, can serve up to a maximum of three such terms.
At the AGM held in February 2011, the Company did not comply with Provision B7.1, which requires all the directors of FTSE 350
companies to be subject to annual election by shareholders. The Board intends to comply with this provision in the future.
operaTion of The boarD
Senior executives below Board level attended relevant parts of Board meetings in order to make presentations on their areas
of responsibility. This gives the Board access to a broader group of executives and helps the Directors make assessments of the
Group’s succession plans.
In addition to the papers circulated prior to each meeting, Directors were provided between meetings with relevant information
on matters affecting the business. Such updates were carried out by a variety of methods, including conference calls amongst the
full Board or between the Chairman and the Non-Executive Directors, and by way of the Group Company Secretary circulating
papers and updates on relevant issues. During the year, the Chairman has held meetings with the Non-Executive Directors
without the Executive Directors present.
The Group Company Secretary, who was appointed by the Board, is responsible for advising and supporting the Chairman and
the Board on company law and corporate governance matters as well as ensuring that there is a smooth flow of information
to enable effective decision making. 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 Group
Company Secretary acts as secretary to the Board, the Group Executive Board, the Finance & Administration Committee, the
Disclosure Committee, the Audit Committee, the Nominations Committee and the Remuneration Committee. The Deputy
Company Secretary acts as secretary to the Health, Safety & Environmental Committee.
In accordance with its Articles, the Company has granted a deed of indemnity, to the extent permitted by law, to each Director
and the Group Company Secretary. The Company also maintains Directors’ and Officers’ liability insurance.
Directors’ Report: Governance 47
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boarD eValuaTion
The Board recognises the benefit of a thorough evaluation process as a useful tool to highlight issues, track progress against
targets and to determine and shape the focus of Board attention in the future.
A thorough evaluation of the Board and its Committees was conducted during the year. This was facilitated by the Group
Company Secretary under the direction of the Chairman. The process involved each of the Directors completing a comprehensive
questionnaire, which was structured to encourage both graded responses and narrative feedback in respect of a range of
questions that focused on the following areas:
• Board and Committee composition and dynamics;
• knowledge and information;
• agenda and time management;
• Board support;
• strategic development and oversight;
• delegation of authority;
• risk management;
• corporate responsibility;
• human resource management;
• executive remuneration;
• performance of Executive and Non-Executive Directors;
• Committee structure and performance; and
• priorities for change.
Upon receipt of the completed forms, the Group Company Secretary compiled a report in September 2011, drawing out the
key themes and issues that were raised and formulated a number of recommendations for consideration.
The Board recognised that progress had been made in respect of actions agreed following our 2010 Board and Committee
evaluation, particularly with regard to Board composition and talent management and succession planning in respect of the
Executive Directors, the members of the GEB and their direct reports. As mentioned elsewhere in this report, new senior
management teams were put in place in the UK and France and, as part of succession planning and development, a new Chief
Executive Officer in the Northern Europe segment and a new Group Human Resources Director were appointed during the year.
The evaluation exercise highlighted a number of issues and themes that should be addressed in order to improve the
effectiveness of the Board. Ordinarily, the report prepared by the Group Company Secretary would be debated by the Board
and a set of actions would be agreed for implementation. However, in view of the forthcoming change of Chairman, it was
agreed that the report would first be given to the Chairman Designate to provide him with a timely insight into the issues being
faced by the Board. The Chairman Designate then used the report as the basis of his discussions with each of the Directors
with a view to developing and improving Board effectiveness under his leadership. The results of the evaluation and Frank
Meysman’s observations and proposed approach will be debated at the first Board meeting following his appointment as
Chairman on 1 December 2011. The Board intends to carry out an externally facilitated Board evaluation process in 2012.
Each of the Committees has reviewed the relevant feedback from the evaluation exercise and has agreed an action plan to
improve their effectiveness in the future. The Committee evaluations and action plans will be subject to review by Frank
Meysman and debate by the Board as above.
In view of the forthcoming retirement of the current Chairman, the Non-Executive Directors did not carry out a Chairman
evaluation. The Board intends to comply with the relevant provision of the Code in the current financial year.
The Company’s performance management system applies to management at all levels across the Group. The individual
performance of the Executive Directors is reviewed separately by the Chairman and the 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. Such inductions typically include meetings with senior management, visits to the Company’s business
segments, and the receipt of presentations on key business areas and relevant documentation.
48
Corporate governance report continued
Directors also receive training throughout the year, both at Board and Committee meetings and by way of attendance at external
conferences and seminars. 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
year, the Board was provided with:
• updates on the economic and business environment in each of the segments;
• a briefing on the EU Trading Emissions scheme and the Group’s exposure and compliance approach;
• a briefing on the new Bribery Act, the Group’s anti-bribery policy and the process being undertaken to ensure that adequate
procedures are in place to prevent bribery;
• presentations on IT security;
• briefings on Lord Davies’ report ‘Women on Boards’ and the Financial Reporting Council’s report ‘Guidance on Board
Effectiveness’; and
• members of the Health, Safety & Environmental Committee and some of the other Non-Executive Directors attended a
destination visit to Mallorca to gain an insight into the practical application of the Company’s health and safety practices.
DirecTorS’ conflicTS of inTereST
From 1 October 2008, the Companies Act codified the Directors’ duty to avoid a situation in which they have, 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 Board has established a set of guiding principles on managing conflicts and has agreed a process to identify and authorise
conflicts. As part of that process, it has also agreed that the Nominations Committee should review the authorised conflicts every
six months, or more frequently if a new potential conflict situation materialises. The Nominations Committee and Board applied
the above principles and process throughout the year to 30 September 2011 and confirm that these have operated effectively.
When authorising a potential conflict in respect of Peter Middleton, the Board specified a condition that he should not participate
in any discussion or decision regarding any of the Group’s pension schemes. The potential conflict is more fully described in the
section on Director Independence on page 46.
The Group GoVernance STrucTure
The Board has delegated authority to its Committees on specific aspects of management and control of the Group. The papers in
respect of the Audit, Remuneration, Nominations, Health Safety & Environmental, and Disclosure Committees are circulated to all
the Non-Executive Directors, regardless of Committee membership. Matters discussed and agreed at those Committees, the Group
Executive Board and the Finance & Administration Committee are reported to the next Board meeting.
Group execuTiVe boarD
The Group Chief Executive Officer chairs the Group Executive Board which meets at least eight times a year to oversee the strategic
development and operational management of the Group’s businesses. The Group Chief Financial Officer is also a member of the
Group Executive Board. The other current members of the Group Executive Board, together with their biographies, are set out
on page 42.
THOMAS COOK GROUP PLC
BOARD OF DIRECTORS
Group
Executive Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Health, Safety
Environmental
Committee
Disclosure
Committee
Finance &
Administration
Committee
Group Risk
Management
Committee
Segment
Boards
Function
Boards
Fuel Hedging
Committee
Country
Boards
Non-Executive Directors only
Executive Directors and Non-Executive Directors
Executive Directors and/or other senior executives only
Directors’ Report: Governance auDiT commiTTee
Chairman
David Allvey*
Other members
Roger Burnell
Bo Lerenius
Meetings
Four
Meetings also regularly attended by+
Sam Weihagen (Group Chief Executive Officer)
Paul Hollingworth (Group Chief Financial Officer)
Derek Woodward (Group Company Secretary)
PricewaterhouseCoopers LLP (‘PwC’)
Ernst & Young LLP (‘E&Y’)
49
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Role of the Committee
The Board has delegated to the Committee responsibility for overseeing the
financial reporting, internal risk management and 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 annual and half-year results and interim
management statements, including a review of the significant financial
reporting judgements contained in them;
• review the Company’s internal financial controls and 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.
To enable it to carry out its duties and responsibilities effectively, the
Committee relies on information and support from management across
the business. The full terms of reference of the Committee are available at
www.thomascookgroup.com or from the Group Company Secretary at the
registered office.
*
+
+
David Allvey is considered by the Board to have recent and relevant financial experience as required by the Code.
Prior to his retirement on 30 November 2011, Michael Beckett regularly attended the Audit Committee meetings.
Prior to his resignation on 2 August 2011, Manny Fontenla-Novoa regularly attended the Audit Committee meetings.
Composition of the Committee
There have been no changes to the composition of the Committee during the year.
Principal activities during the year
At its meetings during the year, the Committee discharged its responsibilities as listed above and, in particular, it reviewed:
• the full and half-year results (including accounting issues and judgements) and the interim management statements issued
during the year;
• information in support of the statements in relation to going concern and disclosure of information to the auditors;
• the Group’s system of internal control, receiving reports from management, the external auditors and the internal auditors
(see section headed ‘Risk management and internal control’ on page 54);
• internal audit reports;
• the annual work plan for each of the internal and external auditors;
• the Group’s main risks and mitigating actions;
• the Group’s business continuity plans and the work plan and timetable for further development;
• the Group’s treasury policies, including the management of related risk;
• the prevention, detection and reporting of fraud and the Group’s anti-fraud and ethics policies;
• IT security and security in relation to retail shops;
• the risks and accounting treatment of major business projects;
• the performance of the internal auditors, leading to the re-appointment of E&Y as the Group’s internal auditors;
• proposals for engaging the external auditors to carry out non-audit related work (see page 50);
• the Committee’s work plan for the year ahead and a review of historic activity against the Committee’s terms of reference; and
• the rotation of the lead audit partner.
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Corporate governance report continued
External auditors
There is a policy in place which requires all material non-audit work proposed to be carried out by the external auditors to
be pre-authorised by the Committee in order to ensure that the provision of non-audit services does not impair the external
auditors’ independence or objectivity. The policy, which is appended as a schedule to the Audit 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 8 to the financial statements. PwC were re-appointed by shareholders at
the AGM held on 11 February 2011. Upon the recommendation of the Audit Committee, PwC will be proposed for re-election by
shareholders at the AGM to be held on 8 February 2012. PwC have confirmed their independence as auditors of the Company
in a letter addressed to the Directors. In accordance with the APB’s Ethical Standard 3, regarding lead audit partner rotation,
during the year John Minards rotated from his position as Senior Statutory Auditor and was replaced by John Ellis.
nominaTionS commiTTee
Meetings also regularly attended by*
Anne Billson-Ross (Group Human Resources
Director) (only in respect of Chairman and
Group CEO succession)
Derek Woodward (Group Company Secretary)
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 required for such appointments. The Committee
is also responsible for reviewing, at least every six months, or more frequently
if required, the Directors’ potential conflicts and for making recommendations
to the Board in respect of authorising such matters.
The full terms of reference of the Committee are available at
www.thomascookgroup.com or from the Group Company Secretary at the
registered office.
Chairman
Frank Meysman
Meetings
Three ordinary meetings
and eight in respect of
Chairman Succession
Other members
Dawn Airey
David Allvey
Roger Burnell (chaired
meetings related to
Chairman’s succession)
Bo Lerenius
Peter Marks
Peter Middleton
Martine Verluyten
*
Prior to his resignation on 2 August 2011, Manny Fontenla-Novoa regularly attended the Nominations Committee meetings.
Composition of the Committee
The Chairman and all of the Non-Executive Directors are members of the Committee. Michael Beckett, the former Chairman,
was Chairman of the Committee throughout the year and until his retirement on 30 November 2011. Martine Verluyten was
appointed as a member of the Committee on being appointed to the Board on 9 May 2011. Frank Meysman and Peter Marks
joined the Committee upon their appointment to the Board on 1 October 2011.
Principal activities during the year
At its meetings during the year, the Committee discharged its responsibilities as listed above and in particular:
• considered the appointment of Sam Weihagen as Group Chief Executive Officer, to hold office until a permanent successor
is found;
• undertook, under the leadership of the Senior Independent Director, a thorough Chairman Succession process, leading to
the recommendation to the Board of the appointment of Frank Meysman as Chairman Designate from 1 October 2011 and
as Chairman from 1 December 2011 (see opposite for details);
• considered the re-appointment of the Directors, before making a recommendation to the Board regarding their re-election;
• commenced and monitored the process to recruit additional Non-Executive Directors, leading to recommendations for the
appointment of Martine Verluyten and Peter Marks; and
• considered Directors’ potential conflicts (see page 48).
Directors’ Report: Governance 51
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Board appointments policy
Appointments to the Board are made on merit, against objective criteria and with due regard for the benefits of diversity on
the Board. This process is led by the Committee which, after evaluating the balance of skills, knowledge and experience of each
Director, makes recommendations to the Board. In August 2011, the Board refreshed its appointments policy and reinforced
its principle that appointments will continue to be made on merit, in line with our current and future requirements, and will
reflect the international activity of our Group. The policy also recognises the benefits of diversity, including gender diversity.
Appointments during the course of the year have been in line with that policy and have reinforced the diverse composition of
the Board. The Board endorses the aims of the Davies’ Report entitled ‘Women on Boards’ and when considering appointments
in the future will, with the support of the Nominations Committee, aim to build on its firm foundations. A copy of the Group’s
Board appointments policy can be found on our website at www.thomascookgroup.com.
Chairman succession
During the year, the Nominations Committee conducted a rigorous and transparent Chairman Succession process in advance of
Michael Beckett’s planned retirement. The Committee, comprising the Independent Non-Executive Directors under the leadership
of Roger Burnell, the Senior Independent Director, prepared a detailed job specification, candidate profile and timetable to
ensure an orderly and efficient process. It appointed Egon Zehnder, an international search and selection firm, to assist with the
identification of potential candidates, benchmarking and referencing. Towards the final stages of the process, the Committee
took soundings from the Company’s major shareholders and advisers to gain their views. At the end of the process the Board,
upon the unanimous recommendation of the Committee, took the decision to appoint Frank Meysman as Chairman Designate
with effect from 1 October 2011 and as Chairman from 1 December 2011. In reaching its decision, the Committee took account of
Frank Meysman’s extensive experience as a Non-Executive Director and Chairman, his successful executive career in international
companies, both at the operational and strategic levels, his particular strength in marketing and his achievements in both brand
building and product innovation.
Non-Executive appointments
In respect of the process to appoint a new Non-Executive Director to the Board, the Committee formulated a set of criteria,
including the required skills and attributes for suitable candidates. This took account of the comments from the 2010 Board
evaluation process and considered the current composition of the Board and the skills and attributes required in the future.
Prior to the appointment of Martine Verluyten the Committee considered candidates brought to their attention from a wide
range of professional firms and other sources. Although the appointment of Peter Marks, CEO of The Co-operative Group, was
recommended by the Committee, he was identified as a candidate during the discussions prior to the agreement to form the UK
retail joint venture with The Co-operative Group and Midlands Co-operative. Accordingly, an external search agent was not used.
An international search and selection firm has been appointed to assist with the initiative, led by the Chairman, to refresh and
further strengthen the Board’s composition.
Group Chief Executive Officer succession
Upon the resignation on 2 August 2011 of Manny Fontenla-Novoa, Sam Weihagen was appointed Group Chief Executive Officer on
an interim basis until a permanent successor could be appointed. Prior to that date, Sam Weihagen was the Deputy to the Group
Chief Executive Officer and, until an orderly succession process at the end of 2010, had been the Chief Executive Officer, Northern
Europe. He agreed to delay his planned retirement at the end of 2011 to allow as much time as was necessary for a thorough
process, leading to the appointment of a permanent successor to the role of Group Chief Executive Officer.
The succession process to appoint a permanent Group Chief Executive Officer is being conducted by the Committee under the
leadership of the Chairman, Frank Meysman. The Committee has approved a detailed job specification and candidate profile.
An international search and selection firm has been appointed to assist the Committee with the identification of candidates,
benchmarking and referencing.
52
Corporate governance report continued
healTh, SafeTy & enVironmenTal commiTTee
Meetings also regularly attended by*
Executives and Senior Managers with
responsibility for health, safety and
environmental matters
Derek Woodward (Group Company Secretary)
Beth Horlock (Acting Deputy Group Company
Secretary)
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 at
www.thomascookgroup.com or from the Group Company Secretary at the
registered office.
Chairman
Roger Burnell
Meetings
Five
Other members
Dawn Airey
David Allvey
Sam Weihagen
* Prior to his retirement on 30 November 2011, Michael Beckett regularly attended Health, Safety & Environmental Committee meetings.
*
Stephanie Mackie (Deputy Group Company Secretary) attended the meetings of the Committee up to the start of her maternity leave in January 2011.
Composition of the Committee
During the year, Manny Fontenla-Novoa was a member of the Committee until his resignation from the Board on 2 August 2011.
Sam Weihagen was appointed a member of the Committee on 14 September 2011.
Principal activities during the year
At its meetings during the year, the Committee discharged its responsibilities as listed above and in particular:
• reviewed and agreed the Group’s Sustainability Report for 2010;
• reviewed and monitored the Group’s health and safety and sustainability strategies including performance against targets;
• approved future health and safety performance targets;
• took part in an overseas destination visit to Mallorca to gain an insight into the practical application of the Company’s health
and safety practices;
• reviewed current and future legislative requirements in relation to carbon reporting;
• approved a number of health and safety policies, including the Group’s environmental and sustainability policies;
• reviewed the processes in place in respect of health and safety compliance in the area of customer accommodation;
• reviewed retail shop security;
• considered the risks and opportunities for the Group in respect of energy efficiency;
• reviewed key health and safety risks facing the Group and the mitigating actions taken;
• monitored progress in relation to the Group’s programme of government affairs; and
• revised the Committee’s terms of reference.
The Group’s 2010 Sustainability Report is available at www.thomascookgroup.com/sustainability and contains the Group’s
health & safety and environmental policies, an explanation of how Thomas Cook manages sustainability and progress against
targets. The 2011 Sustainability Report will be available at www.thomascookgroup.com in February 2012.
A summary of the approach and Group’s performance in relation to sustainability is contained on pages 35 to 39 of the Directors’
Report: Business Review.
Directors’ Report: Governance
53
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remuneraTion commiTTee
Chairman
Peter Middleton
Meetings
Six
Other members
Roger Burnell
Bo Lerenius
Meetings also regularly attended by*
David Allvey (Chairman, Audit Committee)
Anne Billson-Ross (Group Human Resources Director)
Judith Mackenzie (Group Head of Reward)
Derek Woodward (Group Company Secretary)
Michael Beckett attended the meetings of the Committee until his retirement as Chairman of the Company on 30 November 2011.
*
* Paul Wood, formerly Group Director, Human Resources, attended the meetings until March 2011.
A report detailing the composition, responsibilities and work carried out by the 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 56 to 69.
Composition of the Committee
All members of the Committee are Independent Non-Executive Directors.
finance & aDminiSTraTion commiTTee
To facilitate swift and efficient operational management decisions, the Board has established the Finance & Administration
Committee (comprising any two Directors, one of whom must be an Executive Director) which has delegated authority, within
clearly identified parameters, in relation to day-to-day financing and administrative matters.
DiScloSure commiTTee
The Board has established a Disclosure Committee which is responsible for implementing and monitoring systems and controls
in respect of the management and disclosure of inside information in accordance with the Company’s obligations under the UK
Listing Authority’s Disclosure and Transparency Rules. The Committee comprises the Group Chief Executive Officer, who is the
Chairman, the Group Chief Financial Officer and the Group Company Secretary.
ShareholDer communicaTion anD enGaGemenT
The Board promotes open communication with shareholders. This is formalised within a framework of an investor relations
programme conducted by the Group Chief Executive Officer, the Group Chief Financial Officer and the Investor Relations team.
The programme included the presentation of preliminary and half-year results, which can be accessed on the Thomas Cook
Group website at www.thomascookgroup.com along with financial reports, interim management statements, investor
presentations and trading updates. The management team conducts regular meetings with institutional investors and welcomes
the dialogue that this enables with shareholders. The Company makes every effort to ascertain investor perceptions of the
Company and regular reports of investor and analyst feedback are provided to the Board. Additionally, the Board responds
to ad hoc requests for information and all shareholders are entitled to attend the AGM, where they have an opportunity to
ask questions of the Board.
During the year, Michael Beckett, the former Chairman met with a number of major institutional shareholders following both the
market announcement on 12 July 2011 and the resignation of Manny Fontenla-Novoa on 2 August 2011 to discuss the backdrop
to the profit warning, CEO succession and governance issues in general. Peter Middleton, the Chairman of the Remuneration
Committee met with a number of major institutional shareholders and governance bodies to discuss remuneration matters,
including the discretion that had been applied to the performance targets in respect of the 2007 Award under the Performance
Share Plan (reported in the 2010 Remuneration Report). Roger Burnell, the Senior Independent Director also met a number of
major institutional shareholders to discuss both of the above issues and Chairman Succession. These meetings were both helpful
and productive. The Board was briefed on the content of the above discussions.
54
Corporate governance report continued
At its 2008 AGM, a resolution was passed allowing the Company to use its website and email 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 corporate website contains information for shareholders, including share price information
and news releases. It 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 and risk management 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 UK Corporate Governance Code (the ‘Turnbull Guidance’) and has approved the framework and the standards
implemented. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and
can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board has delegated
responsibility for the implementation of the Group risk management policy to the Group Risk Management Committee
(‘GRMC’), which is chaired by the Group Chief Financial Officer and comprises senior executives from across the Group.
Risk identification and reporting
Each of the six segments has a risk management committee, which meets regularly. 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. In addition, a central risk register is maintained
and updated by risk owners. The GRMC prepares a half-yearly risk report for the attention of the Audit Committee based on the
feedback from the segment risk management committees and also a top down review of the risk register.
The report and the risk register identify the principal risks to the business and assess the adequacy of controls and procedures in
place to mitigate the likelihood and the impact of these risks. There are also reports to the GRMC by specific risk owners on the
effectiveness of actions taken to mitigate risks. The regular risk reporting regime has created an environment for the development
and improvement of risk management procedures across the Group. The Audit Committee reviews the reports of the GRMC 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 relevant corporate governance best practice in relation
to risk management, including the guidance issued under the Turnbull Guidance. The Group’s internal audit function reports
directly to the Chairman of the Audit Committee. Internal audit makes recommendations to that Committee in relation to the
maintenance of a sound control environment throughout the Group.
A schedule of the Group’s principal risks and uncertainties, likely impacts on the Group and mitigating actions being taken by
management is set out on pages 28 to 30 of the Directors’ Report: Business Review.
Whistleblowing
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, as well as anti-bribery and theft and fraud reporting policies. These are published
on the Group’s intranet site, allowing such matters to be raised in confidence through the appropriate channels.
Code of ethics
The Group has a code of ethics which deals with:
• 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.
The Group code of ethics is further reinforced by a disclosure of interests and benefits policy, which applies to senior executives
in the Group. This supplements similar policies that are in place in each of the segments.
Directors’ Report: Governance 55
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Review of system of internal control
During the year, the Board, through the work of the Audit 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. This includes the
process by which management prepares consolidated accounts. The work conducted by management and described on pages
54 to 55 is complemented, supported and challenged by the controls assurance work carried out independently by the external
auditors, PwC, and the internal auditors, E&Y. Regular reports on control issues are presented to the Audit Committee by PwC
and E&Y. 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.
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. 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 accounting 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 show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the Company and the Group, and for ensuring that the
financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 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.
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/she is aware,
there is no relevant audit information of which the Company’s auditors are unaware; and that he/she has taken all steps that
he/she ought to have taken as a Director to make him/her aware of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
reSponSibiliTy STaTemenT of The DirecTorS in reSpecT of The annual financial STaTemenTS
Each of the Directors, who were in office at the date of this report, whose names and responsibilities are listed on pages 40 and
41, confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit of the Group; and
• the Directors’ Report contained on pages 2 to 72 includes a fair review of the development and performance of the
business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
56
Remuneration report
This report provides information on remuneration in four sections and aims to do
so with clarity and transparency to convey the context and intent as well as the detail:
a. Governance
• Composition of the Remuneration
Committee
• Terms of reference of the
Remuneration Committee
• Meetings
• Main areas of focus
• Advisers
C. remuneration by pay element
• Base salary
• Pensions
• Annual bonus
• Long-term incentives
• Service contracts
• External appointments
• Non-Executive Directors
B. Policy and approach
• Remuneration policy
• Overview of remuneration structure
for Executive Directors:
– Balance between fixed and variable
remuneration
– Performance graph
– Group Chief Executive Officer’s
remuneration
• Shareholder consultation
• Risk assessment
• Pay and conditions across the Group
D. audited information
• Directors’ interests in shares
• Share options and share awards
under long-term incentive plans
• Directors’ remuneration
• Directors’ pensions
Dear ShareholDer
After a year of great challenge for the Company, I am pleased to report on Directors’ remuneration for the year to
30 September 2011.
Business performance, senior leadership changes and strategic change projects all impact remuneration. I have sought to
steer a pragmatic course with the objectives of:
(a) operating a reward policy that allows the Company to attract, retain and incentivise the key talent that it needs (i) to deliver
the recovery programmes in the under-performing parts of the business and (ii) to continue to deliver at and ahead of targets
in the more strongly performing areas;
(b) ensuring that performance targets are aligned with business priorities and that outcomes under the various incentive plans
are commensurate with achievement; and
(c) providing a measured response to current challenges. We might need to conduct a review of our remuneration policy once
the new Chairman and the new Group Chief Executive Officer have had the opportunity to define the strategic priorities of
the Company over the medium-term.
In delivering to the above objectives, I have been grateful for the views expressed by shareholders in consultation meetings,
and these inputs have helped shape the actions taken. I would draw your attention to the following:
• The terms of the resignation of the Company’s former Group Chief Executive Officer, Manny Fontenla-Novoa, provide for no
vesting under short or long-term incentive plans and provide for no payments beyond those legally or contractually due to him.
• The Company is fortunate to have secured the services of the Deputy Group Chief Executive Officer, Sam Weihagen, to serve as
Group Chief Executive Officer beyond his planned retirement date, until a permanent successor is found. His annualised total
remuneration is consistent with the Company’s target total remuneration pay positioning.
• No bonus payments will be made to any Executive Director in respect of the year ended 30 September 2011.
• The Board has agreed to introduce deferral and claw-back in respect of future senior executive bonus payments.
• The performance conditions in respect of awards made under the Performance Share Plan and the Co-Investment Plan in
2008 and 2009 have not been achieved. Accordingly, these awards have lapsed with no vesting.
• The Committee reviewed remuneration policy during the first half of the year and agreed a more focused approach to the
list of companies with whom we conduct peer group comparison, but otherwise agreed no major changes to policy.
The Board will be submitting this Report for approval by shareholders at our Annual General Meeting on 8 February 2012.
Peter Middleton
Chairman, Remuneration Committee
13 December 2011
Directors’ Report: Remuneration report 57
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InformatIon not SuBjeCt to auDIt
a. GovernanCe
Composition
The following Independent Non-Executive Directors are members of the Remuneration Committee (the ‘Committee’):
Peter Middleton (Chairman)
Roger Burnell
Bo Lerenius
There has been no change to the composition of the Committee during the financial year ended 30 September 2011 (the ‘Year’).
Terms of reference
The responsibilities of the Committee include:
• making recommendations to the Board on the Company’s framework of executive remuneration and its cost;
• reviewing and determining, on behalf of the Board, the remuneration and incentive packages of the Executive Directors to
ensure that they are appropriately rewarded for their individual contributions to Thomas Cook’s overall performance; and
• formulating remuneration policy with regard to the strategic objectives and operational performance of the Company.
The terms of reference of the Committee are available on www.thomascookgroup.com or from the Group Company Secretary
at the registered office.
Meetings
The Committee held six meetings during the Year. Attendance at those meetings is disclosed on page 45 of the Corporate
Governance Report.
Main areas of focus
Matters discussed by the Committee during the Year included:
• the Group’s remuneration policy, including a review of comparator companies used for benchmarking purposes;
• key trends in executive remuneration;
• the market competitiveness of the remuneration packages for Executive Directors;
• views expressed by institutional shareholder and governance bodies;
• resignation terms for the former Group Chief Executive Officer, Manny Fontenla-Novoa;
• reward arrangements for the current Group Chief Executive Officer, Sam Weihagen;
• annual bonus: achievement of the annual bonus targets for Executive Directors in respect of the previous financial year and
the structure and targets of the annual bonus arrangements for the Year;
• long-term incentives: performance against targets set in respect of long-term incentive share awards granted in 2008, 2009
and 2010; and approval of the grants of new awards;
• review of risk in remuneration arrangements; and
• review of remuneration advisers.
Advisers
The Committee invites individuals to attend meetings, as it deems beneficial to assist it in reviewing matters for consideration.
During the Year, these individuals included the Chairman of the Company, the Group Chief Executive Officer, the Group Human
Resources Director, the Group Company Secretary and the Group Head of Reward. The Chairman of the Audit Committee also
usually attends meetings to ensure that there is coordination on risk and accounting issues.
No Director or senior executive is present at meetings when his or her own remuneration arrangements are being discussed.
In the performance of its duties, the Committee seeks assistance from external advisers, where necessary, to ensure it is suitably
advised. During the Year, Hewitt New Bridge Street (‘HNBS’) provided advice to the Committee in the following areas:
• trends in executive remuneration and review of the Company’s remuneration policy and long-term incentive plans; and
• the benchmarking of remuneration and pension benefits for Executive Directors.
Alithos Limited (‘Alithos’) provided advice on the performance of the total shareholder return targets attached to the Company’s
long-term incentive schemes. Neither Alithos nor HNBS advises the Company in any other capacity.
Evaluation
The Committee evaluated its own performance, which took place at the time of the Board evaluation, details of which are
on page 47.
58
Remuneration report continued
B. PolICY anD aPProaCh
Remuneration policy
The Group’s remuneration policy is to ensure that 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 managers, it must offer rewards which, on the basis of above average performance, offer upper
quartile levels of reward.
The Committee will continually review the remuneration policy to ensure it remains effective, appropriate and continues
to support the Group’s objectives.
The Committee therefore sets 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 Directors and senior executives with above average skills and leadership potential.
• The Committee will look for the Group to provide above industry average total remuneration in line with above average
performance.
• The Committee has determined that its policy for the design of remuneration arrangements for Executive Directors is that their
base salary shall be set in line with the median of a peer group of companies with which the Company should properly be
compared and that total remuneration (which is made up of base salary, benefits, bonuses and long-term incentive awards)
shall be set in the upper quartile of the comparator group but subject to the attainment of appropriate and challenging
performance criteria.
• The remuneration of each Executive Director will be based on performance (both of the Group and of the individual executive),
potential (i.e. the executive’s potential to grow in responsibility and performance) and scarcity (i.e. the availability of candidates
to replace the executive should he leave the Group).
• The remuneration for Executive Directors will be highly geared towards performance with the proportion of “at risk” pay
increasing disproportionately according to:
– the level of personal performance.
– the seniority of the Executive Director and his ability to influence results.
• The proportion between fixed and variable remuneration will typically be targeted at 30% fixed and 70% variable.
Overview of remuneration structure for Executive Directors
The remuneration of the Executive Directors in respect of the Year is set out in the audited section of this report.
For the Year, the remuneration of the Executive Directors comprised base salary, participation in the annual bonus and long-term
incentive arrangements, other benefits including the provision of pension contributions or allowances, private medical insurance, income
protection, death in service benefit and a car allowance. The only component of executive remuneration that is pensionable is base salary.
In benchmarking the remuneration of Executive Directors, the Remuneration Committee looks at pay levels at other travel and
leisure sector companies and takes a broader view by considering pay at other companies of a similar size to Thomas Cook.
At its meeting in December 2011, the Committee agreed to increase the required minimum level of bonus deferral for its senior
executives and to introduce claw-back provisions in respect of the deferred bonus.
(a) Balance between fixed and variable remuneration
The remuneration of Executive Directors is highly geared towards performance with the proportion of ‘at risk’ pay increasing
according to:
• the seniority of the Executive Director and his ability to influence results; and
• the level of personal performance.
The performance related portion of remuneration rewards short-term and long-term performance separately, with the potential
level of payment being heavily weighted in favour of the long-term. The relative importance of the fixed and variable elements
of the remuneration packages of Executive Directors in circumstances of target and stretch performance, are shown in the chart
opposite. The chart assumes:
(a) base salaries as at 30 September 2011;
(b) value of pension allowances and other benefits provided in the Year;
(c) annual bonus:
• 60% of full bonus paid at target performance;
• 100% of full bonus paid at maximum performance;
Directors’ Report: Remuneration report 59
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(d) Performance Share Plan: 25% of the award vests at target performance with 100% of the award vesting at maximum performance; and
(e) Co-Investment Plan: an initial investment of:
• at target performance, 10% of net of tax base pay;
• at maximum performance, the net of tax bonus paid above 100% of base salary.
At the end of the three-year performance period, the initial investment will be matched (further details are disclosed on page 63):
• 0.5:1 at target performance;
• 3.5:1 at maximum performance.
Further details of the remuneration of the Executive Directors in respect of the Year is set out in the audited section of this report.
Relative importance of fixed and variable remuneration
Group Chief Executive Officer
Target Performance
Stretch Performance
(% of total
remuneration)
0
20
40
60
80
100
Group Chief Financial Officer
Target Performance
Stretch Performance
(% of total
remuneration)
0
20
40
60
80
100
Variable
Fixed
(b) Performance graph
The graph below shows the TSR for holders of Thomas Cook Group plc €0.10 ordinary shares for the period since listing on
19 June 2007, measured against the FTSE All Share Travel & Leisure Index. This index was chosen as a comparator because the
Company has been a constituent of it throughout the period since listing. The calculation of TSR follows the provisions of the
Regulations and is broadly the change in market price together with reinvestment of dividend income. This graph shows the
spot value of £100 invested in Thomas Cook Group plc on 19 June 2007 compared with the value of £100 invested in the FTSE
All Share Travel & Leisure Index. The intermediate points are the spot values on the Company’s Financial Year ends.
100
90
80
70
60
50
40
30
20
10
0
)
£
(
e
u
l
a
V
FTSE All Share Travel
& Leisure Index
19/06/07
30/09/07
30/09/08
30/09/09
30/09/10
30/09/11
Thomas Cook
(c) Group Chief Executive Officer’s remuneration
Manny Fontenla-Novoa stood down as Group Chief Executive Officer with effect from 2 August 2011. The terms of the settlement were
agreed by the Committee and by the Board and provided for no remuneration beyond that which was contractually or legally due to him.
Manny Fontenla-Novoa’s service contract contained a 12-month notice period. In accordance with its terms he received a payment in lieu
of notice in respect of base salary, pension allowance and contractual benefits. No payment was made in respect of annual bonus and all
subsisting share awards have lapsed with no vesting. Total payments made to Manny Fontenla-Novoa after his resignation amount to
£1,166,639, which is made up as follows:
• he continued to receive his salary, pension and certain benefits (private medical, life cover, personal accident, income
protection, death in service pension and access to car and pool driver) in accordance with contractual terms for the period
between his resignation and 4 November 2011. Payments made and benefits received during this period amounted to
£315,525; and
60
Remuneration report continued
• on termination of his employment on 4 November 2011 it was agreed that a payment of £851,114 would be made to Manny Fontenla-
Novoa, in full and final settlement of all amounts due. Due to deterioration of the Company’s forecast year-end headroom position
after agreement was reached, Mr Fontenla-Novoa agreed to a deferral of the due date for payment of this sum until after the seasonal
cash low point at the end of December.
With the exception of medical cover, which is being continued until 1 April 2012, all other insured benefits ceased on termination of
employment. Full details of the settlement given to the former Group Chief Executive Officer are included in the table of Directors’
remuneration and relevant footnotes on pages 68 and 69.
Sam Weihagen, Deputy to the Group Chief Executive Officer, relinquished his additional role as Chief Executive Officer, Northern
Europe from 1 January 2011 and became part-time with a view to retiring at the end of 2011. His remuneration was pro rated
50% to reflect his contractual commitments. Upon the Board’s acceptance of the resignation of Manny Fontenla-Novoa, Sam
Weihagen was asked to assume the role of Group Chief Executive Officer on an interim basis until a permanent successor is
appointed. Sam Weihagen accepted and agreed to postpone his planned retirement, to relocate to London and to revert to
full-time hours. The Committee, having regard for the Company’s remuneration policy, the unique features of the interim
appointment and also for market rates of pay for the position, set remuneration for the duration of this interim appointment.
The key features of this remuneration are:
• base salary at a rate of: £750,000 per annum;
• maximum annualised bonus opportunity: 175% of base salary against clearly defined objectives;
• pension allowance: 25% of base salary; and
• benefits: accommodation in London, regular home leave flights, private health insurance, personal accident cover, death
in service benefit.
Long-term incentives are not provided. The base salary has been set at a level below that of the former incumbent, but at slightly
above median. Overall this produces a greater weighting on the fixed elements of remuneration than provided for under the
remuneration policy. The Committee considered this appropriate to reflect the interim nature of the appointment and to
recognise the willingness of Sam Weihagen to postpone his retirement. The maximum annual bonus opportunity and the
pension allowance percentages are unchanged from his previous entitlement.
Shareholder engagement
During the Year, Peter Middleton met with a number of major shareholders to discuss remuneration matters. The meetings were
helpful and productive and all matters raised were reported back to the Board at its next meeting. It is intended to continue with
a level of engagement in the current financial year.
Risk assessment
During the Year, the Committee considered remuneration in relation to risk and concluded that the Group’s remuneration policy
and incentives were not incompatible with its risk policies and systems.
Pay and conditions across the Group
Thomas Cook is a large international business with diversified business interests across the travel and leisure sector. As such, we
do not believe it is appropriate to establish direct correlation between pay and employment conditions of employees of the wider
business and Directors’ remuneration. Rather we seek to ensure that core principles are applied in determining remuneration
at all levels across the Group. Core principles and features of broader remuneration practices include:
• employees, including the Executive Directors, are paid competitively and fairly by reference to the local market rate.
Benchmarking is carried out to support pay positioning;
• through short and long-term incentive schemes, which operate throughout the organisation, overall pay is aligned to business
strategy and performance. The Company is reviewing the operation of key performance related pay structures to increase
alignment to business goals, improve consistency, transparency and fairness and ensure effective line of sight and cascade;
• the Company offers a range of benefits depending on employee location including pensions, flexible benefits, paid annual
leave and healthcare insurance;
• the Company offers internal promotion opportunities;
• the Company promotes employment conditions that are commensurate with a good employer and with a high profile brand,
including high standards of health and safety and policies on equal opportunity; and
• the Company promotes a wide range of best practice learning and development programmes to help people maximise their
potential contribution to the business and be eligible for higher levels of reward and promotion opportunities.
Directors’ Report: Remuneration report 61
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C. remuneratIon BY PaY element
Base salary
In accordance with the Group’s remuneration policy, the base salary of Executive Directors reflects the size and scope of their
responsibilities. The Committee reviewed the base salary of the Executive Directors in November 2010 and agreed that they
should remain unchanged. Changes to Sam Weihagen’s base salary during the Year to reflect his changing role, are described in
the section on Group Chief Executive Officer remuneration on page 60.
A review of market rates of base salary and total remuneration for Executive Directors was conducted in August 2011, which the
Committee reviewed in September 2011. The Committee agreed that base salaries should remain at their current level and will
be reviewed again in 2012.
The annual rates of base salary, as at 13 December 2011 (throughout the Year for Sam Weihagen), for the Executive Directors
are shown in the table below:
Name
Sam Weihagen1
Role
Deputy Group Chief Executive Officer and Chief Executive Officer, Northern Europe
Deputy to the Group Chief Executive Officer
Group Chief Executive Officer
Paul Hollingworth Group Chief Financial Officer
2011
‘000
SeK 5,600
SeK 2,800
GBP 750
GBP 480
2010
‘000
SEK 5,600
–
–
GBP 480
1
Sam Weihagen’s base salary of 5.6m Swedish Krona equated at 30 September 2011 to a base salary of £527,538 and his salary of 2.8m Swedish Krona equated to £263,769 at the same date.
Details of the periods of service in respect of each role are given in the service contracts section of this report on page 65.
Pensions
The Committee believes that the Executive Directors should be provided with competitive post retirement benefits. In respect
of each Executive Director, the Company contributes an amount equivalent to 25% of base salary each year, either into a pension
scheme or as a cash allowance.
Sam Weihagen is entitled to a bridging pension payable under a defined benefit pension scheme between the ages of 60 and
65 of 70% of his final salary* and a lifetime pension payable from 65 of 30% of his final salary* less the Swedish state pension.
From age 60, when the Company’s contributions to the above pension ceased, Sam Weihagen was paid a salary supplement of
25% of his base pay. Since reaching age 60, Sam Weihagen has not drawn any of his bridging pension, which will be subject to
actuarial adjustment once it is drawn. The table on page 69 discloses these arrangements.
*SEK 5,600,000 as at 31 December 2010.
Annual bonus
The Committee believes that it is important to incentivise Executive Directors on a short-term basis with an annual cash bonus,
earned on the attainment of stretching performance targets. These targets are set by the Committee at the start of the financial
year. Should all objectives be achieved in full, the maximum annual bonus opportunity for all Executive Directors is 175% of base
salary. Of the maximum bonus payable in respect of the Year:
(i)
37.5% was linked to the attainment of Group financial targets, earned on a pro rata basis by reference to the achievement
of those targets;
(ii) 25% was linked to the attainment of quarterly Group free cash flow targets;
(iii) 12.5% was linked to the achievement of a significant reduction in the level of exceptional items; and
(iv) 25% was linked to the attainment of individual financial and non-financial targets including those relating to strategic change
projects and executive succession planning.
The Committee determines the extent to which it considers the objectives have been met and the annual bonus payable.
Achievement of Group financial targets is required as a hurdle before achievement against other performance targets are
measured. For the Year, the Group financial targets were not met and the Committee determined that no bonus would be
payable to any of the Executive Directors.
The annual bonus for the year ended 30 September 2012 will be structured in the following way:
(i) 40% to be linked to the attainment of Group financial targets;
(ii) 35% to be linked to the attainment of quarterly Group free cash flow targets; and
(iii) 25% to be linked to the attainment of individual financial and non-financial objectives.
Long-term incentives
The Committee believes that influencing long-term performance and the close alignment of Executive Directors’ remuneration with
the interests of shareholders is an important element of the Company’s remuneration policy. Therefore, the following two share-based
long-term incentive plans, both of which have been approved by shareholders, have been designed to reward and retain Executive
Directors and key senior executives over the longer-term, whilst also aligning with the interests of the Company’s shareholders.
62
Remuneration report continued
In line with market practice, 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 target has been met. Unless there are exceptional
circumstances, awards are made annually within 42 days of the Company’s annual financial results being announced. No award
can be made under either plan later than 10 years after the anniversary of the adoption date and options are not exercisable
later than 10 years after the date of the award. Neither plan has a performance target retest provision.
(a) Thomas Cook Group plc 2007 Performance Share Plan (‘PSP’)
In January 2011, PSP awards with a face value equal to the following percentages of base salary were made to the
Executive Directors:
Name
Paul Hollingworth1
Sam Weihagen
Manny Fontenla-Novoa
Percentage of
base salary
200
150
175
1
As an exception to the remuneration policy the Committee agreed that Paul Hollingworth would receive an award equal to 200% of base salary for the first two years following his
appointment. Thereafter, his awards will revert to 150% of base salary.
Awards with a face value of 100% or less of base salary were also made to other senior executives.
(b) Thomas Cook Group plc 2008 Co-Investment Plan (‘COIP’)
Under the COIP, Executive Directors and key executives 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 invest a further part of their bonus to
purchase shares. The shares purchased, on either a voluntary or a 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 target. 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.
In December 2011, the Remuneration Committee and the Board approved changes to the COIP which will take effect for awards
made in respect of the 2011/12 bonus year. These will increase the level of mandatory investment to 25% of gross base salary,
reduce the maximum match from three and a half Matching Shares to two Matching Shares for every one Lodged Share and
include claw-back rights in respect of the Lodged Shares.
The number of Lodged Shares held by each Executive Director and the percentage of base salary that represents (based on
a market value of 39.89p per share as at 30 September 2011) is detailed below:
Name
Sam Weihagen
Paul Hollingworth
Number of Lodged
Shares held
101,715
103,897
Percentage of
base salary
5.4
8.6
Vesting of awards under long-term incentive plans
The performance measurement period in respect of awards granted under the PSP and COIP in 2008 ended during the Year.
As the targets had not been met, the Committee determined that no part of the awards would vest. At its meeting in October
2011, the Committee made the same determination in respect of PSP and COIP awards granted in 2009 as it was clear that these
targets would similarly not be met. Under the terms of Manny Fontenla-Novoa’s departure, none of his Matching Shares, awarded
under the COIP, vested.
Award grants in 2011/12
It is intended to make awards under the PSP and COIP in the current financial year.
Performance conditions attached to long-term incentive plans
Following the consultation, the Board sought shareholder approval for new performance targets to attach to PSP and COIP awards
at the AGM on 25 March 2010. This resolution was passed with 99.8% of the vote.
The Committee adopted these targets for awards granted in February 2010. Following a review of the continued appropriateness
of these targets, the Committee concluded that they remained appropriate and adopted these targets again for awards granted
in January 2011.
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 management are aligned with shareholders. It is currently intended that further
awards granted during the current financial year will have the same performance targets as were attached to awards granted
in February 2010 and January 2011.
Details of the performance targets attached to each PSP and COIP award are detailed in the table opposite. A further explanation
of the selection of the different performance measures is given on page 64.
Directors’ Report: Remuneration report 63
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Vesting criteria
Performance targets over three-year period
Year of Award
Performance Share Plan
2008 and 2009
2010 and 2011
50% – Total Shareholder
Return ranked against the
comparator group
50% – Earnings Per Share
50% – Total Shareholder
Return ranked equally
against the following
comparator groups:
• the 50 companies at the
bottom of the FTSE 100
and the 50 companies at
the top of the FTSE 250; and
• sector specific comparator
group. (see page 64)
50% – Earnings Per Share
Co-Investment Plan
2008 and 2009
100% – Earnings Per Share
2010 and 2011
50% – Earnings Per Share
50% – Total Shareholder
Return ranked equally
against the following
comparator groups:
• the 50 companies at the
bottom of the FTSE 100 and
the 50 companies at the top
of the FTSE 250; and
• sector specific comparator
group. (see page 64)
2008, 2009, 2010 and 2011 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.
March 2008 award: Full vesting for adjusted EPS of 33 pence or above.
Zero vesting for EPS below 28 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 28 pence and 33 pence.
January and June 2009 awards: The same vesting schedule applies as
for the March 2008 award but the EPS target is 35 pence to 40 pence.
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. Each comparator group determines 25% of
the award.
Full vesting for EPS growth of 14% or greater. Zero vesting for EPS
growth of less than 6%. Vesting will increase on a straight line basis
from 25% to 100% of the EPS linked part of the award for EPS growth
between 6% and 14%.
June 2008 award: Vesting of up to 2.5 Matching Shares for adjusted
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
the ROIC ratchet (see below).
January, June and August 2009 awards: The same vesting schedule applies
as for the June 2008 awards but the EPS target is 35 pence to 40 pence.
Vesting of up to 2.5 Matching Shares for EPS growth of 14% or greater.
Zero vesting for EPS growth of less than 6%. Vesting will increase on
a straight line basis from 25% to 100% of the EPS linked part of the
award for EPS growth between 6% and 14%.
Vesting of up to 2.5 Matching Shares 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. Each comparator group
determines 25% of the award.
If ROIC is below 4% no Matching Shares will vest. If ROIC is between
4% and 6%, a reduction of up to 40% is applied on a straight line basis.
If ROIC is between 6% and 10%, Matching Shares vest according to
EPS performance only (EPS and TSR performance for the 2010 award)
(overall opportunity of up to 2.5 times a participant’s investment).
If ROIC is between 10% and 14%, an uplift of up to 40% is applied on
a straight line basis, subject to a maximum uplift of 40% for ROIC in
excess of 14%. This will increase the matching ratio to 3.5 Matching
Shares for every one Lodged Share.
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Remuneration report continued
Total shareholder return
The Committee selected relative TSR as a performance condition under the PSP and the COIP as it considered it to be aligned
with shareholder interests. The TSR performance of the Company is measured relative to that of companies in the following
comparator groups:
• PSP 2008 and 2009: the 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 (‘the FTSE comparator group’). 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; and
• PSP and COIP 2010 and 2011: two comparator groups as follows:
– the FTSE comparator group; and
– a tailored peer group of international travel operators (see details below). The Committee believes that this second
comparator group improves the relevance of the performance target to participants.
The constituent members of both of the comparator groups are determined on the date the awards are made. At the end of the
performance period, TSR calculations will be performed by the Company’s external advisers using the 90-day average share price
at the start and end of the performance period.
The sector specific comparator group applied to the 2010 and 2011 PSP and COIP awards consists of the following companies:
Company name
Accor SA
Air France KLM SA
Avis Europe plc1
Carnival Corp
easyJet plc
Flight Centre Limited
Holidaybreak plc
Kuoni Reisen Holding AG
Priceline.com Inc
Ryanair Holdings plc
Transat A.T. Inc
Tui Travel PLC
Country of main listing
France
France
UK
US
UK
Australia
UK
Switzerland
US
Ireland
Canada
UK
Country of main listing
Company name
Germany
Air Berlin PLC
US
Avis Budget Group Inc
British Airways Plc2
UK
Germany
Deutsche Lufthansa AG
US
Expedia Inc
Hogg Robinson Group plc
UK
Intercontinental Hotels Group PLC UK
Millennium & Copthorne Hotels plc UK
US
Royal Caribbean Cruises Ltd
Sweden
SAS AB
France
Trigano SA
1
2
Avis Europe plc (‘Avis’) was acquired by Avis Budget Group, by means of a Scheme of Arrangement, which became effective on 3 October 2011. Under the terms of the PSP and COIP’s
performance targets the position of Avis was established at the date the scheme of arrangement became effective and its position frozen.
British Airways Plc (‘BA’) delisted from the London Stock Exchange on 24 January 2011 following its merger with Iberia. Under the terms of the PSP and COIP’s performance targets
the position of BA was established at the date of the merger and its position frozen.
Earnings per share
The Committee selected EPS as a performance condition under the PSP and the COIP as it is regarded as a good reflector
of business performance.
• PSP and COIP 2008 and 2009: the Committee was advised that an absolute target was considered more appropriate than
a percentage growth target as there was little historic data for the Company, having only been established in 2007. The EPS
target range was set by reference to early consensus forecasts.
• PSP and COIP 2010 and 2011: the EPS target was set as a compound annual growth rate over a three-year period.
EPS will be derived from the income statement for the last financial year ending prior to the end of the performance period.
Return on invested capital
ROIC in relation to the COIP: 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 three-year performance period by taking the post tax
operating profit over the performance period and dividing this by the sum of the opening capital for each year in the period.
Change of control and other circumstances
In the event of a change of control, the awards under both the PSP and COIP 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. Where options have been
granted, participants would have six months following the change of control to exercise their options, to the extent permitted
by the Committee. On the death of a participant or in the case of early termination of a participant’s employment where the
Committee has used its discretion, participants (or their representatives) would have twelve and six months respectively to
exercise their options, to the extent permitted by the Committee.
Directors’ Report: Remuneration report 65
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Funding of share plans
It is the Company’s current intention to satisfy the requirements of its share plans in the method best suited to the interests of
the Company, either by acquiring shares in the market or, subject to institutional shareholder guidelines, issuing new shares. The
Committee has agreed that it is prudent and appropriate to hedge the shares awarded under the PSP and the matching element
awarded under the COIP. As at 30 September 2011, 3,863,970 shares were held in the Thomas Cook Group plc 2007 Employee
Benefit Trust, which represents 13% of share incentive awards held on that date and 0.4% of the total issued share capital.
The level of hedging will be kept under review. Subject to the rules of the plans, awards cannot be made if awards under any
discretionary employee share plan 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 and did not vote at the AGM held in February 2011.
Service contracts
Each of the Executive Directors, who served during the Year, has or had a service contract with the Company or one of its
subsidiary companies. The date of the current service contract and notice period for each Executive Director are set out below:
Name
Current Directors
Sam Weihagen
Paul Hollingworth
former Directors
Manny Fontenla-Novoa
Date of contract
2 August 2011
12 November 2009
30 January 2008
During the Year Sam Weihagen has served under three different contracts:
• Up to 31 December 2010: Chief Executive Officer, Northern Europe and Deputy to the Group Chief Executive Officer;
• 1 January to 1 August 2011: Deputy Group Chief Executive Officer; and
• 2 August 2011 onwards: Group Chief Executive Officer (interim). The notice period for Sam Weihagen serving in this role
is three months, but the stated intention of the parties is that the appointment shall last until a successor is selected.
The notice period for Paul Hollingworth is 12 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 the relevant period of written
notice and the Company may pay compensation in lieu of notice. Under its terms of reference, it is the Committee’s responsibility
to determine the basis on which the employment of an Executive Director is terminated. The Committee aims to avoid rewarding
poor performance and to take a robust line on reducing compensation to reflect any obligation to mitigate loss on the part of the
departing Executive Director. 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.
Manny Fontenla-Novoa served as an Executive Director until his resignation as Group Chief Executive Officer with effect from
2 August 2011. His employment was subsequently terminated in line with contractual terms which provided for a notice period
of 12 months or payment in lieu thereof.
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.
Paul Hollingworth, Group Chief Financial Officer, is a non-executive director of Electrocomponents plc. For the Year he received
a fee of £53,750 from Electrocomponents plc, which he is allowed to retain.
Non-Executive Directors
The Committee is responsible for determining the fees for the Chairman of the Company. The fees for the other Non-Executive
Directors are set by the Board. No Director votes on his or her own remuneration.
The Non-Executive Directors’ fees were reviewed during the Year. The fees were benchmarked against other companies in the
FTSE 350 and, following the review, it was agreed that no increase in the fees should be made, but a further review will take place
in 2012. 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.
66
Remuneration report continued
The annual rates of Non-Executive Director fees are shown in the table below:
Position
Chairman*
Non-Executive Director
Additional fee for the Chair of the Audit Committee
Additional fee for the Chair of the Remuneration Committee
Additional fee for the Chair of the Health, Safety & Environmental Committee
Annual fees £000
275
60
20
20
10
*
This is the annual rate of fees payable to Frank Meysman, who became Chairman on 1 December 2011. The annual rate of fees paid to the former Chairman was £250,000.
The fees paid to the Chairman and the Non-Executive Directors in respect of the Year 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
Frank Meysman
Dawn Airey
David Allvey
Roger Burnell
Bo Lerenius
Peter Marks
Peter Middleton
Martine Verluyten
Date of letter of
appointment
1 October 2011
12 April 2010
22 November 2010
22 November 2010
22 November 2010
1 October 2011
30 November 2009
9 May 2011
Expiry date
N/A
11 April 2013
10 April 2012
10 April 2012
30 June 2013
30 September 2014
29 November 2012
8 May 2014
Notice period
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
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 Year in the €0.10 ordinary
shares of the Company:
Directors as at 30 September 2011
executive Directors1
Paul Hollingworth
Sam Weihagen
non-executive Directors2
Michael Beckett
Dawn Airey
David Allvey
Roger Burnell
Bo Lerenius
Peter Middleton
Martine Verluyten
ordinary shares at
30 September 2011
Ordinary shares at
1 October 2010
or on appointment
153,897
152,385
225,000
10,000
–
53,692
20,000
1,000
–
83,568
89,680
45,000
10,000
–
3,692
20,000
1,000
–
1
2
The holdings of the Executive Directors include shares held as Lodged Shares under the COIP: 103,897 held by Paul Hollingworth and 101,715 held by Sam Weihagen.
Frank Meysman purchased 100,000 ordinary shares in the Company on 30 September 2011, prior to his appointment as Chairman Designate on 1 October 2011. Peter Marks does not
currently hold shares in the Company.
As at the date of his resignation on 2 August 2011, the financial year-end of 30 September 2011, and the date of this report the former Group Chief Executive Officer, Manny Fontenla-Novoa, held
958,398 ordinary shares in the Company.
Directors’ Report: Remuneration report 67
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Share options and share awards under long-term incentive plans
The following tables show, in respect of each person who served as a Director at any time during the Year, the number of ordinary
shares of €0.10 each that were the subject of a share option at the start of the Year and at the end of the Year (or on the date
of resignation). Holdings relate to the PSP and COIP. Options under the PSP and COIP are awarded as ‘nil cost’. All share options
shown in the tables below as held by the former Group Chief Executive Officer, Manny Fontenla-Novoa, lapsed subsequent to
his resignation.
The following table gives details of PSP awards held by Executive Directors who served during the Year:
Sam Weihagen
Name
Date of award
Paul Hollingworth 12 February 2010
10 January 2011
12 July 2007
11 March 2008
9 January 2009
12 February 2010
10 January 2011
Number of
options
awarded
411,134
486,815
61,387
121,588
227,394
315,979
198,621
Share price
used to calculate
award (pence)
234
197
333
283
188
234
197
Number of
share options
exercised
–
–
–
–
–
–
–
Manny
Fontenla-Novoa
12 July 2007
11 March 2008
9 January 2009
12 February 2010
10 January 2011
52,500
389,576
791,223
637,044
754,310
333
283
188
234
197
52,500
–
–
–
–
Number of
share options
–
–
–
121,588
–
–
–
lapsed Date of exercise
–
–
–
–
–
–
–
10 January
2011
–
–
–
–
–
389,576
–
–
–
Share price
on date of
exercise (pence)
–
–
–
–
–
–
–
Total as at
30 September
2011 or on date of
resignation
411,134
486,815
61,387
0
227,394
315,979
198,621
195
–
–
–
–
0
0
791,223
637,044
754,310
Manny Fontenla-Novoa exercised options over 52,500 ordinary shares on 10 January 2011. On the same day, he sold 26,830 shares
at a price of 194.8p, to cover income tax liability and NICs and commission costs. The total pre-tax gain on exercise was £102,270.
He retained the remaining 25,670 shares after exercise.
For UK participants, £30,000 of awards can be made and held under a HMRC approved Company Share Option Sub-Plan
(‘CSOSP’). The following table gives details of awards made under the CSOSP in conjunction with the PSP:
Paul Hollingworth
Manny Fontenla-Novoa
Option price (pence)
9 January 2009
–
15,957
188
12 February 2010
12,847
–
234
Total held at
30 September 2011
or on date of resignation
12,847
15,957
At the date of exercise, to the extent that there is a gain on the HMRC approved options, PSP options will be forfeited to the same value.
The exercise periods in respect of the options held under the PSP and CSOSP awards set out in the tables above are set out below:
Date of Award
12 July 2007
9 January 2009
12 February 2010
10 January 2011
Earliest exercisable date
12 July 2010
9 January 2012
12 February 2013
10 January 2014
Expiration date
12 July 2017
9 January 2019
12 February 2020
10 January 2021
Vesting of awards made under the PSP in 2007, 2008 and 2009 (including the HMRC approved options) is dependent on 50% Total
Shareholder Return ranked against the FTSE 50 to 150 comparator group and 50% growth in Earnings Per Share. During the Year, the 2008
award lapsed as the performance target had not been met. Between the end of the Year and the date of this report, it became apparent
that the EPS target in respect of the 2009 PSP award had not been achieved and that the TSR target would not be achieved. Therefore, the
PSP awards made in 2009 have lapsed. Vesting of awards made under the PSP in 2010 and 2011 (including the HMRC approved options) is
dependent on 25% TSR ranked against the FTSE 50 to 150 comparator group, 25% TSR ranked against the sector specific comparator group
and 50% growth in Earnings Per Share. Further information on the performance conditions is detailed on pages 63 and 64.
68
Remuneration report continued
The following table gives details of the maximum number of Matching Shares each Executive Director can receive under the
COIP if the performance conditions are met in full. Details of the Lodged Shares purchased under the COIP are included in the
Directors’ interests in shares table on page 66:
Name
Paul Hollingworth
Sam Weihagen
Manny Fontenla-Novoa
Date of award
12 February 2010
21 May 2010
10 January 2011
12 January 2009
12 February 2010
21 May 2010
10 January 2011
25 June 2008
12 January 2009
13 August 2009
Total number
of Matching
Shares
awarded
222,435
70,052
71,151
36,379
205,156
70,000
44,467
591,535
618,775
318,174
12 February 2010 1,099,052
350,269
968,121
21 May 2010
10 January 2011
Number
lapsed during
the Year
591,535
–
Total held at
30 September
2011 or on
date of
resignation
222,435
70,052
71,151
36,379
205,156
70,000
44,467
0
618,775
318,174
1,099,052
350,269
968,121
End of
vesting period
12 February 2013
21 May 2013
10 January 2014
12 January 2012
12 February 2013
21 May 2013
10 January 2014
25 June 2011
12 January 2012
13 August 2012
12 February 2013
21 May 2013
10 January 2014
Expiration date
12 February 2020
21 May 2020
10 January 2021
12 January 2019
12 February 2020
21 May 2020
10 January 2021
N/A
12 January 2019
13 August 2019
12 February 2020
21 May 2020
10 January 2021
Vesting of Matching Shares awarded under the COIP in 2008 and 2009 was dependent on growth in EPS and Return on Invested
Capital achievement. During the Year, the 2008 award lapsed as the performance target had not been met. Between the end of
the Year and the date of this report, it became apparent that the performance target in respect of the 2009 COIP award had not
been achieved. Therefore, the Matching Shares in respect of the 2009 awards have lapsed. Vesting of Matching Shares awarded
under the COIP in 2010 and 2011 is dependent on growth in EPS, TSR ranked against the comparator groups and Return on
Invested Capital achievement. Further information on the performance conditions is detailed on pages 63 and 64.
The following table gives details of the awards held by the Executive Directors under the Sharesave Scheme:
Name
Manny Fontenla-Novoa
Date of award
22 June 2010
Option price
(pence)
181
Number of
options
awarded
4,972
Date from which the
option may be exercised
1 August 2013
Date on which
the option expires
31 January 2014
None of the Directors of the Company held any interest in any other securities of Thomas Cook Group plc during the Year. In the
period between 30 September 2011 and 13 December 2011, there were no changes in the Directors’ interests referred to above.
The mid-market price of the Company’s ordinary shares at the close of business on 30 September 2011 was 39.89p and the range
during the Year was 204.80p to 33.78p. These mid-market prices are as quoted on the London Stock Exchange.
Directors’ remuneration
Details of the remuneration of the Directors for services to the Company for the Year are disclosed below.
Payments after
service as a
Director
£000
Annual bonus
payments1
£000
Pay in lieu of
pension2
£000
Base
salary/fees
£000
Benefits3
£000
Name
executive Directors
Paul Hollingworth
Sam Weihagen4
non-executive Directors*
Dawn Airey
David Allvey
Roger Burnell
Bo Lerenius
Peter Middleton5
Martine Verluyten6
Past executive Directors
Manny Fontenla-Novoa7
Past non-executive Directors
Michael Beckett8
Total
480
416
60
80
70
60
80
24
714
250
2,234
–
–
–
–
–
–
–
–
–
–
–
120
26
–
–
–
–
–
–
151
–
297
27
11
–
–
–
–
–
–
129
–
167
Total
emoluments
2011
£000
Total
emoluments
2010
£000
627
453
974
1,117
60
80
70
60
80
24
28
80
70
60
60
–
–
–
–
–
–
–
–
–
199
–
199
1,193
2,348
250
2,897
250
4,987
Directors’ Report: Remuneration report 69
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Annual bonus entitlement is up to 175% of salary for each of the Executive Directors. No bonuses were paid in respect of the Year.
The pay in lieu of pension which is paid as a salary supplement to Manny Fontenla-Novoa, Paul Hollingworth and Sam Weihagen is treated as a separate non-salary benefit and is excluded
from the calculation of bonus entitlement and share plan award calculations.
Benefits received by all Executive Directors include private medical insurance and life assurance and car allowance. For the period from 2 August 2011, Sam Weihagen receives
accommodation and home leave flights, but no car allowance. Manny Fontenla-Novoa additionally received income protection and death in service pension insurances. The cost of premiums
for these benefits were paid by the Company and are included within the benefits total.
Sam Weihagen was paid in Swedish Krona for the period to 1 August 2011. His emoluments have been converted into Sterling at the average exchange rate for the Year of 10.4.
Peter Middleton also received a pension of £60,523 in the Year from the Thomas Cook Defined Benefit Pension Scheme. This pension is fully funded and accrued in the period 1987 to
1992 when he was CEO of Thomas Cook. See page 46 of the Corporate Governance Report for further information.
Martine Verluyten joined the Board on 9 May 2011.
Manny Fontenla-Novoa left office on 2 August 2011 and was on garden leave from 3 August to 4 November when his employment was terminated. Total payments made to
Mr Fontenla-Novoa after his resignation as a Director amount to £1,166,639 comprising £198,781 in respect of the period to 30 September 2011 (included in the table opposite),
£116,744 from 1 October 2011 to 4 November and £851,114 as payment in lieu of the balance of his 12-month notice period.
8 Michael Beckett retired from the Board on 30 November 2011.
* Frank Meysman and Peter Marks were both appointed to the Board on 1 October 2011. Neither received any remuneration for the year ended 30 September 2011.
Directors’ pensions
The Company contributes for each of the Executive Directors into either a pension scheme or as a cash allowance an amount
equivalent to 25% of their annual base salary. To the extent that this is provided as a cash allowance it is disclosed in the
Directors’ remuneration table as pay in lieu of pension.
For the period to August 2011 an amount equal to 25% of Sam Weihagen’s then base salary was paid as a contribution into
an insurance-based defined contribution scheme with Skandia AB. For the period from August 2011 to 30 September 2011,
Sam Weihagen was paid the 25% as a cash allowance.
Sam Weihagen
SEK 816,667 converts to a contribution of £78,255 at 30 September 2011.
Paul Hollingworth is paid the 25% as a cash allowance.
Pension contribution for the
year ended 30 September 2011
SEK 816,667
Manny Fontenla-Novoa was an active member of the Thomas Cook Pension Plan, a defined benefit pension scheme that closed to future
accrual on 31 March 2011. Salary above that which was pensionable under the rules of his plan was paid as a cash allowance. Since the plan
closed, part of his pension allowance was paid into the Thomas Cook UK DC Pension Scheme and the balance was paid as a cash allowance.
Manny Fontenla-Novoa
Name
Manny Fontenla-Novoa
Accrued pension
at 30 Sep 2011
£ pa
27,090
Increase in
accrued pension
during 2011
£ pa
1,530
Increase in
accrued pension
during 2011
(net of inflation)
£ pa
738
Transfer value
of accrued
pension at
30 Sep 2011
£
546,231
Transfer value of
accrued pension
at 1 Oct 2010
£
480,138
This report on remuneration has been approved by the Board of Directors and signed on its behalf by:
Defined contribution pension
contribution for the year
ended 30 September 2011
£3,417
Increase in
transfer value
during 2011 net
of Director’s
contribution
£
62,718
Director’s
contribution
during 2011
£
3,375
Peter Middleton
Chairman, Remuneration Committee
13 December 2011
70
Other disclosures
SHARE CAPITAL
The Company has the following two classes of shares in issue:
Name
Ordinary shares of €0.10 each
Deferred shares of £1 each
Number of
Shares in issue
874,990,495
50,000
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 ordinary shares make up the significant majority of the share capital as at 30 September 2011. 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.
As part of the £200m bank facility announced on 25 November 2011 the Company issued Warrants to certain of its lenders
giving holders the right, at any time until 22 May 2015, to subscribe for up to an aggregate of approximately 43m ordinary shares
(representing approximately 4.9% of the issued share capital of the Company at the date of issue) at a subscription price per
share of 19.875 pence. As at 12 December 2011 none of the Warrantholders had exercised their Subscription Rights in respect
of the Warrants.
AUTHORITY TO PURCHASE SHARES
The Company currently does not have authority to purchase its own shares.
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 1008/2008 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.
Directors’ Report: Other disclosures 71
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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. 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.
As at 30 September 2011, 110,944 ordinary shares (0.013%) were held on the Separate Register.
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.
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 interest shall be construed accordingly.
PROVISIONS OF CHANGE OF CONTROL
The Company has a £1.2bn Group Banking 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) 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 of its commitments under the Agreement. The amendments
to the Agreement dated 21 October 2010, 15 July 2011 and 2 December 2011 did not affect these provisions regarding change
of control.
The Company has a 50.1% stake in ITC Travel Investments as part of a joint venture with VAO Intourist and Intourist Overseas
Limited. Under the terms of the joint venture agreement, if a change of control of the Company occurs, the other shareholders
which are party to the agreement are entitled to issue an irrevocable notice in writing to the Company requiring it to purchase
all of their shares at a prescribed default value.
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 year (2010: nil).
CHARITABLE DONATIONS
The Company made cash donations of £5,000 to Leeds Metropolitan University and £25,000 to Just a Drop Charity during the
financial year (in 2010 the Company made a donation of £125,000 to the Travel Foundation).
72
Other disclosures continued
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 2011, the Company had no
trade creditors (2010: nil).
MAJOR SHAREHOLDINGS
As at 12 December 2011, 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
Marathon Asset Management LLP
Invesco Ltd
BlackRock Inc
AXA S.A.
Lloyds Banking Group plc
Massachusetts Financial Services Company
Standard Life Investments Ltd
Number of
shares held
59,283,472
45,085,133
42,946,657
42,030,117
40,869,697
40,726,189
35,491,827
Percentage of
issued capital (%)
6.78
5.15
4.91
4.80
4.67
4.65
4.06
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP have expressed their willingness to be re-appointed as auditors of the Company. Upon the
recommendation of the Audit Committee, resolutions to re-appoint them as the Company’s auditors and to authorise the
Directors to determine their remuneration will be proposed to the 2012 Annual General Meeting.
The Directors’ Report comprising pages 2 to 72 has been approved and is signed by order of the Board by:
Derek Woodward
Group Company Secretary
13 December 2011
REGISTERED OFFICE
6th Floor South
Brettenham House
Lancaster Place
London WC2E 7EN
REGISTERED NUMBER
6091951
Directors’ Report: Other disclosures 73
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Independent auditors’ report to the members of Thomas Cook Group plc
We have audited the financial statements of Thomas Cook
Group plc for the year ended 30 September 2011, which
comprise the Group income statement, the Group statement
of comprehensive income, the Group and Company cash
flow statement, the Group and Company balance sheet, the
Group and Company statement of changes in equity and the
related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS
AND AUDITORS
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to
audit and express an opinion on the financial statements in
accordance with applicable law and International Standards
on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no
other purpose. We do not, in giving these opinions, 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.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the parent
company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read
all the financial and non-financial information in the Directors’
Report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and of the parent company’s affairs as
at 30 September 2011 and of the Group’s loss and Group’s
and parent company’s cash flows for the year then ended;
• the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of
the lAS Regulation.
OPINION ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance
with the Companies Act 2006; and
• the information given in the Directors’ Report for the
financial year for which the financial statements are
prepared is consistent with the financial statements.
MATTERS ON wHICH wE ARE REqUIRED TO REPORT
BY ExCEPTION
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified
by law are not made; or
• we have not received all the information and explanations
we require for our audit; or
• a Corporate Governance Statement has not been prepared
by the parent company.
Under the Listing Rules we are required to review:
• the Directors’ statement in relation to going concern; and
• the parts of the Corporate Governance Statement relating
to the Company’s compliance with the nine provisions of
the UK Corporate Governance Code specified for our review.
John Ellis
Senior Statutory Auditor,
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
13 December 2011
74
Group income statement
For the year ended 30 September 2011
Year ended 30 September 2011
Year ended 30 September 2010
Revenue
Cost of providing tourism services
Gross profit
Personnel expenses
Depreciation and amortisation
Net operating expenses
Loss on disposal of assets
Amortisation of business combination intangibles
Profit/(loss) from operations
Share of results of associates and joint venture
Profit on disposal of associates
Net investment loss
Finance income
Finance costs
Profit/(loss) before tax
Tax
(Loss)/profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Loss per share (pence)
Basic
Diluted
notes
3
4
12/13
6
5
12
3
14
5
14
7
7
8
9
11
11
All revenue and results arose from continuing operations.
Separately
disclosed
items
(note 5)
£m
–
(62.3)
(62.3)
(55.1)
–
(413.9)
(4.6)
(34.3)
(570.2)
–
10.3
–
–
(12.9)
(572.8)
Underlying
results
£m
9,808.9
(7,648.9)
2,160.0
(1,068.2)
(167.1)
(621.1)
–
–
303.6
(2.3)
–
(4.8)
47.9
(169.8)
174.6
Total
£m
9,808.9
(7,711.2)
2,097.7
(1,123.3)
(167.1)
(1,035.0)
(4.6)
(34.3)
(266.6)
(2.3)
10.3
(4.8)
47.9
(182.7)
(398.2)
(119.8)
(518.0)
(520.7)
2.7
(518.0)
(60.7)
(60.7)
Separately
disclosed
items
(note 5)
£m
–
(80.9)
(80.9)
(12.8)
–
(68.8)
(1.8)
(30.9)
(195.2)
–
–
–
7.3
(18.2)
(206.1)
Underlying
results
£m
8,890.1
(6,746.5)
2,143.6
(1,052.8)
(152.8)
(575.8)
–
–
362.2
3.2
–
(1.5)
44.8
(160.9)
247.8
Total
£m
8,890.1
(6,827.4)
2,062.7
(1,065.6)
(152.8)
(644.6)
(1.8)
(30.9)
167.0
3.2
–
(1.5)
52.1
(179.1)
41.7
(38.9)
2.8
(2.6)
5.4
2.8
(0.3)
(0.3)
Financial Statements
Group statement of comprehensive income
For the year ended 30 September 2011
(Loss)/profit for the year
Other comprehensive income and expense
Acquisition costs accounted for under IFRS 3
Foreign exchange translation (losses)/gains
Actuarial gains/(losses) on defined benefit pension schemes
Tax on actuarial gains/(losses)
Fair value gains and losses
Gains deferred for the year
Tax on gains deferred for the year
(Gains)/losses transferred to the income statement
Tax on (gains)/losses transferred to the income statement
Total comprehensive (expense)/income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive (expense)/income for the year
75
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m
e
n
t
s
Year ended
30 September
2011
£m
(518.0)
Year ended
30 September
2010
£m
2.8
notes
29
35
9
29
9
29
9
–
(39.1)
41.0
(17.0)
112.5
(31.5)
(34.2)
9.7
(476.6)
(479.3)
2.7
(476.6)
(0.7)
64.1
(58.2)
16.4
62.6
(18.2)
69.4
(20.1)
118.1
112.7
5.4
118.1
76
Group cash flow statement
For the year ended 30 September 2011
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 associates
Proceeds on disposal of property, plant and equipment
Purchase of subsidiaries (net of cash acquired)
Purchase of tangible assets
Purchase of intangible assets
Movement on non-current financial assets
Additional loan investment
Movement on short-term securities
Net cash used in investing activities
Financing activities
Interest paid
Dividends paid
Dividends paid to non-controlling interests
Draw down of borrowings
Repayment of borrowings
Payment of facility set-up fees
Repayment of finance lease obligations
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Liquid assets
Bank overdrafts
Cash and cash equivalents at end of year
Year ended
30 September
2011
£m
Year ended
30 September
2010
£m
notes
320.9
(32.3)
288.6
5.9
3.2
14.1
(19.2)
(118.5)
(68.0)
4.7
(0.6)
–
(178.4)
(98.3)
(91.8)
(0.2)
485.0
(356.0)
(4.4)
(16.7)
(82.4)
27.8
316.8
(2.9)
341.7
359.3
(17.6)
341.7
324.1
(24.7)
299.4
–
–
7.8
(27.2)
(196.1)
(77.8)
3.7
(1.2)
(0.3)
(291.1)
(65.1)
(59.7)
–
1,118.0
(959.5)
(20.5)
(197.4)
(184.2)
(175.9)
507.0
(14.3)
316.8
339.6
(22.8)
316.8
30
14
14
15
10
18
20
Financial Statements Group balance sheet
At 30 September 2011
Non-current assets
Intangible assets
Property, plant and equipment – aircraft and aircraft spares
– investment property
– other
Investments in associates and joint venture
Other investments
Deferred tax assets
Tax assets
Trade and other receivables
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
77
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30 September
2011
£m
30 September
2010
£m
notes
12
13
13
13
14
14
25
17
22
16
17
22
18
27
35
19
20
21
26
22
27
3,550.0
638.6
18.0
280.3
22.1
13.4
281.3
4.2
153.0
12.6
4,973.5
38.7
40.2
1,090.5
117.2
359.3
1,645.9
70.4
6,689.8
(6.8)
(2,008.2)
(179.5)
(18.6)
(92.7)
(1,167.2)
(187.6)
(88.2)
(3,748.8)
(35.0)
3,828.9
655.2
17.0
336.1
38.6
18.7
383.2
5.5
136.6
6.6
5,426.4
32.1
33.9
972.9
85.2
339.6
1,463.7
10.5
6,900.6
(6.7)
(1,821.2)
(106.3)
(16.0)
(93.2)
(1,056.4)
(204.5)
(80.7)
(3,385.0)
–
78
Group balance sheet continued
Non-current liabilities
Retirement benefit obligations
Trade and other payables
Long-term borrowings
Obligations under finance leases
Non-current 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
Hedging and translation reserves
Capital redemption reserve
Retained earnings deficit
Investment in own shares
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
These financial statements were approved by the Board of Directors on 13 December 2011.
Signed on behalf of the Board
Paul Hollingworth
Group Chief Financial Officer
30 September
2011
£m
30 September
2010
£m
notes
35
19
20
21
25
26
22
28
29
(324.2)
(42.4)
(967.8)
(62.1)
(0.6)
(1.9)
(120.9)
(193.5)
(9.4)
(1,722.8)
(5,506.6)
1,183.2
59.2
29.2
1,617.8
316.9
8.5
(871.4)
(13.3)
1,146.9
36.3
1,183.2
(407.8)
(21.5)
(956.4)
(64.5)
–
(0.9)
(88.2)
(212.8)
(20.8)
(1,772.9)
(5,157.9)
1,742.7
57.7
8.9
1,984.2
299.5
8.5
(626.9)
(13.3)
1,718.6
24.1
1,742.7
Financial Statements 79
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Group statement of changes in equity
For the year ended 30 September 2011
Opening balance at 1 October 2009
(Loss)/profit for the year
Other comprehensive income/(expense):
Acquisition costs accounted for under IFRS 3
Foreign exchange translation gains
Actuarial losses on defined benefit pension schemes
(net of tax)
Fair value gains and losses:
Gains deferred for the year (net of tax)
Losses transferred to the income statement (net of tax)
Total comprehensive income/(expense) for the year
Equity credit in respect of share-based payments
Recognition of put option to non-controlling interest
Exchange difference on non-controlling interests
Purchase of own shares
Dividends
At 30 September 2010
(Loss)/profit for the year
Other comprehensive income/(expense):
Foreign exchange translation losses
Actuarial gains on defined benefit pension schemes
(net of tax)
Fair value gains and losses:
Gains deferred for the year (net of tax)
Gains transferred to the income statement (net of tax)
Total comprehensive income/(expense) for the year
Equity debit in respect of share-based payments
Recognition of put options to non-controlling interests
Acquisition of ITC Travel Investments
Release of merger reserve
Derecognition of non-controlling interest
Exchange difference on non-controlling interests
Dividends
At 30 September 2011
Share capital
& share
premium
£m
66.6
Other
reserves
£m
1,979.6
Translation
& hedging
reserve
£m
141.7
Retained
earnings/
(deficit)
£m
(487.2)
Attributable
to equity
holders of
the parent
£m
1,700.7
Non-
controlling
interests
£m
18.9
Total
£m
1,719.6
–
–
–
–
–
–
–
–
–
–
–
–
66.6
–
–
–
–
–
–
–
–
21.8
–
–
–
–
88.4
–
–
–
–
–
–
–
–
–
–
(0.2)
–
1,979.4
–
–
–
–
–
–
–
–
–
(366.4)
–
–
–
1,613.0
–
(2.6)
(2.6)
5.4
2.8
–
64.1
(0.7)
–
(0.7)
64.1
–
(41.8)
(41.8)
44.4
49.3
157.8
–
–
–
–
–
299.5
–
–
(45.1)
8.1
(11.0)
–
–
(91.7)
(626.9)
44.4
49.3
112.7
8.1
(11.0)
–
(0.2)
(91.7)
1,718.6
–
–
–
(0.7)
64.1
(41.8)
–
–
5.4
–
–
(0.2)
–
–
24.1
44.4
49.3
118.1
8.1
(11.0)
(0.2)
(0.2)
(91.7)
1,742.7
–
(520.7)
(520.7)
2.7
(518.0)
(39.1)
–
(39.1)
–
24.0
24.0
81.0
(24.5)
17.4
–
–
–
–
–
–
–
316.9
–
–
(496.7)
(3.2)
(20.6)
–
366.4
2.1
–
(92.5)
(871.4)
81.0
(24.5)
(479.3)
(3.2)
(20.6)
21.8
–
2.1
–
(92.5)
1,146.9
–
–
(39.1)
24.0
–
–
2.7
–
(8.2)
19.1
–
(2.6)
1.4
(0.2)
36.3
81.0
(24.5)
(476.6)
(3.2)
(28.8)
40.9
–
(0.5)
1.4
(92.7)
1,183.2
Other reserves consist of the merger reserve, the capital redemption reserve and own shares held. The capital redemption reserve
was created as a consequence of the share buy back programme during the year ended 30 September 2009.
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.
Details of changes in hedging and translation reserves are set out in note 29.
80
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 2006 and listed on the London Stock Exchange. The address of the registered office is 6th Floor South, Brettenham House,
Lancaster Place, London, WC2E 7EN. The principal activities of the Group are discussed in the Directors’ Report – Business Review
on pages 2 to 39.
These consolidated financial statements were approved for issue by the Board of Directors on 13 December 2011.
2 ACCOUNTING POLICIES
These financial statements have been prepared in accordance with IFRS and IFRIC interpretations and with those parts of the
Companies Act 2006 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 financial statements have been prepared under the historical cost convention, except for revaluation of certain financial
instruments, investment property, share-based payments and defined benefit pension obligations.
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 unless otherwise stated.
Basis of preparation
Adoption of new or amended standards and interpretations in the current year
In the current year, the following new or amended standards have been adopted. Their adoption has not had a significant impact
on the amounts reported or the disclosure and presentation in these financial statements, but may impact the accounting or the
disclosure and presentation for future transactions and arrangements.
IFRS2 Amendment
“Share-based payments” is effective for annual reporting periods commencing on or after 1 January 2010.
This amendment clarifies the scope and accounting for group cash-settled share-based payments.
New or amended standards and interpretations in issue but not yet effective
The following new standards, amendments to standards and interpretations that are expected to impact the Group, which have
not been applied in these financial statements, were in issue, but are not yet effective:
IAS 24 Amendment
“Related parties” is effective for annual reporting periods commencing on or after 1 January 2011.
The amendment clarifies the definition of related parties.
IFRIC 14 Amendment
“Prepayments of a minimum funding requirement” is effective for annual reporting periods commencing
on or after 1 January 2011. The amendment remedies one of the consequences of IFRIC 14, whereby an
entity under certain circumstances is not allowed to recognise an asset for the prepayment of a minimum
funding requirement.
Management does not anticipate that the adoption of these new or amended standards and interpretations will have a material
impact on the Group.
New or amended standards and interpretations in issue but not yet effective and not EU endorsed
The following new standards, amendments to standards and interpretations that are expected to impact the Group, which have
not been applied in these financial statements, were in issue, but are not yet effective and are not EU endorsed:
IFRS 9
IFRS 10
IFRS 11
IFRS 12
“Financial Instruments” is effective for annual reporting periods commencing on or after 1 January 2013.
The standard will eventually replace IAS 39 but currently only details the requirements for recognition
and measurement of financial assets.
“Consolidated financial statements” is effective for annual reporting periods beginning on or after
1 January 2013. This standard builds on existing principles by identifying the concept of control as the
determining factor in whether an entity should be included within consolidated financial statements.
“Joint arrangements” is effective for annual periods beginning on or after 1 January 2013. This standard
provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations
of the arrangement, rather than its legal form.
“Disclosure of interests in other entities” is effective for annual periods beginning on or after 1 January 2013.
This standard includes the disclosure requirements for all forms of interests in other entities, including joint
arrangements, associates, special purpose vehicles and other off balance sheet vehicles.
IAS 19 (revised 2011)
“Employee benefits” is effective for annual periods beginning on or after 1 January 2013. This amendment
makes significant changes to the recognition and measurement of defined benefit pension expense and
termination benefits, and to the disclosures for all employee benefits.
Financial Statements
81
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IAS 27 (revised)
IAS 28 (revised)
“Separate financial statements” is effective for annual periods beginning on or after 1 January 2013.
This standard includes the provisions on separate financial statements that are left after the control
provisions of IAS 27 have been included in the new IFRS 10.
“Investments in associates and joint ventures” is effective for annual periods beginning on or after
1 January 2013. This standard includes the requirements for joint ventures, as well as associates,
to be equity accounted following the issue of IFRS 11.
Management is currently assessing the impact of adopting these new or amended standards and interpretations.
Basis of consolidation
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(R) 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, contingent consideration arrangements entered into, and liabilities incurred or assumed at the date of exchange. Directly
attributable transaction costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the acquisition date. When the ownership of an acquired
company is less than 100%, the non-controlling interest is measured as the proportion of the recognised net assets attributable to
the non-controlling interest. 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 is 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 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 three (2010: three) SPEs that own four (2010: four) aircraft operated by the Group on
operating leases. In addition, during 2009 the operations of the German airline were placed in a holding company in which the
Group owns a 50.0023% direct interest. All risks and rewards continue to be held by the Group and, in accordance with accounting
standards, the entity has been treated as being 100% controlled and fully consolidated by the Group.
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 shares 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.
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.
82
Notes to the financial statements continued
2 ACCOUNTING POLICIES CONTINUEd
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
Customer relationships
Computer software
10 years to indefinite life
1 to 15 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.
Intangible assets with indefinite useful lives are tested for impairment at least annually at the CGU level 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, 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
Leasehold properties
Aircraft
Aircraft spares
Other fixed assets
40 to 50 years
Shorter of remaining lease period and 40 years
18 years (or remaining lease period if shorter)
5 to 15 years (or remaining lease period if shorter)
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 is 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.
Financial Statements 83
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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 operating 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 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. The costs attributable to producing brochures are expensed when the brochures are available
to be sent to customers or retail outlets. 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 and separately disclosed items
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.
The Group separately discloses in the income statement: exceptional items; amortisation of business combination intangibles; and
IAS 39 fair value re-measurement.
Exceptional items, namely items that are material either because of their size or their nature, and which are non-recurring, are
presented within their relevant income statement category, but highlighted through separate disclosure. The separate reporting
of exceptional items helps provide a full understanding of the Group’s underlying performance.
Items which are included within the exceptional category include:
• profits/(losses) on disposal of assets or businesses and costs of acquisitions;
• costs of integration of significant acquisitions and other major restructuring programmes;
• significant goodwill or other asset impairments;
• material write-down of assets/reassessment of accruals, reflecting a more cautious evaluation in the light of current trading and
economic conditions (excluding errors or prior year items);
• other individually material items that are unusual because of their size, nature or incidence.
Material business combination intangible assets were acquired as a result of the merger between Thomas Cook AG and MyTravel
Group plc and other business combinations made in subsequent years. 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.
IAS 39 fair value re-measurement includes movements in forward points related to foreign exchange forward contracts and time
value of options in cash flow hedging relationships. Both items are subject to market fluctuations and unwind when the options
or forward contracts mature and therefore are not considered to be part of the Group’s underlying performance.
84
Notes to the financial statements continued
2 ACCOUNTING POLICIES CONTINUEd
Finance income and costs
Finance income comprises interest income on funds invested, expected return on pension plan assets and changes in the fair value
of held for trading interest-related derivatives.
Finance costs comprise interest costs on borrowings and finance leases, unwind of the discount on provisions, interest cost on
pension plan liabilities, changes in the fair value of held for trading interest-related derivatives and the movement in forward
points on outstanding foreign exchange forward contracts in cash flow hedging relationships.
The movement in forward points on outstanding foreign exchange forward contracts in cash flow hedging relationships is included
as a separately disclosed item in the income statement under the description “IAS 39 fair value re-measurement”.
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 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.
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 under the schemes (calculated using
the projected unit credit method) 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 comprehensive income and expense. The current service cost, representing benefits
accruing over the year, is included in the income statement as a personnel expense. The unwinding of the discount rate on the
scheme liabilities and the expected return on scheme assets are presented as finance costs and finance income respectively.
Past service costs are recognised immediately in the income statement in personnel expenses.
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.
Financial Statements 85
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Leases
Leases under which substantially all of the risk 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 the 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.
Borrowing costs
The Group capitalises borrowing costs directly attributable to the acquisition, construction or production of qualifying assets
requiring a substantial amount of time to be ready for the intended purpose.
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. Forward
points on foreign exchange forward contracts and time value of options are not designated as part of the hedging relationship and
therefore are recorded in the income statement within finance costs and costs of providing tourism respectively. Any ineffective
portion of the change in fair value of a derivative in a cash flow hedge is recognised immediately in the income statement within
net operating expenses.
For 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 the income statement.
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 and other receivables
Trade and other 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.
86
Notes to the financial statements continued
2 ACCOUNTING POLICIES CONTINUEd
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.
Trade and other payables
Trade and other payables are initially recognised at their fair value and subsequently recorded at amortised cost using the effective
interest method.
Borrowings
Interest bearing borrowings are initially recognised at their fair value net of any directly attributable transaction costs. They are
subsequently recorded at amortised cost using the effective interest method.
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 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.
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 the income statement 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:
Financial Statements 87
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Residual values of tangible fixed assets
Judgements have been made in respect of the residual values and useful economic lives 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 at a suitable discount rate in order to calculate present value.
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 estimates 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 as a result. The recoverability of these assets is dependent on the agreement of the losses with the relevant authorities
and the estimates of future profitability.
Retirement benefits
The consolidated financial statements include costs in relation to, and provision for, retirement benefit obligations. The costs and
the present value of any related pension assets and liabilities depend on such factors as life expectancy of the members, the salary
progression of current employees, the returns that plan assets generate and the discount rate used to calculate the present value of
the liabilities. The Group uses previous experience and impartial actuarial advice to select the values of critical estimates. The
estimates, and the effect of variances in key estimates, are disclosed in note 35.
3 SEGmENTAL INFOrmATION
For management purposes, the Group is currently organised into six geographic operating divisions: UK, Central Europe, West & East
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.
These reportable segments are consistent with how information is presented to the Group Chief Executive (chief operating decision
maker) for the purpose of resource allocation and assessment of performance.
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.
88
Notes to the financial statements continued
3 SEGmENTAL INFOrmATION CONTINUEd
Segmental information for these activities is presented below:
Year ended 30 September 2011
revenue
Segment sales
Inter-segment sales
Total revenue
result
Underlying profit/(loss) from operations
Exceptional operating items
IAS 39 fair value re-measurement
Amortisation of business combination intangibles
Segment result
Share of results of associates and joint venture
Profit on disposal of associates
Net investment loss
Finance income
Finance costs
Loss before tax
Tax
Loss for the year
Other information
Capital additions
Depreciation
Amortisation of intangible assets
Amortisation of business combination intangibles
Impairment of goodwill
Impairment of other intangible assets
Impairment of property, plant & equipment
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
£m
Central
Europe
£m
West & East
Europe
£m
Northern
Europe
£m
North
America
£m
Airlines
Germany
£m
Corporate
£m
Total
£m
3,281.8 2,402.6 1,910.7 1,159.2
(6.5)
3,255.0 2,348.8 1,901.6 1,152.7
(53.8)
(26.8)
(9.1)
349.2 1,120.3
(318.7)
801.6
–
349.2
– 10,223.8
(414.9)
–
– 9,808.9
34.1
(321.0)
1.6
(9.3)
(294.6)
69.8
(6.6)
(0.4)
(1.0)
61.8
40.4
(34.3)
2.3
(2.4)
6.0
106.3
–
(2.8)
(20.9)
82.6
10.5
(76.7)
–
(0.7)
(66.9)
69.3
(3.3)
(6.6)
–
59.4
(26.8)
(88.1)
–
–
(114.9)
49.4
42.6
19.6
9.3
210.3
1.0
9.9
14.7
6.2
5.2
1.1
–
–
–
18.8
3.7
6.8
2.3
–
–
–
17.1
15.5
1.2
20.9
–
–
–
7.4
1.5
2.3
0.7
68.4
–
–
78.2
56.8
0.3
–
–
–
–
25.8
0.5
4.9
–
–
82.9
–
303.6
(530.0)
(5.9)
(34.3)
(266.6)
(2.3)
10.3
(4.8)
47.9
(182.7)
(398.2)
(119.8)
(518.0)
211.4
126.8
40.3
34.3
278.7
83.9
9.9
3,339.1
945.1 1,687.2 1,841.5
314.9
2,592.3 1,182.7 1,377.8
915.1
206.0
920.5 6,398.2 15,446.5
(9,104.5)
6,342.0
22.1
325.7
6,689.8
599.2 5,509.3 12,382.4
(8,318.0)
4,064.4
214.2
1,228.0
5,506.6
Financial Statements 89
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Inter-segment sales are charged at prevailing market prices. 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.
Capital additions comprise additions to other intangible assets (note 12) and property, plant and equipment (note 13).
The entity is domiciled in the UK. Revenue from external customers in the UK was £3,047.1 m (2010: £2,941.8m) which is derived
from the ‘UK’ segmental revenue shown above but excluding external revenue in India, Egypt, Ireland and Spain-domiciled
companies, which would otherwise be included in the UK segment. Revenue from external customers in Germany was £2,963.3m
(2010: £2,511.2m).
The total of non-current assets, other than financial instruments and deferred tax (there are no employment benefits assets or
rights arising under insurance contracts), located in the UK was £2,247.2m (2010: £2,346.7m).
Year ended 30 September 2010
revenue
Segment sales
Inter-segment sales
Total revenue
result
Underlying profit/(loss) from operations
Exceptional operating items
IAS 39 fair value re-measurement
Amortisation of business combination intangibles
Segment result
Share of results of associates and joint venture
Net investment loss
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Other information
Capital additions
Depreciation
Amortisation of intangible assets
Amortisation of business combination intangibles
Impairment of property, plant & equipment
UK
£m
Central
Europe
£m
West & East
Europe
£m
Northern
Europe
£m
North
America
£m
Airlines
Germany
£m
Corporate
£m
Total
£m
3,150.5 2,024.0 1,707.8 1,016.6
(2.6)
3,143.4 1,973.4 1,698.4 1,014.0
(50.6)
(9.4)
(7.1)
352.5
–
352.5
996.2
(287.8)
708.4
– 9,247.6
–
(357.5)
– 8,890.1
107.5
(93.7)
(3.3)
(9.4)
1.1
58.6
(8.8)
–
–
49.8
82.0
(29.4)
(2.1)
(0.5)
50.0
91.7
3.2
0.7
(20.3)
75.3
9.1
(17.5)
0.1
(0.7)
(9.0)
51.1
(13.9)
6.6
–
43.8
(37.8)
(6.2)
–
–
(44.0)
79.9
41.6
12.2
9.4
14.8
22.7
6.1
4.9
–
–
22.3
3.8
5.6
0.5
–
72.9
10.0
0.8
20.3
–
4.4
1.5
1.4
0.7
–
68.0
62.3
0.4
–
–
15.5
0.1
2.1
–
–
362.2
(166.3)
2.0
(30.9)
167.0
3.2
(1.5)
52.1
(179.1)
41.7
(38.9)
2.8
285.7
125.4
27.4
30.9
14.8
90
Notes to the financial statements continued
3 SEGmENTAL INFOrmATION CONTINUEd
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
4 PErSONNEL ExPENSES
Wages and salaries
Social security costs
Share-based payments – equity settled (see note 34)
Defined benefit pension costs (see note 35)
Curtailment gain (see note 35)
Defined contribution pension costs (see note 35)
The average number of employees of the Group during the year was:
UK
Central Europe
West & East Europe
Northern Europe
North America
Airlines Germany
Corporate
UK
£m
Central
Europe
£m
West & East
Europe
£m
Northern
Europe
£m
North
America
£m
Airlines
Germany
£m
Corporate
£m
Total
£m
3,752.1
1,410.1
1,036.4
1,765.0
370.6
756.9
2,646.0
835.9
702.2
892.0
308.0
571.2
4,332.6 13,423.7
(6,984.3)
6,439.4
38.6
422.6
6,900.6
4,185.2 10,140.5
(6,307.2)
3,833.3
181.4
1,143.2
5,157.9
2011
£m
950.9
157.1
(3.2)
19.1
(25.8)
25.2
2010
£m
902.0
112.9
8.1
22.3
–
20.3
1,123.3 1,065.6
2011
Number
17,227
3,669
3,427
2,794
1,275
2,517
188
31,097
2010
Number
17,686
3,608
3,217
2,680
1,092
2,363
101
30,747
Disclosures of Directors’ remuneration, share options, long-term incentive schemes, pension contributions and pension entitlements
required by the Companies Act 2006 and those specified for audit by the Financial Services Authority are on pages 66 to 69 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 36.
Financial Statements 91
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5 SEPArATELY dISCLOSEd ITEmS
Exceptional operating items
Property costs, redundancy and other costs incurred in business integrations and reorganisations
Provision for HMRC settlement
Aircraft-related separately disclosed items
Other separately disclosed operating items
Loss on disposal of assets
Net gain on pension plan curtailment (note 35)
Direct costs of volcanic ash cloud
Asset impairment and onerous lease provisions in Hi Hotels
Costs and write downs associated with Skyservice liquidation
Fuel-related separately disclosed items
Impairment of goodwill
Impairment of other intangible assets and associated costs
Balance sheet reviews
Total exceptional operating items
Share of associates’ exceptional items
Profit on disposal of associates
Exceptional finance costs
Write off of unamortised bank facility set-up and related costs
Other exceptional interest charges
Total exceptional items
IAS 39 fair value re-measurement
Time value component of option contracts
Included within cost of providing tourism services
Forward points on foreign exchange cash flow hedging contracts
Included within finance income and costs
Amortisation of business combination intangibles
Total separately disclosed items
2011
£m
2010
£m
(57.3)
(37.6)
(16.4)
(10.5)
(4.6)
24.5
–
–
–
–
(101.9)
(278.7)
(86.3)
(63.1)
(530.0)
(35.4)
–
(3.9)
(7.7)
(1.8)
–
(52.9)
(26.0)
(15.3)
(23.3)
(166.3)
–
–
–
(166.3)
10.3
10.3
–
–
(0.9)
(2.9)
(3.8)
(523.5)
(18.2)
–
(18.2)
(184.5)
(5.9)
(5.9)
(9.1)
(9.1)
2.0
2.0
7.3
7.3
(34.3)
(30.9)
(572.8)
(206.1)
The £57.3m (2010: £35.4m) relates to the integration of acquisitions and other restructuring projects that have been undertaken
across the Thomas Cook Group. The restructuring projects reflect changes made to underlying business processes and systems in
the UK, Germany, the Western Europe markets and Canada to improve efficiency across the Group.
The provision of £37.6m relates to a dispute with HM Revenue & Customs regarding place of business.
Aircraft-related separately disclosed items of £16.4m (2010: £3.9m) include £9.9m for impairment of aircraft, as disclosed in note
13 and costs associated with the UK fleet restructure programme.
Other separately disclosed operating items of £10.5m (2010: £7.7m) include acquisition costs and losses resulting from other
exceptional operating events that are not expected to recur in future years.
92
Notes to the financial statements continued
5 SEPArATELY dISCLOSEd ITEmS CONTINUEd
During the year the Group recognised impairment losses on goodwill totalling £278.7m in relation to its UK, North America and
India segments to reflect a decrease in the likely future profitability and cash flows of those businesses. The Group also wrote down
the carrying value of purchased and internally generated computer software, giving rise to an impairment loss of £83.9m. Details
of these impairments are disclosed in note 12. The £86.3m above also includes £2.4m for the recognition of provisions for onerous
contracts in respect of the impaired assets.
The £63.1m relates to UK and France balance sheet reviews which were carried out following management changes in our UK
business and the substantial deterioration of trading within our French operation. The review of the UK balance sheet identified
several areas where recovery of the carrying value of assets was no longer considered achievable or where recognition of additional
liabilities was considered appropriate. The overall impact of this reassessment was £49.7m. Deterioration of trading and a change of
management in our French business led to the reassessment of certain assets and liabilities that had been recognised at the previous
year end. It is now considered that certain accounting judgements regarding collectability of assets and recognition of liabilities
were incorrect. Revision of these accounting judgements has resulted in a charge totalling £13.4m in the year.
The £10.3m profit on disposal of associates relates to the disposal by Central Europe of minority stakes in two hotel management
companies, as disclosed in note 14.
Other exceptional interest charges include interest incurred upon recognition of the provision for HMRC settlement and other
adjustments to interest arising as a result of the balance sheet reviews.
Exceptional operating items have been included in the income statement as follows:
Cost of providing tourism services
Personnel expenses
Net operating expenses
Loss on disposal of assets
Total exceptional operating items
6 NET 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
2011
£m
(56.4)
(55.1)
(413.9)
(4.6)
(530.0)
2011
£m
180.5
146.6
86.7
67.0
37.3
49.0
379.9
15.7
12.2
33.6
26.5
1,035.0
2010
£m
(82.9)
(12.8)
(68.8)
(1.8)
(166.3)
2010
£m
164.8
143.8
84.1
63.9
42.8
46.9
13.7
14.8
10.6
2.5
56.7
644.6
Financial Statements 7 FINANCE INCOmE ANd COSTS
Underlying finance income
Income from loans included in financial assets
Other interest and similar income
Expected return on pension plan assets (note 35)
Fair value gains on derivative financial instruments
Underlying finance costs
Interest payable
Finance costs in respect of finance leases
Interest cost on pension plan liabilities (note 35)
Discounting of provisions and other non-current liabilities
Exceptional finance costs
Write off of unamortised bank facility set-up and related costs
Other exceptional interest charges
IAS 39 fair value re-measurement
Forward points on foreign exchange cash flow hedging contracts
(LOSS)/PrOFIT BEFOrE TAx
8
(Loss)/profit before tax for the year has been arrived at after charging/(crediting):
Exceptional operating items (note 5)
Including: Impairment of goodwill
Impairment of other intangible assets
Impairment of property, plant and equipment
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
Net foreign exchange losses/(gains)
Personnel expenses (note 4)
Auditors’ remuneration (see next page)
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£m
0.2
5.3
42.1
0.3
47.9
2010
£m
0.7
5.3
37.9
0.9
44.8
(97.5)
(6.4)
(54.7)
(11.2)
(169.8)
(80.9)
(12.7)
(54.8)
(12.5)
(160.9)
(0.9)
(2.9)
(3.8)
(18.2)
–
(18.2)
(9.1)
7.3
2011
£m
530.0
278.7
83.9
9.9
103.8
23.0
40.3
34.3
42.5
(10.3)
128.5
112.2
4.4
1,123.3
5.2
2010
£m
166.3
–
–
14.8
74.7
50.7
27.4
30.9
41.0
–
134.0
127.8
(16.3)
1,065.6
2.9
94
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(LOSS)/PrOFIT BEFOrE TAx CONTINUEd
8
A more detailed analysis of auditors’ remuneration on a worldwide basis is provided below:
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 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
All other services
Total non-audit fees
Total fees
2011
£m
0.3
2.3
2.6
0.4
0.1
0.1
0.1
1.7
0.2
2.6
5.2
2010
£m
0.2
2.0
2.2
0.3
0.1
–
0.1
–
0.2
0.7
2.9
In addition to the above, £61,000 (2010: £56,000) has been incurred in respect of the audits of the Group pension schemes.
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 Committee is set out in the Corporate Governance report on pages 49 to 50 and includes an
explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors.
Recruitment and remuneration services mainly relate to pension work performed in the UK for the closure of defined benefit
pension schemes.
9 TAx
Analysis of tax charge
Current tax
UK
corporation tax charge for the year
adjustments in respect of prior periods
Overseas
corporation tax charge for the year
adjustments in respect of prior periods
Total current tax
deferred tax
Total deferred tax
Total tax charge
tax charge/(credit) for the year
adjustments in respect of prior periods
2011
£m
2010
£m
–
(6.8)
(6.8)
35.1
0.3
35.4
28.6
73.8
17.4
91.2
1.6
–
1.6
32.5
5.1
37.6
39.2
(1.1)
0.8
(0.3)
119.8
38.9
Financial Statements
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£m
(398.2)
(107.5)
(19.3)
9.8
100.1
76.4
(10.8)
(34.6)
94.1
(8.6)
9.2
0.1
10.9
119.8
2010
£m
41.7
11.7
(13.9)
6.3
–
50.9
(6.3)
(24.9)
–
(0.2)
8.6
0.8
5.9
38.9
Tax reconciliation
(Loss)/profit before tax
Expected tax charge at the UK corporation tax rate of 27% (2010: 28%)
Income not liable for tax
Expenses not deductible for tax purposes
Impairment for which no tax relief is due
Losses and other timing differences for which tax relief is not available
Utilisation of tax losses not previously recognised
Recognition of losses not previously recognised
Derecognition of deferred tax previously recognised
Difference in rates of tax suffered on overseas earnings
Impact of changes in tax rates (note 25)
Other
Income tax charge in respect of prior periods
Tax charge
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 £38.8m has been charged directly to equity (2010: £21.9m). UK corporation tax is
calculated at 27% (2010: 28%) of the estimated assessable loss for the year. Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
Surplus losses not recognised in deferred tax of £1,427.3m (2010: £888.2m) are available in the UK and Germany for offset against
future profits.
10 dIvIdENdS
The following dividends have been deducted from equity in the year:
Final dividend paid for 2010 of 7p per share (2009: 7p)
Interim dividend for 2011 of 3.75p per share (2010: 3.75p)
2011
£m
59.8
32.7
92.5
2010
£m
59.7
32.0
91.7
The interim dividend for 2011 was paid to shareholders in October 2011.
On 29 September 2011 the Directors announced that they would not propose any further dividend payments whilst the Group
rebuilds its balance sheet.
11 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 3.8m shares held by the employee share ownership trusts (2010: 4.5m).
Basic and diluted loss per share
Net loss attributable to equity holders of the parent
Weighted average number of shares for basic loss per share
Weighted average number of shares for diluted loss per share
Basic loss per share
Diluted loss per share
2011
£m
(520.7)
millions
858.2
858.2
pence
(60.7)
(60.7)
2010
£m
(2.6)
millions
853.8
853.8
pence
(0.3)
(0.3)
96
Notes to the financial statements continued
11 EArNINGS PEr ShArE CONTINUEd
Underlying basic and diluted earnings per share
Underlying 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
Underlying basic earnings per share
Underlying diluted earnings per share
2011
£m
100.3
millions
858.2
1.9
860.1
pence
11.7
11.7
2010
£m
174.0
millions
853.8
0.8
854.6
pence
20.4
20.4
*
**
Underlying net profit attributable to equity holders of the parent is derived from the pre-exceptional profit before tax for the year ended 30 September 2011 of £174.6m (2010: £247.8m)
and deducting a notional tax charge of £71.6m (2010: £68.4m).
Awards of shares under the Thomas Cook Performance Share Plan, Buy As You Earn Scheme, Restricted Share Plan and Co-Investment Plan 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.
12 INTANGIBLE ASSETS
Goodwill
Business combination intangible assets
Other
Goodwill
Cost
At 1 October 2009
Additions
Reassessment of goodwill
Exchange differences
At 30 September 2010
Additions (note 15)
Reassessment of goodwill (note 15)
Exchange differences
At 30 September 2011
Accumulated impairment losses
At 1 October 2009
Exchange differences
At 30 September 2010
Impairment charge for the year
Exchange differences
At 30 September 2011
Carrying amount
At 30 September 2011
At 30 September 2010
2011
£m
2,981.6
393.3
175.1
3,550.0
2010
£m
3,216.3
384.3
228.3
3,828.9
£m
3,305.9
15.2
(1.5)
7.6
3,327.2
68.6
(1.6)
(5.2)
3,389.0
117.3
(6.4)
110.9
278.7
17.8
407.4
2,981.6
3,216.3
Financial Statements 97
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The carrying value of goodwill is analysed by business segment as follows:
UK*
Central Europe
West & East Europe
Northern Europe
North America
Airlines Germany
2011
£m
1,868.0
106.1
156.9
722.0
106.9
21.7
2,981.6
2010
£m
2,094.7
61.4
132.6
731.1
174.8
21.7
3,216.3
The carrying value of goodwill in the UK segment is comprised of the UK (£1,698.6m), India (£150.1m) and Egypt (£19.3m).
*
In accordance with accounting standards, the Group tests the carrying value of goodwill for impairment annually and whenever
events or circumstances change.
Impairment testing is performed by comparing the carrying value of each cash-generating unit (CGU) to the recoverable amount,
determined on the basis of the CGU’s value in use. The value in use is based on the net present value of future cash flow projections
discounted at pre-tax rates appropriate for each CGU. The Group’s CGUs are determined by geographical market and consist of
UK, India, Egypt, Central Europe, West & East Europe, Northern Europe, North America and Airlines Germany.
The value in use calculations use cash flow projections based on the most recent annual budgets and three-year plans for each
of the CGUs. In determining these projections the Board has approved budgets which they consider to be prudent and reflect the
trading environment in which each CGU operates. Cash flow forecasts for years beyond the three-year plan are extrapolated at
an estimated average long-term nominal growth rate.
The key assumptions used in the value in use calculations are as follows:
• a pre-tax discount rate of between 9.2% and 11.1% reflecting the specific risks of each CGU
• a long-term nominal terminal growth rate of 2% for all CGUs with the exception of Egypt (5%)
As a result of the value in use calculations performed at 30 September 2011, an impairment charge of £278.7m (2010: £nil) was
booked against the carrying value of the Group’s goodwill. The impairment losses were recognised within operating expenses in
the Group’s income statement.
A breakdown of the impairment charge is presented below. Management believes the assumptions applied in each test were prudent
and appropriate for that CGU. However, any sensitivity to these assumptions would result in a change to the recoverable amount.
UK
North America
India
Goodwill
impairment
charge
£m
206.8
68.4
3.5
278.7
Pre-tax
discount rate
used
%
9.29
9.23
10.33
Long-term
growth rate
2%
2%
2%
98
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12 INTANGIBLE ASSETS CONTINUEd
The value in use calculations remain sensitive to reasonably possible changes in the key assumptions. The table below sets out the
impact changes to the key assumptions would have had for the segments where goodwill has been impaired during the year:
Sensitivity to a change in assumption
UK growth rate
UK pre-tax discount rate
UK cash flows – each and every year
North America growth rate
North America pre-tax discount rate
North America cash flows – each and every year
India growth rate
India pre-tax discount rate
India cash flows – each and every year
Increase/(decrease) in impairment
£1.0m decrease
in cash flow
£m
–
–
13.6
1% increase
in rate
£m
(210.1)
175.5
–
1% decrease
in rate
£m
159.4
(231.7)
–
–
–
13.9
–
–
12.0
(25.3)
21.2
–
(29.3)
25.7
–
19.1
(28.0)
–
23.0
(32.8)
–
Management believe that any reasonable change in assumptions would not cause the carrying value of the remaining segment
CGUs to exceed their recoverable amount.
Business combination intangibles
Cost
At 1 October 2009
Exchange differences
At 30 September 2010
Additions (note 15)
Exchange differences
At 30 September 2011
Amortisation
At 1 October 2009
Charge for the year
Exchange differences
At 30 September 2010
Charge for the year
Exchange differences
At 30 September 2011
Carrying amount
At 30 September 2011
At 30 September 2010
Brands and
customer
relationships
£m
Order
backlog
£m
Computer
software
£m
469.0
15.0
484.0
45.8
(4.3)
525.5
75.5
27.1
3.5
106.1
30.7
(1.5)
135.3
390.2
377.9
41.1
(0.1)
41.0
0.5
–
41.5
41.0
0.1
(0.1)
41.0
0.5
–
41.5
–
–
14.8
0.9
15.7
–
(0.1)
15.6
8.3
3.6
0.9
12.8
3.0
(0.2)
15.6
–
2.9
Other
£m
3.1
0.5
3.6
–
(0.3)
3.3
–
0.1
–
0.1
0.1
–
0.2
3.1
3.5
Total
£m
528.0
16.3
544.3
46.3
(4.7)
585.9
124.8
30.9
4.3
160.0
34.3
(1.7)
192.6
393.3
384.3
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 1 to 15 years and computer software over
a period of 4 years. Order backlog has been amortised over the period from acquisition to departure. Other includes 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 trademarks are related to the core brands of each segment and 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
Financial Statements 99
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s
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 earlier in this note.
The carrying value of brands with an indefinite life is analysed by business segment as follows:
UK
Central Europe
West & East Europe
Northern Europe
North America
Other intangible assets
Cost
At 1 October 2009
Additions
Disposals
Exchange differences
At 30 September 2010
Additions
Acquisitions (note 15)
Transfer to non-current assets held for sale (note 27)
Disposals
Exchange differences
At 30 September 2011
Amortisation
At 1 October 2009
Charge for the year
Disposals
Exchange differences
At 30 September 2010
Charge for the year
Impairment losses
Disposals
Exchange differences
At 30 September 2011
Carrying amount
At 30 September 2011
At 30 September 2010
2011
£m
70.6
15.9
32.4
132.9
23.4
275.2
2010
£m
70.6
–
23.4
134.6
22.3
250.9
Computer software and
concessions
Other
Purchased
£m
Internally
generated
£m
Purchased
£m
Total
£m
238.4
28.2
(6.2)
(11.6)
248.8
38.7
0.1
(0.1)
(1.2)
(1.2)
285.1
118.5
10.4
(5.5)
(5.7)
117.7
14.4
83.4
(0.9)
(1.6)
213.0
134.1
43.5
(0.6)
(1.9)
175.1
31.8
–
–
(0.4)
(0.2)
206.3
81.0
16.4
(0.3)
(1.5)
95.6
20.4
0.5
–
–
116.5
7.0
13.1
–
0.3
20.4
1.0
–
–
–
–
21.4
2.1
0.6
–
–
2.7
5.5
–
–
–
8.2
379.5
84.8
(6.8)
(13.2)
444.3
71.5
0.1
(0.1)
(1.6)
(1.4)
512.8
201.6
27.4
(5.8)
(7.2)
216.0
40.3
83.9
(0.9)
(1.6)
337.7
72.1
131.1
89.8
79.5
13.2
17.7
175.1
228.3
Computer software is amortised on a straight-line basis over its estimated useful life of between three and ten years. 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. Other items are amortised over their estimated useful lives of between
three and five years. The impairment loss of £83.4m in respect of purchased computer software and concessions is principally in
respect of the historic costs associated with a long running major IT project that has yet to be fully commissioned by the Group’s
incumbent provider. The Directors consider that the costs, execution risks and timeframe to delivery exceed the previously
anticipated benefits. As required by accounting standards, a review of the recoverable amount was performed on a fair value less
cost to sell basis and was determined by reference to its value in an active market taking into account the customised nature of the
assets. The impairment loss was booked against other intangible assets and recognised within operating expenses in the Group’s
income statement against the UK and Corporate reporting segments.
100
Notes to the financial statements continued
13 PrOPErTY, PLANT ANd EqUIPmENT
Cost
At 1 October 2009
Additions
Acquisitions
Disposals
Exchange differences
At 30 September 2010
Additions
Acquisitions (note 15)
Transfer to non-current assets held for sale (note 27)
Revaluation
Disposals
Exchange differences
At 30 September 2011
Accumulated depreciation and impairment
At 1 October 2009
Charge for the year
Provision for impairment
Disposals
Exchange differences
At 30 September 2010
Charge for the year
Provision for impairment (note 5)
Transfer to non-current assets held for sale (note 27)
Disposals
Exchange differences
At 30 September 2011
Carrying amount
At 30 September 2011
At 30 September 2010
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
1,713.4
154.2
–
(51.7)
(76.1)
1,739.8
97.6
–
–
–
(62.8)
(2.4)
1,772.2
1,085.1
98.3
–
(45.7)
(53.1)
1,084.6
90.7
9.9
–
(49.9)
(1.7)
1,133.6
18.0
–
–
–
(1.0)
17.0
–
–
–
1.0
–
–
18.0
–
–
–
–
–
–
–
–
–
–
–
–
243.8
10.5
–
(2.7)
(12.3)
239.3
3.1
–
(64.2)
–
(0.1)
(1.0)
177.1
71.0
6.3
–
(2.5)
(4.3)
70.5
5.9
–
(20.4)
–
(0.4)
55.6
187.0
10.7
–
(4.7)
(4.0)
189.0
11.5
–
–
–
(4.5)
(0.6)
195.4
116.6
10.3
–
(3.1)
(2.5)
121.3
11.0
–
–
(3.6)
(0.2)
128.5
260.7
25.5
0.1
(9.3)
(10.9)
266.1
27.7
0.5
(52.8)
–
(7.7)
(1.3)
232.5
156.8
10.5
14.8
(8.4)
(7.2)
166.5
19.2
–
(38.7)
(5.4)
(1.0)
140.6
Other
Total
£m
691.5
46.7
0.1
(16.7)
(27.2)
694.4
42.3
0.5
(117.0)
–
(12.3)
(2.9)
605.0
344.4
27.1
14.8
(14.0)
(14.0)
358.3
36.1
–
(59.1)
(9.0)
(1.6)
324.7
638.6
655.2
18.0
17.0
121.5
168.8
66.9
67.7
91.9
99.6
280.3
336.1
Freehold land with a cost of £26.1m (2010: £37.5m) has not been depreciated.
The net book value of aircraft and aircraft spares includes £123.8m (2010: £111.8m) in respect of assets held under finance leases.
The net book value of other property, plant and equipment includes £12.7m (2010: £14.1m) in respect of assets held under
finance leases.
The investment property was revalued on the basis of market value by £1m in September 2011. This followed an external
professional valuation performed in the Netherlands. Market value represents the figure that would appear in a hypothetical
contract of sale between a willing buyer and a willing seller. Market value is estimated without regard to costs of sale.
Financial Statements 101
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Capital commitments
Capital expenditure contracted but not provided for in the accounts
2011
£m
31.6
2010
£m
38.9
In addition, the Group is contractually committed to the acquisition of twelve new Airbus A321 aircraft which have a list price of
$96m each, before escalations and discounts. These aircraft are scheduled for delivery in 2014 and will be the first aircraft to be
delivered as part of the fleet replacement programme announced last year.
14 NON-CUrrENT ASSET INvESTmENTS
Cost
At 1 October 2010
Acquisitions (note 15)
Disposals
Group’s share of associates’ and joint venture’s loss for the year
Interest received
Dividend from associate
Additional loan investment
Exchange differences
At 30 September 2011
Amounts written off or provided
At 1 October 2010
Disposals
Impairment losses
At 30 September 2011
Carrying amount
At 30 September 2011
At 30 September 2010
Other Investments
Associates and
joint venture
£m
Available-for-
sale financial
assets
£m
Loans &
receivables
£m
Total other
investments
£m
66.8
–
(6.1)
(2.3)
–
(11.8)
0.6
(0.4)
46.8
28.2
(3.5)
–
24.7
22.1
38.6
8.8
1.0
(0.1)
–
–
–
–
0.1
9.8
4.0
(0.1)
3.8
7.7
2.1
4.8
13.9
–
–
–
(3.6)
–
1.0
–
11.3
–
–
–
–
22.7
1.0
(0.1)
–
(3.6)
–
1.0
0.1
21.1
4.0
(0.1)
3.8
7.7
11.3
13.9
13.4
18.7
Associates
Investments in associates at 30 September 2011 included a 40% interest in Activos Turisticos S.A., an incoming agency and hotel
company based in Palma de Mallorca, Spain, a 25% interest in Hotelera Adeje S.L., a hotel company based in Santa Cruz, Tenerife,
and a 25.1% interest in Oasis Company SAE, a hotel company in Egypt.
During the year, the Group disposed of its 40% interest in Hispano Alemana de Management Hotelero S.A., and its 25% interest in
COPLAY 95 S.L.; both hotel management companies. The combined proceeds on disposal were £12.9m of which £3.2m was received
in cash.
In the current year the Group has also recognised dividends from associates of £11.8m in relation to its 40% interest in Activos
Turisticos S.A., £5.9m of which has been received in cash.
Joint venture
The Group’s joint venture entity is Thomas Cook Personal Finance Limited. This is a joint venture arrangement with Barclays Bank,
the Group’s share being 50%.
102
Notes to the financial statements continued
14 NON-CUrrENT ASSET INvESTmENTS CONTINUEd
Summarised financial information in respect of the associates and joint venture is as follows:
Total assets
Total liabilities
Net (liabilities)/assets
Group’s share of net (liabilities)/assets
Revenue
(Loss)/profit for the year
Group’s share of associates’ and joint venture’s (loss)/profit for the year
Net impairment reversals recognised by the Group
Group’s share of associates’ and joint venture’s (loss)/profit after tax
2011
Joint venture
£m
75.3
(98.5)
(23.2)
(11.6)
9.5
(1.2)
(0.6)
–
(0.6)
2011
Associates
£m
157.8
(70.5)
87.3
24.2
96.0
(0.1)
(1.7)
–
(1.7)
2010
Joint venture
£m
99.6
(121.6)
(22.0)
(11.0)
7.6
(2.4)
(1.2)
–
(1.2)
2010
Associates
£m
248.6
(117.8)
130.8
41.6
142.5
6.5
2.4
2.0
4.4
The financial statements of the associates are made up to 31 December each year, being their financial reporting date. For the
purposes of applying the equity method of accounting for 2011, the financial statements of these undertakings for the year ended
31 December 2010 have been used together with management accounts for the period from 1 January 2011 to 30 September 2011.
Other investments
Available-for-sale financial assets include £nil in respect of a 24.9% interest in Aldiana GmbH, a German tour operator. During the
year, the Group recognised an impairment loss of £3.8m (2010: £1.7m) on its investment in Aldiana. This is shown in net investment
loss in the income statement. Aldiana is not accounted for under the equity method as the Group does not have significant influence
over its activities.
During the year ended 30 September 2011, the Group recognised income from available-for-sale financial assets of £0.5m
(2010: £0.2m). There is no active market for the available-for-sale financial assets, consequently they are recorded at cost.
In addition to the above, net investment loss for the year of £4.8m (2010: £1.5m) includes a loss on disposal of other available-for-
sale financial assets of £1.5m (2010: £nil). These assets were recorded within non-current trade and other receivables in the prior
year balance sheet.
Loans and receivables of £11.3m are in respect of the Group’s investment, as a member of Airline Group, in the UK National
Air Traffic Services (NATS). The investment comprises ordinary shares accruing interest at 8% in the Airline Group.
15 SUBSIdIArIES ANd ACqUISITIONS
A list of the significant investments in subsidiaries, including the name, country of incorporation, description and proportion
of ownership interest, is given in note 17 to the Company’s separate financial statements. All of the subsidiary undertakings have
been consolidated in the Group accounts.
Acquisitions made during the year
Öger Tours GmbH
On 1 October 2010, the Group acquired 100% of Öger Tours GmbH, a German tour operator specialising in the sale of package
holidays from Germany to Turkey. The purchase price was £10.3m of which £4.2m was paid in cash with the remaining consideration
being liabilities assumed as part of the acquisition.
Financial Statements Details of the net assets acquired are set out in the table below:
Net assets acquired
Intangible assets
Property, plant and equipment
Investments
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Provisions
Deferred tax liability
Goodwill
Total consideration
Satisfied by:
Cash
Liabilities assumed
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Carrying
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£m
Amount
recognised at
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£m
Fair value
adjustment
£m
–
0.2
0.8
12.7
14.8
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(0.2)
–
(49.9)
23.3
–
–
–
–
–
–
(6.7)
16.6
23.3
0.2
0.8
12.7
14.8
(78.2)
(0.2)
(6.7)
(33.3)
43.6
10.3
4.2
6.1
10.3
The acquired businesses contributed revenue of £242.1m and net profit of £8.6m to the Group for the period from acquisition
to 30 September 2011.
The goodwill of £43.6m reflects anticipated benefits from gaining an increased share of the German market, greater presence
in Turkey as a destination and substantial cost savings within the Central Europe segment.
ITC Travel Investments SL
On 12 July 2011, the Group acquired 50.1% of the share capital of ITC Travel Investments SL, a company established to enable a joint
venture between VAO Intourist and the Group. VAO Intourist is one of Russia’s most renowned travel companies and provides Thomas
Cook with entry into a fast-growing Russian market which has strong demand for beach and family holidays, particularly to Turkey
and Egypt. The acquired business is being fully consolidated as the Group is able to exercise control over the joint venture entity and
its subsidiaries.
The consideration was satisfied by cash of US$10m and the issue of new shares in Thomas Cook Group plc, adjusted for a receivable
resulting from contingent consideration. Contingent consideration represents the Group’s right to $15.0m or a further 25% of the
issued share capital from VAO Intourist in the event that certain trading conditions exist in the next financial year.
104
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15 SUBSIdIArIES ANd ACqUISITIONS CONTINUEd
Details of the net assets acquired are set out in the table below:
Net assets acquired
Intangible assets
Property, plant and equipment
Investments
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Short-term borrowings
Deferred tax asset/(liability)
Less: non-controlling interest
Goodwill
Total consideration
Satisfied by:
Cash
Contingent consideration
Issue of shares
Carrying
amount before
business
combination
£m
Amount
recognised at
acquisition
date
£m
Fair value
adjustment
£m
–
0.3
0.2
41.3
5.7
(49.6)
(3.5)
2.0
(3.6)
22.1
–
–
–
–
–
–
(4.4)
17.7
22.1
0.3
0.2
41.3
5.7
(49.6)
(3.5)
(2.4)
14.1
(19.1)
(5.0)
23.8
18.8
6.2
(9.2)
21.8
18.8
The purchase price of each asset component of the acquisition represents its provisional fair value, based on management’s best
estimates. The amount indicated above for trade and other receivables represents the fair value of the acquired receivables and
is equal to the gross contractual cash flows, all of which are expected to be recoverable.
The acquired business contributed revenue of £98.9m and net loss of £0.2m to the Group for the period from acquisition to
30 September 2011.
If the acquisition had occurred on 1 October 2010, it would have contributed £266.2m to consolidated revenue and £(9.1)m
to consolidated net profit.
The provisional goodwill of £23.8m reflects the anticipated benefits from gaining access to the Russian travel market.
Algarve Tours – Agência de Viagens e Turismo, Lda
On 20 September 2011, the Group acquired 100% in Algarve Tours – Agência de Viagens e Turismo, Lda. The company acquired
is an incoming agency based in Portugal and was purchased for a cash consideration of £1.2m. Given the timing of completion
it was not practical to provide a breakdown of the net assets acquired nor of any fair value adjustments.
Changes to the prior period acquisitions
Think W3 Ltd
During the year the fair value adjustments relating to the Think W3 Ltd (trading as Essential Travel) acquisition were amended.
The Directors do not consider the amendments to be material to the Group. Consequently the prior year comparatives have
not been restated as required by IFRS 3 Revised ‘Business Combinations’.
Financial Statements 105
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Had the prior year comparatives been restated the fair value amendments would have had the following impact as at the date
of acquisition (30 April 2010) and as at 30 September 2010:
Balance sheet
Intangible assets:
Decrease in goodwill
Increase in business combination intangibles
Increase in deferred tax liability
At date of
acquisition
£m
At
30 September
2010
£m
(0.7)
1.0
(0.3)
–
(0.7)
1.0
(0.3)
–
Hotels4U.com contingent consideration
The contingent consideration for the Hotels4U acquisition has been reassessed in light of changes to the expected timing of future
cash flows. In accordance with IFRS 3 (issued 2004) ‘Business Combinations’ goodwill has decreased by £0.9m in the current year.
Net cash outflow from acquisitions
Net cash outflow from acquisitions
Cash consideration for shares
Payment of contingent and deferred consideration
Cash and cash equivalents acquired (net of overdraft)
Total consideration
16 INvENTOrIES
Goods held for resale
Raw materials and supplies
17 TrAdE ANd OThEr rECEIvABLES
Non-current assets
Trade receivables
Other receivables
Deposits and prepayments
Loans
Securities
Amounts owed by associates and participations
Current assets
Trade receivables
Other receivables
Deposits and prepayments
Loans
Amounts owed by associates and participations
Other taxes
Current year
acquisitions
£m
Gold Medal
£m
Hotels4U
£m
(11.6)
–
20.5
8.9
–
(23.5)
–
(23.5)
–
(4.6)
–
(4.6)
2011
£m
15.4
23.3
38.7
Total
£m
(11.6)
(28.1)
20.5
(19.2)
2010
£m
13.2
18.9
32.1
2011
£m
2010
£m
0.1
28.4
115.8
4.1
2.3
2.3
153.0
377.5
80.2
555.0
26.5
5.0
46.3
1,090.5
0.1
7.8
124.0
2.0
2.7
–
136.6
351.7
88.2
461.8
27.0
2.8
41.4
972.9
106
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17 TrAdE ANd OThEr rECEIvABLES CONTINUEd
The average credit period taken on invoicing of leisure travel services is 13 days (2010: 13 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 creditworthiness 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. The Group’s current policy is that deposits and prepayments will normally be made for periods of up
to two years in advance. There is a credit risk in respect of the continued operation of those suppliers during those periods. Deposits
and prepayments also include £41.8m (2010: £47.5m) of deposits on aircraft lease arrangements which are primarily attributable
to the UK airline.
Securities include money market securities amounting to £2.3m (2010: £2.7m) purchased as collateral against liabilities arising
from part-time retirement contracts at Thomas Cook AG, which are classified as available-for-sale financial assets.
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 year
Additional provision
Exchange differences
Acquisitions
Receivables written off
Unused amounts released
At end of year
At the year end, trade and other receivables of £153.4m (2010: £173.3m) were past due but not impaired.
The analysis of the age of these financial assets is set out below:
Less than one month overdue
Between one and three months overdue
Between three and twelve months overdue
More than twelve months overdue
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 approximate to their fair values.
18 CASh ANd CASh EqUIvALENTS
Cash at bank and in hand
Term deposits with a maturity of less than three months
2011
£m
55.8
11.6
(0.2)
1.9
(3.5)
(4.2)
61.4
2011
£m
65.2
40.0
44.5
3.7
153.4
2010
£m
61.2
8.8
(2.5)
(0.1)
(1.7)
(9.9)
55.8
2010
£m
91.4
38.0
23.2
20.7
173.3
2011
£m
348.6
10.7
359.3
2010
£m
289.9
49.7
339.6
Cash and cash equivalents largely comprise bank balances denominated in Sterling, Euro and other currencies for the purpose of
settling current liabilities as well as balances arising from agency collection on behalf of the Group’s travel agencies.
Financial Statements 107
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Included within the above balance are the following amounts considered to be restricted:
• £60.3m (2010: £46.3m) held within escrow accounts in Canada, Switzerland and the Czech Republic in respect of local
regulatory requirements;
• £11.6m (2010: £17.1m) of cash held by White Horse Insurance Ireland Limited, the Group’s captive insurance company; and
• £13.1m (2010: £11.1m) of cash held in countries where exchange control restrictions are in force (India, Egypt, Tunisia and
Morocco), net of cash available to repay local debt in those countries.
The Directors consider that the carrying amounts of these assets approximate to their fair value.
19 TrAdE ANd OThEr PAYABLES
Current liabilities
Trade payables
Amounts owed to associates and participations
Social security and other taxes
Accruals and deferred income
Other payables
Non-current liabilities
Accruals and deferred income
Other payables
The average credit period taken for trade purchases is 59 days (2010: 55 days).
The Directors consider that the carrying amounts of trade and other payables approximate to their fair value.
20 BOrrOWINGS
Short-term borrowings
Unsecured bank loans and other borrowings
Unsecured bank overdrafts
Current portion of long-term borrowings
Long-term borrowings
Bank loans and bonds – repayable within one year
– repayable between one and five years
– repayable after five years
Less: amount due for settlement within one year shown under current liabilities
Amount due for settlement after one year
2011
£m
2010
£m
1,124.4
5.7
74.0
603.1
201.0
2,008.2
6.4
36.0
42.4
1,007.6
7.0
54.6
569.2
182.8
1,821.2
9.1
12.4
21.5
2011
£m
2010
£m
93.1
17.6
110.7
68.8
179.5
68.8
672.9
294.9
1,036.6
(68.8)
967.8
44.2
22.8
67.0
39.3
106.3
39.3
650.4
306.0
995.7
(39.3)
956.4
108
Notes to the financial statements continued
20 BOrrOWINGS CONTINUEd
Borrowings by class
Group committed credit facility (including transaction costs)
Aircraft-related bank loans (including transaction costs)
Other bank borrowings
Issued bonds (including transaction costs)
2011
2010
Current
£m
43.6
36.1
99.8
–
179.5
Non-current
£m
207.7
107.2
17.0
635.9
967.8
Current
£m
–
32.0
74.3
–
106.3
Non-current
£m
185.9
93.5
41.9
635.1
956.4
As at 30 September 2011 the bank facilities comprised of a £200 million term loan, repayable in annual instalments of £50m
commencing in October 2011, and a revolving credit facility of £850 million. As at 30 September 2011, the £200m term loan
(2010: £200m) was drawn down and £69.3m (2010: £4.2m) was drawn under the revolving credit facility.
The Directors consider that the fair value of the Group’s borrowings with a carrying value of £1,147.3m is £938.9m (2010: carrying
value £1,062.7m; fair value £1,081.6m). The fair values quoted were determined on the basis of the interest rates for the
corresponding terms to maturity or repayment as at the year end. The fair values of the issued bonds have been derived using the
quoted market price as at 30 September 2011. For items maturing in less than one year, the Directors consider that the fair value
is equal to the carrying amount.
Other borrowings with a carrying value of £22.1m (2010: £nil) and a fair value of £22.3m are related to non-current assets classified
as held for sale and are presented in accordance with IFRS 5 (see note 27).
During the year £6.3m (2010: £11.4m) of the capitalised transaction costs have been recognised within finance costs in the
income statement.
Borrowing facilities
As at 30 September 2011, the Group had undrawn committed debt facilities of £781m (2010: £846m). Whilst these facilities have
certain financial covenants they are not expected to prevent full utilisation of the facilities if required.
The Group complied with its covenants throughout the year.
21 OBLIGATIONS UNdEr FINANCE LEASES
Minimum lease payments
Present value of
minimum lease payments
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 12 months (shown under current liabilities)
Amount due for settlement after 12 months
The currency analysis of amounts payable under finance leases is:
Euro
US Dollar
Indian Rupee
Finance leases principally relate to aircraft and aircraft spares.
No arrangements have been entered into for contingent rental payments.
2011
£m
21.6
54.3
22.8
98.7
(18.0)
80.7
2010
£m
19.4
54.5
25.4
99.3
(18.8)
80.5
2011
£m
18.6
46.3
15.8
80.7
–
80.7
(18.6)
62.1
2011
£m
15.9
64.5
0.3
80.7
2010
£m
16.0
47.0
17.5
80.5
–
80.5
(16.0)
64.5
2010
£m
16.6
63.5
0.4
80.5
Financial Statements 109
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The Directors consider that the fair value of the Group’s finance lease obligations with a carrying value of £80.7m was £82.6m at
30 September 2011 (2010: carrying value £80.5m; fair value £82.0m). The fair values quoted were determined on the basis of the
interest rates for the corresponding terms to repayment as at the year end.
The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets.
Sub-lease rentals receivable
During the year, one aircraft (2010: two) held under a finance lease was sub-let on an operating lease for the whole or part of
the year.
22 FINANCIAL INSTrUmENTS
Carrying values of financial assets and liabilities
The carrying values of the Group’s financial assets and liabilities as at 30 September 2011 and 30 September 2010 are as set
out below:
At 30 September 2011
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 30 September 2010
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
–
–
–
–
–
–
42.1
42.1
Derivative
instruments
in designated
hedging
relationships
£m
–
–
–
–
–
–
(12.4)
(12.4)
held
for trading
£m
–
–
–
–
–
–
(9.9)
(9.9)
Held
for trading
£m
–
–
–
–
–
–
2.7
2.7
Loans &
receivables
£m
11.3
612.8
359.3
–
–
–
–
983.4
Loans &
receivables
£m
13.9
571.8
339.6
–
–
–
–
925.3
Financial
liabilities at
amortised
cost
£m
–
–
–
(1,832.3)
(1,147.3)
(80.7)
–
(3,060.3)
Available-
for-sale
£m
2.1
2.3
–
–
–
–
–
4.4
Available-
for-sale
£m
4.8
2.7
–
–
–
–
–
7.5
Financial
liabilities at
amortised cost
£m
–
–
–
(1,634.0)
(1,062.7)
(80.5)
–
(2,777.2)
Derivative financial instruments
The fair values of derivative financial instruments as at 30 September 2011 were:
At 1 October 2009
Movement in fair value during the year
At 1 October 2010
Movement in fair value during the year
At 30 September 2011
Interest
rate swaps
£m
(21.1)
12.0
(9.1)
6.1
(3.0)
Currency
contracts
£m
(5.2)
(27.4)
(32.6)
72.1
39.5
Fuel
contracts
£m
(104.8)
136.8
32.0
(36.3)
(4.3)
Total
£m
(131.1)
121.4
(9.7)
41.9
32.2
110
Notes to the financial statements continued
22 FINANCIAL INSTrUmENTS CONTINUEd
Non-current assets
Current assets
Current liabilities
Non-current liabilities
2011
£m
12.6
117.2
(88.2)
(9.4)
32.2
2010
£m
6.6
85.2
(80.7)
(20.8)
(9.7)
Fair value hierarchy
The fair value of the Group’s financial instruments are disclosed in hierarchy levels depending on the valuation method applied.
The different methods are defined as follows:
Level 1: valued using unadjusted quoted prices in active markets for identical financial instruments
Level 2: valued using techniques based on information that can be obtained from observable market data
Level 3: valued using techniques incorporating information other than observable market data as at least one input to the
valuation cannot be based on observable market data.
The fair value of the Group’s financial assets and liabilities at 30 September 2011 are set out below:
Financial assets
Currency contracts
Fuel contracts
Securities
Financial liabilities
Currency contracts
Fuel contracts
Interest rate swaps
At 30 September 2011
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
–
73.6
56.3
2.3
(34.1)
(60.6)
(3.0)
34.5
–
–
–
–
–
–
–
The fair value of the Group’s financial assets and liabilities at 30 September 2010 are set out below:
Financial assets
Currency contracts
Fuel contracts
Securities
Financial liabilities
Currency contracts
Fuel contracts
Interest rate swaps
At 30 September 2010
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
–
52.4
39.4
2.7
(85.0)
(7.4)
(9.1)
(7.0)
–
–
–
–
–
–
–
Total
£m
73.6
56.3
2.3
(34.1)
(60.6)
(3.0)
34.5
Total
£m
52.4
39.4
2.7
(85.0)
(7.4)
(9.1)
(7.0)
The Group uses derivative financial instruments to hedge significant future transactions and cash flows denominated in foreign
currencies. The Group enters into foreign currency forward contracts, swaps and options in the management of its exchange
rate exposures.
Currency hedges are entered into between 12 and 24 months in advance of the forecasted requirement.
As at 30 September 2011, the Group had in place currency hedging derivative financial instruments with a maximum maturity
of April 2013.
Financial Statements 111
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The Group also uses derivative financial instruments to mitigate the risk of adverse changes in the price of fuel. The Group enters
into fixed price contracts (swaps) and net purchased options in the management of its fuel price exposures.
Fuel price hedges are entered into up to a maximum of 24 months in advance of forecasted consumption of fuel.
As at 30 September 2011, the Group had in place fuel price hedging derivative financial instruments with a maximum maturity
of April 2013.
In addition, the Group uses derivative financial instruments to manage its interest rate exposures. The Group enters into interest
rate swaps to hedge against interest rate movements in connection with the financing of aircraft and other assets. The Group also
enters into cross currency interest rate swaps to hedge the interest rate and the currency exposure on US Dollar external borrowings.
Interest rate swaps and cross currency interest rate swaps are designated as cash flow hedges.
As at 30 September 2011, the maximum maturity of interest rate derivatives was February 2017.
The fair values of the Group’s derivative financial instruments have been calculated using underlying market prices available
on the 30 September 2011.
During the year, a gain of £35.7m (2010: £69.4m 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 £9.1m was recognised in the income statement in respect of the forward points on foreign exchange cash
flow hedging contracts (2010: £7.3m gain) and a loss of £5.9m in respect of the movement in the time value of options in cash flow
hedging relationships (2010: £2.0 gain).
Cost of providing tourism services:
Finance (costs)/income:
– release from hedge reserve
– time value on options
– release from hedge reserve
– forward points on foreign exchange cash flow hedging contracts
2011
£m
40.6
(5.9)
(4.9)
(9.1)
2010
£m
(66.0)
2.0
(3.4)
7.3
During the year a loss of £9.9m (2010: £49.6m gain) was taken directly to the income statement in respect of held for trading
derivatives that are used to hedge Group balance sheet exposure. This has been recorded within net foreign exchange loss for
the year of £4.4m (2010: £16.3m gain) which is included within cost of providing tourism services.
23 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.
Interest rate risk
The Group is subject to risks arising from interest rate movements in connection with its bank debt, aircraft financing and cash
investments. Interest rate swaps are used to manage these risks and are usually designated as cash flow hedges of the interest rate.
Exchange rate risk
The Group has activities in a large number of countries and is therefore subject to the risk of exchange rate fluctuations. These risks
arise in connection with the procurement of services in destinations outside the source market. In addition, US Dollar exposure arises
on the procurement of fuel and operating supplies for aircraft, as well as investments in aircraft.
The Group requires subsidiaries to identify and appropriately hedge all trading exposures in line with established treasury policies.
The Group uses currency forwards, currency swaps and plain vanilla currency options to manage currency risks and these are usually
designated as cash flow hedges of forecast future transactions.
Fuel price risk
Exposure to fuel price risk arises due to flying costs incurred by the Group’s aircraft. The Group requires subsidiaries to identify
and properly hedge all exposures in line with established treasury policies.
The Group uses commodity derivative contracts, including fixed price contracts (swaps) and net purchased options, to manage
fuel price risk and these are usually designated as cash flow hedges of the fuel price.
112
Notes to the financial statements continued
23 FINANCIAL rISK CONTINUEd
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 at 30 September 2011, the sensitivity of these risks to the defined scenario changes are set out below:
Interest rate risk
1% (2010: 1%) increase in interest rates
0.25% (2010: 0.25%) 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
2011
2010
Impact
on profit
before tax
£m
(7.1)
1.8
Impact
on equity
£m
–
–
Impact
on profit
before tax
£m
(4.6)
1.1
Impact
on equity
£m
–
–
2011
2010
Impact
on profit
before tax
£m
11.2
(13.8)
7.2
(6.6)
Impact
on equity
£m
23.8
(21.3)
70.9
(63.9)
Impact
on profit
before tax
£m
21.2
(23.8)
2.6
(2.5)
Impact
on equity
£m
26.6
(26.5)
64.3
(58.1)
2011
2010
Impact
on profit
before tax
£m
5.6
(15.5)
Impact
on equity
£m
94.9
(78.0)
Impact
on profit
before tax
£m
(2.7)
(12.2)
Impact
on equity
£m
105.3
(83.4)
Liquidity risk
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 seasonal nature of its liquidity
by making use of its bank revolving credit facility.
Short-term liquidity is primarily invested in bank deposits.
Financial liabilities are analysed below based on the time between the year 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 2011
Trade and other payables
Borrowings
Obligations under finance leases
Derivative financial instruments:
– payable
– receivable
Amount due
between
3 and 12
months
£m
137.7
38.3
17.7
between
1 and 5 years
£m
88.8
794.8
54.3
in more than
5 years
£m
1.9
431.7
22.8
Total
£m
1,832.3
1,408.3
98.7
in less than
3 months
£m
1,603.9
143.5
3.9
1,858.3
(1,843.6)
1,766.0
2,250.2
(2,233.7)
210.2
397.7
(395.8)
939.8
–
–
456.4
4,506.2
(4,473.1)
3,372.4
Financial Statements
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At 30 September 2010
Trade and other payables
Borrowings
Obligations under finance leases
Derivative financial instruments:
– payable
– receivable
Amount due
between
3 and 12
months
£m
118.0
89.0
15.0
between
1 and 5 years
£m
8.2
797.0
54.6
in more than
5 years
£m
2.3
468.5
25.4
Total
£m
1,634.0
1,377.3
99.4
in less than
3 months
£m
1,505.5
22.8
4.4
1,589.0
(1,589.1)
1,532.6
2,223.0
(2,185.4)
259.6
568.0
(550.6)
877.2
0.1
–
496.3
4,380.1
(4,325.1)
3,165.7
For all gross settled derivative financial instruments, such as foreign currency forward contracts and swaps, the pay and receive leg
has been disclosed in the table above. For net settled derivative financial instruments, such as fuel swaps and options, the fair value
as at the year end of those instruments in a liability position has been disclosed in the table above. Trade and other payables include
non-financial liabilities of £218.3m (2010: £208.2m) which have not been analysed above.
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 assesses
its counterparty exposure in relation to the investment of surplus cash, fuel contracts, foreign exchange and interest rate
hedging contracts and undrawn credit facilities. The Group uses published credit ratings, credit default swap prices and share
price performance in the previous 30-day period to assess counterparty strength and therefore to define the credit limit for
each counterparty.
The Group’s approach to credit risk in respect of trade and other receivables is explained in note 17.
24 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
Continental Europe.
When estimating the cost of claims outstanding at the year 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 White Horse Insurance Ireland Ltd Board of Directors 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.
114
Notes to the financial statements continued
24 INSUrANCE CONTINUEd
Income and expenses arising directly from insurance contracts
revenue
Net earned premium income
Deposit interest
Expenses
Claims incurred
Other operating expenses
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 October 2010
Net earned premium income
Premiums written
Claims incurred
Claims paid
At 30 September 2011
2011
£m
11.5
0.1
11.6
10.4
2.4
12.8
2011
£m
2.7
0.1
2.8
2.0
9.4
1.6
0.1
2.1
15.2
2010
£m
9.3
0.1
9.4
16.1
1.0
17.1
2010
£m
4.8
0.1
4.9
2.2
8.9
1.7
0.4
0.9
14.1
Deferred
income arising
from unearned
premiums
£m
2.2
(11.5)
11.3
–
–
2.0
Claims
accruals
£m
8.9
–
–
10.4
(9.9)
9.4
Financial Statements 115
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25 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 year:
At 1 October 2009
(Charge)/credit to income
Credit/(charge) to equity
Reclassifications
Exchange differences
At 30 September 2010
(Charge)/credit to income
Charge to equity
Reclassifications
Acquisitions (note 15)
Transferred to assets held for sale
Exchange differences
At 30 September 2011
Aircraft
finance
leases
£m
25.8
(28.6)
–
–
1.1
(1.7)
(5.5)
–
–
–
–
–
(7.2)
Retirement
benefit
obligations
£m
81.2
(14.5)
16.4
(7.5)
(5.4)
70.2
(12.2)
(17.0)
(1.5)
–
–
(1.4)
38.1
Fair value
of financial
instruments
£m
35.6
(0.9)
(38.3)
1.4
7.7
5.5
5.5
(21.8)
–
–
–
5.1
(5.7)
Other
temporary
differences
£m
(34.5)
2.4
–
5.0
(7.9)
(35.0)
(5.4)
–
1.5
(9.1)
0.6
0.2
(47.2)
Tax losses
£m
215.4
41.8
–
1.1
(2.3)
256.0
(73.6)
–
–
–
–
–
182.4
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 liabilities
Deferred tax assets
2011
£m
(120.9)
281.3
160.4
Total
£m
323.5
0.2
(21.9)
–
(6.8)
295.0
(91.2)
(38.8)
–
(9.1)
0.6
3.9
160.4
2010
£m
(88.2)
383.2
295.0
At the balance sheet date, the Group had unused tax losses of £2,116.5m (2010: £1,820m) 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 decrease in recognised tax losses in the year relates to the review of the UK balance sheet
which identified items whose recoverability is considered unlikely. No deferred tax asset has been recognised in respect of tax losses
of £1,427.3m (2010: £888.2m) 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 temporary differences in respect of which no deferred tax asset has been recognised
amounting to £229.0m (2010: £186.1m), 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.
The deferred tax assets and liabilities at the year end, without taking into consideration the offsetting balances within the same
jurisdiction, are £292.6m and £132.2m respectively.
The March 2011 Budget Statement announced a proposed reduction in the main rate of UK corporation tax from 27% to 26% from
1 April 2011 and a further reduction to 25% effective from 1 April 2012. Finance Act 2011 included legislation confirming this rate
change and the effect has been to reduce the deferred tax assets by £9.2m as at 30 September 2011 (2010: £8.6m).
The Budget Statement also proposed a further reduction in the main rate of corporation tax in the UK, to be enacted at a rate
of 1% per year to 23% by 1 April 2014. The overall effect of the further changes from 25% to 23%, if applied to the deferred tax
balance at 30 September 2011, would be to reduce the deferred tax asset by approximately £14.2m.
116
Notes to the financial statements continued
26 PrOvISIONS
At 1 October 2010
Additional provisions in the year
Unused amounts released in the year
Acquisitions (note 15)
Unwinding of discount
Utilisation of provisions
Exchange differences
At 30 September 2011
Included in current liabilities
Included in non-current liabilities
At 30 September 2011
Included in current liabilities
Included in non-current liabilities
At 30 September 2010
Aircraft
maintenance
provisions
£m
204.8
59.7
(6.1)
–
–
(44.0)
1.6
216.0
73.2
142.8
216.0
87.1
117.7
204.8
Other
provisions
£m
212.5
64.2
(39.7)
0.2
7.6
(70.6)
(9.1)
165.1
114.4
50.7
165.1
117.4
95.1
212.5
Total
£m
417.3
123.9
(45.8)
0.2
7.6
(114.6)
(7.5)
381.1
187.6
193.5
381.1
204.5
212.8
417.3
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 accounting policies for more details).
Other provisions relate to provisions for off-market leases, onerous contracts, deferred and contingent consideration and future
obligations, including those arising as a result of reorganisation and restructuring plans that are irrevocably committed, including
severance payments and provisions for social security compensation plans.
Provisions included in non-current liabilities are principally off-market lease provisions, that are expected to be utilised over the
term of those contracts which extend up to ten years from the balance sheet date, and deferred and contingent consideration arising
on acquisitions.
Financial Statements 27 NON-CUrrENT ASSETS CLASSIFIEd AS hELd FOr SALE
Assets
Property, plant and equipment:
Intangible assets
Trade and other receivables
Tax assets
Inventories
– land and buildings
– other fixed assets
Liabilities
Retirement benefit obligations
Trade and other payables
Borrowings
Obligations under finance leases
Tax liabilities
Revenue received in advance
Deferred tax liabilities
117
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£m
2010
£m
53.4
14.1
0.1
2.2
0.1
0.5
70.4
2011
£m
1.5
10.2
22.1
0.1
0.3
0.2
0.6
35.0
10.5
–
–
–
–
–
10.5
2010
£m
–
–
–
–
–
–
–
–
In the current year the assets and liabilities of Hoteles y Clubs Vacaciones S.A., a 51% owned, consolidated subsidiary of TC Touristik
GmbH, reported within the Central Europe segment, have been classified as held for sale. A term sheet has been agreed on the
disposal and the Group expects to complete the sale within the next 12 months.
In 2009 the Group gained legal title to a hotel property in Mexico as settlement of an outstanding loan for CAD 16.6m. The carrying
amount at 30 September 2011 is £9.6m (2010: £10.5m). During the year, contracts have been exchanged on the sale of the property
and it is expected to complete within the next 12 months.
28 CALLEd-UP ShArE CAPITAL
Allotted, called-up and fully paid
874,990,495 ordinary shares of €0.10 each (2010: 858,292,947)
Allotted, called-up and partly paid
50,000 deferred shares of £1 each, 25p paid (2010: 50,000)
2011
£m
2010
£m
59.2
57.7
–
–
Contingent rights to the allotment of shares
As at 30 September 2011, options to subscribe for 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, the Thomas Cook Restricted Share Plan and
the Thomas Cook Group plc 2008 Save As You Earn Scheme. For further details refer to note 34. On exercise, the awards of shares
under these plans will be satisfied by either purchases in the market of existing shares or, subject to institutional guidelines,
issuing new shares.
Own shares held in trust
Shares of the Company are held under trust by EES Trustees International Limited in respect of the Thomas Cook Group plc 2007
Performance Share Plan, the Thomas Cook Group plc 2008 Co-Investment Plan and the Thomas Cook Restricted Share Plan and are
held by Equiniti Share Plan Trustees Limited in connection with the Thomas Cook Group plc Buy As You Earn Scheme. 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 2011 by EES Trustees International Limited and Equiniti Share Plan Trustees Limited
was 3,863,970 (2010: 4,282,801) and 128,316 (2010: 69,602) respectively. The cumulative cost of acquisition of these shares was
£13.3m (2010: £13.3m) and the market value at 30 September 2011 was £1.6m (2010: £7.5m). Shares held by the trust have been
excluded from the weighted average number of shares used in the calculation of earnings per share.
118
Notes to the financial statements continued
28 CALLEd-UP ShArE CAPITAL CONTINUEd
Issue of company shares
During the year, the Group issued 16,697,548 ordinary shares as part consideration for the agreement to acquire a 50.1% stake
in ITC Travel Investments SL. Details of this transaction are provided in note 15.
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. In the year the Directors have set an objective of strengthening
the balance sheet of the Group through substantially reducing its net debt over the next two to three years. To achieve this aim the
Directors have decided to embark on an asset disposal programme and to suspend future dividend payments until
such a time as the balance sheet is sufficiently rebuilt.
The capital structure of the Group consists of debt, cash and cash equivalents (as shown in note 31) and 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
£2,061.7m (2010: £2,522.2m).
29 hEdGING ANd TrANSLATION rESErvES
At 1 October 2009
Foreign exchange translation gains
Fair value gains deferred for the year
Fair value losses transferred to the income statement
Tax on fair value gains and losses and transfers
At 30 September 2010
Foreign exchange translation losses
Fair value gains deferred for the year
Fair value (gains)/losses transferred to the income statement
Tax on fair value gains and losses and transfers
At 30 September 2011
Hedging
reserve
£m
(109.1)
–
62.1
69.4
(38.8)
(16.4)
–
112.5
(35.7)
(21.5)
38.9
Available-
for-sale
investments
£m
(2.2)
–
0.5
–
0.5
(1.2)
–
–
1.5
(0.3)
–
Translation
reserve
£m
253.0
64.1
–
–
–
317.1
(39.1)
–
–
–
278.0
Total
£m
141.7
64.1
62.6
69.4
(38.3)
299.5
(39.1)
112.5
(34.2)
(21.8)
316.9
Financial Statements
30 NOTE TO ThE CASh FLOW STATEmENT
(Loss)/profit before tax
Adjustments for:
Finance income
Finance costs
Net investment loss
Profit on disposal of associates
Share of results of associates and joint venture
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of business combination intangibles
Impairment of assets
Write up in value of investment property
Loss on disposal of assets
Share-based payments
Other non-cash items
Decrease in provisions
Income received from other non-current investments
Additional pension contributions
Interest received
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Increase in payables
Cash generated by operations
Income taxes paid
Net cash from operating activities
119
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2011
£m
(398.2)
(47.9)
182.7
4.8
(10.3)
2.3
126.8
40.3
34.3
372.5
(1.0)
4.6
(3.2)
(24.5)
(26.2)
0.5
(21.0)
5.6
242.1
(7.0)
(40.5)
126.3
320.9
(32.3)
288.6
2010
£m
41.7
(52.1)
179.1
1.5
–
(3.2)
125.4
27.4
30.9
14.8
–
1.8
8.1
38.8
(50.1)
0.3
(16.0)
6.0
354.4
(9.4)
(85.6)
64.7
324.1
(24.7)
299.4
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.
120
Notes to the financial statements continued
31 NET dEBT
Liquidity
Cash and cash equivalents
Current debt
Bank overdrafts
Short-term borrowings
Loan note
Current portion of long-term borrowings
Borrowings classified as held for sale
Obligations under finance leases classified as
held for sale
Obligations under finance leases
Non-current debt
Long-term borrowings
Loan note
Obligations under finance leases
Total debt
Net debt
At
1 October
2010
£m
Cash flow
£m
Transfer to
liabilities
related to
assets held
for sale
£m
Acquisitions
£m
Other
non-cash
changes
£m
Exchange
movements
£m
At
30 September
2011
£m
339.6
339.6
(22.8)
(44.2)
(18.5)
(20.8)
–
–
(16.0)
(122.3)
(952.8)
(3.6)
(64.5)
(1,020.9)
(1,143.2)
(803.6)
23.0
23.0
4.8
(86.8)
21.0
12.6
–
–
16.7
(31.7)
(50.4)
–
–
(50.4)
(82.1)
(59.1)
–
–
–
0.2
–
2.8
(22.1)
(0.1)
–
(19.2)
19.1
–
0.1
19.2
–
–
–
–
–
(3.5)
–
–
–
–
–
(3.5)
–
–
–
–
(3.5)
(3.5)
–
–
–
42.1
(6.5)
(63.5)
–
–
(19.2)
(47.1)
15.1
3.6
4.0
22.7
(24.4)
(24.4)
(3.3)
(3.3)
0.4
3.1
–
0.1
–
–
(0.1)
3.5
1.2
–
(1.7)
(0.5)
3.0
(0.3)
359.3
359.3
(17.6)
(89.1)
(4.0)
(68.8)
(22.1)
(0.1)
(18.6)
(220.3)
(967.8)
–
(62.1)
(1,029.9)
(1,250.2)
(890.9)
32 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:
The Group as lessee
Within one year
Later than one and less than five years
After five years
Property
and other
2011
£m
Aircraft and
aircraft spares
2011
£m
107.6
251.3
108.0
466.9
99.3
154.3
171.7
425.3
Total
2011
£m
206.9
405.6
279.7
892.2
Property
and other
2010
£m
Aircraft and
aircraft spares
2010
£m
112.9
296.3
110.9
520.1
109.4
177.8
–
287.2
Total
2010
£m
222.3
474.1
110.9
807.3
Operating lease payments principally relate to rentals payable for the Group’s retail shop and hotel properties and for aircraft and
spares used by the Group’s airlines.
Shop leases are typically negotiated for an average term of five years.
Leases for new aircraft are typically negotiated for an average term of 12 years; leases for second hand aircraft and extensions are
typically considerably shorter.
After the year end, several extensions have been signed as part of the fleet rollover. This results in increasing the within-one-year
obligation by £1.4m and the one-to-five year obligation by £10.8m.
Financial Statements 121
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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:
The Group as lessor
Within one year
Later than one and less than five years
After five years
Property
2011
£m
Aircraft
2011
£m
2.8
11.5
1.4
15.7
–
–
–
–
Total
2011
£m
2.8
11.5
1.4
15.7
Property
2010
£m
Aircraft
2010
£m
2.5
6.9
3.2
12.6
–
–
–
–
Total
2010
£m
2.5
6.9
3.2
12.6
Rental income earned during the year was:
4.7
3.6
8.3
3.2
5.4
8.6
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 4.8 years for property
(2010: 5.9 years) and nil months for aircraft (2010: nil months).
At 30 September 2011, no aircraft held under operating leases (2010: nil) were sub-let by the Group.
33 CONTINGENT LIABILITIES
Contingent liabilities
2011
£m
124.7
2010
£m
118.8
Contingent liabilities primarily comprise guarantees, letters of credit and other contingent liabilities, including contingent liabilities
related 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 customers’ 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,
there is 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.
34 ShArE-BASEd PAYmENTS
The Company operates five equity-settled share-based payment schemes, as outlined below. The total income recognised during the
year in respect of equity-settled share-based payment transactions was £3.2m (2010: £8.1m expense).
The Thomas Cook Group plc 2007 Performance Share Plan (PSP) and the HM Revenue & Customs Approved Company
Share Option Sub-Plan (CSOSP)
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 adjusted 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,
return on invested capital (ROIC) and TSR are met during the three years following the date of grant. Subject to vesting conditions,
the options or contingent share awards are exercisable up to ten years after the date of grant.
The Thomas Cook Group plc 2008 Save As You Earn Scheme (SAYE)
Eligible employees across the Group were offered options to purchase shares in the Company by entering into a three or four year
savings contract. The option exercise price was set at a 10% (2010 grant) or 20% (2008 grant) discount to the market price at the
offer date. Options are exercisable during the six months after the end of the savings contract.
122
Notes to the financial statements continued
34 ShArE-BASEd PAYmENTS CONTINUEd
The Thomas Cook Group plc 2008 HM Revenue & Customs Approved Buy As You Earn Scheme (BAYE)
Eligible UK tax-paying employees are offered the opportunity to purchase shares in the Company by deduction from their monthly
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 2011, 128,316 matching shares had been purchased (2010: 69,602).
The Thomas Cook Group plc Restricted Share Plan (RSP)
Senior executives of the Company and its subsidiaries are granted options to acquire, or contingent share awards of, the ordinary
shares of the Company. Executive Directors are excluded from receiving awards under the RSP. The Company will determine at the
date of award whether the award will be subject to a performance target and the date of vesting. Subject to any vesting conditions,
the options or contingent share awards are exercisable up to ten years after the date of grant.
The movements in options and awards during the year and prior year were:
Outstanding at beginning of year
Granted
Exercised
Cancelled
Forfeited
Outstanding at end of year
Exercisable at end of year
PSP
18,686,727
8,021,142
(417,871)
–
(8,809,120)
17,480,878
174,233
COIP
8,600,129
2,995,380
–
(119,126)
(5,484,632)
5,991,751
–
2011
SAYE
7,294,552
–
–
(1,432,980)
(253,037)
5,608,535
2,222,467
CSOSP
796,123
212,968
–
–
(234,497)
774,594
–
rSP
–
518,439
–
–
(5,135)
513,304
–
Exercise price (£)
Average remaining contractual life (years)
nil
8.3
nil
8.5
1.81-2.15
1.5
1.88-2.34
7.8
nil
9.5
The weighted average share price at the date of exercise for the options exercised during the year ended 30 September 2011
was £1.81.
Outstanding at beginning of year
Granted
Exercised
Cancelled
Forfeited
Outstanding at end of year
Exercisable at end of year
Exercise price (£)
Average remaining contractual life (years)
PSP
15,025,776
7,017,596
(846,063)
–
(2,510,582)
18,686,727
587,085
2010
COIP
4,630,851
4,934,780
–
(857,500)
(108,002)
8,600,129
–
SAYE
3,155,112
4,544,329
(705)
(344,819)
(59,365)
7,294,552
–
CSOSP
879,018
12,847
–
–
(95,742)
796,123
–
nil
8.5
nil
8.9
1.81 –2.15
2.5
1.88 –2.34
8.3
The weighted average share price at the date of exercise for the options exercised during the year ended 30 September 2010
was £2.43.
Financial Statements 123
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The fair value of options and awards subject to adjusted 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 year the key inputs to the models were:
2011
Weighted average share price at measurement date
Weighted average exercise price
Expected volatility
Expected volatility of comparator group
Expected correlation with comparator group
Weighted average option life (years)
Weighted average risk-free rate
Expected dividend yield
Weighted average fair value at date of grant
Weighted average share price at measurement date
Weighted average exercise price
Expected volatility
Expected volatility of comparator group
Expected correlation with comparator group
Weighted average option life (years)
Weighted average risk-free rate
Expected dividend yield
Weighted average fair value at date of grant
COIP
£1.89
nil
48%
PSP
£1.70
nil
48%
SAYE
£1.65
£1.97
48%
25%–121% 25%–121% 25%–121%
35%
3
1.7%
7%
£0.28
35%
3
1.7%
6%
£1.30
35%
3
1.7%
7%
£1.15
CSOSP
£1.67
nil
31%
n/a
n/a
1
0.8%
7%
£1.56
2010
PSP
£2.33
nil
50%
COIP
£2.25
nil
50%
26% –121% 26% –121%
32%
3
1.9%
6%
£1.57
32%
3
2.0%
6%
£1.62
SAYE
£2.01
£1.81
50%
n/a
n/a
3.3
1.6%
6%
£0.46
CSOSP
£2.34
£2.34
50%
26% –121%
32%
3
2.0%
6%
£0.55
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.
35 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 £188.6m (2010: £205.6m) were attributable to the pension commitments
of the Condor Group (Condor Flugdienst GmbH, Condor Berlin GmbH and CF 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. 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 from
1995 onwards participate in a company pension scheme under which the pension entitlements are based on the average salaries
of those employees (average salary plan). The 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 schemes are accounted for as part of liabilities for retirement benefit obligations in the balance sheet.
124
Notes to the financial statements continued
35 rETIrEmENT BENEFIT SChEmES CONTINUEd
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
2011
%
4.99%
1.65%
1.50%
2010
%
4.70%
1.93%
1.69%
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 2011. These assume a life expectancy for members currently
aged 60 of 22.96 years for men and 27.55 years for women.
Amounts recognised in the income statement in respect of these defined benefit schemes are as follows:
Current service cost
Past service cost
Gain on settlements
Curtailment gain
Interest cost on scheme liabilities
Total included in income statement
2011
£m
11.2
0.3
(2.4)
–
11.3
20.4
2010
£m
8.1
–
–
(2.0)
11.4
17.5
Service costs, gains on settlement and curtailment gains 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 comprehensive income.
Changes in the present value of unfunded pension obligations were as follows:
At beginning of year
Current service cost
Past service cost
Interest cost
Benefits paid
Settlements
Curtailments
Actuarial (gains)/losses
Exchange difference
At end of year
2011
£m
239.1
11.2
0.3
11.3
(6.1)
(8.5)
–
(17.5)
(2.0)
227.8
2010
£m
208.9
8.1
–
11.4
(6.2)
(7.2)
(2.0)
36.5
(10.4)
239.1
Funded defined benefit pension obligations
The pension entitlements of employees of Thomas Cook UK and employees in Norway and the Netherlands 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 year 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.
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
2011
%
5.13%
3.13%
5.78%
4.34%
2.86%
2010
%
4.97%
3.20%
6.07%
4.68%
3.20%
Financial Statements 125
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The Thomas Cook UK Pension Plan accounts for approximately 90% (2010: 97%) of the total funded defined benefit obligations.
The mortality assumptions used in arriving at the present value of those obligations at 30 September 2011 are based on the PMA92/
PFA92 tables with medium cohort improvements and a minimum future longevity improvement per year of 1%, adjusted for recent
mortality experience. The mortality assumptions adopted for the plan liabilities indicate a further life expectancy for members
currently aged 65 of 22.7 years for men and 25.8 years for women.
On 31 March 2011, the UK defined benefit schemes closed to all active members and pension provision will now be through a
defined contribution scheme. The closure of the schemes resulted in a cessation of future pension benefit accrual and a consequent
curtailment gain of £25.8m, which has been recognised in the income statement.
Amounts recognised in the income statement in respect of these defined benefit schemes are as follows:
Current service cost
Curtailment gain
Expected return on scheme assets
Interest cost on scheme liabilities
Total included in the income statement
2011
£m
10.0
(25.8)
(42.1)
43.4
(14.5)
2010
£m
16.2
–
(37.9)
43.4
21.7
Service costs and curtailment gains 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 £18.2m (2010: £66.2m).
Actuarial gains and losses have been reported in the statement of comprehensive income.
Changes in the present value of funded defined benefit obligations were as follows:
At beginning of year
Current service cost
Interest cost
Benefits paid
Transfers
Curtailments
Expenses paid
Contributions paid by plan participants
Actuarial (gains)/losses
Exchange difference
At end of year
Changes in the fair value of scheme assets were as follows:
At beginning of year
Expected return on scheme assets
Contributions from the sponsoring companies
Contributions paid by plan participants
Actuarial (losses)/gains
Benefits paid
Transfers
Expenses paid
Exchange difference
At end of year
2011
£m
878.8
10.0
43.4
(19.4)
6.4
(25.8)
(1.5)
1.7
(47.4)
0.3
846.5
2011
£m
703.4
42.1
33.9
1.7
(23.9)
(19.4)
6.5
(1.5)
0.5
743.3
2010
£m
784.1
16.2
43.4
(18.7)
2.4
–
(1.5)
3.4
49.9
(0.4)
878.8
2010
£m
621.9
37.9
31.3
3.4
28.2
(18.7)
1.4
(1.5)
(0.5)
703.4
126
Notes to the financial statements continued
35 rETIrEmENT BENEFIT SChEmES CONTINUEd
Following the 2008 actuarial valuation of the Thomas Cook UK pension plan, a six-year Recovery Plan was agreed with the
pension trustees to fund the actuarial deficit. In line with that agreement, Thomas Cook UK committed to make additional quarterly
payments totalling £105.6m through to June 2014. During the year ended 30 September 2011, Thomas Cook UK paid four
instalments totalling £21.0m in line with the recovery plan. Quarterly payments totalling £22.3m will be made during the year
ending 30 September 2012. The Group is expected to make aggregate contributions to its funded defined benefit schemes of £28.7m
during the year commencing 1 October 2011.
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 year
2011
Long-term
rate of return
%
7.1
5.6
4.0
7.1
6.2
2010
Long-term
rate of return
%
7.5
5.9
4.2
7.5
6.7
2011
£m
279.9
68.2
217.7
116.4
61.1
743.3
2010
£m
287.6
65.1
202.1
93.4
55.2
703.4
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
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:
Current liabilities
Non-current liabilities
2011
£m
846.5
(743.3)
103.2
227.8
331.0
6.8
324.2
331.0
2010
£m
878.8
(703.4)
175.4
239.1
414.5
6.7
407.8
414.5
The cumulative net actuarial losses recognised in the statement of comprehensive income at 30 September 2011 were £322.9m
(2010: £363.9m).
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
2011
£m
1,074.3
(743.3)
331.0
2010
£m
1,117.9
(703.4)
414.5
(9.4)
(24.1)
(10.1)
27.6
2009
£m
993.0
(621.9)
371.1
(7.7)
(13.7)
2008
£m
771.2
(581.7)
189.5
2.7
(116.6)
2007
£m
810.4
(635.2)
175.2
2.0
11.2
Defined contribution schemes
There are a number of defined contribution schemes in the Group, the principal scheme being the Thomas Cook UK DC Pension Scheme,
which is open to all UK employees. The total charge for the year in respect of this and other defined contribution schemes, including
liabilities in respect of insured benefits relating to workers’ compensation arrangements, amounted to £25.2m (2010: £20.3m).
The assets of these schemes are held separately from those of the Group in funds under the control of trustees.
Financial Statements 127
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36 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 venture undertakings are disclosed below.
Transactions between the Company and its subsidiaries and associates are disclosed in the Company’s separate financial statements.
Trading transactions
During the year, 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
Other income
Management fees and other expenses
Amounts owed by related parties**
Provisions against amounts owed
Amounts owed to related parties
Associates, joint venture
and participations*
2011
£m
31.6
(36.3)
0.5
–
23.2
(4.2)
(5.7)
2010
£m
31.6
(35.0)
0.6
(1.3)
18.1
(4.2)
(7.0)
Participations are equity investments where the Group has a significant equity participation but which are not considered to be associates or joint ventures.
*
** Amounts owed by related parties include £11.7m (2010: £11.1m) which for statutory purposes is reported as part of the associate investment.
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 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 66 to 69.
Short-term employee benefits
Termination benefits
Share-based payments
2011
£m
2.7
1.2
(0.5)
3.4
2010
£m
5.0
–
0.2
5.2
Termination benefits include an outstanding balance, as at 30 September 2011, of £1.0m, due to the former CEO of the Group
in relation to remuneration over his contractual notice period. This consists of £116,744 in remuneration over the period from
1 October 2011 to 4 November 2011, and a payment in lieu of notice made on 4 November 2011 of £851,114, as disclosed in the
Remuneration report on page 69.
37 SUBSEqUENT EvENTS
The Co-operative Travel
On 4 October 2011, the Group completed the merger of its UK high street travel agency and foreign exchange business with those
of The Co-operative Group and the Midlands Co-operative, after receipt of clearance from the Competition Commission. The Group
holds 66.5% of the share capital of the new entity, The Co-operative Group holds 30% and the Midlands Co-operative Society holds
3.5%. Given the timing of the transactions relative to the publication of these financial statements, it is not practical to provide
a breakdown of the assets and liabilities acquired.
Bank facilities
On 25 November 2011, the Group announced that it had reached agreement with its banking group to amend the terms of its
existing bank facilities to widen the financial covenants and increase financial flexibility for the Group until March 2013. In addition
a new £200m facility, available until April 2013, was agreed.
Hoteles y Clubs Vacaciones S.A.
On 13 December 2011, the Group announced that it had reached agreement to sell its interest in Hoteles y Clubs Vacaciones S.A.
(HCV) to IBEROSTAR Hoteles y Aparamentos S.L., the hotel division of GRUPO IBEROSTAR. HCV indirectly owns five hotels and one golf
club and operates a second golf club in Spain. The Group will receive cash proceeds of €72.2m and HCV will be sold with net debt of
€22.4m. The transaction is conditional upon shareholder approval and is expected to complete in the first quarter of 2012.
128
Company balance sheet
At 30 September 2011
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Deferred tax assets
Trade and other receivables
Current assets
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
Merger reserve
Hedging and translation reserves
Capital redemption reserve
Retained earnings surplus
Investment in own shares
Total equity
These financial statements were approved by the Board of Directors on 13 December 2011.
Signed on behalf of the Board
Paul hollingworth
Group Chief Financial Officer
Notes 1 to 17 form part of these financial statements.
30 September
2011
£m
30 September
2010
£m
notes
5
6
11
7
7
8
9
12
2.6
2,619.8
–
3.9
2,626.3
1,267.1
1,267.1
3,893.4
1.4
4,073.3
1.6
4.6
4,080.9
859.4
859.4
4,940.3
(250.4)
(110.1)
(635.9)
(886.3)
3,007.1
(635.1)
(745.2)
4,195.1
59.2
29.2
1,588.0
888.7
8.5
446.8
(13.3)
3,007.1
57.7
8.9
3,051.3
882.8
8.5
199.2
(13.3)
4,195.1
Financial Statements Company cash flow statement
For the year ended 30 September 2011
Cash flows from operating activities
Loss before tax
Adjustments for:
Finance income
Finance expense
Depreciation of property, plant and equipment
Impairment of investment
Share-based payments
(Increase)/decrease in receivables
Increase/(decrease) in payables
Net cash (used in)/from operating activities
Investing activities
Dividends received
Purchase of intangible assets
Net cash from/(used in) investing activities
Financing activities
Interest paid
Dividends paid
Issue of bonds
Funding advanced to subsidiaries
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Liquid assets
Cash and cash equivalents at end of year
129
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Year ended
30 September
2011
£m
Year ended
30 September
2010
£m
(1,525.8)
(64.2)
(1.6)
48.5
0.2
1,463.3
(3.5)
(281.4)
135.9
(164.4)
303.5
–
303.5
(47.3)
(91.8)
–
–
(139.1)
–
–
–
–
–
–
(0.7)
24.9
0.1
–
2.7
59.0
(21.2)
0.6
–
(0.6)
(0.6)
–
–
638.4
(638.4)
–
–
–
–
–
–
–
130
Company statement of changes in equity
For the year ended 30 September 2011
At 1 October 2009
Loss for the year
Other comprehensive expense
Total comprehensive expense for the year
Equity credit in respect of share-based payments
Purchase of own shares
Dividends paid
At 30 September 2010
Loss for the year
Other comprehensive expense
Total comprehensive expense for the year
Equity debit in respect of share-based payments
Issue of equity shares net of expenses
Release of merger reserve
Dividends paid
Dividends received
At 30 September 2011
Share
capital
£m
57.7
–
–
–
–
–
–
57.7
–
–
–
–
1.5
–
–
–
59.2
Share
premium
£m
8.9
–
–
–
–
–
–
8.9
Merger
reserve
£m
3,051.3
–
–
–
–
–
–
3,051.3
Capital
redemption
reserve
£m
8.5
–
–
–
–
–
–
8.5
Translation
reserve
£m
1,126.3
–
(243.5)
(243.5)
–
–
–
882.8
Retained
earnings
£m
347.2
(63.7)
(0.7)
(64.4)
8.1
–
(91.7)
199.2
Own
shares
£m
Total
£m
(13.1) 4,586.8
(63.7)
(244.2)
(307.9)
8.1
(0.2)
(91.7)
(13.3) 4,195.1
–
–
–
–
(0.2)
–
–
–
–
–
20.3
–
–
–
–
–
– (1,463.3)
–
–
–
–
1,588.0
29.2
–
–
–
–
–
–
–
–
8.5
– (1,522.9)
5.9
–
5.9 (1,522.9)
(3.2)
–
–
–
– 1,463.3
(92.5)
–
402.9
–
446.8
888.7
– (1,522.9)
–
5.9
– (1,517.0)
(3.2)
–
21.8
–
–
–
(92.5)
–
402.9
–
(13.3) 3,007.1
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 and represents the difference between the nominal value and the fair
value of the shares acquired. Following the impairment of the Company’s investment in subsidiaries during the year, the Company
has, in accordance the Companies Act 2006, relieved the impairment loss through a transfer from the merger reserve to
retained earnings.
The share premium arose in connection with the issue of ordinary shares of the Company following the exercise of MyTravel
executive share options.
At 30 September 2011, the Company had distributable reserves of £446.8m (2010: £199.2m).
Details of the own shares held are set out in note 28 to the Group financial statements.
Financial Statements 131
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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.
2 LOSS FOr ThE YEAr
As permitted by section 408(3) of the Companies Act 2006, the Company has elected not to present its own income statement for
the year. The loss after tax of the Company amounted to £1,522.9m (2010: £63.7m loss after tax).
The auditors’ remuneration for audit services to the Company was £0.3m (2010: £0.2m).
3 PErSONNEL ExPENSES
Wages and salaries
Social security costs
Share-based payments – equity settled
Average number of employees of the Company during the year
Employees are based in the United Kingdom and Germany.
2011
£m
17.4
0.2
(3.5)
14.1
2010
£m
21.5
2.5
2.7
26.7
2011
Number
101
2010
Number
95
Disclosures of individual Directors’ remuneration, share options, long-term incentive schemes, pension contributions and pension
entitlements required by the Companies Act 2006 and specified for audit by the Financial Services Authority are on pages 66 to 69
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 35 of the Group financial statements.
4 dIvIdENdS
The details of the Company’s dividend are disclosed in note 10 to the Group financial statements.
132
Notes to the Company financial statements continued
5 PrOPErTY, PLANT ANd EqUIPmENT
Other fixed assets
Cost
At 1 October 2009
Additions
Exchange differences
At 30 September 2010
Additions
At 30 September 2011
Accumulated depreciation and impairment
At 1 October 2009
Charge for the year
At 30 September 2010
Charge for the year
At 30 September 2011
Carrying amount at 30 September 2011
Carrying amount at 30 September 2010
6
INvESTmENTS IN SUBSIdIArIES
Cost and net book value
At 1 October 2009
Additions
Exchange difference
At 30 September 2010
Adjustment in respect of share-based payments
Impairment
Exchange difference
At 30 September 2011
£m
1.1
0.6
(0.1)
1.6
1.4
3.0
0.1
0.1
0.2
0.2
0.4
2.6
1.4
£m
4,293.5
8.9
(229.1)
4,073.3
(1.2)
(1,463.3)
11.0
2,619.8
A list of the Company’s principal subsidiary undertakings is shown in note 17 to the financial statements.
The additions in the current year relate to share-based payment charges related to subsidiaries’ employees.
During the year the Company recognised an impairment loss of £1,463.3m on it’s investment in subsidiaries. The impairment
stems from a decrease in management’s estimates of the likely future profitability and cash flows of mainly the UK and
Canadian businesses.
Financial Statements
133
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7 TrAdE ANd OThEr rECEIvABLES
Current
Amounts owed by subsidiary undertakings
Other receivables
Deposits and prepayments
Non-current
Deposits and prepayments
2011
£m
2010
£m
1,244.9
0.6
21.6
1,267.1
3.9
3.9
858.1
0.9
0.4
859.4
4.6
4.6
Amounts owed by subsidiary undertakings are repayable on demand. The average interest on overdue amounts owed by subsidiary
undertakings is 0.4% (2010: 0.6%). The Directors consider the fair value to be equal to the book value.
8 TrAdE ANd OThEr PAYABLES
Amounts owed to subsidiary undertakings
Social security and other taxes
Other payables
Accruals
2011
£m
188.6
2.0
53.2
6.6
250.4
2010
£m
40.9
4.7
52.4
12.1
110.1
The average interest on overdue amounts owed to subsidiary undertakings is 0% (2010: 0%).
Amounts owing to subsidiary undertakings are repayable on demand. The Directors consider the fair value to be equal to the
book value.
9 BOrrOWINGS
Borrowings comprise a €400m bond, issued with an annual coupon of 6.75% maturing in June 2015, and a £300m bond, with
an annual coupon of 7.75% maturing in June 2017.
10 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 on pages 28 to 30.
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 loss before tax by £23.4m (2010: increase loss
before tax by £14.8m), while a 5% weakening in Sterling would decrease loss before tax by £23.4m (2010: decrease loss before tax
by £14.8m).
The carrying value of the Company’s financial instruments is exposed to movements in interest rates. The Company estimates that
a 0.5% increase in interest rates would decrease loss before tax by £1.2m (2010: 0.5% increase in interest rates decrease loss before
tax by £1.7m), while a 0.5% decrease in interest rates would increase loss before tax by £1.2m (2010: 0.5% decrease in interest rates
increase loss before tax by £1.7m).
134
Notes to the Company financial statements continued
10 FINANCIAL rISK CONTINUEd
The maturity of contracted cash flows on the Company’s financial liabilities is as follows:
At 30 September 2011
Trade and other payables
Borrowings
At 30 September 2010
Trade and other payables
Borrowings
Less than
1 year
£m
(250.3)
–
(250.3)
Between
1 and 5 years
£m
–
(432.1)
(432.1)
In more
than 5 years
£m
–
(430.8)
(430.8)
Total
£m
(250.3)
(862.9)
(1,113.2)
Less than
1 year
£m
(110.1)
–
(110.1)
Between
1 and 5 years
£m
–
(455.3)
(455.3)
In more
than 5 years
£m
–
(454.7)
(454.7)
Total
£m
(110.1)
(910.0)
(1,020.1)
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 set at the date of the last rate reset.
11 dEFErrEd TAx ASSETS
At 1 October 2009
Credit to income statement
At 30 September 2010
Debit to income statement
At 30 September 2011
2011
£m
1.1
0.5
1.6
(1.6)
–
At the balance sheet date the Company had unused tax losses of £46.5m (2010: £28.7m) and other deductible short-term timing
differences of £5.4m (2010: £6.5m) available for offset against future profits. No deferred tax asset has been recognised in respect of
unused tax losses and other deductible short-term timing differences.
12 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 28 to the Group financial
statements in this report.
Details of share options granted by the Company are set out in note 34 to the Group financial statements.
13 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
2011
£m
0.6
2.4
1.3
4.3
2010
£m
0.6
2.4
1.9
4.9
Financial Statements 135
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14 CONTINGENT LIABILITIES
At 30 September 2011, 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 £534.2m (2010: £464.8m). This predominately relates to a guarantee
on the drawndown portion of the Group banking facility (detailed in note 20 of 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 of £44.7m (2010: £79.6m).
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.
15 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
Year–end balances arising on transactions with subsidiaries
Loans receivable
Interest receivable
Other receivables
Loans payable
Other payables
2011
£m
1.6
–
10.6
402.9
1,208.9
0.6
35.4
(146.5)
(42.1)
2010
£m
0.7
(3.7)
8.1
–
824.9
0.1
33.1
–
(40.9)
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Company, is set out in note 36 of the Group
financial statements.
16 ShArE-BASEd PAYmENTS
The employees of the Company, including the Directors, collectively participate in all of the Group’s equity-settled share-based
payment schemes. The details relating to these schemes in respect of the Company are identical to those disclosed in note 34 to
the Group financial statements and have therefore not been re-presented here.
The share-based payment credit of £3.5m (2010: charge of £2.7m) is stated net of amounts recharged to subsidiary undertakings.
136
Notes to the Company financial statements continued
Country of
incorporation
and operation
Nature of the business
Proportion
held by
Company (%)
Proportion
held by
Group (%)
Germany
Holding Company
100
100
17 PrINCIPAL SUBSIdIArIES
Direct subsidiaries
Thomas Cook AG
Indirect subsidiaries
UK
Thomas Cook Airlines Limited
Thomas Cook Retail Limited
Thomas Cook Scheduled Tour Operations Limited
Thomas Cook Tour Operations Limited
Thomas Cook UK Limited
Central Europe
Bucher Reisen GmbH
TC Touristik GmbH
West & East Europe
Thomas Cook Airlines Belgium NV
Thomas Cook Belgium NV
Thomas Cook SAS
England
England
England
England
England
Airline
Travel Agent
Tour Operator
Tour Operator
Tour Operator
Germany
Germany
Tour Operator
Tour Operator
Belgium
Belgium
France
Airline
Tour Operator
Tour Operator and Travel Agent
Northern Europe
Thomas Cook Airlines Scandinavia A/S
Denmark
Airline
North America
Thomas Cook Canada Inc.
Airlines Germany
Condor Berlin GmbH*
Condor Flugdienst GmbH *
Canada
Tour Operator
Germany
Germany
Airline
Airline
Corporate
Thomas Cook Group Treasury Limited
England
Financing Company
The Company has taken advantage of the exemption under Section 410 of the Companies Act 2006 by providing information only
in relation to subsidiary undertakings whose results or financial position, in the opinion of the Directors, principally affected the
financial statements. A full list of subsidiaries will be sent to Companies House with the next annual return.
* All risks and rewards continue to be held by the Group and, in accordance with accounting standards, the entity has been treated as being 100% controlled and fully consolidated by the Group.
100
100
100
100
100
100
50.0023
100
100
100
100
100
50.0023
50.0023
100
Financial Statements 137
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Appendix 1 – Key performance indicators definitions
*
**
Revenue for the Group and segmental analysis represents
external revenue only, except in the case of the Airlines
Germany segmental key performance analysis, where
revenue of £318.7m (2010 £287.8m) largely attributable
to the Central Europe division has been included.
Underlying profit from operations is defined as earnings
before interest and tax, and has been adjusted to exclude
all separately disclosed items. It also excludes our share
of the results of associates and joint venture.
*** Underlying operating profit margin is underlying 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.
#
†
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 year. It excludes customers who
booked third-party tour operator products through
Thomas Cook retail channels and customers who booked
transfers only. For Central and West & East Europe,
passengers represents all tour operator passengers
departed in the year, 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.
††
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 tour operator was at
selling the committed capacity. Load factor is calculated
by dividing the departed mass market passengers in the
year (excluding accommodation only passengers) by the
capacity in the year.
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 one passenger is carried one kilometre.
Average selling price for UK, Northern Europe and
North America represents the average selling price (after
discounts) achieved per mass market passenger departed
in the year (excluding accommodation only passengers).
For Central and West & East Europe, average selling price
represents the average selling price (after discounts)
achieved per passenger departed in the year.
## Brochure mix is defined as the number of mass market
holidays (excluding seat and accommodation only) sold
at brochure prices divided by the total number of holidays
sold (excluding seat and accommodation 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 year.
‡‡‡ Sold seats in Airlines Germany represents the total number
of one-way seats sold on aircraft (in thousands) that
departed in the year.
### Yield in Airlines Germany represents the average price
per seat departed in the year.
138
Shareholder information
AnnuAl GenerAl MeetinG (“AGM”)
The AGM will be held at The Lincoln Centre, 18 Lincoln’s Inn Fields,
London WC2A 3ED on Wednesday 8 February 2012
at 10.00am. The last date for AGM proxy votes to be received
by the Registrar is Monday 6 February 2012.
All shareholders can submit their proxy vote for the AGM
electronically at www.sharevote.co.uk. To register their vote
shareholders will need the numbers detailed on their form
of proxy.
Alternatively, shareholders who have already registered
with Shareview can submit their proxy vote by logging
on to www.shareview.co.uk and clicking on the link to
vote underneath their Thomas Cook Group plc holding.
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 0182)
*
Calls to this number cost 8p per minute from a BT landline, other providers’ costs may vary.
Lines are open 8.30am to 5.30pm, Monday to Friday.
Shareholders should quote the Company reference number 3174
and their shareholder reference number (which can be found on
their share certificates and dividend documentation), when
contacting the Registrar.
ShAreview
To be able to access information about their shares and other
investments online, shareholders can register with Shareview (www.
shareview.co.uk). Registration is free; shareholders will need their
shareholder reference number which is shown on their form of
proxy and share certificate. By registering for
this service shareholders will:
• help reduce paper, print and postage costs;
• help the environment; and
• be able to manage their shareholding easily and securely online.
Once registered, whenever shareholder documents are available
shareholders will be sent a link to the appropriate website, where
the documents will be available to view
or download. Receiving documents online does not affect
shareholders’ rights in any way.
dividendS
Information on recent dividend payments is detailed below:
webSite
The Company’s corporate 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 Group Executive
Board;
• the Company’s Articles of Association and the terms
of reference for the Committees of the Board; and
• sustainability reporting.
Multiple AccountS on the ShAre reGiSter
If a shareholder receives two or more sets of the documents
concerning the AGM, this means that there is more than one
account in their name on the shareholder register, perhaps because
either the name or the address appear on each account in a slightly
different way. For security reasons, Equiniti will not amalgamate the
accounts without the shareholder’s written consent. Therefore, if a
shareholder would like their multiple accounts to be combined they
should write to Equiniti at the address above, detailing the different
shareholder reference numbers, and request that they be combined
into one account.
electronic coMMunicAtionS
At the AGM on 10 April 2008, the Company passed a resolution
allowing the Company’s corporate 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; or
• 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 Company’s corporate
website. These arrangements for electronic shareholder
communications provide shareholders with
the opportunity to access information in a timely manner
and help the Company to reduce both its costs and
its environmental impact.
Name
Amount per share
Record date
Payment date
Final dividend for the
financial year ended 30
September 2009
7.00p
Interim dividend for the
financial year ended 30
September 2010
3.75p
19 March 2010 10 September 2010
8 October 2010
8 April 2010
Final dividend for the
financial year ended 30
September 2010
7.00p
Interim dividend for the
financial year ended 30
September 2011
3.75p
18 March 2011 9 September 2011
7 October 2011
7 April 2011
Financial Statements: 139
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AnAlySiS of ShAreholderS AS At
30 SepteMber 2011
Distribution of shares by the type of
shareholder
Nominees and institutional investors
Individuals
Total
Number
of holdings
Number
of shares
1,395 866,806,023
14,677
8,184,472
16,072 874,990,495
Size of shareholding
1-100
101-500
501-1,000
1,001-10,000
10,001-100,000
100,001-500,000
500,001-1,000,000
1,000,001 and above
Total
Number
Number
of shares
of holdings
310,290
9,663
780,115
3,320
683,468
893
5,233,067
1,536
12,216,450
355
36,803,986
146
32,413,364
47
112 786,549,755
16,072 874,990,495
reGiStered office
6th Floor South, Brettenham House, Lancaster Place,
London WC2E 7EN
Registered Number: 6091951
ShAreholder contActS
Shareholder helpline: 0871 384 2154*
(international telephone number: +44 (0)121 415 0182)
Website: www.thomascookgroup.com
Registrar’s website: www.shareview.co.uk
*
Calls to this number cost 8p per minute from a BT landline, other providers’ costs
may vary. Lines are open 8.30am to 5.30pm, Monday to Friday.
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. If a replacement certificate(s)
has not been received, please contact 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. These are typically from overseas based ‘brokers’ who
target US or UK shareholders, offering to sell them what often turns
out to be worthless or high risk shares. These operations are
commonly known as ‘boiler rooms’ and the ‘brokers’ can be very
persistent and extremely persuasive. If shareholders receive any
unsolicited investment advice,
they can check if the person or organisation is properly authorised
by the Financial Services Authority (“FSA”) at
www.fsa.gov.uk/register/ and the matter can be reported
to the FSA by visiting www.moneymadeclear.fsa.gov.uk.
Details of any share dealing facilities that the Company endorses
will be included in Company mailings or on
our corporate 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), which
specialises in using such holdings
for charitable benefit. 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 dealing
call 08456 037 037 (international telephone number:
+44 (0)121 415 7560) 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).
140
visit us at:
www.thomascookgroup.com
the thomas cook Group website provides news and details
of the Group’s activities, plus links to our customer sites
and up-to-date information, including:
• corporate news
• presentations
• share price data
• historic Annual & Sustainability Reports
• half-year results and interim
management statements
• news alerts
Design and production:
Black Sun Plc (London)
+44 (0) 20 7736 0011
Photos: Thomas Cook
Printed in the UK by Pureprint Group on paper made from fibre
from certified managed forestry. Pureprint Group is a carbon neutral
company registered to EMAS, the Eco Management Audit Scheme
and is certified to ISO 14001 Environmental Management System.
Thomas Cook Group plc
6th Floor South
Brettenham House
Lancaster Place
London WC2E 7EN
www.thomascookgroup.com
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