Thomas Cook Group plc

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Energise

Focus Rebuild

Thomas Cook Group plc  
Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
2012 Group highlights

•	Building on a stable platform, the business transformation  

has begun and is focused on:
Building an effective organisation:

–   Changes in organisational structure and key management in order to break down 

historic silos, energise our people and implement cultural change; 

Addressing cost and cash management:

–   Driving efficiency through global procurement, centralised hotel purchasing and 
consolidation to reduce fixed and overhead costs and improve working capital:  
over £100m of annual cost benefits and £50m of incremental working capital 
improvements already identified and significant further opportunities to come; and 

 Creating profitable growth:

–  Developing an online centre of excellence with powerful channels tailored to local 

markets by leveraging the latest technology to deliver true omni-channel distribution.

•	Net debt reduced through asset disposals and working  

capital management: 
–  Net debt reduced by £103m (from £891m to £788m); and

–   Liquidity headroom at circa £1bn, £160m higher than prior year.

•	Gross profit of £2.1bn, with resilient gross margin despite input 
cost pressures; underlying profit from operations 49% lower  
at £156m, in line with expectations but significantly impacted  
by £110m in higher fuel costs.

•	Fourth quarter financial performance in line with the same 
period last year, reflecting a significant improvement on the  
first three quarters of the year. 

•	Loss for the year of £590m, including previously disclosed  
goodwill and other write-downs of £369m and business 
repositioning costs of £81m.

•	Good current trading, with summer 12 ending strongly and  

winter 12/13 trading off to a good start in our major markets,  
with bookings ahead of committed capacity and improvements  
in pricing; our capacity strategy will reduce operating risk in an 
uncertain consumer environment as the Group implements its 
business transformation.

2012 Financial summary

Year ended 30 September 2012

Year ended 30 September 2011

£m (unless otherwise stated)
Revenue

Gross profit

Profit/(loss) from operations1 

(Loss)/profit for the year

(Loss)/earnings per share (p)

Net debt

Underlying
9,491

2,070

156

(37)

(3.7)

788

Statutory
9,491

2,075

(319)

(590)

(67.2)

788

Underlying
9,809

2,160

304

103

11.7

891

Statutory
9,809

2,098

(267)

(518)

(60.7)

891

1 

 Underlying profit from operations is considered by management to give a fairer view of the year on  
year comparison of trading performance and 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.

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01  Group highlights

04  Chairman’s statement

06  Group overview

08 

 Group Chief Executive Officer’s Q&A

12 

 Market and business overview

15   Strategy

18  Risk management

20  Operating review

28  Financial review

32  Sustainability

38  Board of Directors

40 

 Corporate governance report

53  Remuneration report

65  Other disclosures

70 

Independent auditors’ report 

71  Group income statement

72 

 Group statement of  
comprehensive income

73  Group cash flow statement

74  Group balance sheet

76 

 Group statement of changes  
in equity

77 

 Notes to the financial statements

125  Company balance sheet

126  Company cash flow statement

127   Company statement of changes  

in equity

128   Notes to the Company  
financial statements

134   Appendix 1 – key performance 

indicators definitions

135  Shareholder information

 
 
 
 
 
 
 
Holiday with heart
Our products are designed with our 
customers in mind. We will be offering a 
wider range of products and outstanding 
service which will exceed the expectations 
of our existing customers and attract new 
travellers to the Group.

23 

million customers

31,000 

employees

8,000 

employees have 
shared their views

2

Thomas Cook Group plc Annual Report & Accounts 2012

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Directors’ Report:
Business Review
04  Group Chairman’s statement
06  Group overview
08 
12 
15   Strategy
18  Risk management
20  Operating review
28  Financial review
32  Sustainability

 Group Chief Executive Officer’s Q&A
 Market and business overview

Energise

Energising Thomas Cook with a renewed focus on 
exceeding customers’ expectations and broadening 
our product offering to ensure even greater 
flexibility and choice.

Thomas Cook Group plc Annual Report & Accounts 2012

3

 
 
 
 
 
 
 
Chairman’s statement

Good progress on 
actions to rebuild  
our business

Dear Shareholder,
As we emerge from a challenging year for the Thomas Cook Group  
I am pleased to be able to report that the many actions we have 
taken are now starting to deliver results. Real progress has been 
achieved since we implemented our initial stabilisation plan, 
described in more detail on page 15 with our strengthened balance 
sheet and a restructured Board providing a firm foundation for us  
to now build upon. Significantly, under the leadership of our new 
Group CEO, Harriet Green, the organisation is mobilised around a full 
business transformation which will build a stronger and sustainable 
future. I would like to focus on the progress that we have made and 
add greater insight to the initiatives that are underway. 

Strengthening the balance sheet
In May 2012, we announced the agreement with our lenders of  
a new more flexible financing package with an extended maturity  
to 31 May 2015, providing further stability to our business. As part  
of our initial stabilisation plan, we took decisions to sell non-core 
businesses, including HCV and Thomas Cook India, as well as 
conducting the sale and leaseback of 19 of our aircraft. I would like 
to thank our shareholders for the overwhelming support that they 
gave for the Board’s recommendations at the respective general 
meetings in May and August 2012. 

The proceeds from these disposals and a substantial improvement  
in working capital management have resulted in a year-end net debt 
reduction of £103m (from £891m to £788m) and liquidity headroom 
at circa £1bn, improved by £160m over the prior year. There is a 
continued focus on cash management and improving our working 
capital position as part of the business transformation.

Building a stronger Board 
One of my main priorities in my role as Chairman was to recruit  
a high calibre Group CEO to lead the significant transformation 
required to re-build our Company, and I am delighted that Harriet 
Green agreed to take on the challenge. Harriet, who joined us at the 
end of July, is an extremely successful executive with the right 
combination of international, business transformation and 
e-commerce experience that we need to take the Group forward  
and build on our resilient brand. Michael Healy, who has successful 
experience of e-commerce, corporate restructuring and highly 
leveraged businesses, was appointed Group CFO at the beginning  
of July. 

I would like to thank Sam Weihagen, who served as Group CEO  
until 30 July and Paul Hollingworth, who served as Group CFO until 
30 June for the contribution they each made during a difficult and 
challenging period for the Company. 

At the beginning of my tenure, I conducted a review of the Board 
with the intention of making changes to refresh and further 
strengthen its Non-Executive composition. The type of skills and 
experience required was reinforced by the output from our externally 
facilitated Board evaluation that we carried out in the spring of this 
year. As a result of our search, I am very pleased that Emre Berkin 
recently joined our Board as an Independent Non-Executive Director 
and we welcome the experience that he brings to our deliberations. 
Roger Burnell, our Senior Independent Director and Chairman of  
the Remuneration Committee, who was due to retire at the AGM in 
February 2013 will continue on the Board for a further year to provide 
continuity and continue to share his significant industry experience.

Three of our Non-Executive Directors retired at the AGM in February 
2012: David Allvey at the end of nine years’ service; Bo Lerenius and 
Peter Middleton which gave me the opportunity to refresh the Board 
at a crucial stage in the Company’s evolution. I would like to thank 
all three for their contribution to the Board over the years. 

The progress we have made with our corporate governance 
arrangements is fully covered in my letter to shareholders at the  
start of the Governance Report on page 40. 

Transforming the business and developing a strategy  
for the future
Since joining the Company, Harriet Green has moved at pace as  
she and her senior leadership team, supported by talent from across 
the Group, work to deliver on 15 turnaround initiatives focused on 
three essential elements:

•	 Building an effective organisation;

•	 Addressing costs and cash management; and 

•	 Creating a profitable growth strategy.

The entire organisation is now fully mobilised around the 
transformation and the top 100 managers are fully engaged.  
There have been a number of key management changes, as Harriet 
strengthens her team to take the business forward. These management 
changes, the transformation initiatives and the progress being made 
are described fully in the Strategy Review on pages 15 to 17.

4

Thomas Cook Group plc Annual Report & Accounts 2012

 “ The entire organisation is  

now fully mobilised around  
the transformation and the top  
100 managers are fully engaged”

Since joining the Board in October 2011 and taking on the role of 
Chairman two months later I have travelled extensively across the 
Group, to better understand the opportunities and challenges facing 
our businesses and to meet the leaders and their teams who 
contribute to our success. In addition to the over-arching Thomas 
Cook brand we have other strong regional brands such as Ving in 
Northern Europe and Neckermann in Continental Europe, to name 
but two, which continue to perform well and deliver for our 
customers. I have seen first-hand the pockets of excellence in each  
of our businesses. This understanding gives me confidence that the 
actions being taken by Harriet and her management team, and the 
pace and vigour of the change they are heralding, will enable us to 
rebuild and emerge even stronger than before.

Engaging with our important stakeholders
I would like to thank our many stakeholder communities for the 
support and trust they have shown us throughout the year, loyalty 
that we intend to repay now by delivering on our commitments  
as we look to the future. 

Customers travelled with us in the same numbers as before, over  
23 million in the last year trusting us to deliver a memorable holiday 
experience which our suppliers partnered with us to deliver.

Our shareholders and the wider financial community also 
demonstrated their support whilst our employees continued to focus 
on customer service excellence, showing real strength, resilience and 
passion for Thomas Cook. They are energised by the changes we are 
making and excited to be part of the future we are building together. 
Again, on behalf of the Board, I thank every one of our important 
stakeholders for their belief in us and our brands – the Thomas Cook 
brand which has a 171 year reputation for delivering innovation and 
outstanding service is now in safe hands.

We are optimistic that even in the current economic environment  
the management team’s focus on providing customers with  
wonderful holiday experiences, whilst improving our cash and 
financial management, will lead to an improvement in the financial 
results and the building of a future for Thomas Cook worthy of  
its heritage.

Frank Meysman
Chairman

27 November 2012

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2012 Governance highlights 

•	New Group CEO and Group 
CFO leading renewed focus  
on risk management, internal 
and financial control, and the 
management and direction  
of internal audit. New senior 
management appointments to 
support these important areas

•	Strengthened the Board with 
Executive and Non-Executive 
appointments

•	Improved diversity against  

a range of measures

•	New chairs of the Board’s 

Committees

•	Externally facilitated Board 

effectiveness review
–  Outputs shaped the candidate profile  

for new Board appointments

–  Outputs debated by the Board and agreed 
action plan in place. Being monitored with 
regular progress reports to the Board

For more information on our governance  
see page 40

Thomas Cook Group plc Annual Report & Accounts 2012

5

 
 
 
 
 
 
 
Group overview

Leveraging best practice across 
our geographic businesses

The Group’s gross profit margin is in line with last year at 22%, however, with an operating profit margin  
of 1.6% there is a clear need to reduce costs. Reducing cost is a key focus of our transformation initiatives 
and we will do this through increased intra-Group cohesion, structural change and better use of technology. 
With significant cost savings already identified we have an opportunity to leverage best practice in our 
more profitable businesses and apply this to our underperforming businesses, particularly in the UK.  

North America
New management has implemented 
plans to improve financial performance

6

Northern Europe
69% internet distribution

UK
£60m in benefits from turnaround plan

West Europe
Average selling price increased by 3.8%

5

2

3

1

4

Central Europe
Öger Tours expanded its product 
into Tunisia and Egypt

Airlines Germany
One of the most profitable  
airlines in Germany

6

Thomas Cook Group plc Annual Report & Accounts 2012

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1

UK
Turnaround plan delivered benefits of £60m, increasing 
the gross profit margin to 25.8% and work is on-going  
to address the overhead cost base.  

2012

2011
£3,109.4m £3,255.0m
£12.7m £34.1m
23.4%
1.0%

25.8%
0.4%

Revenue
Underlying profit from operations*
Underlying gross profit
Underlying operating profit margin**

Key facts:
•	 Passengers: 6.6m1

•	 Retail outlets: 1,089

•	 Aircraft: 352

•	 Controlled distribution‡‡: 86.3%

•	 Internet distribution‡‡: 34.7%

4

West Europe
Significantly impacted by the performance of the French 
business, where results continue to be hit by lower 
demand for holidays to the important French-speaking 
North-African destinations. 

Revenue
Underlying profit from operations*
Underlying gross profit
Underlying operating profit margin**

2012

2011
£1,467.4m £1,704.0m
£2.0m £37.9m
17.3%
16.4%
2.2%
0.1%

Key facts:
•	 Passengers: 2.7m

•	 Retail outlets: 793

•	 Aircraft: 62

•	 Controlled distribution‡‡: 60.2%

•	 Internet distribution‡‡: 27.1%

2

Central Europe 
A solid year for the German business is masked by  
the inclusion of losses in our Russian joint venture.  

5

Northern Europe
A consistent performer, Northern Europe delivered 
another highly profitable year with industry  
leading margins. 

2012

2011
£2,586.5m £2,546.4m
£50.1m £72.3m
13.1%
2.8%

12.7%
1.9%

Revenue
Underlying profit from operations*
Underlying gross profit
Underlying operating profit margin**

Key facts:
•	 Passengers: 4.7m

•	 Retail outlets: 1,625

•	 Controlled distribution‡‡: 23.4%

•	 Internet distribution‡‡: 6.8% 

Revenue
Underlying profit from operations*
Underlying gross profit
Underlying operating profit margin**

Key facts:
•	 Passengers: 1.5m

•	 Retail outlets: 11

•	 Aircraft: 122

•	 Controlled distribution‡‡: 87.1%

•	 Internet distribution‡‡: 69.4%

2012

2011
£1,167.1m £1,152.7m
£100.9m £106.3m
27.2%
9.2%

26.9%
8.6%

3

Airlines Germany
Condor had a difficult winter season in a very 
competitive German airline market and against a strong 
prior year comparator, but remains one of the most 
profitable airlines in Germany. 

6

North America
Overcapacity in the mainstream market resulted  
in significant winter losses. Actions have been taken  
to reduce the committed capacity risk and rebalance  
the product portfolio. 

Revenue
Underlying profit from operations*
Underlying gross profit
Underlying operating profit margin**

2012

2011
£1,164.6m £1,120.3m
£35.7m £69.3m
33.4%
6.2%

27.5%
3.1%

Key facts:
•	 Passengers: 6.7m3
•	 Aircraft: 382
•	 Approximately one-third of seats sold in-house3

Includes 0.2m Egypt passengers. 

1 
2  As at 30 September 2012.
3 
4 
See Appendix on page 134 for key.

Includes 2.2m in-house passengers.
Includes independent travel bookings.

2012

2011
£296.2m £349.2m
£(22.3)m £10.5m
18.6%
3.0%

14.5%
(7.5)%

Revenue
Underlying profit from operations*
Underlying gross profit
Underlying operating profit margin**

Key facts:
•	 Passengers: 1.0m

•	 Retail outlets: 119

•	 Controlled distribution‡‡: 14.1%

•	 Internet distribution‡‡: 35.7%4

Thomas Cook Group plc Annual Report & Accounts 2012

7

 
 
 
 
 
 
 
 
 
 
Group Chief Executive Officer’s Q&A

The beginning of a  new era  
at Thomas Cook

Q What can you tell us about your first 100 days? 
A Exciting and illuminating! I’ve learned a lot and now understand 
the strengths, challenges and incredible opportunities facing the 
Thomas Cook Group. 

Before I joined I spent time understanding how the Group is viewed 
from the outside. I met with customers, suppliers, key contacts in the 
city, shareholders, our banks and the media so I was already forming 
impressions before I joined. Once I started on 30 July 2012, I spent 
the first two months concentrating on understanding the inside-out 
view of the organisation. I have visited all of our major business 
centres, hosted employee briefings and held in-depth senior 
management sessions and budget reviews.

I spoke to customers and travelled to some of our significant holiday 
destinations to get a real sense of the service and experience our 
customers receive and I spoke at length to some of our critical 
partners. Service matters so much in our business – we’re not just 
delivering a product but an experience, fulfilling an expectation and 
creating lasting memories. Our customers trust us to deliver the best 
weeks of their year, and we want to be sure they’ll return and travel 
with us again and again.

I wanted to learn about our business from those who know it best – 
our employees, so I invited them to share their views with me, 
confidentially in a short feedback survey. I was delighted by both the 
quality and the number of responses I received, from over 8,000  
of our global team – real insights, solutions as well as problems, all 
characterised by refreshing honesty and passion for this business  
and our customers.

I was attracted to join Thomas Cook by its strong brands, reputation 
for customer service and the opportunity to transform the business 
by harnessing its inherent potential and building a best in class 
online capability. I almost feel that my entire career experience to 
date was preparing me for the challenges at Thomas Cook, a set of 
challenges I firmly believe we will address. The world in which we 
live is changing and we must capitalise on our many existing 
strengths whilst embracing new opportunities and different ways of 
working. Opportunities such as the way technology is transforming 
the travel industry, particularly the web and mobile. This influences 
the way consumers research and book holidays. Our customers want 
high tech and high touch – from our stores to our websites they want 
advice from our travel experts to help them make the choices that 
are right for them. We will embrace all channels to ensure our 
customers get exactly what they need, how and when they need it  
as we focus on becoming easier to do business with.

 “ I was attracted to join  

Thomas Cook by its strong  
brands, reputation for  
customer service and the 
opportunity to transform  
the business by harnessing  
its inherent potential” 

8

Thomas Cook Group plc Annual Report & Accounts 2012

The beginning of a  new era  

 “ Some parts of the business are 

currently not performing as well 
as we need them to, but there are 
also areas of real strength” 

at Thomas Cook

The Thomas Cook family of brands are incredibly powerful and have 
proven themselves to be resilient, bouncing back from the challenges 
of the last year. We will now build on the trust placed in us by  
the 23 million customers who travel with us each year to ensure we 
deliver an experience that exceeds their expectations. At the same 
time we will target new market areas to keep at the forefront of  
what customers need and attract new customers. 

Some parts of the business are currently not performing as well as we 
need them to, but there are also areas of real strength, in particular 
Northern and Continental Europe, whose strong brands such as Ving, 
Spies, Tjäreborg and Neckermann are well known and regarded in 
their markets. We will work together to utilise best practice and 
learnings and really leverage the overall strength and expertise  
of the Group.

Ours is a target rich environment with real opportunity to take out 
cost. Since I joined, working closely with the senior team we have 
identified £100 million of cost savings and there is more to come. 
These savings will come from greater efficiency and use of 
technology, not at the expense of the customer experience. 

Pleasingly, I have not found anything which I did not expect.  
The historic underperformance I now believe is largely down to 
organisational complexity and structure, a lack of focus on some of 
the core business essentials and a failure to integrate our different 
businesses successfully and learn from each other as well as other 
industries and sectors. When I arrived the Group felt like a collection 

of individual businesses, working in silos, making it harder for us to 
succeed collectively. Already this has started to change – I have been 
delighted by the quality of people I have found across the business, 
many leaders with a verve for change and a desire to return the 
Group’s financial performance to where it needs to be. Inevitably 
there will be leadership changes – my usual formula is ‘a third, a 
third and a third’ – that’s a third of the existing team retained, a 
third coming from internal promotions and a third of the leadership 
coming in externally, bringing new strengths and skills. This pattern  
is already reflected in my direct report team.

We have made a number of critical appointments including: Peter 
Fankhauser appointed as UK CEO in addition to his existing role as 
CEO of Continental Europe, to leverage his business transformation 
experience; Susan Duinhoven, who previously led our West Europe 
business, has been appointed to lead the Group’s web transformation 
including the integration of web back into the segments whilst 
maintaining a web centre of excellence; Christoph Debus has been 
appointed as Group Head of Air Travel to review the Group’s air travel 
strategy, with regard to both our airlines and our purchasing of third 
party capacity in the tour operator and scheduled businesses. In our 
Benelux and East Europe businesses, Reto Wilhelm has been 
appointed as Managing Director, bringing his extensive knowledge 
and experience to help drive an improved performance; and Joe 
O’Neill joins as Group Treasurer as we also strengthen our Finance, 
Communications, Investor Relations, Audit and Risk teams. 

Thomas Cook Group plc Annual Report & Accounts 2012

9

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We are driving cultural change through greater collaboration and 
changing our structure to maximise the customer experience. These 
changes are happening at speed to quickly invigorate the Group  
and break down organisational silos and I firmly believe the recent 
appointments I have made will facilitate this, driving faster decision 
making and reducing costs through back office rationalisation. 

Across the Group, customer service will be a priority as we embed the 
mantra: “if you’re not serving the customer directly then brilliantly 
serve someone who is.”

This is a £9.5 billion turnover business, with a gross profit margin of 
22%, reducing to an operating margin of just 1.6%. There is a major 
opportunity here to reduce our costs and improve profitability. We 
are targeting cost reduction through structural change and we have 
already identified £100m of savings with substantial further 
opportunities to come.

The principles driving our focus on reducing costs and improving 
cash management are firstly acting cohesively as a Group, for 
example better leveraging our purchasing power, centralising where 
it makes sense to do so, whilst remaining committed to the 
importance of local knowledge and relationships for our customers 
and suppliers. We are also reducing costs through immediate 
self-help measures which include our air travel strategy as we look 
for greater integration of maintenance activities and better yield 
management of seat only sales.

Further savings will be driven as we reshape the organisation and 
take out layers and also by making better use of existing technology, 
for example standardisation of systems across the Group and the 
consolidation of technology platforms.

We also have an entire initiative dedicated to improving working 
capital management focused particularly on more disciplined cash 
collection and an improved procurement strategy. These measures 
are already delivering improvements. We have also identified 
significant gross cash flow improvements and expect to identify  
more benefits. 

In the UK, the turnaround plan has delivered significant benefits and  
we are accelerating the work to look at the high operating costs  
and opportunities for cash generation. 

Our entire customer proposition is also under detailed review, 
encompassing our distribution channels, our products and our 
brands. We want to continue to improve our core products to ensure 
we retain our existing customers whilst also attracting new customers 
through innovation.

The work on these transformational initiatives will drive immediate 
benefits and lay the foundations for the new strategy that we will  
be sharing in the spring of 2013.

Group Chief Executive Officer’s Q&A continued

The entire organisation is now mobilised around the changes 
required, our top 100 managers are fully engaged with the 
objectives we are working to achieve and we are actively changing 
the culture and ways of working as our transformation process 
begins to gain momentum. Over 100 of our teams globally are 
already working on our transformation projects which have been  
my real focus since the start of the new financial year.

Q Have you established a list of priorities? 
A My immediate priority was to accelerate the turnaround changes 
already underway and foster the heightened sense of urgency 
needed to transform the business. Being relatively new to the 
industry has proven to be an advantage as I ask the naïve questions, 
and bring fresh experience of other industries and I hope therefore 
a different perspective to the business. There are many excellent 
travel people within the business who I can rely on for industry 
knowledge to help inform my decisions. 

I had an initial list of areas I wanted to focus on when I started, but 
it has been an iterative process over the first 100 days resulting in 
the creation of a series of transformational initiatives that will build 
an effective organisation, address the cost and cash issues we face 
and create profitable growth, whilst delivering innovation and 
excellence for our customers.

We want to deliver even more to our existing, loyal customer groups 
whilst targeting new customer segments and responding to the 
increasingly diverse and individual needs of today’s leisure traveller. 
In the spirit of our pioneering founder, Thomas Cook, we will 
continue to differentiate ourselves. 

I shared these top priorities with the top 100 managers across the 
business that make up the Thomas Cook Leadership Council (‘TCLC’) 
in September 2012 and since then we have been building the teams 
who will develop our future strategy. There is a real sense of urgency 
and pace of change sweeping across the Group as people engage 
and connect with these initiatives that will ultimately shape our 
future direction. As I have already shared, we will be ready to 
announce this information to all stakeholders in the spring of 2013. 

Each of our key strategic initiatives now has a strong team assigned 
to move it forward with clear timelines, accountabilities and 
priorities and they fall into three main areas:

•	 Building an effective organisation;

•	 Addressing costs and cash management; and

•	 Creating a profitable growth strategy.

Building an effective organisation is the most important first step  
as it will underpin all our other work. Without this our strategic 
initiatives in both the short and long-term might fail. Our cost base  
is too high and this affects operating margin performance. We need 
to reduce our costs and start generating cash whilst considering 
carefully the assets we hold. Finally, we want to grow this business 
profitably for the future. We can leverage the strength of our brands 
and significant customer base to build on our popular current core 
products to attract new and existing customers. The way customers 
want to interact with us is changing and we will invest in our 
technology offering to meet their high tech and high touch needs. 

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Q Are the financial problems of the past year behind  
you now?
A We are making progress, as already shared, to address the 
challenges and the business improvements in Q4 are encouraging. 
Clearly there are challenges ahead which will take time to resolve 
but, as shared, we have robust plans and processes in place now and 
a critical element of our business improvement plan is to address the 
Group’s cost base and cash management and we will be reducing 
costs through the immediate self-help measures and more structural 
longer-term changes. 

The UK turnaround plan is critical to restoring the financial health  
of the business and is covered in more detail on page 22. First 
announced last year, the plan is progressing well, delivering £60m  
of savings in the year, largely through improved yield management 
(£19m) and cost synergies through the integration of the Co-operative 
Travel business (£15m); and the key actions taken in the year which 
include the return of six aircraft to the lessors, removing 
underperforming hotels, closing 149 stores and five head office 
properties and implementing a single commercial trading platform. 
With the appointment of Peter Fankhauser to lead the UK we  
now have one business, with one CEO, which will further reduce 
duplication and drive out cost. The strengths and contributions  
of Northern Europe and Germany in particular continue to be high 
and as we increase intra-Group partnerships, work more as a 
cohesive Group and leverage best practice we hope to see similar 
performance levels across the Group.

Eliminating duplication will enable us to leverage our global 
purchasing power more effectively, whilst reducing unnecessary 
overheads. 

Again, while the Group’s current gross profit margin is a respectable 
22%, our Group operating profit margin is just 1.6%, which 
demonstrates the scale of the potential within this business once  
we reduce cost and build the right organisational and operational 
capabilities. This is the central driving force of all of the work we  
are currently focused on and the senior team is totally committed  
to the improvements needed and the power of the transformation  
we are undertaking. 

Q How do you plan to energise, focus and rebuild  
Thomas Cook?
A We are breaking down barriers to growth, removing silos  
and strengthening the management team, as I hope I have already 
explained, and restoring our financial health to build an effective 
organisation able to deliver good returns in the future. We will  
be lean with ourselves and lavish with our customers and we  
will harness technology in all its forms to drive efficiency, service  
and even easier access to information. 

We’ll build on the strength and promise of our iconic and much 
loved travel brands, and widen our product portfolio to address the 
insatiable desire of our existing and new customers to travel more 
flexibly and cost effectively. Increasingly, our products are designed 
to target the specific needs of our different customer segments such 
as the family-friendly SENTIDO and Sunwing concepts or the adult  
only Sunprime and Sunselect Hotels which are very successful  
and popular. Targeting different customer groups in this way  
and developing compelling new propositions, affords us a very  
real opportunity to attract new customers. 

Even in these tougher macro-economic conditions, when disposable 
income is down, 41%* of consumers surveyed regard their holiday  
as an essential purchase.

We will continue to offer customers a full multi-channel experience 
to ensure they can reach us however and whenever they want to, 
harnessing technology and the web to drive differentiation at every 
point of the holiday experience. The customer’s holiday must begin 
the first time they connect with us and last until they collect their 
luggage and return home. Every part of the process matters in 
creating the final experience and every one of our employees  
must understand this. 

Internally, we will build a fresh culture centred on our core values, 
our ways of working and the clear message that every act we each 
take every day matters. Instilling a high performance culture  
of accountability is vital to our strategic transformation and  
the new ways of working will help guide and shape our future.

Our values

Succeed as One Team 

Deliver for Our Customers  

Engage Each other 

Drive for Results  

Act with Integrity

Every Act
Every Day
Every One

Q What is your vision for Thomas Cook? 
A I believe Thomas Cook will become THE ‘Voyager Android’ of the 

future. We will be there for our customers however, whenever and 
wherever they are in the world. We will do this through innovation 
and by working more collaboratively as a Group to share and expand 
on the best of what we already have and do. We’ll help them sort the 
vast array of data into meaningful, value adding information – we’ll 
use our expertise and knowledge of 171 years of travel to shape, 
guide and inform their decisions in this web world as they remain  
at the heart of the organisation, the primary driver of all we do.  

Harriet Green
Group Chief Executive Officer

27 November 2012

*  TNS UK Market Insights Report 2012

Thomas Cook Group plc Annual Report & Accounts 2012

11

 
 
 
 
 
 
 
Market and business overview

Understanding our 
market and business

Despite the uncertain economic environment,  
the long-term outlook for the international tourism 
industry remains attractive and the Thomas Cook 
Group is well positioned for future growth.

Economic environment
Following the international economic and financial crisis in 2008,  
the GDP of our two largest source markets, Germany and the UK,  
fell 5% and 4% respectively in 2009, whilst the Nordic countries saw 
growth of only 1%. Since then, economic conditions have improved 
slightly, however the ongoing global economic uncertainty combined 
with the current sovereign debt crisis in Europe continues to 
negatively impact the GDP of our source markets, with GDP forecast 
to fall to just +0.5% in the UK, +0.7% in Germany and +1.5% in the 
Nordic countries in 2012. Although unemployment rates in both  
the UK and Germany are beginning to fall, the economic outlook  
for 2013 remains uncertain with different markets at different  
points in the economic cycle (source: IMF).

Industry overview
In general, the growth of global international tourism outpaces  
the growth of economic output. According to the UN World Tourism 
Organisation (‘UNWTO’), demand for global international tourism 
maintained momentum in 2011 and early 2012, with an expected 
growth in international tourism for the full year 2012 of 3% to 4%. 
Between 2010 and 2030, the UNWTO estimates that global outbound 
tourism will grow at 3.3% pa, with outbound tourism from Europe 
growing at 2.5% pa vs. 5.0% pa growth in the Asia Pacific region. 

According to Euromonitor, the Group’s top 10 source markets, 
comprising the UK, Germany, Sweden, Norway, Denmark, Finland,  
the Netherlands, Belgium, France and Canada, made up £355bn  
of global travel spend in 2011. 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 consumer. Thomas Cook largely 
operates in the travel intermediary segment, made up of travel 
agents and tour operators, which accounted for £94bn (26%)  
of travel spend in 2011. 

Outlook and how the Group is responding to changes  
in the market environment
In recent years, a number of key trends in leisure travel, namely 
increasing online distribution and the rise of low-cost carriers, have 
facilitated a shift towards more flexible consumer-led travel choices. 
As a result, there has been a decline in pre-packaged holidays with  
a corresponding rise in dynamically packaged products and 
independent travel. These do not always provide the same level  
of protection and customer peace of mind as our packaged products, 
which is one of the reasons why we have such highly trusted brands. 
The rate of shift between the traditional packages and dynamic 
packages varies by source market, but is greater in those markets 
with more low cost carrier penetration such as Germany and the UK. 
The overall package holiday market across our top 10 source markets 
is expected to grow in line with the market, remaining at 53% of the 
total intermediary leisure travel market between 2011 and 2016 
(source: Euromonitor). This is driven by the growth of dynamic 
packages, offset by a decline in pre-packaged products. 

The growth of the internet has increased price transparency and 
choice, making it easier for travellers to gather information about the 
destination they plan to visit. At the same time, the emergence  
of online intermediaries has also provided an alternative and easily 
accessible distribution channel for suppliers of holiday products, 
moving the focus in holiday supply away from the traditional high 
street travel agents. In 2011, 29% of the market value was transacted 
through online channels and this is predicted to rise to 34% by 2016 
(source: Euromonitor).

Split of travel intermediary market in 2011 (£94bn, Euromonitor)

Accommodation only 8%
Car rental 1%
Cruise 7%
Flight 20%
Package holiday 53%
Insurance 1%
Other transport 4%
Other 6%

12

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 “The web is an increasingly important 
channel for the distribution of all  
our products and is a key part of  
the Group’s strategy and vision”

Key industry change

Thomas Cook’s response

Growth of online

Online growth is predicted to be faster  
than offline growth across all our markets; 
however, the rate and total percentage of 
value transacted online vary significantly  
by source market.

The web is an increasingly important channel for the distribution of all our 
products and is a key part of the Group’s strategy and vision. Work is underway  
to energise our web channels through greater focus on product, content, 
performance and the overall customer experience. We will leverage our existing 
web talent to build a centre of excellence whilst ensuring the development  
of powerful channels tailored to the local markets, delivering a more  
integrated approach. 

In 2012, Thomas Cook Group made 25% of its sales through its own web channels, 
with web sales in Northern Europe at 69% and the UK package business at 35%. 
Web distribution is a key area of focus for the Group going forward and will be 
developed as part of an omni-channel distribution strategy. 

Shift from pre-package to dynamic package

Traditional package holidays are generally 
accepted to be in decline, whilst the more 
flexible dynamic packages are growing  
as consumers value the security of a package 
with the choice and flexibility that are  
on offer. 

The Group continues to adjust its product range to increase the flexibility of the 
offering available to customers. We have changed how we manage air capacity, 
reducing the amount of committed capacity giving more flexibility to adjust  
to customer preferences. As we build on our successful core product strength  
by broadening our product offer and developing compelling new propositions,  
we have a huge opportunity to attract new customers. 

In the UK, passengers purchasing a dynamically packaged holiday increased  
12% in the year and now comprise 11% of total UK passengers.

Split of the Group’s FY12 sales by distribution channel

Proportion and growth of online distribution: 
Thomas Cook and market 

Retail store 27%
Web 25%
Call centre 3%
Third party 45%

30

20

10

0

29%

25%

Thomas Cook
Market

21%

15%

2007

2007

2011

2011

Thomas Cook Group plc Annual Report & Accounts 2012

13

 
 
 
 
 
 
 
Market and business overview continued

Thomas Cook offers a wide range of holiday options, from 
pre-packaged holidays through to individual components and 
personally tailored holidays. Alongside our travel offering, we  
provide a selection of travel-related financial services. In 2012,  
23 million customers travelled with the Group and each of  
our businesses tailors these offerings to their local market, whilst  
our scale provides the opportunity to drive economies in sourcing 
and operations.

duration, variety and quality. Independent travel, including flight and 
accommodation only, comprised 46% of the market in 2011 (source: 
Euromonitor) and represented 27% of the Group’s revenue in 2012. 

Finally, to complement its travel offerings, the Group offers 
travel-related financial services, including foreign exchange and 
travel assurance. These can be bought by customers alongside  
or independently of their holiday purchases and represented  
1% of Group revenue in 2012. 

Our core product category is pre-packaged holidays, where flights, 
hotels and transfers are bundled together and offered for sale as a 
single product. Within the traditional package holiday market, the 
Group has number one or two positions across all our major markets 
and with well-established and trusted brands. Package holidays 
comprised 53% of the intermediary leisure travel market in 2011 
(source: Euromonitor) and include both traditional pre-packaged 
holidays and also the emerging dynamic packages, where 
components are tailored to the individual customer; traditional 
packages contributed 72% to Group revenue in 2012. 

Independent travel products offered by the Group encompass holiday 
components, dynamic packaging and scheduled tours. This provides 
customers with greater flexibility and choice to tailor their holiday  
to meet their personal requirements with regard to destination, 

The Group is focused on establishing an omni-channel distribution 
platform for its products, including the web, retail stores and call 
centres, whilst driving an increase in in-house distribution to reduce 
third party distribution costs. In most of the Group’s operating 
segments, retail stores remain a significant distribution channel, 
particularly for mainstream package products. However, the Group 
recognises that as the importance of the web grows, the business 
must continually reassess its presence on the high street. As part of 
the UK turnaround plan, the UK business has committed to reduce 
the number of retail stores it operates by at least 200 by the end  
of 2013. Across the Group, we are increasing our focus on web 
distribution and as such have reorganised our talented web people 
to create a web centre of excellence whilst ensuring the development 
of powerful web channels tailored to local markets. 

How we create value 
We offer our customers 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. 

Service

Our customer  
service representatives  

are present at many 
customer touch points, 
including in destination, 
providing reassurance and 

n

d

B

a

r

Thomas Cook,  
our global umbrella 
brand, is highly resilient, 
demonstrated by the 23m 
customers that booked with  
us in 2012. It stands alongside 

ensuring a high quality  
travel experience.

strong local brands with high 
brand awareness, trust  
and consideration.

Our 
customers

Reach customers 
seamlessly through 
omni-channel distribution.

Significant in-house distribution 
ensures the best customer 
advice and support.

D

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We offer a wide product 
range to suit all customer 

needs and will continue  

to broaden our offering.  
We also offer products from  
other suppliers to provide  
our customers with  
a breadth of choice.

Product

14

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
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Strategy

 Evolving our strategy  
to deliver future growth

The past year has been challenging, but the 
unwavering commitment of our employees to 
ensuring each of our customers had a wonderful 
experience saw 23m customers travel with us,  
the same as the previous year. Thomas Cook is  
an iconic and much loved travel brand with a 
demonstrable resilience.

Our success in the long-term will be achieved in two steps: 
stabilisation and business transformation. Following our difficulties 
in November 2011, our immediate priority was stability, to create a 
stable platform for recovery by improving our profitability and cash 
flow generation. The next step, business transformation, will allow  
us to take advantage of strategic opportunities to create value in  
the travel market. 

Stability
We have made encouraging progress on a number of fronts:

•	 Continuing to drive the turnaround of our UK business. 

Implementation of the plan is underway and progressing well.  
We expect to deliver a fully annualised improvement in 
profitability of £140m, up from £110m as announced last year;

•	 Building on the solid performance of our Northern Europe  

and German businesses;

•	 Addressing our under-performing businesses, particularly in 

Canada, France and Russia;

•	 Reducing debt and improving the resilience of our financing  
and capital structure through asset disposals (such as the sale  
of Hoteles Y Clubs De Vacaciones and Thomas Cook India),  
aircraft disposals and minimising our financial commitments; and

•	 Stabilising our capital structure through the agreement of longer 

dated, more flexible financing facilities as announced on  
5 May 2012.

These initiatives mean that our customers, suppliers and other 
stakeholders can trade with us with improved confidence.

Business transformation
A critical enabler of our transformation plan was a change in senior 
leadership. Harriet Green and Michael Healy joined the Group as  
CEO and CFO, respectively, in the summer and they have started  
to re-energise the entire organisation around reinvigorating the 
Thomas Cook brand, to return us to profitable growth and to  
make us the travel partner of the future.

The entire organisation is mobilised around the changes required 
and the top 100 leaders are engaged fully with what we are working 
to achieve. We have 15 separate turnaround initiatives, each of which 
is being led by business leaders. A project management office with 
clear targets, reporting and timelines supports these business 
transformation plans.

Our recovery is focused on the following three essential elements:

Building an effective organisation
The first crucial element is to build a more efficient and effective 
organisation, structured to maximise the customer experience.  
This revitalised organisation is driven by a sense of urgency and 
characterised by robust decision-making, clear accountability and 
defined performance metrics. There is a strong focus on rigorous 
execution and delivering our plans. We are energising our people  
to drive the cultural change needed to break down historic regional 
silos through better communication and collaboration. We have 
already made a number of key management changes, as we build  
a strengthened team to take the business forward. Some of the key 
appointments are new to the Group as we learn from best practice 
elsewhere, but many have been promoted from within the Group, 
retaining the detailed knowledge of our business. The key changes 
include the following: 

•	 Peter Fankhauser appointed as UK CEO in addition to his existing 

role as CEO of Continental Europe, to leverage his business 
transformation experience; 

•	 Susan Duinhoven, who previously led our West Europe business, 
has been appointed to lead the Group’s web transformation, 
including the closer integration of web development into  
the operating businesses whilst maintaining a web centre  
of excellence; 

Thomas Cook Group plc Annual Report & Accounts 2012

15

 
 
 
 
 
 
 
Strategy continued

 “We are energising our people to  
drive the cultural change needed  
to break down historic regional silos 
through better communication  
and collaboration”

•	 Christoph Debus has been appointed as Group Head of Air Travel 
to review the Group’s air travel strategy, with regard to both our 
airlines and our purchasing of third party capacity in the tour 
operator and scheduled businesses; 

•	 Within our new Continental Europe business segment, Reto 
Wilhelm has been appointed as Managing Director with 
responsibility for Benelux and East Europe, bringing his extensive 
knowledge and experience to help drive an improved 
performance; and

•	 We have strengthened the Group finance team with the external 
appointments of a new Group Treasurer, Joe O’Neill, Group Head 
of Financial Control and Planning, Bill Scott, and a Director of 
Enterprise Risk and Audit, Lee Bradley.

There is a real passion for customer service within the organisation 
and a strong belief in the future of Thomas Cook. Our people want to 
be a part of the transformation and having consulted with them all, 
over 8,000 of them have shared their views to management in the 
last 100 days as part of our Business Transformation initiative. 

Addressing costs and cash management
The second element of our business improvement plan is to address 
the Group’s cost base and cash management. There are a number  
of initiatives in this area which broadly fall under two guiding 
principles: 

•	 An increased degree of intra-Group cohesion; and 

•	 Cost reduction through structural change. 

The UK turnaround plan, first announced last year, is focused on 
both aspects. Turnaround in the UK is progressing well, delivering 
£60m of financial benefits in the year. These benefits arose largely 
through improved yield management (£19m), operational excellence 
initiatives (£17m) and cost synergies through the integration of the 
Co-operative Travel business (£15m); further detail is available on 
page 22 and the key actions taken in the year include: 

•	 The return of six aircraft to lessors, reducing the fleet size to 35  

at 30 September 2012; 

•	 Removal of more than 500 underperforming hotels, with 150  
new properties added to the portfolio with 35% of mainstream 
customers choosing differentiated products; 

•	 Implementation of a single commercial trading platform with a 

coordinated discount approach to deliver substantial improvement 
in yield management; and

•	 The closure of 149 stores and five head office properties.

As a result of these actions, the gross margin for the UK business 
improved to 24.7%. However, despite the gross margin 
improvements, the UK business only delivered £1m at the operating 
profit level and as a result the business is now placing a greater 
emphasis on accelerating the transformation and work is underway 
to drive a faster reduction in overhead costs through increased 
consolidation measures, particularly in non-customer facing business 
support processes. The team is targeting rapid organisational change 
and Peter Fankhauser, who successfully transformed our business in 
Central Europe, is now leading the business and the turnaround 
which is critical to improving the profitability of the UK business  
and the overall Group. 

Throughout the organisation, we are implementing measures to 
increase intra-Group partnerships, working as a more cohesive Group 
and leveraging the best practice that already exists. Eliminating 
duplication will enable us to leverage our global purchasing power 
more effectively, whilst reducing unnecessary overheads. We will 
centralise where it makes sense to do so but will continue to 
recognise the importance of local knowledge and relationships  
for our customers. 

While the Group’s current gross profit margin is 22%, our Group 
operating profit margin is just 1.6%, highlighting the need to improve 
operating efficiency. The Group is currently in the process of 
identifying structural cost savings and, whilst very early in the 
process, has already clearly established robust plans to achieve 
annualised savings of circa £100m. These are largely expected to be 
realised in FY14 and FY15 at a cost of circa £65m over the next three 
years. These savings are in addition to the £140m of anticipated 
benefits from the UK turnaround plan and represent just 1% of the 
Group’s total cost base. Work is ongoing to quantify further potential 
savings in other areas of the business where substantial opportunities 
have been identified. 

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We will continue to offer our customers a wide range of distribution 
channels to meet their needs and we will make it easier for our 
customers to access our deep travel knowledge, making it available 
to them in whatever form they choose, from wherever they want to 
access it. We recognise the increasing importance of technology and 
the Group already has pockets of excellence. Web distribution varies 
by market and ranges from 7% to 69% across the Group. 

Our online business is changing and will become our key distribution 
channel as we will continue to invest in order to harness the power 
of technology. We have appointed Susan Duinhoven to lead this 
transformation, which will leverage our existing web talent to build  
a centre of excellence whilst ensuring the development of powerful 
channels tailored to the local markets, delivering a more integrated 
approach. Our retail stores remain important for many of our 
customers and whilst we continue to review the scale of our retail 
operations in order to streamline where appropriate, we will 
continue to invest in our most successful stores as part of our 
omni-channel distribution strategy. 

We will continue to drive the transformation process with rigour over 
the coming months and the outcomes of the work already underway 
will shape our longer-term strategy, which we will announce in the 
spring of 2013. 

£m
Integrated air travel strategy
Organisational structure
Infrastructure, technology and other
Total 

Cost to achieve – income statement 
Cost to achieve – cash flow

FY13
5
5
3
13

65
30

FY14
30
20
20
70

–
20

FY15 Run Rate
40
40
35
30
25
25
100
95

–
15

The Group has also identified a number of areas where cash flow can 
be sustainably improved by changing working capital management 
processes, ranging from more disciplined cash collection to 
transformational change in procurement strategy. By developing a 
cash culture throughout the Group and by operating in a coordinated 
way, leveraging the Group’s market position, we expect to build on the 
cash benefits already achieved in these results. Although the ability to 
influence the absolute amount of working capital is partially driven by 
trading volumes, which in turn will be impacted by capacity strategy, 
we are already well advanced in identifying, activating and 
monitoring multiple work streams that will aim to deliver gross  
cash flow improvements in the region of £50m in the current year. 

Creating a profitable growth strategy
The third element of our Business Transformation will be to create  
a strategy for profitable growth by unlocking the potential of the 
Group’s brands through understanding and reacting to customer 
demands, both in terms of product and distribution channel. This 
will see both a change of emphasis in our approach and an ongoing 
review of all business areas to ensure more effective and efficient 
ways of working. 

We will build and enhance our current core product strength by 
building stronger relationships and partnerships with hoteliers to 
deliver a differentiated proposition with the right balance of assets in 
our portfolio. This will require us to look both at the hotels with which 
we choose to contract and the way in which we contract with them. 
We are also working to strengthen our air travel proposition and have 
appointed Christoph Debus to lead this as Group Head of Air Travel, 
starting with a review of our approach to capacity management. 

Thomas Cook Group plc Annual Report & Accounts 2012

17

 
 
 
 
 
 
 
Risk management

Renewed focus 
on risk management

Thomas Cook Group has a renewed  
focus on risk management.

The Board is committed to further enhancing our risk  
management capability and has recently appointed a highly 
experienced Director of Enterprise Risk and Audit. Working  
closely with our senior management team, he will ensure that  
the management of risk is further embedded in the strategic  
and operational processes of the Group. This means that risk 
management is not a separate process or set of actions, but part of 
normal business and daily management practice. We are committed 
to promoting effective risk management as a core management 
capability that will support the Group in achieving its targets. 

It is the aim of the Group to promote a culture where, as a matter  
of good business practice, both risk and opportunity are identified 
and managed, thereby ensuring more informed and effective 
business decisions are made and that the Group achieves its 
objectives and targets. On an annual basis, the Board will review risk 
appetite to ensure it is calibrated to the Group’s strategic objectives. 
Risk is assessed formally at business segment level through risk  
workshops and via the maintenance of risk registers. The updating  
of the risk registers is a continuous process involving the 
identification, evaluation and management of risks by individual 
managers. Risk exposure will be considered against risk appetite  
by profiling individual risks in respect of their potential impact  
and likelihood of occurrence, after consideration of mitigating  
and controlling actions that are in place. 

Internal audit deliver a comprehensive risk-based combined 
assurance plan and regularly advise the Board of the effectiveness  
of the design and operation of the control environment. We are  
also committed to promoting a culture in which people will openly 
communicate risk to appropriate levels within the Group and in 
which information on risk, and the actions taken to manage risk,  
is shared openly through an effective communication process.

The table opposite lists the principal risks and uncertainties that may 
affect the Group and highlights the mitigating actions that are being 
taken and the opportunities that we aim to capture. The content of 
the table however, is not intended to be an exhaustive list of all the 
risks and uncertainties that may arise.

18

Thomas Cook Group plc Annual Report & Accounts 2012

Principal risks

Mitigating actions

Opportunity

Threat of a continued downturn in 
demand due to adverse global 
economic factors

Failure to implement strategic 
initiatives results in projected cost 
savings and growth opportunities  
not being realised

Recruitment, development or 
retention of talented people

A major health and safety incident 
impacting our customers or colleagues

Political and regulatory

Liquidity and counterparty credit 

Our flexible business model allows us to align our committed capacity to 

Our focus on delivery of our strategy means we are 

fluctuating demand. We continue to develop multi-channel distribution and 

able to respond rapidly to economic improvement.

develop strategies to improve product mix, increase margins and reduce costs.

We have a fully integrated transformation plan to align the business to 

To deliver sustainable growth in shareholder value, 

future strategy. Delivery of strategic transformation is led by a high calibre 

balancing the needs of our customers, employees and 

team with regular reviews of the business’ progress by the executive team 

communities in which we work with our strategic 

and Board.

objectives and corporate and social responsibilities.

Our high potential talent is identified and nurtured through agreed 

The creation of a high performing actively engaged 

development plans including a comprehensive mentoring programme as 

team which will consequently lead to improved 

well as a focus on succession planning for our key leadership positions. Our 

business performance.

reward schemes are constantly evaluated to drive and reward performance 

and ensure retention of key talent. As we drive change throughout the 

organisation our competency development and evaluation processes are 

focused on encouraging change agility.

There is a Group-wide structure in place to support management through 

We are committed to identifying initiatives that will 

the provision of staff training, auditing and specialist advice. The assessment 

enhance the safety culture and contribute to the 

of health and safety risks is inbuilt into daily management routines and is 

continuous improvement of the safety and well-being 

monitored by a comprehensive structure of health and safety committees 

of all our colleagues and customers.

that are in turn overseen by a corporate Health, Safety & Environmental 

Committee with Board level oversight.

Dedicated management teams ensure full compliance with formal 

The Group will continue to contribute to the 

regulatory requirements. We monitor stakeholder and political reactions  

constructive engagement with government agencies 

to ensure we react to emerging political and regulatory developments.

and other stakeholders to help create a sustainable 

framework for travel and tourism. 

We monitor liquidity and cashflow on a rolling 26-week basis. We continue  

The Group will ensure it has sufficient liquidity, 

to monitor and challenge the wider business to ensure cash targets are met. 

cashflow and profit headroom to support delivery  

In addition, we monitor the performance of the Group against the covenants 

of our strategic initiatives.

set out in our lending facility. We maintain ongoing communication with all 

providers of credit.

Commodity, currency and interest rate

We undertake hedging in line with Group policy.

The Group achieves certainty on which business 

segments can establish competitive brochure pricing.

 “ It is the aim of the Group to  

promote a culture where, as a  
matter of good business practice, 
both risk and opportunity are 
identified and managed” 

Principal risks

Mitigating actions

Opportunity

Threat of a continued downturn in 

demand due to adverse global 

economic factors

Failure to implement strategic 

initiatives results in projected cost 

savings and growth opportunities  

not being realised

Recruitment, development or 

retention of talented people

A major health and safety incident 

impacting our customers or colleagues

Political and regulatory

Liquidity and counterparty credit 

Our flexible business model allows us to align our committed capacity to 
fluctuating demand. We continue to develop multi-channel distribution and 
develop strategies to improve product mix, increase margins and reduce costs.

Our focus on delivery of our strategy means we are 
able to respond rapidly to economic improvement.

We have a fully integrated transformation plan to align the business to 
future strategy. Delivery of strategic transformation is led by a high calibre 
team with regular reviews of the business’ progress by the executive team 
and Board.

To deliver sustainable growth in shareholder value, 
balancing the needs of our customers, employees and 
communities in which we work with our strategic 
objectives and corporate and social responsibilities.

Our high potential talent is identified and nurtured through agreed 
development plans including a comprehensive mentoring programme as 
well as a focus on succession planning for our key leadership positions. Our 
reward schemes are constantly evaluated to drive and reward performance 
and ensure retention of key talent. As we drive change throughout the 
organisation our competency development and evaluation processes are 
focused on encouraging change agility.

The creation of a high performing actively engaged 
team which will consequently lead to improved 
business performance.

There is a Group-wide structure in place to support management through 
the provision of staff training, auditing and specialist advice. The assessment 
of health and safety risks is inbuilt into daily management routines and is 
monitored by a comprehensive structure of health and safety committees 
that are in turn overseen by a corporate Health, Safety & Environmental 
Committee with Board level oversight.

We are committed to identifying initiatives that will 
enhance the safety culture and contribute to the 
continuous improvement of the safety and well-being 
of all our colleagues and customers.

Dedicated management teams ensure full compliance with formal 
regulatory requirements. We monitor stakeholder and political reactions  
to ensure we react to emerging political and regulatory developments.

We monitor liquidity and cashflow on a rolling 26-week basis. We continue  
to monitor and challenge the wider business to ensure cash targets are met. 
In addition, we monitor the performance of the Group against the covenants 
set out in our lending facility. We maintain ongoing communication with all 
providers of credit.

The Group will continue to contribute to the 
constructive engagement with government agencies 
and other stakeholders to help create a sustainable 
framework for travel and tourism. 

The Group will ensure it has sufficient liquidity, 
cashflow and profit headroom to support delivery  
of our strategic initiatives.

Commodity, currency and interest rate

We undertake hedging in line with Group policy.

The Group achieves certainty on which business 
segments can establish competitive brochure pricing.

Thomas Cook Group plc Annual Report & Accounts 2012

19

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Operating review

Focused on improving  
our operations

The fourth quarter result was back in line with the 
prior year, representing a major improvement in 
quarterly year on year financial performance. 

The year end net debt position of £788m and substantial liquidity 
headroom of circa £1bn demonstrate the positive results of improved 
business performance monitoring, together with the impact of asset 
disposals and the additional banking facilities secured during the year. 
Improvement in working capital practices combined with the 
development of robust cash forecasting processes has also enhanced 
the Group’s ability to drive sustainable cash flow benefits. 

The stabilisation plan implemented by the Group early in the year  
is complete and provides a solid platform to build on. The Group is 
now focusing on improvements to its operations and some of the  
key focus areas for this are outlined in this report. There is a real 
sense of urgency and pace of change sweeping across the Group  
as we energise our people, develop our strategic plan and drive  
its execution to rebuild a stronger sustainable Group for the future. 

Revenue and underlying results
Group revenue for the 12 months to 30 September 2012 was £9,491m 
(2011: £9,809m), down 3% (but 1% higher on a constant currency 
basis). Like-for-like revenue was reduced by planned capacity 
management actions in the UK and West Europe whilst the inclusion 
of acquisitions, specifically in Russia and the Co-op in the UK, added 
£240m. Underlying gross profit was £2,070m (2011: £2,160m) with  
the year on year reduction largely reflecting capacity reductions and 
higher fuel costs of £110m and the difficult trading environment. 
Despite input cost pressures, the Group’s overall gross margin was 
maintained at circa 22% through improved yield management and  
a reduction in unprofitable capacity, particularly in the UK. 

The Group’s underlying profit from operations, including an £11m 
contribution from the Indian business which was disposed of during 
the year, was £156m (2011: £304m). Significant progress was made 
under the UK transformation plan, with benefits of £60m being 
recorded in the year. However, those benefits were offset by increased 
fuel costs and the adverse publicity surrounding our bank refinancing 
such that UK underlying profit from operations was £19m below last 
year. Northern Europe had a strong end to the summer season and our 
German airline performed better in the second half of the year, despite 
experiencing a difficult winter season. The political upheaval in MENA 
had a major negative impact on our French business, whilst our  
North America business suffered from overcapacity in the market. 

The Group’s underlying net interest charge for the year was £146m, 
an increase of £24m as a result of higher average debt and increased 
margin payable under our banking facilities. 

Separately disclosed items
Included within separately disclosed items of £498m is a £300m 
charge as a result of a previously disclosed review of the carrying 
value of goodwill in our North America, West Europe and India 
businesses which was disclosed at the time of our interim results. 
Cash exceptional costs were £130m (2011: £90m) and largely relate to 
the reorganisation and restructuring during the year of our UK, North 
America and West Europe businesses and costs in relation to the 
Group’s financing. 

Earnings and dividends
As a result of the lower underlying operating profit and the 
separately disclosed items, the Group delivered a statutory loss 
before tax of £485m (2011: £398m loss). The reported loss after tax 
was £590m (2011: £518m). The underlying basic loss per share was 
3.7p (2011: earnings of 11.7p) and the basic loss per share was 67.2p 
(2011: 60.7p). No dividend will be paid for the year ended 30 
September 2012. 

Net debt
Net debt was reduced by £103m to £788m as a result of proceeds 
from the sale of businesses and a substantial improvement in 
working capital management, which compensated for the negative 
cash impact of circa £100m from committed capacity reductions.  
The Group’s asset disposal programme contributed £196m to the 
reduction in net debt and £346m to the increase in liquidity, whilst 
the new management team began implementing improved 
processes to manage working capital. 

Outlook 
The Group has embarked upon a transformation which will shape its 
future strategy and we anticipate making good progress during the 
current year. As our customers are experiencing the financial realities 
of the weak economic environment, we are focused on delivering 
higher quality and better value holidays, whilst at the same time 
implementing measures to improve business profitability and  
cash flow.

The year ahead is the initial stage in this recovery and as we embark 
upon our first year of Business Transformation, we are optimistic 
about the future and will announce our full plans and additional 
financial benefits in the spring of 2013. 

20

Thomas Cook Group plc Annual Report & Accounts 2012

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Our UK business is undergoing a fundamental transformation and 
this year saw the first significant delivery of financial benefits from 
the series of initiatives to turnaround the UK business from a trading 
and operational perspective. A full update on the progress under  
the plan is given on page 22 but the impact on operating profit 
performance for the year was principally through improved yield 
management processes and increased central control of discounts, 
which together delivered significant benefits of around £45m. In 
addition, synergies from the Co-op transaction of approximately 
£15m were realised during the year and are expected to increase  
to around £25m annually in 2012/13.

The positive impact of the turnaround actions was offset by trading 
pressures from the uncertain economic back drop, increased input 
prices and the negative publicity surrounding the Company in 
November 2011. Underlying profit from operations reduced to 
£12.7m (2011: £34.1m) and the underlying operating profit margin 
reduced to 0.4% (2011: 1.0%). The underlying profit from operations 
does not include any impact from the sale of ticket and 
accommodation packages for the 2012 Olympic and Paralympic 
Games; this has been included within separately disclosed items.

Underlying profit from operations*
UK & Ireland
India
Egypt

Year ended 
30 September 
2012  
£m

Year ended 
30 September 
2011  
£m

0.8
10.8
1.1
12.7

19.5
13.3
1.3
34.1

Management of our UK Mainstream capacity to remove low or 
negative margin business resulted in a revenue reduction of around 
£240m but was broadly neutral at the EBIT level and allowed 
significant fixed operating costs to be removed from the business. 
The bookings intake pattern was distorted with a higher proportion 
of capacity being sold in the less profitable ‘lates’ market, closer to 
departure, as a result of negative publicity during the peak selling 
period of January to February 2012. However, the actions we had 
taken to improve our yield management process and manage 
capacity, together with the poor late summer weather in the UK, 
ensured that we finished the year with strong sales and margins.

Thomas Cook Group plc Annual Report & Accounts 2012

21

UK
UK at a glance financial highlights
Key performance indicators

Year ended 
30 September 
2012

Year ended 
30 September  
2011

3,109.4
43.1
3,152.5

814.3
25.8%
427.4
55.0
319.2

12.7

0.4%

Financial (£m unless 
otherwise stated)
External revenue
Internal revenue
Segment revenue

Underlying gross profit
Underlying gross profit %
Personnel costs
Depreciation & amortisation
Other operating expenses
Underlying profit from 
operations*
Underlying operating profit 
margin %**

Non-financial
Mass market risk
Passengers†
Capacity††
Average selling price#
Load factor†††
Brochure mix##

Change

-4.4%
+60.8%
-3.9%

+5.8%
+10.3%

3,255.0
26.8
3,281.8

769.5
23.4%
402.6
62.3
270.5

34.1

-62.8%

1.0%

-60.0%

-10.2%
-10.5%
+4.9%
+0.2%
-0.3%

Controlled distribution‡‡
Internet distribution‡‡

86.3%
34.7%

73.8%
30.1%

+16.9%
+15.3%

See Appendix 1 on page 134 for key.

 
 
 
 
 
 
 
 
 
 
 
 
Operating review continued

2011 UK underlying profit from operations
Transformation benefits
Fuel and hotel accommodation cost increases
Management’s estimate of the impact of negative publicity
Volume and mix
Price and margin
Overhead cost savings
2012 UK underlying profit from operations

£m
20
60
(62)
(30)
(15)
(6)
34
1

Controlled distribution of our mass market holidays rose to 86.3% 
(2011: 73.8%), primarily due to the impact of the Co-op transaction 
which completed at the start of the year and has now been fully 
integrated and is on track to deliver the planned synergies. Internet 
distribution of mass market products has also increased despite 
temporary issues with our main website at the start of the 2012 
calendar year which adversely impacted our growth in this area.

Our Independent businesses in the UK faced strong competitive 
pressure which reduced margins in Hotels4U and passenger volumes 
in our Scheduled businesses. Sales of ancillary travel products and 
insurance also suffered volume decline which was directly linked  
to the reductions in footfall seen in our stores and our insurance 
business saw a rise in claims.

In light of the continued difficult trading conditions, cost control has 
been given much focus this year. Structural cost reductions included 
a reduction in our UK aircraft fleet, which was reduced by six aircraft 
in Winter 11/12 and the closure of 149 retail stores. In addition, 
management took a number of additional actions to manage our 
cost base and reduce marketing spend and we benefited from the 
full year effect of closing the defined benefit pension scheme during 
the previous year.

Since the financial year end, we have taken further action to ensure 
the size of our airline is appropriate for our business and have 
announced our intention to reduce the UK fleet by a further five 
aircraft during Winter 12/13. The reduced fleet will require fewer 
operational crew and fewer engineering and support staff and we are 
in a consultation period with the affected members of our business.

Also included in the UK segment for reporting purposes, are the 
Group’s Indian and Egyptian businesses which reported underlying 
profit from operations broadly in line with the prior year. As part of 
the Group’s actions to stabilise its financial position, Thomas Cook 
India was sold in August 2012, reducing the net debt of the Group by 
£80m. Our Egyptian operation has broadly maintained its operating 
profit performance, despite continuing political uncertainty.

Turnaround of our UK business 
For the financial year 2011/12 we delivered benefits of £60m  
at a cost of £36m, which helped to mitigate the difficult trading 
environment and the negative publicity which we experienced  
earlier in the year. We still expect over three years to deliver  
a fully annualised improvement in profitability of £140m,  
for a total estimated cost of circa £70m.

The initial focus of the UK turnaround plan has been on optimising 
yield, reducing retail and tour operator discounts, improving the 
operational efficiency of the organisation and facilitating faster,  
more focused decision making. The following is a summary of  
the key actions taken to date and the financial benefits delivered  
to date against target: 

Annual improvement

Optimise the UK airline
Refocus the product strategy in mainstream 
package holidays
Improve yield management
Rationalise distribution
Operational excellence
Total

Targeted by 
30 September 
2014 
£m
10

Delivered at 
30 September 
2012 
£m
5

15
40
30
45
140

4
19
15
17
60

1. Optimise the UK airline
We reduced the UK fleet by six aircraft during Winter 11/12 as  
part of right-sizing the UK tour operator programme, particularly  
in long-haul, to reduce the risk to the business; as previously 
announced, around 350 employees left the business during the year. 
Through our constant review of customer requirements, including 
the additional flexibility of third party flying arrangements, we  
will continue to offer our customers greater flexibility and choice.  
To this end we are currently consulting with our employees about  
our proposal to reduce the UK aircraft fleet by a further five aircraft 
at the end of their lease term during Winter 12/13. 

2. Refocus the product strategy in mainstream package holidays
For the Summer 12 programme, over 500 under-performing hotels 
were removed from the portfolio (around 22% of properties), whilst 
we introduced around 150 new properties, focused on differentiation 
and exclusivity. Customers choosing differentiated products were  
up 17%, making up 35% of package passengers for the Summer 12 
season. Looking forward, a further 220 underperforming properties 
have been removed for Summer 13 as we continue to rationalise our 
product portfolio and pursue a narrower and deeper hotel strategy. 

3. Improve yield management
The implementation of a single commercial trading approach 
allowed us to better manage fast selling stock, whilst a coordinated 
discounting approach to ensure that distribution channels are  
not competing against each other led to a substantial reduction  
in discount levels in retail shops. We are now focused on rolling  
out the yield tools to our Independent and Specialist businesses. 

4. Rationalise distribution
Since October 2011, we have closed 149 stores and five head office 
properties, resulting in a headcount reduction of around 1,200 
employees. Productivity improvements have been identified through 
a review and negotiation of commercial terms, reduced discounting 
and alignment of terms and fees which will drive substantial 
commercial benefits. 

5. Operational excellence
As outlined previously, operational excellence is about reducing and 
eliminating operational inefficiencies driven by organisational silos 
and overlapping, manual processes. In line with this, we reviewed 
our contact centre operating model and location strategy. In June 
2012, we proposed that the work currently undertaken in our 
Bradford office would transfer to other Thomas Cook locations,  
be outsourced to external specialists or be discontinued. Plans are 
now underway to close Bradford and by March 2013 there will be an 
overall reduction of around 250 roles. Paperless tickets and E-payslips 
have been launched during Summer 12 and we have reduced 
brochures by 20% for the current financial year, with further 
efficiencies expected in 2012/13.

22

Thomas Cook Group plc Annual Report & Accounts 2012

 
Central Europe
Central Europe at a glance financial highlights
Key performance indicators

Year ended 
30 September 
2012

Year ended 
30 September 
 2011 as restated

2,586.5
51.1
2,637.6

335.3
12.7%
158.0
9.4
117.8

50.1

1.9%

Financial (£m unless 
otherwise stated)
External revenue
Internal revenue
Segment revenue

Underlying gross profit
Underlying gross profit %
Personnel costs
Depreciation & amortisation
Other operating expenses
Underlying profit from 
operations*
Underlying operating profit 
margin %**

Non-financial
Mass market
Passengers†

Flight inclusive
Non-flight inclusive
Average selling price#

2,546.4
53.8
2,600.2

341.5
13.1%
154.6
12.0
102.6

72.3

-30.7%

2.8%

-32.1%

Change

+1.6%
-5.0%
+1.4%

-1.8%
-3.1%

+6.2%
+7.3%
+3.6%
+2.5%

-2.5%
-2.9%

Controlled distribution‡‡
Internet distribution‡‡

23.4%
6.8%

24.0%
7.0%

See Appendix 1 on page 134 for key.
From 1 October 2011, the segment includes the East Europe and Russian businesses and 
the comparatives have been restated to reflect this. Non-financial data only includes 
Russia in the year ended 30 September 2012. Excluding Russia from 2012 results in like 
for like comparators of passengers +0.5%, thereof flight inclusive -1.0%, non-flight 
inclusive +3.6%; average selling price +2.7%, controlled distribution 24.4% vs. 24.0%, 
change +1.7%; internet distribution 7.2% vs. 7.0%, change +2.9%.

Our Central Europe segment now includes the East Europe businesses 
in Poland, Hungary and the Czech Republic together with our 
Russian business which was acquired in July 2011.

The segment delivered underlying profit from operations of £50.1m 
(2011: £72.3m) and an underlying operating margin of 1.9%, 
adversely affected by deteriorating margins in Eastern Europe and 
the inclusion of a full year result from Russia. Revenue growth after 
adjusting for the impact of currency rates was 8.0%, again principally 
reflecting the first full year of the Russian business. Excluding Russia, 
currency-adjusted revenue growth was 2.7%.

Underlying profit from operations*
Germany
East Europe
Russia

Year ended 
30 September 
2012  
£m

Year ended 
30 September 
2011  
£m

60.6
(1.9)
(8.6)
50.1

69.6
0.7
2.0
72.3

In a highly competitive German market, we achieved higher volumes 
and average selling prices, with dynamically packaged products 
developing well and contributing to an improved gross profit on a 
currency-adjusted basis. The economic crisis in Greece led to an 18% 
reduction in volume in that destination, while we saw some recovery 
in demand for MENA destinations which had been impacted in 
2010/11. Öger Tours, our specialist tour operator to Turkey, 
successfully expanded its products into Tunisia and Egypt, 
contributing to passengers for Tunisia increasing by more than 35%. 
We also saw increased market share following the expansion of our 
SENTIDO brand to Tunisia. Combined with the results of Airlines 
Germany, we generated an operating profit margin of 3.0% in the 
German market.

Our Eastern markets experienced difficult market conditions with 
general economic uncertainty and some industry specific issues of 
overcapacity. These pressures reduced revenue and margins, resulting 
in lower gross profit. Winter sales of the newly integrated Russian 
business were affected by issues in their important destinations of 
Egypt and Thailand. Overall, Russia made a positive contribution to 
gross profit but the year on year comparison is adversely impacted 
due to the inclusion of summer trading only in the prior year.

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23

 
 
 
 
 
 
 
 
 
 
 
 
Operating review continued

In Russia we commenced a rigorous restructuring project to radically 
reduce the cost base and improve margins. Cost reductions are 
targeted through leaner back office functions and the closure  
of regional airport offices and non-profitable shops. Margin 
improvement initiatives include the reduction of hotel and flight 
commitments, more efficient capacity management together  
with hotel contracting rate benefits derived from the Group’s 
purchasing power.

Controlled and internet distribution percentages show small declines 
following the inclusion of the Russian business, which is mainly 
distributed through third party retail agents. Excluding Russia, the 
remaining Central Europe businesses have seen growth in controlled 
and internet distribution.

The Central Europe management team, led by Peter Fankhauser,  
has undertaken a thorough review of the German business and is 
focused on delivering our customers’ need for exclusive tailor-made 
products in some circumstances and price competitive, simple hotel 
accommodation in others. In addition, they continue to streamline 
processes in all central and support functions. From 1 October 2012, 
our operations in Belgium and the Netherlands also became the 
responsibility of the Central Europe team and consequently, the 
segment will be renamed Continental Europe.

As part of the actions to improve its financial position, the Group  
sold its interests in Hoteles Y Clubs De Vacaciones (HCV) on 27 July 
2012. HCV indirectly owns five hotels and a golf club and prior to 
sale, it contributed an underlying profit from operations of £3.3m  
(2011: £3.4m) to the results of the Central Europe segment.  
The sale reduced the Group’s net debt by circa £80m.

Airlines Germany
Airlines Germany at a glance financial highlights
Key performance indicators

Year ended 
30 September 
2012

Year ended 
30 September  
2011

864.6
300.0
1,164.6

320.1
27.5%
176.5
61.9
46.0

35.7

3.1%

Financial (£m unless 
otherwise stated)
External revenue
Internal revenue
Segment revenue

Underlying gross profit
Underlying gross profit %
Personnel costs
Depreciation & amortisation
Other operating expenses
Underlying profit from 
operations*
Underlying operating profit 
margin %**

Non-financial
Sold seats‡‡‡

Thomas Cook tour 
operators
3rd party tour operators
External seat only

Total sold seats

Sold seats‡‡‡

Short & medium haul
Long haul
Total sold seats

Capacity††
Yield###
Seat load factor†††

See Appendix 1 on page 134 for key.

Change

+7.9%
-5.9%
+4.0%

-14.5%
-17.7%

801.6
318.7
1,120.3

374.5
33.4%
177.7
57.1
70.4

69.3

-48.5%

6.2%

-50.0%

-3.3%
-1.5%
+32.3%
+9.6%

+8.4%
+14.6%
+9.6%

+12.8%
+3.9%
-0.8%

Our Airlines Germany segment reported underlying profit from 
operations of £35.7m (2011: £69.3m), in a very competitive German 
airline market and against a very strong prior year comparator. 
Operating margin reduced to 3.1% (2011: 6.2%) but remains market 
leading in Germany. Results of the long haul business were slightly 
better than the prior year but short and medium haul margins were 
under pressure, particularly in the first nine months of the year, as a 
result of yield pressures from the significant market overcapacity in 
the winter season, combined with German air passenger taxes and 
the impact of a considerable increase in fuel prices.

Total revenue was 4.0% higher at £1,164.6m, with currency-adjusted 
total revenue 10.4% ahead following the expansion of long haul 
capacity with the addition of two aircraft from Winter 11/12. The 
profitable growth to long haul destinations drove the 32.3% increase 
in seat only sales and saw yield growth of 4.1%, while yields to short 
and medium haul destinations could only be increased by 1.4%.

The impact on the underlying profit from operations was mitigated 
by reductions in operating expenses as a result of the business’ 
ongoing efficiency programme and the Group-wide airline synergies 
project. On-time performance improved by 6.4 percentage points  
to 84.1% with consequent improvements in customer satisfaction.

24

Thomas Cook Group plc Annual Report & Accounts 2012

 
West Europe
West Europe at a glance financial highlights
Key performance indicators

Year ended 
30 September 
2012

Year ended 
30 September  
2011 as restated

1,467.4
4.6
1,472.0

241.1
16.4%
119.2
7.5
112.4

2.0

0.1%

Financial (£m unless 
otherwise stated)
External revenue
Internal revenue
Segment revenue

Underlying gross profit
Underlying gross profit %
Personnel costs
Depreciation & amortisation
Other operating expenses
Underlying profit from 
operations*
Underlying operating profit 
margin %**

Non-financial
Mass market
Passengers†

Flight inclusive
Non-flight inclusive
Average selling price#

1,704.0
7.2
1,711.2

295.3
17.3%
128.0
10.0
119.4

37.9

-94.7%

2.2%

-95.5%

Change

-13.9%
-36.1%
-14.0%

-18.4%
-5.2%

-10.2%
-9.2%
-11.7%
+3.8%

-1.1%
+8.0%

Controlled distribution‡‡
Internet distribution‡‡

60.2%
27.1%

60.9%
25.1%

See Appendix 1 on page 134 for key.
From 1 October 2011, the East Europe and Russian businesses are reported within  
Central Europe and the comparatives have been restated to reflect this.

Our West Europe segment comprises our operations in France, 
Belgium and the Netherlands. The underlying profit from operations 
was £2.0m (2011: £37.9m). Within this result, France recorded an 
underlying loss from operations of £20.7m (2011: £10.9m) on 
turnover of £435.4m (2011: £523.9m) but operating profits were also 
reduced in Belgium and the Netherlands. The underlying operating 
profit margin for the segment fell to 0.1% (2011: 2.2%).

Underlying profit from operations*
France
Belgium & the Netherlands

Year ended 
30 September 
2012  
£m

Year ended 
30 September 
2011  
£m

(20.7)
22.7
2.0

(10.9)
48.8
37.9

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The West Europe segment has continued to be affected by the 
ongoing political unrest in the MENA region and the economic 
uncertainty caused by the European debt crisis. In the MENA region, 
we have seen some recovery in demand for Tunisia but less than 
anticipated for Morocco and the important market of Egypt has 
deteriorated further. External revenue in West Europe decreased by 
13.9% on the prior year (7.4% on a currency-adjusted basis) following 
capacity reductions in all markets but particularly in France. Due to 
carefully managed capacities, the average selling price was increased 
by 3.8% but gross profit dropped by £54.2m (£34.9m on a 
currency-adjusted basis) to a 16.4% gross profit margin.

The French market is acutely impacted by both domestic economic 
uncertainty and the political unrest in the MENA region, as the 
French-speaking destinations of Tunisia and Morocco are very 
popular with our French customers. The French business has 
undertaken several initiatives to reduce the risk it carries and to 
strengthen its appeal in the current trading environment. In addition 
to focusing closely on capacity management, we introduced a new 
dynamic packaging engine to offer more flexibility to customers in 
terms of length of stay, improved the value proposition of our 
differentiated ‘club’ products to interest more budget-orientated 
customers and have also shifted passenger volumes from MENA 
affected countries to Greece, Spain and other new destinations.  
These improvements resulted in an increase in gross profit margin 
for the French business, but this has been more than offset by the 
volume decrease. 

The Dutch market continues to be very price competitive and we 
have experienced strong margin pressure. We further developed our 
differentiated and exclusive products and saw their share of revenue 
in the Netherlands rise to more than 35%. The Belgian market  
was characterised by flight overcapacities and aggressive price 
competition. Strict capacity management in our tour operator to 
support margins led to revenue decreases. In our Belgian airline, 
load factors improved by 4.8 percentage points to 88.7%.

Overhead costs were reduced by £5.7m on a currency-adjusted basis. 
The sale of the Dutch retail shops in the prior year reduced the cost 
base by around £12m but it has been adversely affected by general 
inflationary pressures, together with particular increases seen in IT 
costs and in the property costs of the French retail network. In 
Belgium and the Netherlands, this was partly mitigated by reductions 
in personnel and marketing costs, with Belgium reducing full time 
staff by 60 and cutting its expenditure on temporary personnel.

From 1 October 2012, responsibility for our operations in Belgium 
and the Netherlands was moved under the management of the 
current Central Europe segment team and restructuring plans have 
been established and initiated for these countries. Closer integration 
of all our Continental Europe businesses will provide the opportunity 
for cost efficiency and the sharing of best practice particularly by 
sharing common IT systems and back office processes. Combined 
hotel contracting will further increase the purchasing power of  
these businesses.

Responsibility for the French business will be assigned to our Group 
Strategy Director, Zubin Randeria, from 1 December 2012. The 
French management team, supported by Aforge Finance, is reviewing 
various options to help the business reach its full potential, either 
through a restructuring, a disposal of certain assets or a corporate 
transaction such as a merger or a sale.

Thomas Cook Group plc Annual Report & Accounts 2012

25

 
 
 
 
 
 
 
 
 
 
 
 
Operating review continued

Northern Europe
Northern Europe at a glance financial highlights
Key performance indicators

Year ended 
30 September 
2012

Year ended 
30 September  
2011

1,167.1
6.5
1,173.6

315.9
26.9%
152.0
17.1
45.9

1,152.7
6.5
1,159.2

315.7
27.2%
146.7
16.7
46.0

100.9

106.3

8.6%

9.2%

Financial (£m unless 
otherwise stated)
External revenue
Internal revenue
Segment revenue

Underlying gross profit
Underlying gross profit %
Personnel costs
Depreciation & amortisation
Other operating expenses
Underlying profit from 
operations*
Underlying operating profit 
margin %**

Non-financial
Mass market risk
Passengers†
Capacity††
Average selling price#
Load factor†††
Brochure mix##

Controlled distribution‡‡
Internet distribution‡‡

87.1%
69.4%

85.7%
65.6%

See Appendix 1 on page 134 for key.

Our Northern Europe segment delivered another very strong result 
with underlying profit from operations for the year of £100.9m (2011: 
£106.3m). This represents an improved performance in the second 
half of the year following a difficult winter, affected by strong 
competition and weaker demand following floods in the key winter 
destination of Thailand. In the second half, although the market 
remained competitive and input costs rose, we were able to recover 
some ground on the record prior year performance to deliver an 
operating profit 5% behind the prior year.

Following winter capacity increases to maintain our position in a 
competitive market, we took a prudent approach to summer capacity 
with a reduction of around 3% in light of the weak economic 
indicators. This put us in a strong position to increase prices in both 
the brochure and late sales markets whilst improving our summer 
load factors. As with the winter, we saw a move towards later sales 
but this was much smaller and at significantly higher prices than  
the prior year. Currency-adjusted revenue for the year was up 4.1% 
on the prior year, driven by the higher average selling prices in  
the summer.

The continuing success of our Northern Europe business is built  
on the strong focus on exclusive and differentiated products and on 
operational efficiency and cost control. During the year, we opened  
a further seven of our popular Sunwing Resorts and Sunwing Prime 
properties. These hotels consistently book early and generate 
premium margins and in 2011/12 almost one in four of our 
customers stayed in one of these truly differentiated hotels. In 
addition, the distributional efficiency is enhanced by the high 
proportion of its bookings taken through controlled and internet 
distribution and we have again experienced strong growth in this 
area. Controlled distribution through owned websites, shops and  
call centres accounted for 87.1% (2011: 85.7%) of departed passengers 
and, within that amount, internet sales grew to 69.4% in the year.

Change

+1.2%
0.0%
+1.2%

0.1%
-1.1%

-5.1%

-6.5%

+1.9%
+1.9%
+2.3%
0.0%
-6.7%

+1.6%
+5.8%

Aligning brands to 
maximise customer 
visibility

Creating brand alignment
From December 2012, 
Thomas Cook Northern 
Europe is introducing a 
single brand strategy, 
symbolised by the heart logo. 
The heart will have increased 
visibility throughout the 
customer journey with the 
aim being to improve 
customer loyalty.

26

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
North America
North America at a glance financial highlights
Key performance indicators

Year ended 
30 September 
2012

Year ended 
30 September  
2011

Financial (£m unless 
otherwise stated)
External revenue
Internal revenue
Segment revenue

Underlying gross profit
Underlying gross profit %
Personnel costs
Depreciation & amortisation
Other operating expenses
Underlying (loss)/profit from 
operations*
Underlying operating 
margin %**

Non-financial
Mass market risk
Passengers†
Capacity††
Average selling price#
Load factor†††
Brochure mix##
Controlled distribution‡‡
Internet distribution‡‡

296.2
–
296.2

43.0
14.5%
41.0
4.0
20.3

(22.3)

(7.5)%

349.2
–
349.2

64.8
18.6%
36.5
3.9
13.9

10.5

3.0%

14.1%
35.7%

16.9%
36.4%

See Appendix 1 on page 134 for key.
Note: Internet distribution % includes independent travel bookings.

Change

-15.2%
0.0%
-15.2%

-33.6%
-22.0%

n/a

n/a

-16.1%
-14.3%
-4.4%
-2.1%
+21.5%
-16.6%
-1.9%

As reported in our results for the first six months, we made changes 
to the senior management of our North America segment during the 
first half of the year and the new team has taken action to stabilise 
the business and implement a turnaround programme for the 
Mainstream operations. This action includes changing our flying 
partner to deliver more flexibility and reduce our exposure to risk. 
Our new arrangements for the forthcoming winter programme will 
provide smaller seat allocations across a wider range of departure 
airports, offering our customers greater choice and convenience.  
It also removes the risk to the business of having to fill dedicated 
aircraft from a smaller number of airports. We have also reviewed 
our hotel portfolio and are focusing on a core group of profitable 
hotels to improve our margins and enhance the experience for  
our customers.

Our North America segment had a very difficult year and reports  
an underlying operating loss of £22.3m (2011: profit of £10.5m). This 
was caused primarily by continued market overcapacity which drove 
down average selling prices across our Mainstream programme and 
the loss of an important premium hotel contract which adversely 
affected our Mainstream product mix. In addition, demand was 
reduced by a very mild Canadian winter which impacted the 
performance of our Mainstream, Independent and Retail businesses. 

Revenue in North America fell, on a currency-adjusted basis, by 
14.8% driven by reduced passenger volumes and average selling 
prices in Mainstream and lower average selling prices across all 
businesses. Gross profit was adversely affected in Mainstream by  
the lower prices and increased input costs. In our Independent 
operations, which accounts for 75% of passenger volumes, the  
impact on gross profit was principally from the lower average  
selling prices achieved. 

Overhead costs increased partly because of marketing support from 
hotel partners in the prior year and because of the full year impact 
of operating the Sears Travel agencies, within Sears retail stores. The 
full integration of this licensing agreement was completed this year 
and we are beginning to see the benefits as the market share of  
our Mainstream business through Sears has increased threefold  
for Winter 12/13. Mainstream controlled distribution decreased, 
however, we were able to increase sales of our Independent products 
through Sears by 70%. Within the overall overhead increase, cost 
efficiencies of approximately £2m were delivered during the year  
and management continue to target further cost reductions, 
principally through the adoption of simplified processes and 
technology based solutions.

The turnaround plans initiated by the new management team in 
2012 are delivering significant trading improvements, particularly  
in the Mainstream business where we are exposed to significantly  
less risk in Winter 12/13 than in Winter 11/12. The management 
team continue to develop plans to de-risk the business, leverage  
its market-leading independent travel business and simplify 
operations to better align the cost base with revenues.

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Thomas Cook Group plc Annual Report & Accounts 2012

27

 
 
 
 
 
 
 
 
 
 
 
Financial review

Rebuilding strength and  
a sustainable future

Financial results and performance review

£m (unless otherwise stated)

Revenue
Underlying gross profit
Underlying profit from 
operations1
Share of results of associates  
& joint venture
Net investment income/(loss)
Finance charges
Underlying profit before tax
Separately disclosed items
Loss before tax
Tax
Loss for the year

Underlying (loss)/earnings  
per share (p)
Basic loss per share (p)
Dividend per share (p)
Net cash flow2
Net debt

Year ended 
30 September 
2012

Year ended 
30 September 
2011

Year on year 
change

9,491.2
2,069.7

9,808.9
2,160.0

-317.7
-90.3

156.1

303.6

-147.5

2.1
0.4
(145.9)
12.7
(498.0)
(485.3)
(104.8)
(590.1)

(3.7)
(67.2)
–
245.0
788.3

(2.3)
(4.8)
(121.9)
174.6
(572.8)
(398.2)
(119.8)
(518.0)

11.7
(60.7)
3.75
(80.1)
890.9

+4.4
+5.2
-24.0
-161.9
+74.8
-87.1
+15.0
-72.1

-15.4
-6.5
-3.75
+325.1
+102.6

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.
 Net cash flow is the net movement in cash and cash equivalents including the 
proceeds of sale and leaseback excluding the drawdown and repayment of 
borrowings, repayments under finance leases and the payment of facility fees.

Income statement
Revenue and underlying profit from operations
Group revenue for the year reduced by 3.2% to £9,491.2m (increase 
of 0.9% at constant-currency), largely reflecting the translation impact 
of the weakening Euro and Swedish Krona on the Group’s foreign 
currency denominated sales. The underlying increase is the result  
of a number of offsetting movements: acquisitions, including 
Co-operative Travel in the UK and the full year impact of our Russian 
business and Sears Travel in Central Europe and North America, 
respectively, added circa £240m. Our operations in Central Europe, 
Northern Europe and Airlines Germany all increased capacity and 
added circa £250m to revenue, while the UK, West Europe and North 
America segments reduced capacity and their revenue reduced  
by circa £400m. Group revenue was derived 72% from mainstream 
travel, 27% from independent travel and 1% from financial services. 
54% of passengers bought mainstream travel products and 46% of 
passengers bought independent travel products.

Group underlying profit from operations was £156.1m, a decrease  
of £147.5m on the prior year. We saw positive impacts from prudent 
capacity management in our major markets with a reduction of low 
or negative margin volumes in the UK and higher average selling 
prices in most markets. In addition, we saw the first financial benefits 
of the transformation programme underway in the UK with 
improved yield management, increased central control of 
discounting and retail synergies delivering benefits of around £60m. 
However, these have been more than offset by a combination of 
higher input costs, principally aviation fuel, together with the impact 
of negative publicity following our announcement of discussions 
with our banking group in November 2011. 

We saw a continuation of the previously announced poor trading in 
our French and North America businesses and we are taking steps to 
minimise cash requirements and considering the best long-term 
options for these businesses. 

28

Thomas Cook Group plc Annual Report & Accounts 2012

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“ We saw the first financial benefits 
of the transformation programme 
underway in the UK”

The main drivers of the year on year fall in underlying profit from 
operations were:

The table below summarises the separately disclosed items,  
which have been included in the full year accounts.

2011 Group underlying profit from operations
Acquisitions and disposals
Volume and mix
Price and margin
Fuel and hotel accommodation cost increases
Overhead cost savings
Exchange translation
2012 Group underlying profit from operations

£m 
304
(18)
(54)
68
(157)
35
(22)
156

The Group’s costs by type, before separately disclosed items, can be 
broken down as follows:

Accommodation
Aviation (excl. Fuel)
Fuel
Commission and other
Personnel
Other operating expenses

Year ended 
30 September 
2012
34%
29%
9%
8%
12%
8%

Year ended 
30 September 
2011
35%
30%
9%
7%
11%
8%

Year on year 
change
-1%
-1%
–
+1%
+1%
–

Separately disclosed items
Separately disclosed items consist of exceptional operating and 
finance items, IAS 39 fair value re-measurement, profit or loss on 
disposal of associates, impairment of goodwill 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.

£m

Affecting profit from operations
Reorganisation and restructuring
Refinancing costs
Impairment of goodwill and 
other intangible assets and 
amortisation of business 
combination intangibles
IAS 39 fair value re-measurement
Other

Affecting income from 
associates and JVs
(Loss)/profit on disposal  
of associates

Affecting net finance costs
Write off of unamortised bank 
facility fees
Other exceptional finance 
charges
IAS 39 fair value re-measurement

Year ended 
30 September 
2012

Year ended 
30 September 
2011

Year on year 
change

(80.7)
(30.1)

(73.7)
–

(7.0)
(30.1)

(368.7)
9.1
(5.0)
(475.4)

(396.9)
(5.9)
(93.7)
(570.2)

28.2
15.0
88.7
94.8

(0.9)

10.3

(11.2)

(23.1)

(0.9)

(22.2)

(0.9)
2.3
(21.7)

(2.9)
(9.1)
(12.9)

2.0
11.4
(8.8)

Total

(498.0)

(572.8)

74.8

Reorganisation and restructuring costs of £80.7m principally relate  
to the projects underway to transform the UK business (£35.6m),  
and turn around the underperforming businesses in West Europe 
(£26.9m) and North America (£15.8m). Refinancing costs of £30.1m 
relate to costs incurred in relation to the renegotiation of the Group’s 
banking facilities. 

Thomas Cook Group plc Annual Report & Accounts 2012

29

 
 
 
 
 
 
 
Financial review continued

Our decision to sell our Indian business and the deterioration in 
profitability of our French and Canadian businesses led to a 
reassessment of the carrying values of goodwill in those segments 
and certain other assets. In total, the write-down is £368.7m and is  
of a non-cash nature. £299.6m is impairment of goodwill, of which 
£96.0m relates to the write-down of the carrying value of our Indian 
business, to fair value less costs to sell, upon its classification as held 
for sale. The sale of the Indian business was subsequently completed 
in August 2012. 

The remaining goodwill impairment relates to the French (£94.4m) 
and Canadian (£109.2m) businesses and reflects a decrease in 
management’s estimates of the likely future profitability and cash 
flows of those businesses. £40.6m relates to the impairment of 
intangible fixed and current assets, principally in respect of prepaid 
contracts for marketing and licensing and capitalised computer 
software costs for which management consider the carrying value to 
be in excess of the recoverable amount. The software was considered 
to be impaired as part of the Group’s review of its ecommerce 
offering. The marketing and licensing costs were sunk costs in 
relation to agreements to sell ticket and accommodation packages 
for the 2012 Olympic and Paralympic Games, which management 
consider to have become onerous during the year. The sale of 
packages themselves generated a trading profit of £9.6m, which  
has been included within other separately disclosed items, with an 
overall net loss of £17.2m recognised. During the year, we incurred 
non-cash costs of £28.5m in relation to the amortisation of business 
combination intangibles.

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 profit of £9.1m in the operating 
result (2011: loss of £5.9m) and a profit of £2.3m in net finance  
costs (2011: loss of £9.1m). 

Income from associates and joint ventures
Our share of the results of associates and joint ventures, which 
comprises mainly hotel participations, was a profit of £2.1m (2011: 
loss of £2.3m). The prior year result reflected deteriorating trading in 
a business that was subsequently sold. 

Net investment income
The net investment income in the year was £0.4m (2011: loss of 
£4.8m). The prior year loss 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 £145.9m, an increase of £24.0m on the prior year. The increase 
reflects higher levels of average borrowings and an increase in 
margin payable following amendments to the Group’s banking 
facilities in May 2012. 

30

Thomas Cook Group plc Annual Report & Accounts 2012

Tax
The tax charge for the year was £104.8m (2011: £119.8m). 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 389.0% (2011: 41.0%) on the underlying profit for the year. 
This percentage rate is heavily impacted by the low level of 
underlying profit and is not expected to be representative of the 
ongoing effective tax rate. Deferred tax assets of £44.8m in the UK 
have been derecognised following a revised assessment of the 
entities in which the forecast taxable profits are expected to arise  
and deferred tax assets of £22.3m in France have been derecognised 
following the deterioration in trading in that business and review  
by new management. In each case, the derecognition reflects the 
reduced likelihood of utilising the related taxable losses within an 
acceptable time period.

Total taxable losses available to carry forward in the Group at 30 
September 2012 were £2.5bn and as at 30 September 2012 deferred 
tax assets were recognised with respect to £0.5bn of this amount.

Earnings per share and dividends
The underlying basic loss per share was 3.7p (2011: earnings of 
11.7p). The basic loss per share was 67.2p (2011: 60.7p).

No dividends were paid in the year and, 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 prior year was 3.75p.

Cash and liquidity

£m

Year ended 
30 September 
2012

Year ended 
30 September 
2011

Year on year 
change

Net cash from operating activities

151.9

288.6

(136.7)

Exceptional items
Capital expenditure
Interest paid

Free cash flow before 
exceptional items

Acquisition of businesses
Disposal of businesses
Disposal of fixed assets
Dividends received
Dividends paid
Proceeds of sale and leaseback
Other items (net)
Exceptional items

129.9
(138.3)
(116.5)

90.1
(186.5)
(98.3)

39.8
48.2
(18.2)

27.0

93.9

(66.9)

32.4
122.7
34.0
–
(33.3)
189.4
2.7
(129.9)

(19.2)
3.2
14.1
5.9
(92.0)
–
4.1
(90.1)

51.6
119.5
19.9
(5.9)
58.7
189.4
(1.4)
(39.8)

Net cash inflow/(outflow)

245.0

(80.1)

325.1

As a result of the decline in underlying profitability, the Group saw a 
reduction of £136.7m in cash inflow from operating activities and a 
£66.9m reduction in free cash flow before exceptional items during 
the year. The reduction in free cash flow was mitigated by 
significantly lower capital expenditure mainly as a result of a 
reduction in non-essential IT spend. The increase in interest paid of 
£18.2m reflects the higher levels of average borrowings across the 
year and increases in interest rates arising from the amendments to 
the Group’s banking facilities.

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 cash flow 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 26-week cash flow 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 £1.1bn provided by a syndicate of banks. These comprise a 
£150m term loan, a revolving credit facility of £850m and an additional 
revolving credit facility of £200m, £89m of which was mandatorily 
prepaid and cancelled due to the sale of our Indian business and is  
now £111m. All of these facilities are committed and mature on  
31 May 2015. As at 30 September 2012, the average remaining term  
of the bonds and committed bank credit facilities was 3.0 years  
(2011: 3.2 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 2015. 

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. 

Acquisition of businesses inflow of £32.4m reflects cash received on 
the joint venture with The Co-operative Group and the Midlands 
Co-operative, partially offset by cash paid for the acquisition of Tour 
Vital and Panameo, two specialist tour operators based in Germany. 
In addition, acquisition of businesses includes adjustments to the 
consideration for Algarve Tours, an incoming agency based in 
Portugal that was acquired at the end of the prior year and payment 
of deferred consideration on other historical acquisitions, Gold 
Medal, Essential Travel and Hotels4U. Disposal of businesses inflow  
of £122.7m includes £61.0m of net proceeds from the disposal of the 
Group’s Indian business in August 2012 and £54.8m of net proceeds 
from the disposal of the Group’s interest in Hoteles Y Clubs De 
Vacaciones in July 2012 as well as proceeds from the disposal of 
Explorers Hotel and the Dutch retail business totalling £6.9m. In 
addition, the Group’s asset disposal programme generated £34.0m 
during the year through the disposal of surplus office buildings in the 
Netherlands and Belgium and a vacant hotel in Mexico, with the sale 
and leaseback of aircraft in Airlines Germany and the UK adding a 
further £189.4m.

Dividends paid includes £32.7m for payment of the interim dividend 
for 2011 of 3.75p per share. Since the declaration of the 2011 interim 
dividend the Group has announced a suspension of dividend 
payments until it has rebuilt the balance sheet.

Net debt (being cash less borrowings, overdrafts and finance leases) 
at the year end was £788.3m (2011: £890.9m). £50m was repaid 
under the term loan agreement during October 2011, reducing the 
term loan from £200m to £150m. Headroom under the banking 
facilities and cash freely available to repay those facilities as at  
30 September 2012 was £981m compared to £821m as at  
30 September 2011.

Segmental performance review
Segmental performance presented in the Operating Review on pages 
21 to 27 is based on underlying financial performance before 
separately disclosed items and the segmental narrative is provided 
on this underlying basis.

Corporate

Financial (£m)
Underlying loss from operations*

See Appendix 1 on page 134 for key. 

Year ended 
30 September 
2012
(23.0)

Year ended 
30 September 
2011
(26.8)

Change
+14.2%

The costs associated with running the corporate headquarters and 
central functions relating to the Group OTA, Destination Management 
and central IT functions reduced by £3.8m to £23.0m. This 
movement reflects lower personnel costs offsetting increased costs  
in the OTA. 

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.

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31

 
 
 
 
 
 
 
Sustainability

Renewed focus on 
long-term sustainability

Our approach
Our approach to sustainability is aligned with the Board’s 
responsibility for the long-term success of the Group. Since the 
appointment of the Group Chief Executive Officer and the Group 
Chief Financial Officer in July 2012, there has been renewed focus 
and significant steps taken to develop and strengthen a number of 
key areas that fall within the sustainability agenda: 

•	 The top 100 managers across the Group are fully engaged with  
the objectives we are working to achieve. We have 15 separate 
transformation initiatives, each of which is being led by our most 
talented business leaders and high potential talent of the future 
(see pages 15 to 17 for further information);

•	 These initiatives are contributing to the development of a 

longer-term strategy which will be presented to the market in 
spring 2013;

•	 A number of senior management appointments have been made 
to strengthen the areas of cash management and forecasting, risk 
management, internal and financial controls and the 
management of internal audit; 

•	 The Thomas Cook Leadership Council has redefined the Group’s 
values, behaviours and ways of working in a major initiative to 
build a more effective organisation. This initiative, together with 
the focus on risk and controls and our trust commitments to our 
people and our stakeholders are being brought together under a 
new Code of Business Conduct (see page 33); and

•	 The Thomas Cook trust agenda includes our significant people 
initiatives as well as the commitments we make towards our 
customers, our suppliers and the communities in which we work. 
A summary of our approach to these three key areas is detailed  
on the following pages.

Our people
Building an effective organisation
Our people are at the heart of our business. We have 31,000 
employees, across 21 countries, who will be the driving force behind 
our future success. As we rebuild the organisation, we want to ensure 
that Thomas Cook is a great place to work; therefore, we have the 
following key priorities for our people agenda in the year ahead:

Engagement and involvement
•	 Engage and energise all our employees by having clear objectives 
in place and regularly reviewing performance against them, so 
that employees are motivated to deliver outstanding service that 
inspires and delights our customers; 

•	 Standardise our employee engagement surveys across the Group; 

and

•	 Continue to encourage employees to provide the senior 

management team with input and feedback by email, surveys  
and face-to-face.

Talent, assessment and development
•	 Assess and develop our key talent, to ensure that we have the best 

leaders running the Group and appropriate succession plans  
in place. 

Reward and recognition 
•	 Ensure that we have the right incentive programmes in place that 
recognise and reward employees against high performance goals 
and quantifiable measures.

Our global people agenda is being led by the Group CEO and  
is focusing on how we embed the new values, drive greater 
cross-region collaboration and alignment and further break down 
silo behaviour. Human Resources teams across the Group are working 
together to ensure an increased focus on our people to make sure 
they feel inspired, engaged and recognised for their contribution  
and developed to reach their full potential wherever they work in  
the world.

Group CEO Direct Reports
The Group CEO regularly holds meetings amongst her Direct Reports, 
to discuss a range of issues in relation to the strategic and 
operational development and performance of the business. The 
Direct Reports team comprises the most senior business leaders and 
Group function heads and, like the Thomas Cook Leadership Council 
(see below), is both culturally and gender diverse, reflecting the wide 
range of diversity amongst employees across the Group.

Thomas Cook Leadership Council
On joining the Group, Harriet Green formed the Thomas Cook 
Leadership Council (‘TCLC’). The TCLC comprises her direct reports,  
the individual business leaders and functional heads. In September 
2012, the first meeting of the TCLC took place in London. This gave 
business leaders from across the Group the opportunity to meet and  
it encouraged greater collaboration, the sharing of best practice and 
breaking down of silos. 

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Going forward, the TCLC will meet four times a year to review the 
Group’s performance and strategy, to enable them to communicate 
effectively with the wider organisation.

Values and Ways of Working
At its first meeting, the TCLC worked together to create and gain 
alignment on leadership ways of working as well as on the new  
set of values that will help guide the Group through its  
strategic transformation. 

The values have now been launched across the Group and are  
being brought to life and embedded through our behaviours  
and ways of working. 

Code of Business Conduct 
The values also fully support the Group’s new Code of Business 
Conduct, which will guide how we work in the future. The Code will 
be launched in early 2013, and training will be given to all employees 
to ensure that they all live and work by the standards in the Code. 
Compliance with the Code will be a measurable objective for  
all managers.

Engagement and involvement
Our people are well placed to tell us how we are performing as an 
employer and in 2011/12 they had many opportunities to do so. 

Our Values

In her first week as Group CEO, Harriet Green invited all employees  
to participate in the My Views survey, a confidential channel through 
which they could express their frustrations, highlight opportunities 
and share what they would do if they were CEO. Through this survey, 
as well as emails, feedback through the Group intranet and 
face-to-face meetings, more than 8,000 people took the opportunity 
to have their say and the common themes are clearly visible in the 
shaping of the Group’s longer-term strategy; ensuring our people feel 
more involved and that their inputs are welcomed, valued and are 
helping create our future. 

For the fifth consecutive year, we conducted employee engagement 
surveys which give every single employee across the Group the 
opportunity to share their open and honest views on how they feel 
about working for the Group, what we are doing well and how we 
could improve. A key objective for the current year is to improve  
and standardise these surveys across the Group, to ensure that  
they operate in the most effective way. 

Our global focus on people will drive us to continually do more  
to fully engage and inspire people and, for the coming year, every 
business leader will have a clear engagement performance measure, 
and will be rewarded in line with their respective targets. This builds 
on well-established and successful practice in some of our segments, 
like Northern Europe, where leaders’ reward is directly linked to the 
engagement survey and has resulted in continuous annual 
improvements in scores and response rates. 

Our people are hungry for information, so regular open and honest 
communications from the leadership team are a priority going 
forward. To succeed, our people need clarity on where the Group  
is headed, our strategy to get there and the part they can play in 
delivering that success. Frequent, effective communication is vital 
and with the creation of a new Group intranet in 2012, and the 
appointment of our new Group Head of Communications, Jenny 
Peters, the Group will further improve its internal and external 
communications in 2013 and beyond. 

Reducing costs and improving cash generation are key 
transformation priorities as well as creating a profitable growth 
strategy. In order to do so, our people understand we have to make 
difficult decisions, some with the potential to impact on them 

1

2

3

4

5

Succeed as One Team
We support and trust each other, and work as a single, 
worldwide high performing team.

Deliver for Our Customers
We are here to deliver the best possible customer experience 
today offering value, flexibility and choice while innovating 
to meet the changing future needs of our customers.

Engage Each other
We recognise Thomas Cook people are the heart of our 
success. We are determined to energise and inspire each 
other, seeking out ideas and making sure we’re all clear on 
our direction.

Drive for Results
We are resilient and have the courage and determination to 
succeed, and hold ourselves accountable for making robust, 
fact-based speedy decisions for lasting value.

Act with Integrity
We maintain the highest ethical standards and transparency 
in our work, and in our dealings with customers, partners, 
stakeholders and fellow employees. We keep our 
commitments, and are honest, fair and trustworthy.

Thomas Cook Group plc Annual Report & Accounts 2012

33

 
 
 
 
 
 
 
Sustainability continued

personally. Such decisions are necessary to secure a long-term and 
sustainable future for our businesses and, whilst we are absolutely 
committed to taking the actions, some can be painful for those 
directly impacted. As a Group we are committed to ensuring that 
anyone negatively impacted is treated fairly and with respect. We 
ensure that any individual affected is fully supported to take the  
next steps in their career, within or outside of the Group. 

Talent, assessment and development 
We will refocus our attention on effective succession planning to 
support our future growth strategy in 2013, providing the Board  
and the Group CEO’s Direct Reports with a detailed assessment of  
the talent in our businesses and succession coverage. A significant 
number of external appointments recently have been recruited at 
the leadership level, many of whom are already identified as having 
potential for further roles. Deeper into the organisation succession is 
being further strengthened, for example in Airlines Germany, 70% of 
its recent leadership positions were filled by internal promotions.

To stretch our people, we develop breadth as well as depth of 
knowledge through formal development programmes and offering 
work placements and secondments. As the Official Provider of short 
breaks to the 2012 Olympic and Paralympic Games, we had the 
opportunity to involve our people through secondments and 
volunteering with LOCOG, as well as in our own ‘Games Time Team’, 
who looked after our customers. Some even had the honour of being 
chosen as torch bearers, nominated for their outstanding 
contribution and personal values. In the latter part of 2012, and into 
2013, we are also developing the talent of our people through their 
involvement in the development of our strategic plan for the future.

Reward and recognition 
During the year, we have placed renewed focus on ensuring a 
consistent approach to pay benchmarking across the Group and  
work in this area will continue. We have signalled that after the 
announcement of our strategy review, there will be a review of 
reward policy that will underpin our efforts to ensure fair and 
effective reward policies across the Group, with outcomes clearly 
aligned to the achievement of strategic objectives. 

Many of our employees already have an element of their reward 
directly linked to their personal performance through Group  
bonus programmes. Bonus targets are reviewed annually to  
reinforce the link between achievement of personal objectives, the 
performance of the business and their reward. We are intensifying 
efforts to ensure that individuals have clear strategic and financial 
objectives linked to high performance in the business and  
the transformation.

We will continue to use reward tools, such as bonus and recognition 
programmes, to drive performance improvement and reward great 
individual and team achievements and positive role model 
behaviours. Share ownership is encouraged; however with recent 
disappointing share price performance we have a need to act 
responsibly and prudently in our utilisation of share awards. We are 
reinforcing the linkages between reward and talent so that we target 
our discretionary reward programmes to support the talent and 
succession initiatives.

Diversity and inclusion
We believe our diversity is an essential part of how we do business 
and meet the needs of our equally diverse customer base. We 
operate in 21 countries, employing people and working with 
customers and suppliers from a broad range of backgrounds  
and cultures. 

Recent appointments to the Board have strengthened our diversity 
across a range of measures, including skills, experience, nationality 
and gender. The leadership teams across many of the Group’s 
markets, and the CEO’s Direct Reports, are increasingly diverse. 
Greater sharing of best practice across the Group and local insights 
further increase the breadth and depth of knowledge, which 
contribute to effective and robust decision making. Looking 
specifically at gender diversity across the Group, women represent 
24% of our Board and CEO Direct Report positions and circa 60% at 
middle and junior management levels. 

We do not tolerate any form of 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 any 
employee on the grounds of sex, gender reassignment, sexual 
orientation, pregnancy, race, colour, nationality, ethnic or national 
origin, religion or belief, age and disability.

Environment
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 
our UK and Scandinavian airlines are accredited. Our head offices  
are also implementing local environmental management systems; 
for instance, our German Head Office achieved the ECOPROFIT 
accreditation in 2012. ECOPROFIT is a programme for sustainable 
development and stands for Ecological Project For Integrated 
Environmental Technology.

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We have invested in building a database system, to strengthen our 
data reporting, analysis and tracking, and enable us to identify  
areas for improvement. 

•	 our Neilson Hotels are subscribing to Travelife for the second time 
and are going through the auditing process this financial year; and 
our Eldorador hotels are also working towards Travelife awards. 

We continually assess changing environmental legislation and likely 
impacts on the business. This includes the European Emissions 
Trading Scheme affecting our Group Airlines, the Carbon Reduction 
Commitment Energy Efficiency scheme affecting the UK business  
and the introduction of mandatory reporting of greenhouse 
gas emissions.

Emissions and energy
Although 95% of our carbon emissions come from our aircraft fleet, 
our airlines are among the world’s most efficient due to our high load 
factors and continual investment in fuel efficiencies. Projects have 
included pilot training, investment in lightweight equipment such  
as seats, containers and trolleys, and improving data management.

The remaining carbon emissions come from electricity and gas 
consumption in our buildings and vehicle fuel used in business 
travel. We have implemented a variety of projects to reduce 
electricity consumption, including trialling LED lighting in our retail 
stores, replacing old inefficient lighting systems with systems with 
inbuilt occupancy and daylight sensors, as well as raising employee 
awareness about saving energy.

We report annually to the Carbon Disclosure Project, an independent 
organisation which works to drive greenhouse gas emissions 
reductions. Organisations are encouraged to measure, disclose, 
manage and share information about greenhouse gas emissions.  
The Company had a disclosure score of 77 for its 2012 response, 
which placed us in the top quarter of FTSE reporting companies.

Resource use and waste
While our priority is to avoid waste, where waste is inevitable we  
aim to reuse or recycle it. Our airlines have set up in-flight recycling 
programmes and encouraged their base airports to implement the 
necessary structure to receive recycled waste. They have also worked 
on engaging destination airports to implement similar infrastructures 
to ensure waste can be recycled outbound as well as inbound. Many 
segments have moved towards e-documentation, for both customers 
and employees, to reduce paper consumption and brochure printing.

Marketplace
We have worked with our supply chain to build trust, increase 
efficiency and reduce costs and waste. In 2011 we subscribed,  
as a Group, to the Travelife Sustainability System, which is a  
system designed to assist the tourism supply chain measure their 
environmental and social impacts, and is dedicated to making the 
holiday experience more sustainable. Through this we continue to 
encourage best practice worldwide and now have 228 contracted 
hotels holding a Travelife award, which is an increase of 71% from  
the previous year. 

As well as encouraging all our contracted hotels to participate in 
Travelife, we have been working to improve our own hotels so  
that we can lead by example:

•	 all 10 of our Sunwing hotels have Travelife gold awards,  

and certain of our hotels also have EU-Ecolabel; 

•	 our SENTIDO brand launched an ambitious programme to have  
all hotels at Travelife award level by 2013. SENTIDO currently has 
16 hotels (representing 34% of its total hotels) at award level, and 
is working to raise awareness with a large percentage of its 
customer base; and

Customer health and safety is also a high priority, both for our Group 
airlines and in the hotels we sell. All our operations are carefully 
managed and we aim to minimise risk and improve our processes 
wherever possible. Our airline businesses in particular have a strong 
safety culture, and we apply many of the principles from those 
businesses to ensuring the safety of our customers in other parts  
of our supply chain.

The Group’s health and safety auditing for customer accommodation, 
excursion and transport suppliers was outsourced to Argent H&S, 
experts in health and safety and risk management, in May 2012. This 
approach enables the auditing by qualified H&S professionals of 
Thomas Cook suppliers to a consistent framework across our 
destinations. Argent Risk Assessments focus on the safety 
management systems employed by suppliers and evidence that these 
comply with our robust H&S requirements, escalating concerns and 
defects so that remedial action can be taken to mitigate and/or 
remove any identified risks.

Whilst everything possible is done to ensure accidents are avoided,  
it is not always possible to prevent all accidents; therefore, it is 
standard practice for a full review of any accidents to be initiated  
to establish details and enable learnings to be taken to prevent 
reccurrence. Incident details are recorded in a database and resulting 
management information is reviewed regularly to identify and act 
upon any emerging trends and used to benefit the continuous 
improvement of H&S for our customers.

Communities
Our business longevity depends on the health and prosperity of both 
our home communities, where we live and work, and destination 
communities, where we visit. We are developing a Group-wide 
community strategy which will cover these communities. Each of our 
markets has responsibility for developing charitable activities. In the 
UK, for example, the Thomas Cook Children’s Charity has raised over 
£1 million which has gone towards projects for sick and 
disadvantaged children. 

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.

Further to the Group-wide child protection policy we launched in 
2011, the Group has committed to ‘The Code’ – the international 
code of conduct driven by the industry, which is designed to protect 
children from sexual exploitation in travel and tourism.

Progress towards our 2020 Targets

We have established a series of targets and objectives, looking 
forward to 2020. We will measure and report on progress towards 
those targets as part of our annual sustainability report  
(www.thomascookgroup.com/sustainability).

Thomas Cook Group plc Annual Report & Accounts 2012

35

 
 
 
 
 
 
 
Over

310m 

website visits

69% 

internet sales in 
Northern Europe

Over

800 

destinations offered by 
Central Europe

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Directors’ Report:
Corporate Governance
38  Board of Directors

40 

 Corporate governance report

53  Remuneration report

65  Other disclosures

High tech and high touch
We are harnessing technology to provide our customers with the information and  
ease of accessibility they need without ever losing the human touch, to enhance  
their holiday experience from the first time they contact us.

Focus

Giving customers what they want by focusing on 
effective, convenient distribution channels and  
a true multi-channel experience.

Thomas Cook Group plc Annual Report & Accounts 2012

37

 
 
 
 
 
 
 
Board of Directors

3

2

1

8

6

7

1. Frank Meysman Non-Executive Chairman, 60
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.

Other appointments: Chairman of Betafence and JBC N.V.  
He is also an Independent Representative Director of Picanol N.V., 
Warehouses De Pauw (WDP) and Spadel S.A. 

2. Harriet Green OBE Group Chief Executive Officer, 50
Appointment: July 2012

Committee memberships: Member of Health, Safety & 
Environmental Committee and Nominations Committee.

Skills & experience: Harriet Green joined the Company as Group 
Chief Executive Officer on 30 July 2012. Prior to this, she was Chief 
Executive Officer of leading high service technology distributor 
Premier Farnell plc. Harriet is a global executive with extensive, 
multi-channel business leadership experience of the worldwide 
technology and industrial markets. She has driven innovation and 
strategic transformation through profitable global growth strategies 
and delivered industry leading results. Harriet has a real focus on 
employee engagement, having lived and worked on four continents 
running businesses for Premier Farnell and volume distributor, Arrow 
Electronics, Inc.

Other appointments: Non-Executive Director of BAE Systems plc and 
Emerson Electric Co. She is also a member of the UK Prime Minister’s  
Business Advisory Group and a founder member and trustee of the 
PeaceWorks Foundation.

Board composition

Chairman 1
Independent Non-Executive Directors 4
Non-Executive Director 1
Executive Directors 2

5

4

9

Board tenure

< 1 year
1 – 4 years
> 4 years

38

Thomas Cook Group plc Annual Report & Accounts 2012

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3. Michael Healy Group Chief Financial Officer, 52
Appointment: July 2012

7. Peter Marks Non-Executive Director, 63
Appointment: October 2011

Committee memberships: Chairman of Health, Safety & 
Environmental Committee, Member of Nominations Committee.

Skills & experience: Peter Marks was appointed as a Non-Executive 
Director on 1 October 2011. He has over 45 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 and prior to this 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.

Other appointments: He is on the Board of a number of 
Co-operative Group businesses, including The Co-operative Bank plc.

8. Martine Verluyten Independent Non-Executive Director, 61
Appointment: May 2011

Committee memberships: Chairman of Audit Committee,  
Member of Nominations Committee and Remuneration Committee.

Skills & experience: Martine Verluyten was appointed as an 
Independent Non-Executive Director on 9 May 2011. She has significant 
international financial and IT expertise and has held a number of 
senior finance positions across the telecommunications, electronics 
and materials sectors. Between 2006 and 2011, she was Chief Financial 
Officer of Umicore, a Brussels-based materials technology group and 
from 2000 to 2006 she was Group Controller and subsequently Chief 
Financial Officer of the mobile telephone operator Mobistar. 

Other appointments: Non-Executive Director of 3i Group plc, 
Supervisory Board member of STMicroelectronics N.V. and Board 
member of Incofin cvso. She also chairs the audit committee of the 
Flemish Region in Belgium. 

9. Derek Woodward Group Company Secretary, 54
Appointment: April 2008

Skills & experience: Derek Woodward joined the Company as Group 
Company Secretary in April 2008. Prior to this, 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 p.l.c. 

Skills & experience: Michael Healy joined the Company on 14 May 
2012 and became Group Chief Financial Officer on 1 July 2012. Prior  
to this, he was Group Finance Director of Kwik-Fit Group. Michael  
has considerable international experience, across a broad range of 
industries and was previously Chief Operating Officer and Finance 
Director of the Hong Kong listed First Pacific Company Limited and 
subsequently Chief Financial Officer of ebookers plc. 

4. Dawn Airey Independent Non-Executive Director, 52
Appointment: April 2010

Committee memberships: Member of Audit Committee, Health,  
Safety & Environmental Committee, Nominations Committee and 
Remuneration Committee. 

Skills & experience: Dawn Airey was appointed as an Independent 
Non-Executive Director on 12 April 2010. She has over 27 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 and prior to 
this, she was 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 a Non-Executive 
Director of easyJet plc. 

Other appointments: Chair of The Grierson Trust and the National 
Youth Theatre of Great Britain. She also sits on the board of the 
British Library.

5. Emre Berkin Independent Non-Executive Director, 51
Appointment: November 2012

Committee memberships: Member of Nominations Committee.

Skills & experience: Emre Berkin was appointed as an Independent 
Non-Executive Director on 1 November 2012. He has considerable 
experience across the technological sector and international markets 
and, being based in Turkey, he has vital knowledge of one of the key 
destinations for millions of our customers. Between 1993 and 2006, 
he held a number of senior positions at Microsoft, latterly as 
Chairman, Middle East & Africa and Vice-President, Europe, Middle 
East & Africa, where he led all aspects of Microsoft business in 79 
countries, including emerging markets. Since 2006, he has acted  
as a Non-Executive Director to a number of companies, including 
Pegasus Airlines, Turkey’s leading low cost carrier, and a broad  
range of technology companies including Alcatel Lucent  
Teletas Telekomunikasyon A.S., which is listed on the Istanbul  
Stock Exchange.

Other appointments: Non-Executive Director of Alcatel Lucent 
Teletas Telekomunikasyon A.S., Teleperformance Turkey and  
Pegasus Airlines.

6. Roger Burnell Senior Independent Director, 62
Appointment: March 2007

Committee memberships: Chairman of Remuneration Committee, 
Member of Audit Committee, Health, Safety & Environmental 
Committee and Nominations 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 and 
prior to this, he was Chief Operating Officer and a Director of 
Thomson Travel Group plc.

Other appointments: Non-Executive Director of Coventry  
Building Society.

Thomas Cook Group plc Annual Report & Accounts 2012

39

 
 
 
 
 
 
 
Corporate governance report

Strengthening 
our governance

Dear Shareholder
At the end of my fi rst year as Chairman, I am pleased to report on the 
progress we have made to strengthen our governance arrangements.

One of my main priorities was to strengthen our Board. In July, 
Harriet Green became our new Group Chief Executive Offi cer and 
Michael Healy joined as our Group Chief Financial Offi cer. Both have 
a highly successful track record; Harriet brings a wealth of experience 
of successful corporate transformations, and Michael likewise, with 
highly leveraged companies.

At our 2012 AGM, three of our long-serving Non-Executive Directors 
stepped down to give me the opportunity to seek Non-Executive 
Directors with more recent operational experience. I am pleased 
to report that Emre Berkin, with a wealth of skills and experience 
in the technological sector and international markets as well as 
experience of airlines, joined our Board as a Non-Executive Director 
on 1 November 2012. We continue to work with an international 
search and selection fi rm and expect to make further appointments 
in due course.

In making these appointments, the Board has strengthened its 
diversity across a range of measures, including skills, experience, 
nationality and gender, which will help bring different perspectives 
to our deliberations and decision making as we face the challenges 
of rebuilding our business.

“ Harriet brings a wealth of 
experience of successful corporate 
transformations, and Michael likewise, 
with highly leveraged companies” 

We have also strengthened our Board Committees with the 
appointment of Martine Verluyten as Chair of the Audit Committee, 
Roger Burnell as Chair of the Remuneration Committee and Peter 
Marks as Chair of the Health, Safety & Environmental Committee. 
Each Committee has made real progress under its new leadership 
as detailed further in this Report.

In the spring of 2012, we conducted a review of Board effectiveness, 
with the assistance of external facilitators. One of the key areas of 
focus was to evaluate the breadth of skills and experience on the 
Board. The output from that evaluation has helped shape the 
candidate profi le for our search for additional Board members. 
There were a number of other outputs, ranging from the need for the 
Board to have greater visibility and connection with the organisation; 
the need for improved fi nancial information and forecasting; and 
an increase in the time allocated for the Board to review strategy, 
succession planning and risk management. There is an action plan 
in respect of each of those outputs (see page 45) and progress is 
monitored by me and reported regularly to the Board.

Whilst improved cash forecasting has been a priority of management 
and the Board in the past year, we are also taking signifi cant steps 
under the leadership of the new Group CEO and Group CFO to 
strengthen risk management, internal and fi nancial control, and 
the management and direction of internal audit. In view of the 
importance and urgency in these areas, a number of senior 
appointments have been made in recent months, including a new 
Group Treasurer, a new Head of Financial Control & Planning, and 
a new Director of Enterprise Risk and Audit. A number of other senior 
appointments have been made, as detailed in the Group CEO Q&A
on page 9.

Throughout the year, Roger Burnell and I engaged with our major 
shareholders on a number of occasions across a range of issues, 
including Board appointments and remuneration, and will continue 
to do so. We are grateful for the feedback given, which has been 
supportive and constructive.

Under my leadership, we have made considerable progress towards 
achieving the highest standards of corporate governance and we 
will strive to build upon this during the course of the year ahead.

Frank Meysman
Chairman

27 November 2012 

40

Thomas Cook Group plc Annual Report & Accounts 2012

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 “ In the spring of 2012, we conducted 
a review of Board effectiveness, with 
the assistance of external facilitators. 
One of the key areas of focus was to 
evaluate the breadth of skills and 
experience on the Board”

Compliance with the UK Corporate Governance Code
This report sets out how the Company applied the principles of 
the UK Corporate Governance Code (‘the Code’) and the extent to 
which the Company complied with the provisions of the Code in 
the year to 30 September 2012. During the year, the Company fully 
complied with the provisions of the Code, except for Provision 
B.3.3, in relation to executive directors taking on more than one 
non-executive directorship in a FTSE 100 company, and Provision 
D.1.5, in relation to Directors’ notice or contract periods being set at 
one year or less. These are explained in the relevant sections within 
the Remuneration Report on pages 53 to 64.

The Group’s business model and strategy
The Group’s business model and strategy are summarised on pages 
12 to 17 of this Report.

The Board of Directors
The Board of Directors is responsible for the long-term success of 
the Group and must ensure that there is a framework of effective 
controls, which enables risk to be assessed and managed. Whilst 
improved cash forecasting has been a priority of management and 
the Board in the past year, signifi cant steps are being taken under 
the leadership of the new Group CEO and Group CFO to strengthen 
risk management, internal and fi nancial control, and the 
management and direction of internal audit. A number of senior 
executive appointments have been made recently to support and 
drive forward these important areas. More information is given 
below and in the Risk management section on pages 18 and 19.

The Thomas Cook Leadership Council (see page 32), led by the 
Group CEO, has redefi ned the Group’s values, behaviours and ways of 
working in a major initiative to build a more effective organisation. 
This initiative, together with the focus on risk and controls and our 
trust commitments to our people and our stakeholders are being 
brought together under a new Code of Business Conduct. This Code 
will be fully embedded with every employee across the Group to 
ensure it guides the way our people work in the future. 

The Board’s governance structure and the roles and activities of 
its Committees are described on pages 46 to 51.

Responsibilities of the Board
The Board is specifi cally responsible for:

•  approval of the Group’s strategy and its budgetary and 

business plans;

•  approval of signifi cant 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 the Group’s dividend policy and the payment of 

interim, and the recommendation of fi nal, 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

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

Board activity during the year
At each Board meeting, the Group CEO presents a comprehensive 
update on the business issues across the Group and the Group CFO 
presents a detailed analysis of the fi nancial performance, both at 
Group and segment level. Senior executives below Board level attend 
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 response to the output from the 2012 
Board evaluation, the Board will hold some of its meetings in the 
segment locations, where it will conduct an in depth review of 
operations and strategy as well as gain more visibility amongst 
management and staff.

Thomas Cook Group plc Annual Report & Accounts 2012

41

 
 
 
 
 
 
 
Corporate governance report continued

At its meetings during the year, the Board discharged its 
responsibilities as listed overleaf. 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 Offi cers and their senior management teams;

•  the UK business transformation plan;

•  fi nancial performance and treasury metrics, including cash fl ow 

and net debt forecasts;

•  the Group’s annual budget;

•  external fi nancial and narrative reporting, and investor feedback;

•  the backdrop to the 22 November 2011 update to the market 

and endorsed management’s improvements to cash forecasting 
and management;

•  the Group’s banking negotiations and refi nancing;

•  the Group’s fi nancial covenants and liquidity analysis;

•  the Group’s stabilisation plan;

•  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 disposal programme;

•  the shareholder circulars in connection with the disposal of HCV, 
the aircraft sale and leaseback and the sale of the Indian business;

•  the Group’s IT strategy and transformation programme and other 

major IT projects including IT security;

•  the Group’s treasury policy;

•  the recruitment of the Group CEO and Group CFO and the 

appointment of additional Non-Executive Directors;

•  the UK pension fund;

•  the division of responsibilities between the Chairman and the 

Group CEO; and

•  the Directors’ confl icts of interest register.

Board meetings and attendance
The Board and its Committees have regular scheduled meetings 
throughout the year and supplementary meetings are held as and 
when necessary. 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.

Frank Meysman was unable to attend one Board meeting (due to a 
prior personal commitment), that fell between the date of 
appointment to the Board, but prior to his appointment as 
Chairman. During that period, he maintained contact with the Board 
and gave his feedback on the matters under review. Dawn Airey 
missed one Board meeting, one Remuneration Committee and one 
Nominations Committee meeting (all on the same date), due to an 
unavoidable prior business commitment. She gave her input on the 
agenda items to the Chairman prior to the meetings. 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 suffi cient time to meet what is expected of them.

In addition to the scheduled meetings, the Directors attended 
additional Board and Committee meetings (please see the notes 
below) to deal with a number of challenges being faced by the 
Company, including liquidity and cash management, the new 
banking arrangements, asset disposals, Executive Director succession, 
long-term incentive awards and the approval of shareholder 
circulars. Despite these meetings being held at relatively short notice, 
attendance levels for each of the Directors was high.

Current Directors

Name
Frank Meysman
Harriet Green1
Michael Healy2
Dawn Airey3
Roger Burnell
Peter Marks
Martine Verluyten4

Board
8/9
2/2
2/2
8/9
9/9
9/9
9/9

Nominations 
Committee
2/3
–
–
2/3
3/3
3/3
3/3

Audit Committee
–
–
–
2/2
4/4
–
2/2

Remuneration 
Committee
–
–
–
1/2
4/4
–
2/2

Health, Safety & 
Environmental 
Committee 
–
1/1
–
5/5
5/5
2/2
–

Notes
In addition to the meetings detailed above, the following additional meetings were held during the year, to discuss the issues highlighted on the previous page: Board: 17; 
Nominations Committee: 4; Audit Committee: 4; Remuneration Committee: 9.
1 
2 
3 
4 

 Harriet Green joined the Board on 30 July 2012 and was appointed to the Health, Safety & Environmental Committee on the same day.
 Michael Healy joined the Board on 1 July 2012.
 Dawn Airey was appointed to the Audit Committee and Remuneration Committee on 8 February 2012.
 Martine Verluyten was appointed as Chairman of the Audit Committee and a member of the Remuneration Committee on 8 February 2012.

42

Thomas Cook Group plc Annual Report & Accounts 2012

Former Directors who served during the year

Name
Michael Beckett1
David Allvey2
Bo Lerenius2
Peter Middleton2
Paul Hollingworth3
Sam Weihagen4

Notes
1  Michael Beckett retired on 30 November 2011.
2  David Allvey, Bo Lerenius and Peter Middleton each retired on 8 February 2012.
3  Paul Hollingworth resigned on 30 June 2012.
4  Sam Weihagen retired on 30 July 2012.

Board composition
As at 27 November 2012, the Board comprised the Chairman, two 
Executive Directors, four Independent Non-Executive Directors and 
one Non-Executive Director. Biographical details of all Directors 
can be found on pages 38 and 39 and on the Company’s corporate 
website at www.thomascookgroup.com.

The Chairman 
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 on 
30 November 2011.

The roles of the Chairman and Group CEO are separate and distinct. 
During the year, the Board reviewed and approved a revised Division 
of Responsibilities, which clearly sets out in writing their respective 
responsibilities. This document 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.

Changes to the Board
Changes to the Board during the year were as follows:

•  Frank Meysman and Peter Marks were appointed to the Board 

as Chairman Designate and a Non-Executive Director respectively, 
on 1 October 2011.

•  Harriet Green was appointed as Group CEO on 30 July 2012, in 
succession to Sam Weihagen who retired from the Board on 
the same date.

•  Michael Healy was appointed to the Board as Group CFO on 1 July 
2012, in succession to Paul Hollingworth who resigned from the 
Board on 30 June 2012.

•  David Allvey, Bo Lerenius and Peter Middleton each retired from 

the Board on 8 February 2012.

•  In the current fi nancial year, Emre Berkin was appointed to 
the Board as an Independent Non-Executive Director on 
1 November 2012.

•  The search, selection and appointment process in respect of the 
above and the search for additional Non-Executive Directors is 
fully described in the section on the Nominations Committee 
on page 48.

Board
2/2
4/4
1/4
2/4
7/7
7/7

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

Audit Committee
–
2/2
1/2
–
–
–

Remuneration 
Committee
–
–
2/2
2/2
–
–

Health, Safety & 
Environmental 
Committee 
–
3/3
–
–
–
3/4

Board induction and training
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 where they receive a thorough 
briefi ng on the business and meet with the management team, and 
the receipt of presentations on other key business areas and relevant 
documentation. Individual induction requirements are monitored by 
the Chairman, with the support of the Group Company Secretary, to 
ensure that new and recently appointed Directors gain suffi cient 
knowledge about the Group to enable them to contribute to the 
Board’s deliberations as swiftly as possible. As a number of new 
Directors have joined the Board during the course of the year, 
there has been a high level of induction activity. Frank Meysman 
conducted most of his induction in the period between joining the 
Board in October 2011 and his appointment as Chairman at the 
beginning of December 2011. He met with major shareholders 
following his appointment as Chairman and has continued to engage 
with them on a range of issues during the year, as explained on page 
51. Harriet Green and Michael Healy both conducted a signifi cant 
element of their initial induction prior to joining the Board. In 
August and the early part of September 2012, they visited each of the 
Company’s business segments and conducted extensive reviews of 
every element of the business as part of the business and budget 
planning process ahead of the new fi nancial year. During those visits, 
they met with management and staff and gained valuable insights 
into the businesses. Both Harriet Green and Michael Healy have been 
on in-destination visits, during which time they met with fl ight and 
in-destination staff as they were taken through every aspect of the 
customer experience. The induction content and process has evolved 
signifi cantly over the year, as we build on the experience of inducting 
each new Director. We are now using the benefi t of that experience 
to revisit the induction and training given to our longer-serving 
Directors. As we develop the programme for each new Director, we 
will give the longer-serving Directors the opportunity to accompany 
and participate in any aspect that they feel would further enhance 
their knowledge and understanding of the Group. 

Directors also receive training throughout the year, both at Board 
and Committee meetings and by way of attendance at external 
conferences and seminars.

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Thomas Cook Group plc Annual Report & Accounts 2012

43

 
 
 
 
 
 
 
Corporate governance report continued

The Board has a programme for holding some of its meetings at 
the business segments, where, in addition to its normal business, the 
Board will focus on the strategy and operations of that segment and 
meet with management and staff. In June 2012, the Board held its 
meeting at the main UK segment offi ces and in October 2012, it 
did likewise at the main offi ces of the Northern Europe segment. 
In March 2013, the Board will hold its meeting in Germany to receive 
presentations on, and meet management and staff of, the Group’s 
Continental Europe and Airlines Germany businesses. At other Board 
meetings and, where appropriate, Committee meetings, the Directors 
receive updates and presentations on developments and changes to 
the business, and to the legislative and regulatory environments. In 
addition to the in-depth presentations on the Company’s businesses, 
the Board was also provided during the year with:

•  presentations on the future of travel and the customer experience;

•  a briefi ng on reward and the Group’s remuneration policy and 

the internal and external context; and

•  a presentation on companies’ and Directors’ responsibilities for 

health and safety.

In the current fi nancial year, the Non-Executive Directors have also 
been given a comprehensive update on our web-based distribution 
transformation, and the developments to the end to end customer 
service experience in our UK business.

Director independence
At its September 2012 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 
specifi ed in the Code and determined that Dawn Airey, Roger Burnell 
and Martine Verluyten were independent. When approving his 
appointment, the Board also determined that Emre Berkin was 
independent. Frank Meysman, Chairman, was independent 
on appointment.

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.

The former Non-Executive Directors David Allvey, Bo Lerenius 
and Peter Middleton were considered independent by the Board.

Directors’ confl icts of interest
From 1 October 2008, the Companies Act codifi ed the Directors’ duty 
to avoid a situation in which they have, or can have, an interest that 
confl icts, or possibly may confl ict, 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 
confl icts and has agreed a process to identify and authorise confl icts. 
As part of that process, it has also agreed that the Nominations 
Committee should review the authorised confl icts every six months, 
or more frequently if a new potential confl ict arises for an existing 
Director. The Nominations Committee reviews the interests of 
candidates prior to making recommendations for the appointment 
of new Directors. The Nominations Committee and Board applied 
the above principles and process throughout the year to 
30 September 2012 and confi rm that these have operated effectively. 
When the Board authorised the confl ict relating to Peter Marks 
in relation to the Company’s UK retail joint venture with The 
Co-operative Group, it did so on the condition that Peter would 
not receive Board papers in respect of, or be involved in, decisions 
about the Company’s UK retail JV.

Re-appointment of Directors
In accordance with the Code and the Company’s Articles of 
Association, all Directors are subject to election by shareholders. 
At the AGM held in February 2012, all the Directors were submitted 
for election/re-election and the Board has agreed that the Directors 
will continue to be subject to annual election in the future. 
Non-Executive Directors are initially appointed for a three-year term 
and, subject to rigorous review by the Nominations Committee and 
annual re-election by shareholders, can serve up to a maximum of 
three such terms.

Operation of the Board
During the year, we introduced a fully encrypted electronic Board 
portal system which enables Board and Committee papers to be 
delivered securely to Directors, which they can access using electronic 
tablets. This enables faster and more secure distribution of 
information and reduces resource usage. 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/or the Group CEO and the Non-Executive Directors, 
and by way of the Group Company Secretary circulating papers and 
updates on relevant issues electronically. During the year, the 
Chairman 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 corporate governance matters as well as ensuring that there is a 
smooth fl ow 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 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 qualifying 
third party indemnity, to the extent permitted by law, to each 
Director and the Group Company Secretary. The Company also 
maintains Directors’ and Offi cers’ liability insurance.

Board evaluation
The Board recognises the benefi t of a thorough Board and 
Committee evaluation process, leading to action to improve 
its effectiveness, future composition and focus.

A thorough evaluation of the Board and its Committees was 
conducted during the year. This was facilitated by Wickland Westcott, 
an independent and experienced fi rm, under the direction of the 
Chairman. Wickland Westcott has no other relationship with the 
Company. The process involved each of the Directors completing a 
high level questionnaire, which was structured to provide an 
introduction for a more in-depth and comprehensive discussion 
between Wickland Westcott and each of the Board members. Such 
meetings allowed each Director to express their perspectives of the 
Board’s effectiveness and performance, as well as to highlight areas 
in which they wished to see improvement. To provide further insight 
into the effectiveness of the Board, Wickland Westcott also 
interviewed a number of senior executives from across the Group. The 
output from the above was compiled by Wickland Westcott and the 
key themes and issues, together with a range of recommendations 
were presented, in the fi rst instance to the Chairman, and then to 
the whole Board for consideration and debate.

44

Thomas Cook Group plc Annual Report & Accounts 2012

Our Board evaluation process

1

2

3

4

Chairman and Company 
Secretary meet with 
external facilitator 
to discuss and agree 
approach and scope.

 Directors and senior 
executives complete high 
level questionnaire.

 External facilitator meets 
with Directors and senior 
executives individually.

External facilitator 
compiles a report from 
the questionnaires 
and meetings.

External facilitator meets 
with the Chairman and 
the Company Secretary 
to discuss the fi ndings 
and recommendations.

Board meeting at which:

–  the external facilitator 
presents the report 
of fi ndings and 
recommendations; and

–  the Board discusses and 
agrees an action plan.

Action plan continually 
monitored by the 
Chairman and Company 
Secretary with regular 
reports to the Board.

Separately, the Non-Executive Directors, under the leadership of 
the Senior Independent Director and with input from the Executive 
Directors, conducted an evaluation of the Chairman. The outputs 
from that evaluation were debated by the Board in the absence 
of the Chairman and feedback was given to him by the Senior 
Independent Director.

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.

One of the key areas of focus was to evaluate the breadth of skills 
and experience on the Board. The output from the evaluation, which 
identifi ed a requirement for a range of skills and experience, helped 
shape the candidate profi le in respect of the search for additional 
Board members. There were a number of other outputs, ranging 
from the need for the Board to have greater visibility and connection 
with the businesses, the need for improved fi nancial information and 
an increase in the time allocated for the Board to review strategy, 
succession planning and risk management. The Board has agreed an 
action plan in respect of each of these outputs and progress is being 
monitored by the Chairman, with the support of the Company 
Secretary, and reported regularly to the Board. Progress will be 
disclosed in the 2013 Governance Report.

The Board agreed that real progress had been made in respect of 
Board and Committee effectiveness during the year, but welcomed 
the above actions in a move to higher standards.

Outputs

Agreed action

A range of skills and experience, 
including travel, international, technology 
and UK plc, required of new 
Non-Executive Directors.

Included in the candidate profi le for the search for additional Non-Executive Directors. Focus for 
international search and selection fi rm.

Board needs to have greater visibility and 
connection with the businesses to build 
a mutual understanding of roles 
and challenges.

Board has agreed a programme for holding some of its meetings at the business segments, where it 
will focus on the strategy and operations of that segment and will meet with management and staff.
Board induction programme ensures that new appointees visit each of the businesses shortly after 
joining. Existing Directors given the opportunity to undergo ‘induction’ with new Directors.

Need for improved fi nancial information 
to the Group and the Board.

New Group CFO working with fi nance community to develop and improve internal fi nancial 
reporting and forecasting.

Board needs to devote more time to the 
development of strategy and succession 
& talent management.

Time allocated for strategy at each Board meeting. The new Group CEO is driving the people agenda, 
focusing on assessment, development, succession, performance management, engagement and 
recognition for high performance. Succession and talent management is scheduled to be presented 
to the Board in spring 2013.

Board needs improved understanding 
of risk identifi cation and management.

A highly experienced new Director of Enterprise Risk and Audit was appointed on 29 October 2012 
to drive an increased focus on risk and controls across the Group and improved reporting to 
the Board and the Audit Committee. He reports directly to the Group CEO and through to the 
Audit Committee. 

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45

 
 
 
 
 
 
 
Corporate governance report continued

The Group governance structure
The Board has a schedule of matters reserved for its approval 
and has a formal structure of delegated authority, whereby 
specifi ed aspects of management and control of the Group have 
been delegated to the Group CEO, the Group CFO, business segments 
and the Board’s Committees. The Board has agreed the terms of 
reference for the Audit, Remuneration, Nominations, Disclosure, 
and Health, Safety & Environmental Committees and the Division 
of Responsibilities between the Chairman and the Group CEO.

The schedule of matters reserved, the terms of reference of each 
of the Board’s Committees and the Division of Responsibilities 
between the Chairman and the Group CEO 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 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. Major decisions taken under the Group’s Delegation 
of Authority are reported to the next Board meeting.

Group CEO Direct Reports
The Group CEO regularly holds meetings amongst her Direct 
Reports to discuss a range of issues in relation to the strategic and 
operational development and performance of the businesses. 
A comprehensive report of all key issues affecting the Group is 
circulated to the Board prior to each meeting. The CEO’s Direct 
Reports team comprises the most senior business leaders and 
Group function heads and, like the Thomas Cook Leadership 
Council (see below), is both culturally and gender diverse refl ecting 
the wide range of diversity amongst employees across the Group.

Thomas Cook Leadership Council
The Group CEO has also established the Thomas Cook Leadership 
Council (‘TCLC’), comprising the top 100 leaders across the Group. 
The TCLC will meet four times a year to review performance and 
help develop the Group’s strategy.

Audit Committee

Chairman
Martine Verluyten*

Meetings
Four

Other members
Dawn Airey
Roger Burnell

Meetings also regularly attended by+
Peter Marks (Non-Executive Director)
Harriet Green (Group CEO)
Michael Healy (Group CFO)
Derek Woodward (Group Company Secretary)
Andrew Porter (Group Finance)
PricewaterhouseCoopers LLP (‘PwC’)
Ernst & Young LLP (‘E&Y’)

Following his appointment in October 2012, the new Director of 
Enterprise Risk and Audit attends the Audit Committee meetings.

Composition of the Committee
During the year, David Allvey was Chairman of the Committee and 
Bo Lerenius was a member until their retirement from the Board 
on 8 February 2012. On the same day, Martine Verluyten and Dawn 
Airey were appointed members, the former succeeding David Allvey 
as Chairman.

* 

+ 

+ 

+ 

 Martine Verluyten is considered by the Board to have recent and relevant fi nancial 
experience, as required by the Code.
 Prior to his retirement on 30 July 2012, Sam Weihagen regularly attended the Audit 
Committee meetings.
 Prior to his resignation on 30 June 2012, Paul Hollingworth regularly attended the 
Audit Committee meetings.
 Prior to the appointment of Lee Bradley, Director of Enterprise Risk and Audit, 
Paul Wilkes (Head of Internal Control and Project Evaluation) regularly attended 
the Audit Committee meetings.

46

Thomas Cook Group plc Annual Report & Accounts 2012

Role of the Committee
The Board has delegated to the Committee responsibility for 
overseeing the fi nancial 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 fi ndings 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 
signifi cant fi nancial reporting judgements contained in them;

•  review the Company’s internal fi nancial 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 offi ce.

Principal activities during the year
At its meeting in July 2012, the Committee agreed with the initiatives 
being led by the new Group CEO and Group CFO for a step change in 
respect of fi nancial and operational controls, risk identifi cation and 
management and the management and direction of Internal Audit. 
To support these important controls being more fully embedded 
across the organisation, Lee Bradley, a highly experienced Director 
of Enterprise Risk and Audit, joined the Company in October 2012. 
He reports directly to the Group CEO and through to the Audit 
Committee and is responsible for risk management, internal 
audit and business continuity planning.

At its meetings during the year, the Committee discharged its 
responsibilities as listed above and 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 51);

•  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 prevention, detection and reporting of fraud and the Group’s 

anti-fraud and ethics policies;

•  the Group’s borrowing powers under the Company’s Articles 

of Association;

•  the backdrop to the 22 November 2011 update to the market;

•  shareholder circulars and the Notices of General Meeting in 
connection with the disposal of HCV, the aircraft sale and 
leaseback and the sale of the Indian business;

•  the working capital reports prepared by PwC in respect of the 

above shareholder circulars;

•  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 below);

•  the Committee’s work plan for the year ahead and a review of 
historic activity against the Committee’s terms of reference; and

•  revised Committee terms of reference.

External auditors
A policy is 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 fi nancial statements. 
PwC were appointed as the sole auditors to the Group in 2008 and 
since that date have complied with the partner rotation requirement 
set out in the Ethical Standards for auditors. PwC were re-appointed 
by shareholders at the AGM held on 8 February 2012. Upon the 
recommendation of the Audit Committee, PwC will be proposed 
for re-election by shareholders at the AGM to be held on 7 February 
2013. PwC have confi rmed their independence as auditors of the 
Company in a letter addressed to the Directors.

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47

 
 
 
 
 
 
 
Corporate governance report continued

Nominations Committee

Chairman
Frank Meysman

Meetings
Three

Other members
Dawn Airey
Emre Berkin
Roger Burnell
Harriet Green
Peter Marks
Martine Verluyten

Meetings also regularly attended by
Derek Woodward (Group Company Secretary)

Composition of the Committee
A majority of the members of the Committee are Independent 
Non-Executive Directors. Frank Meysman was Chairman of the 
Committee from 1 December 2011, following Michael Beckett’s 
retirement from the Board on 30 November 2011. Peter Marks 
joined the Committee upon his appointment to the Board on 
1 October 2011. David Allvey, Bo Lerenius and Peter Middleton 
left the Committee upon their retirement from the Board on 
8 February 2012. Emre Berkin and Harriet Green joined the 
Committee on 1 November 2012. 

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 
confl icts of interest 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 offi ce.

48

Thomas Cook Group plc Annual Report & Accounts 2012

Principal activities during the year
At its meetings during the year, the Committee discharged its 
responsibilities as listed above and in particular:

•  monitored the process in respect of the search and selection 
of a new Group CEO, leading to a recommendation for the 
appointment of Harriet Green;

•  monitored the process in respect of the search and selection 
of a new Group CFO, leading to a recommendation for the 
appointment of Michael Healy;

•  considered the re-appointment of the Directors, before making 
a recommendation to the Board regarding their re-election at 
the 2012 AGM;

•  commenced the process to recruit additional Non-Executive 

Directors in order to strengthen the Board;

•  proposed changes to Committee chairmanships and 

Committee composition;

•  considered Directors’ potential confl icts of interest (see page 44); 

and

•  revised Committee terms of reference.

Board appointments policy
Appointments to the Board are made on merit, against objective 
criteria and with due regard for the benefi ts 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. The Board appointments 
policy reinforces the Board’s principle that appointments are made 
on merit, in line with its current and future requirements, and refl ect 
the international activity of the Group. The policy also recognises the 
benefi ts 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 fi rm foundations. A copy 
of the Group’s Board appointments policy can be found on our 
website at www.thomascookgroup.com.

Chairman succession
During 2011, 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 
specifi cation, candidate profi le and timetable to ensure an orderly 
and effi cient process. It appointed an international search and 
selection fi rm to assist with the identifi cation of potential candidates, 
benchmarking and referencing. Towards the fi nal 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, at both the operational and 
strategic levels, his particular strength in marketing and his 
achievements in both brand building and product innovation.

Non-Executive appointments 
One of the key areas of focus in the 2012 Board effectiveness review 
was to evaluate the breadth of skills and experience on the Board. 
The output from that evaluation (see page 45) helped shape the 
candidate profi le for the search for additional Non-Executive 
Directors. An international search and selection fi rm was appointed 
to assist the Chairman identify a range of suitable candidates for 
review by the Nominations Committee. As a result of that process, 
Emre Berkin was appointed to the Board on 1 November 2012. The 
Chairman and the Committee will continue their work in the current 
year to develop further succession plans to strengthen the Board.

On 1 October 2011, Frank Meysman and Peter Marks were appointed 
to the Board. The succession process in respect of Frank Meysman 
is described in the section above entitled ‘Chairman succession’. 
Although the appointment of Peter Marks, CEO of The Co-operative 
Group, was recommended by the Committee, he was identifi ed as a 
candidate during the discussions in respect of 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.

Group CEO and Group CFO succession
During the year, the Committee conducted a search for a Group CEO 
and a Group CFO. The Committee established clear criteria for the 
required skills and experience and appointed an international search 
and selection fi rm to assist with the identifi cation of candidates, 
benchmarking and referencing. Whilst this process led to the 
identifi cation of candidates, the two individuals who best met the 
established criteria and were appointed to these roles came to the 
attention of the Committee by other means: Harriet Green, the Group 
CEO, made a direct approach to the Chairman and Michael Healy, the 
Group CFO, was brought to the attention of the Committee by one 
of the Company’s advisers. These candidates went through the 
same process as those brought to the attention of the Committee 
by the search and selection fi rm.

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Health, Safety & 
Environmental Committee

Chairman
Peter Marks

Meetings
Five

Other members
Dawn Airey
Roger Burnell
Harriet Green

Meetings also regularly attended by*
Senior managers with responsibility for health, safety 
and environmental matters
Derek Woodward (Group Company Secretary)
Beth Horlock (Deputy Company Secretary)

Composition of the Committee
Dawn Airey and Roger Burnell were members of the Committee 
throughout the year. On 8 February 2012, Peter Marks was appointed 
to the Committee and he replaced Roger Burnell as Chairman. Sam 
Weihagen was a member of the Committee until his retirement from 
the Board on 30 July 2012. Harriet Green was appointed a member 
of the Committee on her appointment to the Board on 30 July 2012. 
David Allvey left the Committee upon his retirement from the Board 
on 8 February 2012.

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.

* 

* 

 Prior to his retirement on 30 November 2011, Michael Beckett regularly attended 
Health, Safety & Environmental Committee meetings.
 Prior to his retirement on 30 July 2012, Sam Weihagen regularly attended 
Health, Safety & Environmental Committee meetings.

Thomas Cook Group plc Annual Report & Accounts 2012

49

 
 
 
 
 
 
 
Corporate governance report continued

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

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 2011;

•  reviewed and monitored the Group’s health and safety and 

sustainability strategies, including performance against targets;

•  approved future health and safety performance targets;

•  reviewed the Group-wide child protection policy and 

implementation plan;

•  approved a number of health and safety policies, including 

the Group’s environmental and sustainability policies;

•  reviewed the proposed outsourcing of customer health and 

safety data capture, risk assessment and data storage functions;

•  reviewed overseas excursion compliance;

•  reviewed employee safety regulations;

•  reviewed the Group’s airline safety; 

•  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 2011 Sustainability Report is available on 
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 2012 Sustainability Report will be available at 
www.thomascookgroup.com in February 2013.

A summary of the approach and the Group’s performance in relation 
to sustainability is contained on pages 32 to 35.

Remuneration Committee

Chairman
Roger Burnell

Meetings
Four

Other members
Dawn Airey
Martine Verluyten

Meetings also regularly attended by*
Frank Meysman (Chairman)
Harriet Green (Group CEO)+
Peter Marks (Non-Executive Director)
Judith Mackenzie (Group Head of Reward)
Derek Woodward (Group Company Secretary)

Composition of the Committee
All members of the Committee are Independent Non-Executive 
Directors. During the year, Peter Middleton was Chairman of the 
Committee until his retirement from the Board on 8 February 2012; 
Roger Burnell was appointed as Chairman on the same day. Dawn 
Airey and Martine Verluyten were appointed as members of the 
Committee on 8 February 2012. Bo Lerenius left the Committee upon 
his retirement from the Board on 8 February 2012.

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 53 to 64.

* 

*  

+ 

 Michael Beckett attended the meetings of the Committee until his retirement as 
Chairman of the Company on 30 November 2011.
 David Allvey attended the meetings of the Committee until his retirement from 
the Board on 8 February 2012.
  Harriet Green does not attend in respect of matters relating to her remuneration.

50

Thomas Cook Group plc Annual Report & Accounts 2012

Finance & Administration Committee
To facilitate swift and effi cient 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 
identifi ed parameters, in relation to day-to-day fi nancing 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 of inside information and the 
disclosure of such information to the market in accordance with the 
Company’s obligations under the UK Listing Authority’s Disclosure 
and Transparency Rules. The Committee meets regularly during the 
year to consider the Group’s activities and risks against its disclosure 
obligations and to review all results announcements, following 
certifi cation from individual executives from across the businesses.
The Committee comprises the Group CEO, who is the Chairman, the 
Group CFO, the Director of Enterprise Risk and Audit and the Group 
Company Secretary. Other attendees include senior managers from 
Group Finance and Investor Relations. 

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 CEO, the Group CFO 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 fi nancial reports, interim management statements, other 
market announcements 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 
including the chairs of the Board’s Committees.

During the year, Frank Meysman met with a number of major 
institutional shareholders on a number of occasions, following the 
market announcement on 22 November 2011 and to discuss the 
appointment of Harriet Green as Group CEO and governance issues 
in general. Roger Burnell, the Chairman of the Remuneration 
Committee, met with several major institutional shareholders and 
governance bodies to discuss remuneration matters, including 
executive share scheme performance targets and the long-term 
incentive arrangements for the new Executive Directors. These 
meetings were both supportive and constructive. The Board was 
briefed on the content of the above discussions.

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 signifi cant benefi ts 
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.

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Risk management and internal control
Whilst improved cash forecasting has been a priority of management 
and the Board in the past year, signifi cant steps are being taken 
under the leadership of the new Group CEO and Group CFO to 
strengthen risk management, internal and fi nancial control, 
and the management and direction of internal audit. 

The Group’s new approach to risk management and internal 
control is more fully described in the Risk management section 
on pages 18 and 19.

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. 

This framework will be developed and standards improved 
as the new approach to risk management and internal control 
is 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 now chaired by the 
newly appointed Director of Enterprise Risk and Audit and comprises 
senior executives from across the Group.

Risk identifi cation and reporting
Each of the 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 specifi c 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 identifi cation, measurement and reporting 
provides a comprehensive ongoing assessment of the signifi cant 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 Director of 
Enterprise Risk and Audit who makes recommendations to 
the Audit Committee in relation to the maintenance of a sound 
control environment throughout the Group.

Thomas Cook Group plc Annual Report & Accounts 2012

51

 
 
 
 
 
 
 
Corporate governance report continued

A schedule of the Group’s principal risks and uncertainties and 
mitigating actions being taken by management is set out on 
pages 18 and 19.

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 fi nancial statements.

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 confi dence 
through the appropriate channels. The helpline was re-launched 
by a Group-wide communication to all employees in spring 2012. 
In addition, the new Group CEO has launched a Group-wide feedback 
facility to all employees, which promotes feedback from all 
employees on any issue that they wish to raise.

Code of ethics
The Group has a code of ethics which deals with:

Statement of Directors’ Responsibilities in respect of the 
Annual Report, the Directors’ Remuneration Report and the 
Financial Statements
The Directors are responsible for preparing the Annual Report, the 
Directors’ Remuneration Report and the fi nancial statements in 
accordance with applicable law and regulations. Company law 
requires the Directors to prepare fi nancial statements for each 
fi nancial year. Under that law, the Directors have prepared the 
Group and the Company fi nancial statements in accordance with 
International Financial Reporting Standards (‘IFRSs’) as adopted by 
the European Union. The fi nancial 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 profi t or loss of the Group for that period.

•  prohibitions on employees using their position for personal gain; 

In preparing those fi nancial statements, the Directors are required to:

•  prohibitions on improper business practices;

•  select suitable accounting policies and then apply them 

•  a requirement for compliance with all internal approval and 

consistently;

authorisation procedures and legal requirements; and

•  make judgements and accounting estimates that are reasonable 

•  a requirement to disclose potential confl icts of interest and 

and prudent; and

potential related party contracts.

•  state that the fi nancial statements comply with IFRSs as adopted 

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’s code of ethics is further reinforced by a disclosure of 
interests and benefi ts policy, which applies to senior executives in the 
Group. This supplements similar policies that are in place in each of 
the segments. A new Code of Business Conduct is being developed, 
along with comprehensive plans to launch and embed this in every 
part of the part of the Group in the fi rst half of 2013.

Review of system of internal control
During the year, the Board, through the work of the Audit 
Committee, has conducted a review of the effectiveness of the 
Group’s system of internal control. There is an ongoing process for 
the identifi cation 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 fi nancial statements. This 
includes the process by which management prepares consolidated 
accounts. The work conducted by management and described on 
pages 51 and 52 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 confi rm that necessary actions have been or are being 
taken to remedy any signifi cant failings or weaknesses identifi ed 
from that review. The recent appointment of a new Director of 
Enterprise Risk and Audit was approved by the Audit Committee 
during the year in response to fi ndings from the Audit Committee’s 
ongoing review. The new approach to risk management and control 
that is being implemented in the current fi nancial year is set out in 
the Risk management section on pages 18 and 19.

Going concern
After making appropriate enquiries and taking into account the 
matters set out in the risk management section on pages 18 and 19, 
the Directors have a reasonable expectation that the Company and 

by the European Union.

The Directors confi rm that they have complied with the above 
requirements in preparing the fi nancial 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 fi nancial position of the 
Company and the Group, and for ensuring that the fi nancial 
statements and the Directors’ Remuneration Report comply with the 
Companies Act 2006 and, as regards the Group fi nancial 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 fi nancial statements 
may differ from legislation in other jurisdictions.

Disclosure of information to auditors
Each of the Directors who held offi ce at the date of approval of this 
Directors’ Report confi rms 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 offi ce at the date of this report, 
whose names and responsibilities are listed on pages 38 and 39, 
confi rm that, to the best of their knowledge:

•  the Group fi nancial statements, which have been prepared in 

accordance with IFRSs as adopted by the EU, give a true and fair 
view of the assets, liabilities, fi nancial position and profi t of the 
Group; and

•  the Directors’ Report contained on pages 4 to 67 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.

52

Thomas Cook Group plc Annual Report & Accounts 2012

Remuneration report

Rewarding	 
progress

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:

	Composition	of	the	Remuneration Committee	
	Terms	of	reference	of	the	Remuneration Committee

A. Governance
•	
•	
•	 Meetings
•	 Main	areas	of	focus
•	
•	
B. Policy and approach
•	
•	

Advisers
Evaluation

Remuneration	policy
	Overview	of	remuneration	structure	for Executive	
Directors

C. Remuneration by pay element
•	 Base	salary
Pensions
•	
Annual	bonus
•	
Long-term	incentives
•	
	Remuneration	arrangements	for	former	Executive	
•	
Directors
Shareholder	engagement
•	
Risk	assessment
•	
The	operation	of	historic	share	plans
•	
	Remuneration	arrangements	across	the Group
•	
Service	contracts
•	
•	
External	appointments
•	 Non-Executive	Directors
D. Audited information
•	 Directors’	interests	in	shares
•	

	Share	options	and	share	awards	under	long-term	
incentive plans

•	 Directors’	remuneration
•	 Directors’	pensions

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Dear Shareholder
After	another	year	of	great	challenge	and	significant	change	for	the	
Company,	I	am	pleased	to	report	on	Directors’	remuneration	for	the	
year	to	30	September	2012.

The	Committee’s	agenda	has	been	heavily	influenced	throughout	the	
year	by	the	Company’s	financial	circumstances,	which	are	detailed	
elsewhere	in	the	Directors’	Report.	I	am	satisfied	that	the	Committee	
has	responded	appropriately	to	all	challenges	and,	in	a	year	of	
transition,	that	important	reward	decisions	have	been	taken	to	secure	 
a	strong	leadership	who	are	incentivised	to	drive	the	business	recovery.	
We	have	engaged	with	shareholders	on	three	separate	occasions	during	
the	year	and	I	am	grateful	for	the	views	expressed	and	support	given.

Major	decisions	and	areas	of	activity	that	I	would	highlight	here,	 
and	which	are	more	fully	explained	in	this	remuneration	report,	are:

•	 The	remuneration	packages	of	Harriet	Green	and	Michael	Healy	
are	highly	performance	leveraged,	with	strong	alignment	to	
achievement	of share	price	targets	and	strategic	objectives.

•	 To	avoid	inappropriate	levels	of	windfall	gains,	and	to	manage	cost	
and	dilution,	share	awards	granted	during	the	year	to	other	senior	
executives	in	the business	have	been	significantly	scaled	back	from	
levels	awarded	in	previous	years.

•	 As	signalled	in	last	year’s	report,	the	Committee	determined	in	

December	2011	to	introduce	mandatory	deferral	with	claw-back	
rights	to	a	portion	of	annual	bonus	for	senior	leaders	across	the	
business.	This	has	been	implemented.

•	 The performance conditions in respect of awards made under the 
Performance	Share	Plan	and	the	Co-Investment	Plan	in	2009	and	
2010	have	not	been	achieved.	Accordingly,	these	awards	have	
lapsed	with	no	vesting.

•	 The	Committee	has	been	strengthened	by	the	appointment	 

of	Dawn	Airey	and	Martine	Verluyten	as	members.

•	 Following	a	selection	process,	the	Committee	also	appointed	
Deloitte	as	its	external	remuneration	adviser	during	the	year.

The	Committee	will	review	remuneration	policy	to	ensure	it	is	
aligned	to	the	future	needs	of	the	business	once	the	new	Company	
strategy	is	communicated	in spring	2013.	We	will,	of	course,	 
engage	with	our	major	shareholders	on	this matter.

The	Board	will	be	submitting	this	Report	for	approval	by	
shareholders	at	our	Annual	General	Meeting	on	7	February	2013.

Roger Burnell
Chairman,	Remuneration	Committee

27	November	2012

Thomas Cook Group plc Annual Report & Accounts 2012

53

 
 
 
 
 
 
 
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	CEO,	the	Group	Human	Resources	Director,	the	Group	
Company	Secretary	and	the	Group	Head	of	Reward.	Martine	
Verluyten	is	also	Chairman	of	the	Audit	Committee	and	as	such	
ensures	that	there	is	coordination	on	risk	and	accounting	issues.	
David	Allvey,	as	the	previous	Chairman	of	the	Audit	Committee,	
attended	meetings	prior	to	his	retirement	from	the	Board	on	 
8	February	2012.

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.	In	June	2012,	the	Committee	formally	appointed	Deloitte 
as	its	remuneration	adviser.	Since	the	appointment,	Deloitte	has	
provided	the	Committee	with	independent	advice	in	relation	to	
various remuneration policy matters and the external  
remuneration	environment.

Deloitte	is	a	member	of	the	Remuneration	Consultants	Group	and	 
as such voluntarily operates under the code of conduct in relation  
to	executive	remuneration	consulting	in	the	UK.

Other	parts	of	Deloitte	have	provided	consulting	services	in	relation	
to	systems	and	organisational	design	projects	and	general	tax	and	
corporate	finance	advice	to	the	Company.

Alithos	Limited	(‘Alithos’)	provided	advice	on	the	performance	of	the	
total	shareholder	return	(‘TSR’)	targets	attached	to	the	Company’s	
long-term	incentive	schemes.	The	Committee	also	received	advice	
from	Linklaters	LLP	(‘Linklaters’)	in	relation	to	the	Group’s	executive	
share	schemes	and	Towers	Watson	&	Co.	(‘Towers	Watson’)	provided	
advice	in	respect	of	the	benchmarking	criteria	to	be	applied	to	the	
remuneration	of	the	Group	CEO	and	Group	CFO.	Linklaters	provide	
the	Company	with	tax	and	legal	advice	in	Germany	as	well	as	
providing	advice	to	Trustees	on	the	Thomas	Cook	Pension	Plan.	
Towers	Watson	act	as	actuaries	to	the	Thomas	Cook	Pension	Plan.

Evaluation
During	the	Year,	the	Board	undertook	an	external	Board	and	
Committee	evaluation,	details	of	which	are	on	page	45.	The	Board	
concluded	that	there	had	been	a	marked	improvement	in	the	
effectiveness	of	the	Committee	during	the	year	and	that	significant	
progress	had	been	made	in	a	number	of	areas,	as	detailed	in	the	
letter	from	the	Chairman	of	the	Committee	on	page	53.

Remuneration report continued

A. Governance
Composition
The	following	Independent	Non-Executive	Directors	are	members	 
of	the	Remuneration	Committee	(the	‘Committee’):

Roger	Burnell	(Chairman)
Dawn Airey
Martine	Verluyten

During	the	year	ended	30	September	2012	(the	‘Year’),	Peter	
Middleton	was	Chairman	of	the	Committee	and	Bo	Lerenius	was	a	
member	until	their	resignation	from	the	Board,	at	the	conclusion	 
of	the	Group’s	Annual	General	Meeting,	on	8	February	2012.	Peter	
Middleton	was	replaced	by	Roger	Burnell	as	Chairman	of	the	
Committee	and	the	composition	of	the	Committee	was	further	
refreshed	with	the	appointment	of	Dawn	Airey	and	Martine	
Verluyten	as	Committee	members,	effective	from	8	February	2012.

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;	and

•	 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.

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

Meetings
The	Committee	held	four	scheduled	and	nine	unscheduled	
supplementary	meetings	during	the	Year.	Attendance	at	the	
scheduled	meetings	is	disclosed	on	page	42	of	the	Corporate	
Governance	Report.

Main	areas	of	focus
Matters	discussed	by	the	Committee	during	the	Year	included:

•	 reward	arrangements	for	the	Group	Chief	Executive	Officer	 

and	Group	Chief	Financial	Officer;

•	 departure	terms	for	the	former	Group	CEO;

•	 the	Group’s	remuneration	policy;

•	 introduction	of	deferral	and	claw-back	provisions	in	respect	 

of	the	annual	bonus	arrangements	for	the	Year;

•	 remuneration	of	senior	management	personnel;

•	 UK	Government’s	proposals	on	executive	remuneration;

•	 views	expressed	during	consultations	with	institutional	

shareholder	and	governance	bodies	in	respect	of	performance	
targets	for	long-term	incentive	share	awards;

•	 annual	bonus:	outcome	of	the	annual	bonus	targets	for	Executive	

Directors	in	respect	of	the	previous	financial	year	and	the	
structure,	performance	measures	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	2009,	2010	and	2011	
and	grant	policy	and	approval	of	grants	of	new	awards,	in	line	
with	dilution	limits	and	institutional	shareholder	guidelines;

•	 review	of	risk	in	remuneration	arrangements;	and

•	 appointment	of	Deloitte	LLP	(‘Deloitte’)	as	the	Committee’s	

remuneration	adviser.

54

Thomas Cook Group plc Annual Report & Accounts 2012

B. Policy and approach
The	Committee	has	agreed	that	it	will	undertake	a	thorough	review	
of	the	remuneration	policy	following	the	completion	of	the	strategic	
review	in	spring	2013.	Detailed	below	is	a	summary	of	the	existing	
Executive	Director	remuneration	policy,	adopted	in	2007	and	
amended	periodically.

•	 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	proportion	of	fixed	and	variable	remuneration	will	typically	 

be	targeted	at	30%	fixed	and	70%	variable.

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.

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	and	benefits.	The	main	benefits	are	the	
provision	of	pension	contributions	or	allowances,	insured	benefits	
and	car	allowance.	The	only	component	of	executive	remuneration	
that	is	pensionable	is	base	salary.

In	benchmarking	the	separate	elements	of	remuneration	of	
Executive	Directors,	the	Remuneration	Committee	references	(i)	a	
bespoke	group	comprising	selected	travel	and	leisure	companies	of	
broadly	similar	size	to	the	Company	(ii)	a	group	with	similar	market	
capitalisation	levels	to	the	Company;	and	(iii)	a	group	with	similar	
revenue	levels	to	the	Company.

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.	This	will	be	implemented	in	respect	of	any	bonuses	
paid	to	senior	executives	for	the	Year	and	future	years.

•	 The	Group	will	look	to	retain	and	attract	Directors	and	senior	
executives	with	above	average	skills	and	leadership	potential.

Further	details	of	the	remuneration	of	the	Executive	Directors	in	
respect	of	the	Year	are	set	out	in	the	audited	section	of	this	report.

•	 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	balance	of	remuneration	for	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 or she 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;	and

–		the	seniority	of	the	Executive	Director	and	his	or	her	ability	 

to	influence results.

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Remuneration report continued

C. Remuneration by pay element

Element

Objective

Base salary

To	attract	and	retain	Executive	
Directors	of	the	quality	required.

Performance	period

Not	applicable

Further detail

Reviewed	annually,	with	regard	to	current	market	data	
and	relative	performance.

Retirement 
benefits

Positioned	to	ensure	broad	
competitiveness	with	market	practice.

Not	applicable

Reviewed	periodically	to	ensure	alignment	with	
market	practice.

Bonus

Designed	to	provide	a	focus	on	the	
business	priorities	for	the	Year	and	
reward	the	achievement	of	strategic	
objectives.	

One	year
See	below	for	details	

Reviewed periodically to ensure appropriateness of 
performance	measures	and	targets.	75%	of	bonus	will	
be	paid	as	cash	following	the	end	of	the	financial	year,	
in	accordance	with	the	performance	achieved.	
25%	of	the	bonus	will	be	delivered	in	the	form	 
of shares and will normally vest one year after  
the	payment	date	subject	to	claw-back	provisions.

Long-term 
incentive plans

Designed	to	align	the	interests	of	
Executive	Directors	with	those	of	
shareholders	and	give	keen	incentives	
to	perform	at	the	highest	levels	over	
the	longer-term.

Three years
See	page	57	for	details

Performance	conditions	aligned	with	turnaround	plans	
and	linked	to	share	price	growth	and	financial	targets.

Base	salary
In	accordance	with	the	Group’s	remuneration	policy,	the	base	 
salary	of	Executive	Directors	reflects	the	size	and	scope	of	their	
responsibilities.	A	review	of	market	rates	of	base	salary	and	total	
remuneration	for	Executive	Directors	was	conducted	during	the	Year	
in	advance	of	the	appointment	of	the	Group	CEO	and	Group	CFO.

The	annual	rates	of	base	salary,	as	at	27	November	2012,	for	the	
Executive	Directors	are	shown	in	the	table	below:

Role 
Name
Harriet	Green
Group	CEO
Michael	Healy Group	CFO

2012  
£‘000
680
480

2011  
£‘000	
–
–

Pensions
The	Committee	believes	that	the	Executive	Directors	should	be	
provided	with	competitive	post	retirement	benefits.	In	respect	 
of	the	Group	CEO	and	Group	CFO,	the	Company	contributes	an	
amount	equivalent	to	30%	and	25%	respectively	of	base	salary	 
each	year,	either	into	a	pension	scheme	or	as	a	cash	allowance.

Annual	bonus
The	Committee	believes	that	it	is	important	to	incentivise	Executive	
Directors,	by	ensuring	that	a	significant	portion	of	their	total	
remuneration	is	conditional	on	achievement	of	business	objectives	
across	both	annual	and	longer-term	time	periods.	An	annual	cash	
bonus	may	be	earned	for	the	attainment	of	stretching	performance	
targets.	These	targets	are	set	by	the	Committee	at	the	start	of	the	
financial	year	or	upon	appointment.	The	maximum	annual	bonus	
opportunity	is	determined	by	the	Committee	from	time	to	time,	
taking	account	of	the	internal	and	external	business	and	market	
context.	To	ensure	an	appropriate	balance	between	fixed,	short	and	
longer-term	pay	elements	and	being	mindful	of	market	benchmarks,	
the	Committee	has	reduced	the	ongoing	maximum	level	of	bonus	
payable	to	Executive	Directors	from	175%	to	150%	of	base	salary.	 
75%	of	any	bonus	earned	will	be	paid	following	the	end	of	the	
financial	year,	in	accordance	with	the	performance	achieved.	The	

remaining	25%	of	annual	bonus	will	be	delivered	in	the	form	of	
shares,	the	vesting	of	which	will	be	deferred	for	a	period	of	one	year	
from	the	payment	date	and	will	be	subject	to	claw-back	provisions.

The	Committee	determines	the	extent	to	which	it	considers	 
the	objectives	have	been	met	and	the	annual	bonus	payable.

Harriet Green
The	ongoing	maximum	bonus	payable	to	Harriet	Green	is	150%	 
of	base	salary,	although	for	the	initial	period	from	joining	on	 
30	July	2012	to	30	September	2013,	her	maximum	annual	bonus	is	
225%	of	base	salary	to	incentivise	significant	stretch	targets	linked	to	
the	transformation	plan.	The	bonus	payable	for	the	period	30	July	
2012	to	30	September	2012	shall	be	calculated	and	paid	based	on	
achievement	of	objectives	set	for	the	year	to	30	September	2013.	 
This	bonus	is	structured	as	20%	linked	to	the	attainment	of	strategic	
targets,	65%	linked	to	the	attainment	of	cash	and	EBIT	targets,	and	
15%	linked	to	the	attainment	of	people	and	engagement	targets.

Michael Healy
The	maximum	bonus	payable	to	Michael	Healy	is	150%	of	base	
salary.	For	the	Year,	his	bonus	was	time	apportioned	for	the	period	
served	and	structured	as	40%	linked	to	the	attainment	of	Group	
financial	targets,	35%	linked	to	the	attainment	of	Group	free	cash	
flow	targets,	and	25%	linked	to	the	attainment	of	personal,	financial	
and	functional	targets.

The	Committee	reviewed	achievement	against	these	objectives	and	
determined,	in	respect	of	the	period	that	Michael	Healy	was	a	
Director,	that	he	should	receive	a	bonus	of	6.25%	of	the	maximum	
bonus	opportunity	for	the	Year.

Michael	Healy’s	bonus	in	respect	of	the	year	to	September	2013	is	
structured	as	35%	linked	to	the	attainment	of	Group	EBIT	targets,	
35%	linked	to	the	attainment	of	Group	free	cash	flow	targets	and	30%	
linked	to	the	attainment	of	personal,	financial	and	functional	targets.

56

Thomas Cook Group plc Annual Report & Accounts 2012

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,	during	the	Year	the	Company	
operated	the	Thomas	Cook	Group	plc	Performance	Share	Plan	(‘PSP’)	
and	the	Thomas	Cook	Group	plc	Co-Investment	Plan	(‘COIP’).

In	September	2012,	the	Company	made	an	award	under	the	PSP	to	
Harriet	Green,	based	on	performance	conditions	explained	below.	
The	Committee	considers	that	it	is	essential	to	have	in	place	a	
coherent	reward	framework	for	the	leadership	team	and	therefore,	 
a	performance	share	award	was	also	made	to	Michael	Healy,	
recognising	his	critical	contribution	since	he	was	appointed	and	 
his	role	going	forward	in	delivering	the	Group’s	turnaround	plan.

During	the	Year,	the	Committee	operated	an	interim	grant	policy,	
when	making	awards	under	the	PSP	and	COIP,	pending	the	completion	
of	the	strategic	review	in	spring	2013.	The	drivers	for	this	interim	policy	
were	two-fold:

•	 Aligning	performance	conditions	with	current	business	priorities;	

The	Committee	believed	that	the	performance	conditions	attached	 
to	these	awards	needed	to	be	relevant	to	the	task	ahead,	including	
creating	value	to	shareholders	and	creating	a	strong	business	future	
through	the	transformation	and	the	development	of	a	strategic	plan	
to	be	announced	in	spring	2013.	

Accordingly,	for	Harriet	Green,	25%	of	her	award	is	based	on	a	
rebuilding	share	price	target,	20%	of	the	award	is	based	on	an	
outstanding	achievement	share	price	target	and	55%	of	the	award	 
is	based	on	create	a	strong	business	financial	performance	targets,	 
to	be	aligned	with	the	strategic	plan	to	be	announced	in	spring	2013.

The	allocation	of	the	performance	conditions	for	the	September	
award	for	Michael	Healy	were	set	such	that	when	taken	together	 
with	his	June	award	resulted	in	45%	of	the	total	award	being	based	
on	a	rebuilding	the	share	price	target	and	55%	based	on	create	a	
strong	business	financial	performance	targets	to	be	aligned	with	 
the	strategic	plan	to	be	announced	in	spring	2013.

Further details of the performance conditions attached to the 
September	2012	PSP	awards	are	included	in	the	table	below.

and

•	 Providing	awards	that	are	both	sustainable	and	appropriate	in	

terms	of	cost	and	dilution,	but	also	sufficient	to	attract	and	retain	
key	talent.

Following	consultation	with	the	Group’s	major	shareholders,	the	
Committee	approved	changes	to	the	performance	targets	attached	 
to	the	PSP	and	COIP	awards.

The	Committee	will	determine	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.

PSP awards to Executive Directors
In	June	2012,	the	Committee	approved	awards	to	the	Group	 
CFO	and	a	number	of	other	senior	executives.	To	avoid	potential	
inappropriate	levels	of	windfall	gains,	and	to	manage	cost	and	
dilution,	these	awards	were	significantly	scaled	back	from	levels	
awarded	in	previous	years.	This	award	will	vest	at	the	end	of	a	
three-year	performance	period,	based	on	a	share	price	target.	Full	
vesting	will	occur	if	the	share	price	is	100p	or	more.	Zero	vesting	if	
the	share	price	is	below	30p.	Vesting	will	increase	on	a	straight-line	
basis	from	30%	to	100%	for	share	prices	between	30p	and	100p.

Date of award

  Vesting	criteria

Performance	targets	over	three-year	period

September	2012

Rebuilding	share	price	 
growth	target

Full	vesting	for	share	price	of	100p	or	above.	Zero	vesting	for	share	price	below	30p.	Vesting	
will	increase	on	a	straight	line	basis	from	30%	to	100%	for	share	prices	between	30p	and	100p.

Create	a	strong	business	
financial	performance	targets

The	actual	measures	and	targets	will	be	determined	after	the	announcement	of	the	Group’s	
strategic	plan	and	further	consultation	with	shareholders	in	spring	2013.	There	will	be	a	30p	
share	price	underpin	attached	to	this	element	of	the	performance	target.	In	the	interim,	 
this	portion	of	the	award	will	be	subject	to	the	rebuilding	share	price	target.

Outstanding	achievement	
share	price	growth	target

Full	vesting	for	share	price	of	140p	or	above.	Zero	vesting	for	share	price	below	56p.	Vesting	
will	increase	on	a	straight	line	basis	from	0%	to	100%	for	share	prices	between	56p	and	140p.

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Remuneration report continued

Whilst	the	Committee	is	aware	that	the	approach	to	setting	the	
financial	performance	targets	after	the	award	has	been	granted	 
is	not	typical,	it	is	considered	that	this	is	the	most	appropriate	
approach,	which	ensures	that	the	conditions	support	the	delivery	 
of	the	strategic	plan	and	that	the	award	acts	as	a	genuine	incentive.	
This	approach	was	discussed	with	the	Group’s	largest	shareholders,	
who	were	broadly	supportive	of	the	approach.	The	Committee	
considers	that	the	vesting	criteria	set	out	on	page	57	provides	 
a	coherent	reward	framework	for	the	leadership	team;	2012	total	
awards	for	each	Executive	Director	are	weighted	45%	on	share	price	
growth	targets	and	55%	on	financial	performance	targets.

Award grants in 2012/13
It	is	the	Committee’s	intention	to	review	the	Company’s	
remuneration	policy	after	the	completion	of	the	strategic	review	in	
spring	2013.	The	future	operation	of	the	long-term	incentive	plans	
will	be	included	in	this	review	and	shareholders	will	be	asked	to	
approve	the	introduction	of	any	new	share	plans.

Remuneration	arrangements	for	former	Executive	Directors
Sam Weihagen
For	the	period	up	to	his	retirement	from	the	Board	on	30	July	2012,	
the	main	elements	of	Sam	Weihagen’s	compensation	comprised	base	
salary	of	£750,000,	maximum	annualised	bonus	of	175%	of	base	
salary,	a	pension	allowance	of	25%	of	base	salary	and,	due	to	the	
interim	nature	of	his	contract,	he	received	accommodation	in	
London	and	regular	home	leave	flights.	He	did	not	receive	awards	
under	the	Company’s	long-term	incentive	plans. For	the	period	from	
30	July	2012	to	30	September	2012,	Sam	Weihagen	received	base	
salary	only,	plus	accommodation	and	home	leave	flights.	The	bonus	
arrangement	in	respect	of	Sam	Weihagen	reflected	the	special	
circumstances	and	uncertain	tenure	of	his	appointment	as	Group	
CEO.	Targets	related	to	financial	performance,	leadership	of	strategic	
and	change	projects	and	of	the	Group	Executive	Board	and	his	
contribution	to	the	succession	process.	For	the	period	to	30	July	 
2012,	the	Committee	agreed	to	award	him	a	total	bonus	of	23%	 
of	his	maximum	bonus	opportunity.

Paul Hollingworth
Paul	Hollingworth	resigned	from	the	Board	and	from	his	role	as	
Group	CFO	with	effect	from	30	June	2012.	The	main	elements	of	 
his	compensation	comprised	base	salary	of	£480,000	per	annum,	 
a	maximum	annual	bonus	of	175%	of	base	salary	and	a	pension	
allowance	of	25%	of	base	salary.	No	other	payments	have	been	paid	
or	are	due	to	Paul	Hollingworth	since	his	resignation.	The	Committee	
determined	that	no	bonus	would	be	payable,	reflecting	the	overall	
financial	and	share	price	performance	of	the	Company.

Long-term incentives
The	performance	targets	for	all	outstanding	awards	under	the	PSP	
and	COIP	to	Sam	Weihagen	and	Paul	Hollingworth	were	tested	from	
the	date	of	award	to	the	date	of	cessation	of	employment.	As	these	
performance	tests	were	not	met,	these	awards	lapsed.	On	leaving	the	
Company,	Sam	Weihagen	had	six	months	in	which	to	exercise	his	
option	under	the	2007	PSP	award,	which	had	vested	in	2010.

Shareholder	engagement
During	the	Year,	the	Committee	consulted	with	the	Group’s	major	
shareholders,	both	in	respect	of	the	proposed	changes	to	the	
performance	targets	for	the	Company’s	long-term	incentive	share	
awards	made	in	June	2012	and	in	respect	of	the	performance	targets	
attached	to	long-term	incentive	awards	to	the	Group	CEO	and	the	
Group	CFO	in	September	2012.	In	addition,	Roger	Burnell	and	the	
Company	Chairman	met	with	a	number	of	major	shareholders	 
to	discuss	other	remuneration	matters,	including	the	proposed	
remuneration	package	of	the	new	Group	CEO.	The	meetings	were	
supportive and constructive and all matters raised were reported 
back	to	the	Board	at	its	next	meeting.	It	is	intended	to	continue	 
with	a	significant	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	structures	and	
incentives	were	appropriate	from	a	risk	management	perspective	
and	should	not	encourage	undue	risk	taking,	out	of	line	with	its	risk	
policies	and	systems.

Operation	of	historic	share	plans
Thomas Cook Group plc 2008 Co-Investment Plan (‘COIP’)
Under	the	COIP,	Executive	Directors	and	key	executives	were	required	
to	invest	a	portion	of	annual	bonus	in	the	purchase	of	shares	in	the	
Company,	referred	to	as	‘Lodged	Shares’.	During	the	Year,	the	
Committee	approved	a	number	of	changes	to	the	operation	of	the	
COIP.	Under	the	revised	terms,	to	manage	dilution	and	cost,	the	
maximum	investment	level	was	restricted	to	5%	of	gross	salary.	
Participants	are	awarded	Matching	Shares	based	on	their	level	of	
investment	and	continued	holding	of	Lodged	Shares.	Matching	
Shares	vest	at	the	end	of	the	three-year	performance	period,	subject	
to	the	satisfaction	of	the	performance	target.	Under	the	revised	terms	
of	the	COIP,	the	maximum	match	has	been	reduced	from	3.5	to	2	
Matching	Shares	for	every	Lodged	Share	held.

As	at	30	September	2012,	neither	of	the	Executive	Directors	held	any	
Lodged	Shares.	

Following	the	end	of	the	Year,	the	Committee	has	determined	that	it	
shall	make	no	further	awards	under	the	COIP,	pending	the	future	
review	of	remuneration	policy.

Vesting of awards under long-term incentive plans
The	performance	measurement	period	in	respect	of	awards	granted	
under	the	PSP	and	COIP	in	2009	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	November	2012,	the	Committee	
made	the	same	determination	in	respect	of	the	PSP	and	COIP	awards	
granted	in	2010,	as	it	was	clear	that	these	targets	would	similarly	not	
be	met.

Performance conditions attached to long-term incentive plans
Details	of	the	performance	conditions	attached	to	former	PSP	 
and	COIP	awards	are	included	in	the	table	on	page	59.	A	further	
explanation of the selection of the different performance measures 
is	given	on	page	60.

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Year	of	award

Vesting	criteria

  Performance	targets	over	three-year	period

Performance Share Plan

2010 and 2011

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

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.

•	 sector	specific	comparator	group	(see	page	60).

50%	–	Earnings	Per	Share

2009

50%	–	Total	Shareholder	Return	ranked	against	
the	comparator	group

50%	–	Earnings	Per	Share

Co-Investment Plan  

2010 and 2011

50%	–	Earnings	Per	Share

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%.

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.	

Full	vesting	for	adjusted	EPS	of	40p	or	above.	Zero	vesting	for	EPS	below	
35p.	Vesting	will	increase	on	a	straight	line	basis	from	25%	to	100%	of	
the	EPS	linked	part	of	the	initial	award	for	EPS	between	35p	and	40p.

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%.

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

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.

•	 sector	specific	comparator	group	(see	page	60).

2009

100%	–	Earnings	Per	Share

2009,	2010	and	2011 Return	On	Invested	Capital	achievement

Vesting	of	up	to	2.5	Matching	Shares	for	adjusted	EPS	of	40p	or	above.	
Zero	vesting	for	EPS	below	35p.	Vesting	will	increase	on	a	straight	line	
basis	from	0.5	Matching	Shares	to	2.5	Matching	Shares	for	EPS	between	
35p	and	40p	subject	to	the	ROIC	ratchet	(see	below).

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.

Total shareholder return
The	Committee	selected	relative	TSR	as	a	performance	condition	
under	the	2009,	2010	and	2011	PSP	and	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	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	on	page	60).	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.

Thomas Cook Group plc Annual Report & Accounts 2012

59

 
 
 
 
 
 
 
   
 
 
 
 
Remuneration report continued

The	sector	specific	comparator	group	applied	to	the	2010	and	2011	PSP	and	COIP	awards	consists	of	the	following	companies:

Company	name
ACCOR	S.A.
Air	France-KLM	S.A.
Avis	Europe	plc1
Carnival	Corp	&	plc
easyJet	plc
Flight	Centre	Limited
Holidaybreak	plc3
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

Company	name
Air	Berlin	PLC
Avis	Budget	Group,	Inc.
British	Airways	Plc2
Deutsche	Lufthansa	AG
Expedia,	Inc.
Hogg	Robinson	Group	plc
Intercontinental	Hotels	Group	PLC
Millennium	&	Copthorne	Hotels	Plc
Royal	Caribbean	Cruises	Ltd.
SAS	AB
Trigano	S.A.

Country	of	main	listing
Germany
US
UK
Germany
US
UK
UK
UK
US
Sweden
France

1	

2	

3	

	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.
	Holidaybreak	plc	(‘Holidaybreak’)	was	acquired	by	Prometheon	Holdings	(UK)	Limited,	a	wholly-owned	subsidiary	of	Cox	&	Kings	Limited,	by	means	of	a	Scheme	of	Arrangement,	
which	became	effective	on	27	September	2011.	Under	the	terms	of	the	PSP	and	COIP’s	performance	targets	the	position	of	Holidaybreak	was	established	at	the	date	the	scheme	
of	arrangement	became	effective	and	its	position	frozen.

Earnings per share
The	Committee	selected	EPS	as	a	performance	condition	under	 
the	2009,	2010	and	2011	PSP	and	COIP	as	it	is	regarded	as	a	good	
reflector	of	business	performance.

•	 PSP	and	COIP	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	2009,	2010	and	2011	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.

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.	As	at	30	
September	2012,	3,551,668	shares	were	held	in	the	Thomas	Cook	
Group	plc	2007	Employee	Benefit	Trust,	which	represents	10%	of	
share	incentive	awards	held	on	that	date	and	0.4%	of	the	total	issued	
share	capital.	These	shares	can	be	used	to	satisfy	share	awards	on	
vesting.	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	2012.

Remuneration	arrangements	across	the	Group
Thomas	Cook	Group	plc	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	target	a	given	level	of	
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.	Following	the	
announcement	of	the	strategic	review	in	spring	2013,	we	will	be	
reviewing	the	core	principles	and	all	aspects	of	remuneration	policy,	
to	align	them	with	the	confirmed	business	strategy,	leadership	
behaviours	and	Company	values.	Through	this	we	will	intensify	 
our efforts to ensure that:

•	 Employees,	including	the	Executive	Directors,	are	paid	

competitively	and	fairly	by	reference	to	the	local	market	rate,	
supported	by	appropriate	internal	and	external	benchmarking.

•	 Through	short	and	long-term	incentive	schemes,	which	operate	
throughout	the	organisation,	overall	pay	is	more	directly	and	
clearly	aligned	to	business	strategy	and	performance.

60

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•	 The	Company	offers	a	range	of	benefits	depending	on	employee	
location,	including	pensions,	flexible	benefits,	paid	annual	leave	
and	healthcare	insurance.

•	 The	Company	will	provide	increased	focus	on	offering	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.

•	 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.

•	 Through	annual	employee	surveys,	consultation	groups	and	other	
feedback	forums,	the	Company	will	intensify	its	commitment	to	
understanding	employee	views	and	to	taking	these	views	into	
account	in	designing	reward	and	other	people-related	policies.

For	further	information	on	our	people	and	the	key	priorities	for	our	
people	agenda	in	the	year	ahead,	please	see	pages	32	to	34.

Service	contracts
Each	of	the	Executive	Directors,	who	served	during	the	Year,	has	or	
had	a	service	contract	with	the	Company.	The	date	of	the	current	
service	contract	and	the	notice	period	for	each	Executive	Director	 
are	set	out	below:

Name
Current Directors
Harriet	Green
Michael	Healy	
Former Directors
Sam	Weihagen
Paul	Hollingworth

Date of contract

30	July	2012
14	May	2012

2	August	2011
12	November	2009

Upon	joining	the	Company,	the	period	of	notice	required	to	be	given	
by	the	Company	to	Harriet	Green	was	24	months,	reducing	by	one	
month	for	every	month	served	until	18	months	have	elapsed	from	
her	appointment	date,	giving	an	ongoing	notice	period	of	six	
months.	This	was	considered	appropriate	in	order	to	secure	the	
appointment	of	Harriet	Green.	The	period	of	notice	required	to	 
be	given	by	Harriet	Green	to	the	Company	is	six	months.	Michael	
Healy’s	service	contract	can	be	terminated	on	six	months’	notice	by	
either	party,	with	notice	by	the	Company	not	to	be	given	earlier	than	 
six	months	from	the	date	of	appointment.

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.

Prior	to	his	retirement	from	the	Board	and	his	position	as	Group	 
CEO	on	30	July	2012,	the	notice	period	for	Sam	Weihagen	was	 
three	months	but	the	stated	intention	of	the	parties	was	that	the	
appointment	would	last	until	a	successor	was	selected.	On	24	May	
2012,	it	was	announced	that	Harriet	Green	would	succeed	Sam	
Weihagen	as	Group	CEO	effective	from	30	July	2012	and	that	Sam	
Weihagen	would	remain	with	the	Group	until	30	September	2012	 
to	ensure	a	seamless	transition.	Sam	Weihagen	did	not	receive	any	
additional	remuneration	from	the	Company	following	30	September	
2012.	Paul	Hollingworth	resigned	from	the	Board	and	his	role	as	
Group	CFO	on	30	June	2012.	The	notice	period	for	Paul	Hollingworth	
was	12	months;	however,	the	Committee	agreed	that	he	would	 
not	be	paid	for	any	of	his	notice	period,	beyond	the	date	he	left	 
the	Company.

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.

Harriet	Green	is	a	non-executive	director	of	BAE	Systems	plc	and	
Emerson	Electric	Co.	Both	roles	were	held	prior	to	her	appointment	
as	Group	CEO.	On	her	appointment,	the	Board	agreed	that	she	 
should	continue	to	serve	on	both	boards,	being	satisfied	that	she	will	
devote	sufficient	time	and	energy	to	the	Company	and	that	being	a	
non-executive	director	is	a	mutual	benefit	to	the	executive	and	the	
Company.	For	the	period	from	her	appointment	to	30	September	
2012,	she	received	fees	of	£17,240	and	$17,833	respectively,	which	
she	is	allowed	to	retain.

Whilst	serving	as	an	Executive	Director	of	the	Company,	Paul	
Hollingworth	was	a	non-executive	director	of	Electrocomponents	plc.	
For	the	period	1	October	2011	to	the	date	of	his	resignation	on	 
30	June	2012,	he	received	a	fee	of	£41,042	from	Electrocomponents	
plc,	which	he	was	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	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	2013.	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.

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s

Thomas Cook Group plc Annual Report & Accounts 2012

61

 
 
 
 
 
 
 
 
 
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,	which	contain	a	six	month	
notice	period.	The	appointments	under	these	letters	continue	until	
the	expiry	dates	set	out	below,	unless	terminated	for	cause	or	on	 
the	period	of	notice	detailed	above:

Name
Current Directors
Frank	Meysman
Dawn Airey
Emre	Berkin
Roger	Burnell
Peter	Marks
Martine	Verluyten
Former Directors
David Allvey
Michael	Beckett
Bo	Lerenius
Peter	Middleton

Date of latest letter 
of appointment

Expiry	date

1	October	2011
12 April 2010
1	November	2012
27 November	2012
1	October	2011
9	May	2011

N/A
11 April 2013
30	October	2015
2014	AGM
30	September	2014
8	May	2014

22	November	2010
10	September	2009
22	November	2010
30	November	2009

N/A
N/A
N/A
N/A

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	250	and	the	FTSE	All	Share	Travel	&	
Leisure	Index.	These	indices	were	chosen	as	comparators	because	 
the	Company	has	been	a	constituent	of	the	FTSE	All	Share	Travel	&	
Leisure	Index	throughout	the	period	since	listing	and	was	a	
constituent	of	the	FTSE	250	for	part	of	the	Year.	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	250	and	the	FTSE	All	Share	Travel	&	Leisure	
Index.	The	intermediate	points	are	the	spot	values	on	the	 
Company’s	financial	year	ends.

Thomas Cook
FTSE 250
FTSE All Share 
Travel and Leisure

Total shareholder return 

120

100

80

60

40

20

0

19 June 07

30 Sep 07

30 Sep 08

30 Sep 09

30 Sep 10

30 Sep 11

30 Sep 12

D. Audited information
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 2012
Executive Directors
Harriet	Green
Michael	Healy
Non-Executive Directors
Frank	Meysman
Dawn Airey
Roger	Burnell
Peter	Marks
Martine	Verluyten

Ordinary	shares	at	
30 September	2012

Ordinary	shares	at	1 October	
2011	or on	appointment

–
–

200,000
10,000
113,692
56,064
–

–
–

100,000
10,000
53,692
–
–

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	or	contingent	share	award	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	and	share	awards	under	the	PSP	and	COIP	are	awarded	as	‘nil	cost’.	

62

Thomas Cook Group plc Annual Report & Accounts 2012

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

Name
Harriet	Green
Michael	Healy

Paul	Hollingworth2

Sam	Weihagen2

Date of award
28	September	2012
12	June	2012
28	September	2012
12	February	2010
10	January	2011
12	July	2007
9	January	2009
12	February	2010
10	January	2011

Number	of	
options/shares	
awarded
6,237,488
500,000
2,000,000
411,134
486,815
61,387
227,394
315,979
198,621

Share	price	on	
date of award 
(pence)
17.5
16.5
17.5
229
195
297
194
229
195

Number	of	
options/shares	
lapsed
–
–
–
–
–
–
(227,394)
–
–

Total as at 
30 September	
Earliest	exercisable/
2012 or on date 
of	resignation
vesting date
6,237,488 28	September	2015
12	June	2015
2,000,000 28	September	2015

500,000

Expiration	date1
–
–
–
12	February	2013 12	February	2020
10	January	2021
10	January	2014
12	July	2017
12	July	2010
–
–
12	February	2013 12	February	2020
10	January	2021
10	January	2014

411,134
486,815
61,387
0
315,979
198,621

1	 No	expiration	date	is	applicable	to	the	awards	made	in	2012	as	these	were	made	as	contingent	share	awards.
2	

	On	leaving	the	business,	the	2009,	2010	and	2011	PSP	awards	held	by	Sam	Weihagen	and	the	2010	and	2011	PSP	awards	held	by	Paul	Hollingworth	were	tested	against	the	
performance	target.	As	these	performance	tests	were	not	met,	these	awards	lapsed.

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	Hollingworth1
Option	price	(pence)

Total	held	at	30 September	
2012	or	on date	of	resignation	
12,847

12	February	2010
12,847
234

1	

	On	leaving	the	business,	the	CSOSP	award	held	by	Paul	Hollingworth	lapsed	as	the	2010	PSP	award	made	in	conjunction	with	the	CSOSP	award	had	also	lapsed	due	to	the	
performance	target	not	being	met.	

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.

Vesting	of	awards	made	under	the	PSP	in	2009	(including	the	HMRC	approved	options),	was	dependent	on	50%	TSR	ranked	against	the	FTSE	
50	to	150	comparator	group	and	50%	growth	in	Earnings	Per	Share.	During	the	Year,	the	2009	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	2010	PSP	
awards	had	not	been	achieved	and	that	the	TSR	target	would	not	be	achieved.	Therefore,	the	PSP	awards	made	in	2010	have	lapsed.	Vesting	
of	awards	made	under	the	PSP	in	2011	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.	Vesting	of	awards	under	the	PSP	in	June	2012	is	
dependent	on	share	price	growth.	Vesting	of	awards	made	under	the	PSP	in	September	2012	is	dependent	on share	price	and financial	
targets.	Further	information	on	the	performance	conditions	is	detailed	on	pages	57	and	59.

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.	At	the	end	of	the	Year,	neither	Harriet	Green	nor	Michael	Healy	held	any	awards	under	the	COIP	 
and	have	not	been	included	in	the	table	below.

Name
Paul	Hollingworth1

Sam	Weihagen1

Date of award 
12	February	2010
21	May	2010
10	January	2011
12	January	2009
12	February	2010
21	May	2010
10	January	2011

Number	
of Matching	
Shares awarded
222,435
70,052
71,151
36,379
205,156
70,000
44,467

Number	
of Matching	
Shares lapsed
– 
– 
– 
(36,379)
– 
– 
– 

Total as 
at 30 September	
2012 or on date 
of resignation
222,435
70,052
71,151
0
205,156
70,000
44,467

Earliest	vesting	date
12	February	2013	
21	May	2013
10	January	2014
12	January	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

1	

	On	leaving	the	business,	the	2009,	2010	and	2011	COIP	awards	held	by	Sam	Weihagen	and	the	2010	and	2011	COIP	awards	held	by	Paul	Hollingworth	were	tested	against	the	
performance	target.	As	these	performance	tests	were	not	met,	these	awards	lapsed.

Vesting	of	Matching	Shares	awarded	under	the	COIP	in	2009	was	dependent	on	growth	in	EPS	and	Return	on	Invested	Capital	achievement.	
During	the	Year,	the	2009	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	2010	COIP	awards	had	not	been	achieved	and	the	awards	of	
Matching	Shares	have	lapsed.	Vesting	of	Matching	Shares	awarded	under	the	COIP	in	2011	is	dependant	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	page	59.

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	2012	and	27	November	2012,	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	2012	was	17.50p	and	the	range	during	 
the	Year	was	10.20p	to	56.65p.	These	mid-market	prices	are	as	quoted	on	the	London	Stock	Exchange.

Thomas Cook Group plc Annual Report & Accounts 2012

63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remuneration report continued

Directors’	remuneration
Details	of	the	remuneration	of	the	Directors	for	services	to	the	Company	for	the	Year	are	disclosed	below.

Name
Executive Directors
Harriet	Green3
Michael	Healy4
Non-Executive Directors
Frank	Meysman5
Dawn Airey
Roger	Burnell
Peter	Marks5
Martine	Verluyten
Past Executive Directors
Paul	Hollingworth6
Sam	Weihagen7
Past Non-Executive Directors
David Allvey8
Michael	Beckett9
Bo	Lerenius8
Peter	Middleton8,	10
Total11

Base	salary/
fees £000

Annual	bonus
payments
£000

Pension
 allowance1
£000

Payments	after	
service as   
a Director 
£000

Total 
emoluments 
2012 
£000

Total 
emoluments 
2011 
£000

Benefits2
£000

118
105

275
60
76
66
73

360
622

42
89
43
58
1,987

–
39

–
–
–
–
–

–
300

–
–
–
–
339

36
26

–
–
–
–
–

90
156

–
–
–
–
308

27
6

54
–
–
–
–

57
93

–
–
–
–
237

–
–

–
–
–
–
–

–
141

–
–
–
–
141

181
176

329
60
76
66
73

507
1,312

42
89
43
58
3,012

–
–

–
60
70
–
24

627
453

80
250
60
80
1,704

1	 The	pension	allowance	is	calculated	by	reference	to	level	of	base	salary.	 It	is	not	taken	into	account	when	calculating	bonus	or	long-term	incentive	targets..
2	

	Benefits	received	by	all	Executive	Directors	include	private	medical	benefits,	death	in	service	benefit	and	car	allowance.	Harriet	Green	additionally	receives	income	protection,	
personal	accident	cover	insurance	and	the	provision	of	accommodation	in	London	and	travel	costs	reimbursed	by	the	Company	and	the	personal	income	tax	assessed	by	HMRC	as	
payable	on	those	amounts.	Paul	Hollingworth	also	received	pay	in	lieu	of	holiday	entitlement.	The	figure	disclosed	for	Frank	Meysman	is	in	respect	of	accommodation	in	London	
and	travel	costs	reimbursed	by	the	Company	and	the	personal	income	tax	assessed	by	HMRC	as	payable	on	those	amounts.

3	 Harriet	Green	was	appointed	Group	CEO	on	30	July	2012.
4	

	Michael	Healy	joined	the	Company	on	14	May	2012	and	was	appointed	as	Group	CFO	on	1	July	2012.	The	figure	for	Michael	Healy	reflects	the	three	month	period	of	the	year	 
he	was	a	Director.

5	 Frank	Meysman	and	Peter	Marks	were	both	appointed	to	the	Board	on	1	October	2011.
6	 Paul	Hollingworth	left	the	Company	on	30	June	2012.
7	 Sam	Weihagen	stepped	down	as	Group	CEO	on	30	July	2012	but	remained	with	the	Company	until	his	retirement	on	30	September	2012.
8	 David	Allvey,	Bo	Lerenius	and	Peter	Middleton	retired	from	the	Board	at	the	conclusion	of	the	Company’s	AGM	on	8	February	2012.
9	
10	 	For	the	period	1	October	2012	to 8	February	2012,	Peter	Middleton	also	received	a	pension	of	£21,574	from	the	Thomas	Cook	Defined	Benefit	Pension	Scheme.	This	pension	is	

	Michael	Beckett	retired	from	the	Board	on	30	November	2011.

fully	funded	and	accrued	in	the	period	1987	to	1992	when	he	was	CEO	of	Thomas	Cook.

11	 	As	disclosed	in	last	year’s	remuneration	report,	the	former	Group	CEO,	Manny	Fontenla-Novoa,	left	office	on	2	August	2011	and	was	on	garden	leave	until	4	November	2011.	
During	the	Year,	he	received	£851,114	as	payment	in	lieu	of	the	balance	of	his	12-month	notice	period.	This	value	has	not	been	included	in	the	‘Total’	value	stated	in	the	
table above.

By	resigning	from	her	previous	position	to	join	the	Company,	Harriet	Green	forfeited	deferred	bonus	and	long-term	incentive	awards	granted	
by	her	former	employer.	To	help	in	securing	her	appointment,	the	Company	agreed	to	provide	a	measure	of	compensation	for	these	awards,	
based	on	an	independent	external	valuation	of	the	projected	vesting	level.	As	a	result,	the	Company	will	pay	Harriet	Green	cash	payments	 
of	£244,000	and	£292,000	in	April	and	July	2013	respectively,	such	dates	being	the	normal	vesting	dates	for	the	awards	made	by	her	 
former	employer.

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	30%	and	25%	of	annual	base	salary	in	respect	of	the	Group	CEO	and	Group	CFO	respectively.	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.

Both	Harriet	Green	and	Michael	Healy	receive	the	pension	contributions	as	cash	allowances.	For	the	period	1	October	2011	until	their	
resignation	from	the	Board,	both	Paul	Hollingworth	and	Sam	Weihagen	were	paid	an	amount	equivalent	to	25%	of	their	respective	 
annual	base	salaries	as	a	cash	allowance.

This	report	on	remuneration	has	been	approved	by	the	Board	of	Directors	and	signed	on	its	behalf	by:

Roger Burnell
Chairman,	Remuneration	Committee

27	November	2012

64

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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	at	 
30	September	2012
885,900,334
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	
2012.	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	19.875p.

On	10	May	2012,	the	Company	issued	Warrants	as	part	of	the	bank	
facility	amendment	announced	on	5	May	2012	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	5.0%	of	the	issued	share	capital	
of	the	Company	at	the	date	of	issue)	at	a	subscription	price	per	share	
of	€0.10.	In	addition,	the	Warrants	issued	as	part	of	the	bank	facility	
announced	in	November	2011	were	re-priced	to	the	same	exercise	
price.	As	at	26	November	2012,	two	Warrantholders	had	exercised	
their	Subscription	Rights	in	respect	of 15,966,244	Warrants.

Articles of Association
The	Company’s	Articles	of	Association	(the	‘Articles’)	may	only	 
be	amended	by	a	special	resolution	at	a	general	meeting	of	
shareholders.	The	Articles	are	available	on	the	Company’s	website	 
at	www.thomascookgroup.com.

Authority to purchase shares
The	Company	currently	does	not	have	authority	to	purchase	its	 
own	shares.

Share transfer restrictions
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.

D
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R
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D
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R
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F
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S
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Thomas Cook Group plc Annual Report & Accounts 2012

65

 
 
 
 
 
 
 
Provisions of change of control
The	Company	has	a	facilities	agreement	(the	‘Agreement’)	in	place	
which	consists	of	£1.2bn	term	and	revolving	credit	facilities	and	
£200m	bilateral	bonding	and	guarantee	facilities.	The	Agreement	
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,	unless	extended	by	agreement	for	a	further	
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,	2	December	2011	and	10	May	2012	did	not	affect	these	
provisions	regarding	change	of	control.

The	Company	also	has	outstanding	€400m	6.75%	guaranteed	notes	
due	2015	and	£300m	7.75%	guaranteed	notes	due	2017	(together,	
the	‘Notes’).	Upon	the	occurrence	of	certain	change	of	control	events	
relating	to	the	Company	(and	then	only	if	certain	rating	conditions	in	
respect	of	the	relevant	Notes	are	met),	each	holder	has	the	option	to	
require	the	Company	to	redeem	or	(at	the	option	of	the	Company)	to	
purchase	the	Notes	of	such	holder	at	par	value	plus	accrued	interest.

The	Company,	through	its	subsidiaries,	has	a	50.1%	stake	in	ITC	Travel	
Investments,	S.L.	as	part	of	a	joint	venture	with	VAO	Intourist.	Under	
the	terms	of	the	joint	venture	agreement,	if	a	change	of	control	of	
the	Company	occurs	in	certain	circumstances,	VAO	Intourist	is	
entitled	to	issue	an	irrevocable	notice	in	writing	requiring	the	
Thomas	Cook	Group	to	purchase	the	ITC	Travel	Investments,	S.L.	
shares	held	by	VAO	Intourist	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	(2011:	nil).

Charitable donations
The	Company	made	no	cash	donations	during	the	financial	year	 
(in	2011	the	Company	made	cash	donations	of	£5,000	to	Leeds	
Metropolitan	University	and	£25,000	to	Just	a	Drop	Charity).

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	2012,	the	Company	had	no	trade	creditors	 
(2011:	nil).	

Other	disclosures	continued

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	2012,	201,848	ordinary	shares	(0.023%)	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.

66

Thomas Cook Group plc Annual Report & Accounts 2012

Major shareholdings
As	at	26	November	2012,	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
Invesco	Ltd
Marathon	Asset	Management	LLP
BlackRock	Inc
AXA	S.A.
Lloyds	Banking	Group	plc
Massachusetts	Financial	Services	Company
Norges	Bank

Number	of	shares	
held as at 
26/11/2012
149,209,379
59,283,472
42,946,657
42,030,117
40,869,697
40,726,189
29,060,292

Percentage	of	issued	
capital	(%)	as	at	
26/11/2012
16.75
6.65
4.82
4.72
4.59
4.57
3.26

Number	of	shares	
held as at 
12/12/2011
45,085,133
59,283,472
42,946,657
42,030,117
40,869,697
40,726,189
–

Percentage	of	issued	
capital	(%)	as	at	
12/12/2011	
5.15
6.78
4.91
4.80
4.67
4.65
–

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	2013	Annual	General	Meeting.

The	Directors’	Report	comprising	pages	4	to	67	has	been	approved	and	is	signed	by	order	of	the	Board	by:

Derek Woodward
Group	Company	Secretary

27	November	2012

Registered office
6th	Floor	South
Brettenham	House
Lancaster	Place
London	WC2E	7EN

Registered number
6091951

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67

 
 
 
 
 
 
 
15 

transformation 
initiatives

100  

managers	focused	on	
the transformation

£100m 

	of	cost	savings	
identified	to	date

68

Thomas Cook Group plc Annual Report & Accounts 2012

Financial	Statements
Independent	auditors’	report	
70	

71	 Group	income	statement

72	

	Group	statement	of	 
comprehensive income

73	 Group	cash	flow	statement

74	 Group	balance	sheet

76	

77	

	Group	statement	of	changes	in	equity

	Notes	to	the	financial	statements

125	 Company	balance	sheet

126	 Company	cash	flow	statement

127	 	Company	statement	of	changes	in	equity

128	 	Notes	to	the	Company	financial	statements

134	 	Appendix	1	–	key	performance	indicators	definitions

135	 Shareholder	information

Collaboration	and	
communication
Our	employees	are	at	the	heart	of	delivering	great	
customer	service.	We	have	updated	our	core	values	
to	reflect	the	Company	we	are	becoming,	as	we	 
focus	on	more	efficient	ways	of	working,	better	
collaboration,	breaking	down	silos	and	
communicating	transparently.	

Rebuild

We	are	rebuilding	the	strength	of	our	business	and	
creating	a	fresh	culture	centred	on	our	customers	
and	our	core	values.	

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69

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

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;

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, set out on page 52, in relation to  

going concern;

•	 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; and

•	 certain elements of the report to shareholders by the Board  

on directors’ remuneration.

John Ellis (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London

27 November 2012

We have audited the financial statements of Thomas Cook Group plc 
for the year ended 30 September 2012 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 Directors’ Responsibilities Statement, 
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 
2012 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.

70

Thomas Cook Group plc Annual Report & Accounts 2012

Group income statement
For the year ended 30 September 2012

Year ended 30 September 2012

Year ended 30 September 2011

Revenue
Cost of providing tourism services
Gross profit
Personnel expenses
Depreciation and amortisation
Net operating expenses
Profit/(loss) on disposal of assets
Impairment of goodwill and amortisation of business 
combination intangibles
Profit/(loss) from operations

Share of results of associates and joint venture
(Loss)/profit on disposal of associates
Net investment income/(loss)
Finance income
Finance costs
Profit/(loss) before tax
Tax
Loss for the year

Attributable to:
Equity holders of the parent
Non-controlling interests

Loss per share (pence)

Basic
Diluted

All revenue and results arose from continuing operations.

notes
3

4
12/13
6
5

12
3

14
5
14
7
7
8
9

11
11

Separately
disclosed
items
(note 5)
£m
–
5.6
5.6
(42.6)
(12.3)
(115.9)
17.9

(328.1)
(475.4)

–
(0.9)
–
–
(21.7)
(498.0)

Underlying
results
£m
9,491.2
(7,421.5)
2,069.7
(1,108.6)
(159.6)
(645.4)
–

–
156.1

2.1
–
0.4
48.6
(194.5)
12.7

Total 
£m  
9,491.2  
(7,415.9) 
2,075.3  
(1,151.2) 
(171.9) 
(761.3) 
17.9  

(328.1) 
(319.3) 

2.1  
(0.9) 
0.4  
48.6  
(216.2) 
(485.3) 
(104.8) 
(590.1) 

(585.9) 
(4.2) 
(590.1) 

(67.2) 
(67.2) 

Separately
disclosed 
items 
(note 5)
£m
–
(62.3)
(62.3)
(55.1)
–
(135.2)
(4.6)

(313.0)
(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)
(756.3)
(4.6)

(313.0)
(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)

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71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group statement of comprehensive income
For the year ended 30 September 2012

Loss for the year

Other comprehensive income and expense
Foreign exchange translation losses
Actuarial (losses)/gains on defined benefit pension schemes
Tax on actuarial (losses)/gains

Fair value gains and losses
(Losses)/gains deferred for the year
Tax on (losses)/gains deferred for the year
Gains transferred to the income statement
Tax on gains transferred to the income statement
Total comprehensive expense for the year

Attributable to:
Equity holders of the parent 
Non-controlling interests
Total comprehensive expense for the year

Year ended
30 September
2012
£m
(590.1)

Year ended
30 September 
2011
£m
(518.0)

notes

29
35
9

29
9
29
9

(30.7)
(35.7)
12.3

(31.9)
7.7
(48.4)
12.1
(704.7)

(39.1)
41.0 
(17.0)

112.5 
(31.5)
(34.2)
9.7 
(476.6)

(700.5)
(4.2)
(704.7)

(479.3)
2.7 
(476.6) 

72

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group cash flow statement
For the year ended 30 September 2012

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 subsidiaries
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 from/(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
Proceeds on sale and finance leaseback
Proceeds on the issue of ordinary shares
Repayment of finance lease obligations
Net cash used in financing activities

Net increase 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 
2012
£m

Year ended
30 September 
2011
£m

notes

181.0
(29.1)
151.9

–
–
122.7 
34.0
32.4
(96.9)
(41.4)
2.4
(0.3)
(0.2)
52.7

(116.5)
(32.7)
(0.6)
869.2
(930.5)
(29.3)
189.4 
0.8 
(23.5)
(73.7)

130.9
341.7
(19.1)
453.5

460.3
(6.8)
453.5

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 

30

15

15

10

21 

18
20

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Thomas Cook Group plc Annual Report & Accounts 2012

73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 September
2012
£m

30 September
2011
£m

notes

12

13
13
13
14
14
25

17
22

16

17
22
18

27

35
19
20
21

26
22

27

3,158.9

3,550.0 

599.6
–
241.2
14.2
11.4
204.7
5.6
146.8
0.2
4,382.6

30.5
50.1
944.1
39.2
460.3
1,524.2
–
5,906.8

(6.8)
(2,008.5)
(37.8)
(32.6)
(90.4)
(1,094.1)
(201.5)
(68.4)
(3,540.1)
–

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)

Group balance sheet
At 30 September 2012

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

74

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

The financial statements on pages 71 to 124 were approved by the Board of Directors on 27 November 2012.

Signed on behalf of the Board

Michael Healy
Group Chief Financial Officer 

30 September
2012
£m

30 September
2011
£m

notes

35
19
20
21

25
26
22

28

29

(324.0)
(95.4)
(977.6)
(200.6)
(1.0)
(2.5)
(89.7)
(214.3)
(3.7)
(1,908.8)
(5,448.9)
457.9

60.0
29.2
1,546.5
225.7
8.5
(1,450.0)
(13.4)
406.5
51.4
457.9

(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 

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Thomas Cook Group plc Annual Report & Accounts 2012

75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group statement of changes in equity
For the year ended 30 September 2012

Opening balance at 1 October 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

Loss for the year 
Other comprehensive expense:
Foreign exchange translation losses
Actuarial losses on defined benefit pension schemes 
(net of tax)
Fair value gains and losses:
Loss deferred for the year (net of tax)
Gains transferred to the income statement (net of tax)
Total comprehensive expense for the year
Equity credit in respect of share-based payments
Purchase of own shares
Issue of shares
Release of merger reserve
Derecognition of put options to non-controlling interests
Acquisition of Co-op
Disposal of HCV
Disposal of Thomas Cook India
Exchange difference on non-controlling interests
Dividends
At 30 September 2012

Share capital 
& share
premium
£m
66.6 

Other 
reserves
£m
1,979.4 

Translation 
& hedging 
reserve
£m
299.5 

Retained
earnings/
(deficit)
£m
(626.9) 

Attributable 
to equity
holders of 
the parent
£m
1,718.6 

Non-
controlling
interests
£m
24.1 

Total
£m
1,742.7

–

–

–

–
–
–
–
–
21.8
–
–
–
–
88.4

–

–

–

–
–
–
–
–
 0.8
– 
–
–
–
–
–
– 
89.2

–

–

–

–
–
–
–
–
–
(366.4)
–
–
–
1,613.0

–

–

–

–
–
–
–
(0.1) 
–
(71.3) 
–
–
–
–
–
– 
1,541.6

–

(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

–

–

–
–
2.7
–
(8.2)
19.1
–
(2.6)
1.4
(0.2)
36.3

(39.1)

24.0

81.0
(24.5)
(476.6)
(3.2)
(28.8)
40.9
–
(0.5)
1.4
(92.7)
1,183.2

–

(585.9)

(585.9)

(4.2)

(590.1)

(30.7)

–

(30.7)

–

(23.4)

(23.4)

(24.2)
(36.3)
(91.2)
–
– 
– 
– 
–
–
–
–
–
 –
225.7

–
–
(609.3)
2.0
–
– 
71.3 
18.8
(61.4)
–
–
–
 –
(1,450.0)

(24.2)
(36.3)
(700.5)
2.0
(0.1) 
0.8 
– 
18.8
(61.4)
–
–
–
– 
406.5

–

–

–
–
(4.2)
– 
– 
–
–
–
36.7
(2.9)
(11.4)
(2.5)
(0.6) 
51.4

(30.7)

(23.4)

(24.2)
(36.3)
(704.7)
2.0
(0.1)
0.8 
– 
18.8
(24.7)
(2.9)
(11.4)
(2.5)
(0.6) 

457.9

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.

76

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Notes to the financial statements

General information

1 
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 4 to 35.

These consolidated financial statements were approved for issue by the Board of Directors on 27 November 2012.

Accounting policies

2 
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 on a going concern basis and 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.

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.

In addition, the Group has adopted the various amendments to International Financial Reporting Standards and the related Bases for 
Conclusions and guidance made in the International Accounting Board’s annual improvement process. The relevant IFRSs subject to  
Annual Improvements 2010 and applicable to the Group include:

IFRS 3

IFRS 7

IAS 1

IAS 27

IAS 34

Business Combinations

Financial Instruments: Disclosure

Presentation of Financial Statements

Consolidated and Separate Financial Statements

Interim Financial Reporting

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

IFRS 13

“Financial Instruments” is effective for annual reporting periods commencing on or after 1 January 2015. 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.

“Fair value measurement” is effective for annual periods beginning on or after 1 January 2013. This standard applies to 
IFRSs that require or permit fair value measurements or disclosures and provides a single IFRS framework for measuring 
fair value and requires disclosures about fair value measurement.

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.

Thomas Cook Group plc Annual Report & Accounts 2012

77

 
 
 
 
 
 
 
Notes to the financial statements continued

Accounting policies continued

2 
IAS 27 (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.

IAS 28 (revised)

“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.

IAS 32

“Offsetting financial assets and liabilities” is effective for annual periods beginning on or after 1 January 2014,  
and provides clarification on the application of offsetting rules.

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 (2011: three) SPEs that own four (2011: 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.

78

Thomas Cook Group plc Annual Report & Accounts 2012

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. 

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Thomas Cook Group plc Annual Report & Accounts 2012

79

 
 
 
 
 
 
 
Notes to the financial statements continued

2 
Accounting policies continued
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; impairment of goodwill and 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.

80

Thomas Cook Group plc Annual Report & Accounts 2012

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.

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81

 
 
 
 
 
 
 
Notes to the financial statements continued

Accounting policies continued

2 
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.

82

Thomas Cook Group plc Annual Report & Accounts 2012

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.

The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as  
a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised  
over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to 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:

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.

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83

 
 
 
 
 
 
 
Notes to the financial statements continued

Accounting policies continued

2 
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.

Segmental information

3 
For management purposes, the Group is currently organised into six geographic operating divisions: UK, Central Europe, West 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.

Following changes in management structure to transfer out East Europe businesses from the former West & East segment to the Central 
Europe segment, we have revised our segmental presentation and restated prior year segmental information to reflect the new structure.  
The Central Europe segment now includes the businesses in Poland, Hungary, the Czech Republic and Russia.

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.

84

Thomas Cook Group plc Annual Report & Accounts 2012

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Segmental information for these activities is presented below:

Year ended 30 September 2012
Revenue
Segment sales
Inter-segment sales
Total revenue

Revenue by product
Mainstream
Independent
Financial services
Inter-segment sales
Total revenue

Result
Underlying profit/(loss) from operations
Exceptional operating items
IAS 39 fair value re-measurement
Impairment of goodwill and amortisation of 
business combination intangibles
Segment result
Share of results of associates and joint venture
Loss on disposal of associates
Net investment income
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 business combination intangibles
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 
Europe
£m

Northern
Europe
£m

North 
America
£m

Airlines
Germany
£m

Corporate
£m

Total
£m

3,152.5
(43.1)
3,109.4

2,637.6
(51.1)
2,586.5

1,472.0
(4.6)
1,467.4

1,173.6
(6.5)
1,167.1

296.2
–
296.2

1,164.6
(300.0)
864.6

–
–
–

9,896.5
(405.3)
9,491.2

12.7
(87.9)
1.1

(108.3)
(182.4)

50.1
24.2
0.3

(2.7)
71.9

2.0
(35.0)
(0.2)

100.9
(5.5)
2.8

(22.3)
(18.8)
–

(94.4)
(127.6)

(13.2)
85.0

(109.5)
(150.6)

35.7
(1.0)
5.1

–
39.8

(23.0)
(32.4)
–

–
(55.4)

61.3
40.9
23.2
12.3
96.0
– 
–
–

11.2
3.1
6.2
2.7
–
– 
10.0
–

7.1
2.9
8.0
–
94.4
 0.6
6.2
–

17.3
15.6
1.5
13.2
–
– 
–
–

4.4
1.5
2.5
0.3
109.2
– 
1.3
0.6

239.3
61.6
0.3
–
–
– 
–
–

6.3
0.7
3.9
–
–
– 
5.1
–

7,095.7
2,707.3
93.5
(405.3)
9,491.2

156.1
(156.4)
9.1

(328.1)
(319.3)
2.1
(0.9)
0.4
48.6
(216.2)
(485.3)
(104.8)
(590.1)

346.9
126.3
45.6
28.5
299.6
0.6 
22.6
0.6

2,996.2

1,917.4

2,402.5

1,913.9

179.7

1,044.5

2,703.3

2,288.1

1,189.2

986.4

230.2

588.6

6,745.3 17,199.5
(11,567.3)
5,632.2
14.2
260.4
5,906.8

7,079.2 15,065.0
(11,045.8)
4,019.2
181.1
1,248.6
5,448.9

Thomas Cook Group plc Annual Report & Accounts 2012

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

Segmental information continued

3 
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 £2,955.4m (2011: £3,047.1m) 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 £2,884.7m (2011: £2,963.3m).

The total 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 £2,066.3m (2011: £2,247.2m).

Restated 
Central 
Europe
£m

2,600.2 
(53.8)
2,546.4 

UK
£m

3,281.8 
(26.8)
3,255.0 

Restated  
West   

Europe
£m

Northern 
Europe
£m

North 
America
£m

Airlines
Germany
£m

Corporate
£m

Total
£m

1,711.2 
(7.2)
1,704.0

1,159.2
(6.5)
1,152.7 

349.2 
–
349.2 

1,120.3 
(318.7)
801.6 

–
–
–

10,221.9 
(413.0)
9,808.9 

Year ended 30 September 2011
Revenue
Segment sales
Inter-segment sales
Total revenue

Revenue by product
Mainstream
Independent
Financial services
Inter-segment sales
Total revenue

Result
Underlying profit/(loss) from operations
Exceptional operating items
IAS 39 fair value re-measurement
Impairment of goodwill and 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

34.1 
(110.7)
1.6 

(219.6)
(294.6)

72.3
(9.0)
(0.4)

(1.2)
61.7 

37.9
(31.9)
2.3 

(2.2)
6.1

106.3 
–
(2.8)

(20.9)
82.6 

10.5 
(8.3)
–

(69.1)
(66.9)

69.3 
(3.3)
(6.6)

–
59.4 

(26.8)
(88.1)
–

–
(114.9)

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

49.4 
42.6 
19.6 
9.3 
210.3 
1.0 
9.9 

14.7 
6.5 
5.5 
1.2
–
–
–

18.8 
3.4
6.5 
2.2 
–
–
–

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 
–

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Thomas Cook Group plc Annual Report & Accounts 2012

7,495.6
2,611.4
114.9
(413.0)
9,808.9

303.6 
(251.3)
(5.9)

(313.0)
(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 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restated 
Central 
Europe
£m

Restated 
West  
Europe
£m

UK
£m

Northern
Europe
£m

North 
America
£m

Airlines 
Germany
£m

Corporate
£m

Total
£m

3,339.1 

1,081.0

1,548.8

1,841.5 

314.9 

920.5 

6,398.2 

2,592.3 

1,292.6

1,265.3

915.1 

206.0 

599.2 

5,509.3 

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)

2012
£m
969.8
139.4
2.0
8.5
–
31.5
1,151.2

15,444.0
(9,102.0)
6,342.0 
22.1 
325.7 
6,689.8 

12,379.8 
(8,315.4)
4,064.4
214.2 
1,228.0 
5,506.6 

2011
£m
950.9 
157.1 
(3.2)
19.1
(25.8)
25.2 
1,123.3 

* The defined benefit pension costs in the prior year are disclosed net of the curtailment gain on the UK defined benefit pension schemes. Further details are available in note 35.

The average number of employees of the Group during the year was:
UK
Central Europe
West Europe
Northern Europe
North America
Airlines Germany
Corporate

2012
Number
18,066
5,727
2,460
2,983
1,343
2,759
255
33,593

2011
Number
17,227 
3,669 
3,427 
2,794 
1,275 
2,517 
188 
31,097 

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 62 to 64 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. 

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Notes to the financial statements continued

5 

Separately disclosed items

Affecting profit from operations
Reorganisation and restructuring costs
Costs associated with refinancing
Impairment of goodwill and other intangible assets and amortisation of business combination intangibles
IAS 39 fair value re-measurement – time value component of option contracts
Other 

Affecting income from associates and JV
(Loss)/profit on disposal of associates

Affecting net finance costs
Write off of unamortised bank facility set-up and related costs
Other exceptional finance charges
IAS 39 fair value re-measurement – forward points on foreign exchange cash flow hedging contracts

Total separately disclosed items

2012
£m

2011
£m

(80.7)
(30.1)
(368.7)
 9.1
(5.0)
(475.4)

(73.7)
–
(396.9)
(5.9) 
(93.7)
(570.2)

(0.9)
(0.9)

10.3 
10.3 

(23.1)
(0.9)
 2.3
(21.7)

(0.9)
(2.9)
(9.1) 
(12.9)

(498.0)

(572.8)

Reorganisation and restructuring costs of £80.7m principally relate to the projects underway to transform the UK business (£35.8m), and  
turn around our underperforming businesses in West Europe (£26.9m) and North America (£15.8m).

Other items affecting profit from operations of £5.0m include further provision for the settlement of a dispute with HMRC (£12.2m), profit  
on disposal of assets of £17.9m (2011: loss of £4.6m) together with legal costs and gains and losses resulting from other exceptional operating 
events. The prior year charge includes the initial provision for the dispute with HMRC (£37.6m) and the impact of balance sheet reviews  
in the UK and France (£63.1m), partially offset by a net gain on pension plan curtailment (£24.5m).

Following poor trading and reviews by new management in Canada and France during the first half of the year and the decision to sell 
the Group’s Indian business, goodwill impairment losses totalling £299.6m were recognised in the West Europe (£94.4m), North American 
(£109.2m) and UK segments (£96.0m). The Group also wrote down the carrying value of purchased and internally generated computer 
software, prepaid marketing and licencing costs which were assessed as generating no future economic benefit for the Group, giving rise  
to a total impairment loss of £40.6m. The software was considered to be impaired as part of the Group’s review of its ecommerce offering.  
The marketing and licensing costs were sunk costs in relation to agreements to sell ticket and accommodation packages for the 2012 Olympic 
and Paralympic games, which management consider to have become onerous during the year. The sale of packages themselves generated  
a trading profit of £9.6m, which has been included within other separately disclosed items, with an overall net loss of £17.2m recognised.

Amortisation of business combination intangibles in the year was £28.5m (2011: £34.3m).

The £0.9m loss on disposal of associates relates to the disposal by Central Europe of a minority stake in one Egyptian hotel company.

88

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 

Net operating expenses

Advertising expenses
Rents and expenses for building maintenance
Information technology and telecommunication costs
Travel expenses and ancillary personnel expenses
Legal and consultancy fees
Impairment of current and non-current assets, excluding goodwill
Insurance
Training expenses
Other taxes
Other operating expenses

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 finance charges

2012
£m
178.5
159.6
125.7
92.3
77.5
53.9
13.2
11.4
3.8
45.4
761.3

2012
£m

0.4
6.8
41.4
–
48.6

(124.7)
(5.4)
(54.6)
(9.8)
(194.5)

(23.1)
(0.9)
(24.0)

2011
£m
180.5 
146.6 
124.0 
67.0 
49.0 
101.2 
15.7 
12.2 
33.6 
26.5 
756.3 

2011
£m

0.2 
5.3 
42.1 
0.3 
47.9 

(97.5)
(6.4)
(54.7)
(11.2)
(169.8)

(0.9)
(2.9)
(3.8)

IAS 39 fair value re-measurement
Forward points on foreign exchange cash flow hedging contracts

2.3

(9.1)

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89

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

Loss before tax

8 
Loss before tax for the year has been arrived at after charging/ (crediting):

Separately disclosed items affecting profit from operations (see note 5)
Including:

– Impairment of goodwill
– Impairment of other non-current intangible assets
–  Amortisation of business combination intangibles
Depreciation of property, plant and equipment:

– owned assets
– held under finance leases
Amortisation of intangible assets
Cost of inventories recognised as expense
Loss/(profit) on disposal of associates
Operating lease rentals payable:

– hire of aircraft and aircraft spares
– other

Net foreign exchange (gains)/losses
Personnel expenses (note 4)
Auditors’ remuneration

A more detailed analysis of auditors’ remuneration on a worldwide basis is provided below:

Audit of the Company’s annual accounts
Audit of subsidiaries
Total audit fees

Audit related assurance services
Other assurance services
Total assurance services
Tax compliance services
Services relating to taxation
Other non-audit services not covered above
Total other non-audit services
Total non-audit services
Total fees

2012
£m
475.4

299.6
22.6
28.5 

100.0
26.3
45.6
70.4
0.9

2011
£m
570.2

278.7
83.9 
34.3 

103.8
23.0 
40.3 
42.5 
(10.3)

103.1
121.5
(19.9)
1,151.2
6.0

128.5
112.2 
4.4 
1,123.3 
5.2 

2012
£m

0.4
2.3
2.7

0.3
1.1
1.4
0.1
0.1
 1.8
 1.8
3.3
6.0

2011
£m

0.3 
2.3 
2.6 

0.2
0.2
0.4
0.1 
0.1
2.1 
2.1 
2.6 
5.2 

In addition to the above, £69k (2011: £61k) 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 46 to 47 and includes an 
explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors.

90

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
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 for the year
adjustments in respect of prior periods

2012
£m

2011
£m

–
(3.8)
(3.8)
33.8
(3.1)
30.7
26.9

51.9
26.0
77.9

–
(6.8)
(6.8)
35.1 
0.3 
35.4 
28.6 

73.8 
17.4 
91.2 

104.8

119.8 

The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable  
to profits of the Company as follows:

Tax reconciliation
Loss before tax
Expected tax charge at the UK corporation tax rate of 25% (2011: 27%)
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

2012
£m

2011
£m

(485.3)
(121.3)
(18.3)
12.6
76.5
89.4
(4.9)
(12.5)
67.1
(11.6)
8.7
–
19.1
104.8

(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 

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 £32.1m has been credited directly to equity (2011: charge of £38.8m). UK corporation tax is calculated 
at 25% (2011: 27%) 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 £1,933.9m (2011: £1,427.3m) are available in the UK, France and Germany for offset  
against future profits.

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91

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

10  Dividends
The following dividends have been deducted from equity in the year:

2010 final dividend
2011 interim dividend

2012
£m
–
–
–

2011
£m
59.8 
32.7 
92.5 

On 29 September 2011 the Directors announced that they would not propose any further dividend payments whilst the Group rebuilds  
its balance sheet.

Earnings per share

11 
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 3.7m shares held by the employee share ownership trusts (2011: 3.8m).

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

Underlying basic and diluted earnings per share
Underlying net (loss)/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

2012
£m
(585.9)

millions
871.9
871.9

pence
(67.2)
(67.2)

2012
£m
(32.5)

millions
871.9
–
871.9

pence
(3.7)
(3.7)

2011
£m
(520.7)

millions
858.2 
858.2 

pence
(60.7)
(60.7)

2011
£m
100.3

millions
858.2 
1.9 
860.1 

pence
11.7 
11.7 

* 

 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 2012 of £12.7m  
(2011: £174.6m) and deducting a notional tax charge of £49.4m (2011: £71.6m).

**   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.

92

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 

Intangible assets

Goodwill
Business combination intangible assets
Other

Goodwill

Cost
At 1 October 2010
Additions 
Reassessment of goodwill
Exchange differences
At 30 September 2011
Additions (note 15)
Reassessment of goodwill (note 15)
Disposals
Exchange differences
At 30 September 2012

Accumulated impairment losses
At 1 October 2010
Impairment charge for the year
Exchange differences
At 30 September 2011
Impairment charge for the year
Disposals
Exchange differences
At 30 September 2012

Carrying amount
At 30 September 2012
At 30 September 2011

2012
£m
2,660.2
369.2
129.5
3,158.9

2011
£m
2,981.6 
393.3 
175.1 
3,550.0 

£m
3,327.2 
68.6 
(1.6)
(5.2)
3,389.0
83.0
7.7
(142.6) 
(81.8)
3,255.3

110.9 
278.7 
17.8 
407.4
299.6
(99.5) 
(12.4)
595.1

2,660.2
2,981.6 

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93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

Intangible assets continued

12 
The carrying value of goodwill is analysed by business segment as follows:

UK*
Central Europe
West Europe
Northern Europe
North America
Airlines Germany

2012
£m
1,746.0
130.8
31.6
731.8
–
20.0
2.660.2

2011
£m
1,868.0 
131.3
131.7
722.0 
106.9 
21.7 
2,981.6 

*  The carrying value of goodwill in the UK segment is comprised of the UK (£1,727.8m) and the Middle East (£18.2m).

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, Egypt, Central Europe, West 
Europe, Northern Europe, North America and Airlines Germany. See note 3 for details of changes to the Group’s CGUs during the year.

The future cash flow projections used to determine the value in use are based on the most recent annual budgets and three-year plans for 
each of the CGU’s. The key assumptions used to determine the Mainstream business’ budget and three-year plans relate to capacity and the 
pricing of accommodation and fuel inputs. Capacity is based on management’s view of market demand and the constraints to managing 
capacity such as aircraft lease commitments. The accommodation pricing is primarily driven by the underlying bed rate and the foreign 
exchange hedges in place. The former is based on the businesses’ ongoing dialogue with bed suppliers and local cost inflation. The fuel 
pricing assumption is primarily driven by the fuel hedges in place and the forward fuel curve at the time that the budget is set. The key 
assumptions used to determine the Independent business’ budget and three-year plans relate to passenger volumes and commission rates, 
and are based on the individual businesses’ view of the market conditions.

Cash flow forecasts for years beyond the three-year plan are extrapolated at an estimated average long-term nominal growth rate.

The other key assumptions used in the value in use calculations are as follows:

– a pre-tax discount rate of between 9.8% – 12.6% reflecting the specific risks of each CGU

– a long-term nominal terminal growth rate of 2% for all CGUs with the exception of Egypt (6%)

The decision to sell the India business and the deterioration in profitability of the French and Canadian businesses led to the reassessment  
of the carrying values of goodwill on those segments during the current year. The India business was classified as held for sale as at  
31 March 2012, and an impairment charge of £96.0m was calculated based on the fair value less cost to sell. The sale of the Indian business 
was subsequently completed in August 2012, see note 15 for further details. Value in use calculations were performed for the North America 
and West Europe segments as at 31 March 2012. As a result an impairment charge of £299.6m was recognised within impairment of goodwill 
and amortisation of business combination intangibles on the face of the balance sheet.

A breakdown of the impairment charge is presented below, along with the pre-tax discount rate and long term growth rate assumptions  
that were applied at 31 March 2012.

West Europe
North America
India

Goodwill
impairment
charge
£m
94.4
109.2
96.0
299.6

Pre-tax
discount rate
used 
%
9.23 
9.24 
n/a

Long-term
growth rate
1.0%
2.0%
n/a

94

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No additional impairments of goodwill were required as at 30 September 2012 (2011: £278.7m).

The value in use calculations performed as at 30 September 2012 indicate that the West Europe and North America CGU’s are no longer 
sensitive to reasonably possible changes in the key assumptions. However a reasonably possible change in the UK CGU future cash flows 
would result in the unit’s carrying amount exceeding the value in use.

As at 30 September 2012 the UK CGU’s value in use exceeds its carrying value by £229m based on a pre-tax discount rate of 10.1%. A key 
assumption made in the UK CGU’s budget and three year plan is the success of the UK turnaround plan, which is described in more detail  
on page 22 and is expected to deliver annualised benefits of £140m by 30 September 2014. A decrease in projected cash flow of £22m in  
year three of the value in use calculation will cause the UK’s value in use to equal its carrying value.

A 1% increase in the discount rate will result in a £178m decrease in the UK CGU’s value in use, whilst a 1% decrease in the discount rate will 
result in a £240m increase. A 1% increase in the growth rate will result in a £218m increase in the UK CGU’s value in use, whilst a 1% decrease 
in the growth rate will result in a £161m decrease. Neither of these changes applied individually will result in an impairment of the UK CGU.

Sensitivity analysis for the remaining segments has not been disclosed as management believe that any reasonable change in assumptions 
would not cause the carrying value of the CGUs to exceed their recoverable amount.

Business combination intangibles

Cost
At 1 October 2010
Additions
Exchange differences
At 30 September 2011
Additions (note 15)
Disposals
Exchange differences
At 30 September 2012

Amortisation
At 1 October 2010
Charge for the year
Exchange differences
At 30 September 2011
Charge for the year
Impairment
Disposals
Exchange differences
At 30 September 2012

 Carrying amount
 At 30 September 2012
 At 30 September 2011

Brands and
customer
relationships
£m

Order
backlog
£m

Computer
software
£m

Other
£m

Total
£m

484.0 
45.8 
(4.3)
525.5
27.1
(26.0) 
(4.0)
522.6

106.1 
30.7 
(1.5)
135.3
27.3
0.6
(9.9) 
0.4
153.7

41.0 
0.5 
–
41.5
1.5
– 
(0.1)
42.9

41.0 
0.5 
–
41.5
1.2
– 
– 
(0.1)
42.6

15.7 
–
(0.1)
15.6
–
– 
0.1
15.7

12.8 
3.0 
(0.2)
15.6
–
– 
– 
0.1
15.7

3.6 
–
(0.3)
3.3
–
(2.9) 
(0.4)
–

0.1
0.1 
–
0.2
–
– 
(0.2) 
–
–

544.3 
46.3 
(4.7)
585.9
28.6
(28.9) 
(4.4)
581.2

160.0 
34.3 
(1.7)
192.6
28.5
0.6
(10.1) 
0.4
212.0

368.9 
 390.2

 0.3
–

–
–

– 
 3.1

369.2 
393.3 

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 four years. 
Order backlog has been amortised over the period from acquisition to departure. 

Indefinite-lived intangible assets principally comprise those trademarks for which there is no foreseeable limit to the period over which they 
are expected to generate net cash inflows. These are considered to have an indefinite life, given the strength and durability of our brands  
and the level of marketing support. The nature of the industry we operate in is such that brand obsolescence is not common if appropriately 
supported by advertising and marketing spend. The Group annually tests the carrying value of indefinite-lived intangibles for impairment  
on a value in use basis consistent with that disclosed for goodwill earlier in this note.

Thomas Cook Group plc Annual Report & Accounts 2012

95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

Intangible assets continued

12 
The carrying value of brands with an indefinite life is analysed by business segment as follows:

UK
Central Europe
West Europe
Northern Europe
North America

Other intangible assets

Cost
At 1 October 2010
Additions
Acquisitions (note 15)
Transfer to non-current assets held for sale (note 27)
Disposals
Exchange differences
At 30 September 2011
Additions
Reclassification
Disposals
Exchange differences
At 30 September 2012

Amortisation
At 1 October 2010
Charge for the year
Impairment losses
Disposals
Exchange differences
At 30 September 2011
Charge for the year
Impairment losses
Reclassification
Disposals
Exchange differences
At 30 September 2012

Carrying amount
At 30 September 2012
 At 30 September 2011

2012
£m
70.6
27.3
20.6
134.7
23.9
277.1

Computer software and 
concessions

Purchased
£m

Internally
generated

£m  

Other

Purchased
£m

248.8 
38.7 
0.1 
(0.1)
(1.2)
(1.2)
285.1
6.3
(16.0)
(115.4)
(19.8)
140.2

117.7 
14.4 
83.4 
(0.9)
(1.6)
213.0
11.6
14.9
(2.8) 
(113.8)
(16.8)
106.1

175.1  
31.8  
–  
–  
(0.4) 
(0.2) 
206.3  
34.9  
17.1  
(24.4) 
(6.2) 
227.7  

95.6  
20.4  
0.5  
–  
–  
116.5  
26.0  
7.7  
2.8  
(12.7) 
(3.0) 
137.3  

20.4 
1.0 
–
–
–
–
21.4
0.2
–
(0.7)
(0.4)
20.5

2.7 
5.5 
–
–
–
8.2
8.0
–
– 
(0.7)
–
15.5

2011
£m
70.6 
26.0
22.3
132.9 
23.4 
275.2 

Total
£m

444.3 
71.5 
0.1 
(0.1)
(1.6)
(1.4)
512.8
41.4
1.1
(140.5)
(26.4)
388.4

216.0 
40.3 
83.9 
(0.9)
(1.6)
337.7
45.6
22.6
– 
(127.2)
(19.8)
258.9

34.1
72.1 

90.4  
89.8  

5.0
13.2 

129.5
175.1 

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. 

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Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
   
 
 
 
13  Property, plant and equipment

Cost
At 1 October 2010
Additions
Acquisitions 
Transfer to non-current assets held for sale (note 27)
Revaluation
Disposals
Exchange differences
At 30 September 2011
Additions
Acquisitions (note 15)
Reclassification
Disposals
Exchange differences
At 30 September 2012

Accumulated depreciation and impairment
At 1 October 2010
Charge for the year
Provision for impairment 
Transfer to non-current assets held for sale (note 27)
Disposals
Exchange differences
At 30 September 2011
Charge for the year
Provision for impairment (note 5)
Disposals
Exchange differences
At 30 September 2012

Carrying amount
At 30 September 2012
At 30 September 2011

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

1,739.8 
97.6 
–
–
–
(62.8)
(2.4)
1,772.2 
276.9
–
–
(823.4)
(117.9)
1,107.8

1,084.6 
90.7 
9.9 
–
(49.9)
(1.7)
1,133.6 
94.9
–
(631.3)
(89.0)
508.2

17.0 
–
–
–
1.0 
–
–
18.0 
–
–
–
(16.6)
(1.4)
–

–
–
–
–
–
–
–
–
–
–
–
–

239.3 
3.1 
–
(64.2)
–
(0.1)
(1.0)
177.1 
3.5
1.1
–
(23.5)
(13.4)
144.8

70.5 
5.9 
–
(20.4)
–
(0.4)
55.6 
4.6
–
(8.9)
(5.0)
46.3

189.0 
11.5 
–
–
–
(4.5)
(0.6)
195.4 
8.7
7.3
–
(29.6)
(6.2)
175.6

121.3
11.0 
–
–
(3.6)
(0.2)
128.5 
11.0
–
(23.0)
(4.4)
112.1

266.1 
27.7 
0.5 
(52.8)
–
(7.7)
(1.3)
232.5 
16.4
2.3
(1.1)
(34.1)
(14.2)
201.8

166.5 
19.2 
–
(38.7)
(5.4)
(1.0)
140.6 
15.8
0.6
(25.0)
(9.4)
122.6

Other
Total
£m

694.4 
42.3 
0.5 
(117.0)
–
(12.3)
(2.9)
605.0 
28.6
10.7
(1.1)
(87.2)
(33.8)
522.2

358.3 
36.1 
–
(59.1)
(9.0)
(1.6)
324.7 
31.4
0.6
(56.9)
(18.8)
281.0

599.6
638.6 

–
18.0 

98.5
121.5 

63.5
66.9 

79.2
91.9 

241.2
280.3 

Freehold land with a cost of £24.3m (2011: £26.1m) has not been depreciated.

The net book value of aircraft and aircraft spares includes £311.3m (2011: £123.8m) in respect of assets held under finance leases.

The net book value of other property, plant and equipment includes £10.9m (2011: £12.7m) in respect of assets held under finance leases.

Capital commitments

Capital expenditure contracted but not provided for in the accounts

2012
£m
8.1

2011
£m
31.6

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 in December 2010. 

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97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

14  Non-current asset investments

Cost
At 1 October 2011
Disposals
Group’s share of associates’ and joint venture’s profit for the year
Interest received
Additional loan investment
Exchange differences
At 30 September 2012

Amounts written off or provided
At 1 October 2011
Disposals
Exchange differences
At 30 September 2012

Carrying amount
At 30 September 2012
At 30 September 2011

Other Investments

Associates and
joint venture
£m

Available-for-
sale financial
assets
£m

Loans &
receivables
£m

Total other
investments
£m

46.8 
(8.7)
2.1
–
0.3
(3.5)
37.0

24.7 
–
(1.9)
22.8

14.2
22.1 

9.8 
(0.8)
–
–
–
(0.7)
8.3

7.7 
(0.1)
(0.5)
7.1

1.2
2.1 

11.3 
–
–
(2.1)
1.0
–
10.2

–
–
–
–

21.1 
(0.8)
–
(2.1)
1.0
(0.7)
18.5

7.7 
(0.1)
(0.5)
7.1

10.2
11.3 

11.4
13.4 

Associates
Investments in associates at 30 September 2012 included a 40% interest in Activos Turisticos S.A, an incoming agency and hotel company 
based in Palma de Mallorca, Spain, and a 25% interest in Hotelera Adeje S.L., a hotel company based in Santa Cruz, Tenerife.

During the year, the Group disposed of its 25.1% interest in Oasis Company SAE, a hotel company in Egypt. The fair value of the consideration 
was £7.8m which will be received in quarterly instalments commencing in the next financial year.

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%.

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
Profit/(loss) for the year
Group’s share of associates’ and joint venture’s profit/(loss) for the year

2012
Joint venture
£m
57.0
(79.6)
(22.6)
(11.3)
8.2
0.4
0.2

2012
Associates
£m
97.2
(41.0)
56.2
16.4
51.2
3.9
1.9

2011
Joint venture
£m
75.3
(98.5)
(23.2)
(11.6)
9.5
(1.2)
(0.6)

2011
Associates
£m
157.8
(70.5)
87.3
24.2
96.0
(0.1)
(1.7)

The financial statements of the associated undertakings are made up at different times to that of the Group. For the purposes of applying the 
equity method of accounting the most recent financial statements of these undertakings and the management accounts are used to draw up 
the financial position and performance of each associate.

Other investments
During the year ended 30 September 2012, the Group recognised income from available-for-sale financial assets of £0.4m (2011: £0.5m). 
There is no active market for the available-for-sale financial assets, consequently they are recorded at cost.

Loans and receivables of £10.2m 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.

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Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15  Acquisitions and disposals
A list of the principal investments in subsidiaries, including the name, country of incorporation, description and proportion of ownership 
interest, is given in note 19 to the Company’s separate financial statements. All of the subsidiary undertakings have been consolidated in  
the Group accounts.

Acquisitions made during the year
Retail travel joint venture between Thomas Cook Group, The Co-operative Group and Midlands Co-operative
On 4 October 2011 the Group concluded the merger of its high street travel agency and foreign exchange business with those of The 
Co-operative Group and Midlands Co-operative, with the aim of combining two of the industry’s strongest brands to reach more customers 
and unlock synergy benefits. The Group acquired 66.5% of the new joint venture company with The Co-operative Group holding 30% and 
Midlands Co-operative Society holding 3.5%.

Details of the net assets acquired are set out in the table below:

Net assets acquired
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liability
Provisions

Less: non-controlling interest

Goodwill
Total consideration

Satisfied by:
Non-controlling interest in the joint venture
Contingent consideration

Fair value as at 
acquisition 
date
£m

23.4 
10.7
26.2
39.4
(136.4)
(1.1)
(4.9)
(42.7)
13.3
(29.4)
80.5
51.1 

50.0
1.1
 51.1

The purchase price of each asset component of the acquisition represents its 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 contingent consideration represents the fair value of the Group’s right and obligation to acquire the remaining shareholding at  
a value determined by profitability in 2016 or beyond and its obligation to ensure that the joint venture partners receive a minimum  
aggregate amount of dividend over the first five years of the joint venture’s operation.

The acquired business contributed revenue of £110.5m and a net loss of £6.0m to the Group for the period from acquisition to  
30 September 2012.

The goodwill of £80.5m reflects anticipated benefits and synergies expected by creating the UK’s largest high street travel network  
and increased in-house distribution of Thomas Cook’s own travel products.

The non-controlling interest represents their proportionate share of the identifiable net liabilities of the acquired business.

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99

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

15  Acquisitions and disposals continued
Tour Vital GmbH and Panameo GmbH
On 1 October 2011 the Group acquired 100% of the share capital of Tour Vital GmbH and Panameo GmbH, two Germany based tour 
operators specialising in holidays with an accompanying doctor and activity experience orientated holidays respectively. These acquisitions 
will allow the Group to expand into new product sectors. The consideration was £5.1m of which £2.3m has been paid in cash and £2.8m  
has been recognised in relation to an earn out to be settled by 1 April 2016.

Details of the net assets acquired are set out in the table below:

Net assets acquired
Intangible assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Provisions
Deferred tax liability

Goodwill
Total consideration

Satisfied by:
Cash paid
Contingent consideration

Fair value as 
at acquisition 
date 
£m

5.2
5.3
1.6
(7.9)
(0.1)
(1.5)
2.6
2.5
5.1

2.3
2.8
5.1

The purchase price of each asset component of the acquisition represents its 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 £30.2m and net loss of £1.0m to the Group for the period from acquisition to 30 September 2012.

The goodwill of £2.5m reflects the anticipated benefits arising from the acquisition of two specialist tour operators.

Adjustments to acquisitions made in the prior year
Algarve Tours – Agência de Viagens e Turismo, Lda
On 20 September 2011, the Group acquired 100% of Algarve Tours, an incoming agency based in Portugal for a cash consideration of £1.6m,  
of which £0.4m was paid in the current year. The fair value of net assets acquired was £1.0m, including £1.4m of cash and cash equivalents, and 
goodwill of £0.6m has been recognised, including the current year re-assessment impact of £(0.5)m. The Directors do not consider the fair value 
adjustments to be material to the Group. Consequently the prior year comparatives have not been restated as required by IFRS3 (revised).

ITC Travel Investments SL
During the year the fair value adjustments related to the ITC Travel Investments SL acquisition were finalised.  The Directors do not consider 
the fair value adjustments to be material to the Group. Consequently the prior year comparatives have not been restated as required by  
IFRS3 (revised).

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Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
The restatements would have had the following impact as at the date of acquisition (12 July 2011) and as at 30 September 2011.

Balance sheet
Intangible assets:

– Increase in goodwill

Decrease in trade and other receivables
Increase in trade and other payables

Net cash inflow from acquisitions

Net cash inflow from acquisitions
Cash consideration for shares
Payment of contingent and deferred consideration
Cash and cash equivalents acquired (net of overdraft)
Total consideration 

At date of
acquisition
£m

At 
30 September
2011
£m

8.0
(7.7)
(0.3)
–

Current year
acquisitions
£m

Gold Medal
£m

Algarve Tours 
£m

Think W3 Ltd 
£m

Hotels4U
£m

(2.3)
–
41.0
38.7

–
(4.0)
–
(4.0)

(0.4)
–
1.4
1.0

–
(2.5)
–
(2.5)

–
(0.8)
–
(0.8)

8.2
(7.9)
(0.3)
–

Total
£m

(2.7)
(7.3)
42.4
32.4

Disposal of businesses during the year
HCV
On 27 July 2012, the Group completed the sale of its interest in Hoteles y Clubs Vacaciones S.A.(HCV) to IBEROSTAR Hoteles y Apartamentos 
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 received gross cash proceeds of €71.7m (£57.3m) for its shareholding.

The assets and liabilities related to HCV form a disposal group, however, HCV is not a discontinued operation at 30 September 2012,  
as it does not represent a major line of business.

Financial information related to the disposal is set out below:

Consideration received, net of costs
Less carrying amount of net assets disposed of
Less options over minority interest derecognised
Less share of translation reserve
Less non-controlling interests disposed of
Profit on disposal

Net cash inflow on disposal:
Consideration received, net of costs
Less cash and cash equivalents disposed of (net of overdraft)
Net cash inflow from disposal

£m
57.0
(30.9)
10.9
(0.2)
2.9
39.7

57.0
(2.2)
54.8

Thomas Cook India
On 21 May 2012, the Group announced that it had agreed to sell its 77% interest in Thomas Cook (India) Limited (“TCIL”) to Fairbridge Capital 
(Mauritius) Limited, a subsidiary of Fairfax Financial Holdings Limited.

The disposal was completed on 14 August 2012. The Group received gross cash proceeds of INR 8,174m for its shareholding; equivalent to 
INR 50 per share. Under the terms of the sale agreement the Group granted Fairbridge a licence over the Thomas Cook brand for 12.5 years 
in the countries in which TCIL currently operates.

The assets and liabilities related to TCIL form a disposal group, however, TCIL is not a discontinued operation at 30 September 2012,  
as it does not represent a major line of business.

During the current year the assets and liabilities of the disposal group were tested for impairment and remeasured to the lower  
of carrying amount and fair value less cost to sell. This resulted in goodwill being written down by £96.0m.

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101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

15  Acquisitions and disposals continued
Financial information related to the disposal is set out below:

Consideration received, net of costs
Less carrying amount of net assets disposed of
Less share of translation reserve
Less non-controlling interests disposed of
Loss on disposal

Net cash inflow on disposal:
Consideration received, net of costs
Less cash and cash equivalents balance disposed of (net of overdraft)
Net cash inflow from disposal

£m
85.0
(92.4)
(11.6)
11.4
(7.6)

85.0
(24.0)
61.0

Reisbureau Neckermann Nederland
On 1 October 2011, the Group completed the sale of its retail stores business in The Netherlands. The net cash proceeds on disposal of the 
business were £4.6m.

Explorers
On 30 March 2012, the Group disposed of the Explorers Hotel in France. The net cash proceeds on disposal were £2.3m.

2012
£m
7.2
23.3
30.5

2012
£m

0.1
35.5
106.6
2.9
1.7
–
146.8

317.3
62.1
494.9
2.6
 0.4
7.5
59.3
944.1

2011
£m
15.4
23.3
38.7

2011 
£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

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
Securities 
Amounts owed by associates and participations
Other taxes

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The average credit period taken on invoicing of leisure travel services is 15 days (2011: 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 
£20.8m (2011: £41.8m) of deposits on aircraft lease arrangements which are primarily attributable to the UK airline.

Securities include money market securities amounting to £1.7m (2011: £2.3m) 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 £96.9m (2011: £153.4m) were past due but not impaired.

The analysis of the age of these financial assets is set out below:

Ageing analysis of overdue trade and other receivables

Less than one month overdue
Between one and three months overdue
Between three and twelve months overdue
More than twelve months overdue

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

2012
£m
61.4
9.3
(3.9)
7.9
(8.3)
(10.1)
56.3

2012
£m
45.7
22.2
16.8
12.2
96.9

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

2012
£m
447.3
13.0
460.3

2011
£m
348.6 
10.7 
359.3 

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.

Included within the above balance are the following amounts considered to be restricted: 

•	 £80.5m (2011: £60.3m) held within escrow accounts in Canada, UK, Switzerland and the Czech Republic in respect of local  

regulatory requirements;

•	 £15.7m (2011: £11.6m) of cash held by White Horse Insurance Ireland Limited, the Group’s captive insurance company; and

•	 £7.8m (2011: £13.1m) of cash held in countries where exchange control restrictions are in force (Egypt, Lebanon, 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.

Thomas Cook Group plc Annual Report & Accounts 2012

103

 
 
 
 
 
 
 
 
 
 
 
 
2012
£m

2011
£m

1,221.1
3.2
76.5
537.9
169.8
2,008.5

5.5
89.9
95.4

2012
£m

0.6
6.8
7.4
30.4
37.8

1,124.4
5.7
74.0
603.1
201.0
2,008.2

6.4
36.0
42.4

2011
£m

93.1
17.6
110.7
68.8
179.5

30.4
977.1
0.5
1,008.0
(30.4)
977.6

68.8
672.9
294.9
1,036.6
(68.8)
967.8

Notes to the financial statements continued

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 85 days (2011: 59 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

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)

2012

2011

Current
£m
–
29.8
8.0
–
37.8

Non-current

£m  
280.6  
70.3  
15.1  
611.6  
977.6  

Current
£m
43.6
36.1
99.8
–
179.5

Non-current
£m
207.7
107.2
17.0
635.9
967.8

On 5 May 2012, the Group agreed a new financing package with its lenders, consisting of a total debt facility of £1,200m that extends the 
maturity of its financing until 31 May 2015. The new facility comprises a £150m term loan with no fixed repayments, a revolving credit 
facility of £850m and a super senior revolving credit facility of £200m. Following the disposal of the Group’s share in Thomas Cook (India) 
Limited, in August 2012 the super senior revolving credit facility was reduced by £89m to £111m. As at 30 September 2012, the £150m  
term loan (2011: £200m) was drawn down and £142m (2011: £69.3m) was drawn under the revolving credit facility.

The Directors consider that the fair value of the Group’s borrowings with a carrying value of £1,015.4m is £739.4m (2011: carrying value 
£1,147.3m; fair value £938.9m). 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 value of the issued bonds has been derived using the quoted market price as at  
30 September 2012. For items maturing in less than one year, the Directors consider that the fair value is equal to the carrying amount.

104

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
During the year £11.1m (2011: £6.3m) of the capitalised transaction costs have been recognised within finance costs in the income statement. 
In addition, following the agreement of the new financing package £22.3m of the capitalised fees associated with the old debt facility has 
been written off and included within ‘Separately disclosed items – finance costs’.

Borrowing facilities
As at 30 September 2012, the Group had undrawn committed debt facilities of £793.3m (2011: £780.7m), and undrawn committed debt 
facilities plus cash available to repay the revolving credit facility of £980.8m (2011:£781.4m). Whilst these facilities have certain financial 
covenants they are not expected to prevent full utilisation of the facilities if required. The Group has complied with its covenants  
throughout the year.

Covenant measures
The covenant measures are tested on a quarterly rolling 12 month basis and consist of a leverage covenant and a fixed charge covenant.  
The leverage covenant is a measure of pre-exceptional earnings before interest, tax, depreciation, amortisation and aircraft operating  
lease rentals compared to net debt. The fixed charge covenant is a measure of pre-exceptional earnings before interest, tax, depreciation, 
amortisation and operating lease charges compared to net interest and operating lease charges. The leverage and fixed charge covenant 
hurdles vary depending on the period that they relate to and range between 3.10x-6.10x and 1.35x-1.80x respectively.

21  Obligations under finance leases

Amounts payable under finance leases:
Within one year
Between one and five years
After five years

Less: future finance charges
Present value of lease obligations

Less: amount due for settlement within 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

Minimum lease payments

Present value of 
minimum lease payments

2012
£m

48.8
170.6
84.8
304.2
(71.0)
233.2

2011
£m

21.6  
54.3  
22.8  
98.7  
(18.0) 
80.7  

2012
£m

32.6
129.5
71.1
233.2
–
233.2

2011
£m

18.6
46.3
15.8
80.7
–
80.7

(32.6)

200.6

(18.6)

62.1

2012
£m
14.1
219.1
–
233.2

2011
£m
15.9
64.5
0.3
80.7

Finance leases principally relate to aircraft and aircraft spares.

During the year the Group received proceeds of USD 294.1m (£184.9m) from the sale and leaseback of 11 Boeing 757 aircraft and 2 Boeing 
767 aircraft with Guggenheim Aviation Partners LLC, and 6 Boeing 767 aircraft with Aircastle Advisor (International) Limited. The leaseback 
arrangements have been treated for accounting purposes as finance leases.

No arrangements have been entered into for contingent rental payments.

The Directors consider that the fair value of the Group’s finance lease obligations with a carrying value of £233.2m was £254.1m at  
30 September 2012 (2011: carrying value £80.7m; fair value £82.6m). 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 (2011: one) held under a finance lease was sub-let on an operating lease for the whole or part of the year.

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105

 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
Notes to the financial statements continued

Financial instruments

22 
Carrying values of financial assets and liabilities
The carrying values of the Group’s financial assets and liabilities as at 30 September 2012 and 30 September 2011 are as set out below:

At 30 September 2012
Non-current asset investments
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Obligations under finance leases
Provisions arising from contractual obligations
Derivative financial instruments

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
Provisions arising from contractual obligations
Derivative financial instruments

Derivative financial instruments
The fair values of derivative financial instruments as at 30 September 2012 were:

At 1 October 2010
Movement in fair value during the year
At 1 October 2011
Movement in fair value during the year
At 30 September 2012

Non-current assets
Current assets
Current liabilities
Non-current liabilities

Derivative
instruments 
in designated
hedging
relationships
£m
–
–
–
–
–
–
–
(36.1)
(36.1)

Derivative
instruments 
in designated
hedging
relationships
£m
–
–
–
–
–
–
–
42.1 
42.1 

Held
for trading
£m
–
–
–
–
–
–
–
3.4
3.4

Held
for trading
£m
–
–
–
–
–
–
–
(9.9)
(9.9)

Loans &
receivables
£m
10.2
471.2
460.3
–
–
–
–
–
941.7

Loans &
receivables
£m
11.3 
612.8 
359.3 
–
–
–
–
–
983.4 

Interest 
rate swaps
£m
(9.1)
6.1 
(3.0)
(0.6)
(3.6)

Currency 
contracts
£m
(32.6)
72.1 
39.5 
(74.3)
(34.8)

Financial 
liabilities at
amortised
cost 
£m
–
–
–
(1,913.2)
(1,015.4)
(233.2)
(371.3)
–
(3,533.1)

Available-
for-sale 
£m
1.2
1.7
–
–
–
–
–
–
2.9

Available-
for-sale
£m
2.1 
2.3 
–
–
–
–
–
–
4.4 

Financial 
liabilities at
amortised cost
£m
–
–
–
(1,832.3)
(1,147.3)
(80.7)
(357.4) 
–
(3,417.7)

Fuel 
contracts
£m
32.0
(36.3)
(4.3)
10.0
5.7

2012
£m
0.2
39.2
(68.4)
(3.7)
(32.7)

Total
£m
(9.7)
41.9 
32.2 
(64.9)
(32.7)

2011
£m
12.6 
117.2 
(88.2)
(9.4)
32.2 

106

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
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 2012 are set out below:

Financial assets
Currency contracts
Fuel contracts
Securities

Financial liabilities
Currency contracts
Fuel contracts
Interest rate swaps
At 30 September 2012

Level 1
£m

Level 2
£m

Level 3 
£m

–
–
1.7

–
–
–
1.7

25.9
13.4
–

(60.7)
(7.7)
(3.6)
(32.7)

–
–
–

–
–
–
–

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

–
–
2.3

–
–
–
2.3

73.6
56.3
–

(34.1)
(60.6)
(3.0)
32.2

–
–
–

–
–
–
–

Total
£m

25.9
13.4
1.7

(60.7)
(7.7)
(3.6)
(31.0)

Total
£m

73.6
56.3
2.3

(34.1)
(60.6)
(3.0)
34.5

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. The fair 
value of currency contracts designated in a cash flow hedge as at 30 September 2012 was a liability of £38.2m (2011: £49.4m asset).

Currency hedges are entered into up to a maximum of 18 months in advance of the forecasted requirement. As at 30 September 2012,  
the Group had in place currency hedging derivative financial instruments with a maximum maturity of November 2013.

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. All fuel hedges are designated  
as cash flow hedges.

Fuel price hedges are entered into up to a maximum of 18 months in advance of forecasted consumption of fuel. As at 30 September 2012, 
the Group had in place fuel price hedging derivative financial instruments with a maximum maturity of February 2014.

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. All interest rate swaps 
and cross currency interest rate swaps are designated as cash flow hedges.

As at 30 September 2012, 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  
30 September 2012.

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107

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

 22  Financial instruments continued
During the year, a gain of £48.4m (2011: £35.7m gain) 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 gain of £2.3m was 
recognised in the income statement in respect of the forward points on foreign exchange cash flow hedging contracts (2011: £9.1m loss) and 
a gain of £9.1m in respect of the movement in the time value of options in cash flow hedging relationships (2011: £5.9m loss).

Cost of providing tourism services:
– release from hedge reserve
– time value on options

Finance income/(costs):

– release from hedge reserve
– forward points on foreign exchange cash flow hedging contracts

2012
£m

48.3
9.1

0.1
2.3

2011
£m

40.6
(5.9)

(4.9)
(9.1)

During the year a loss of £4.7m (2011: £9.9m loss) 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 gain for the year of £19.9m  
(2011: £4.4m loss) which is included within cost of providing tourism services.

The closing hedging reserve, excluding the impact of tax, was a loss of £26.3m (2011: £54.0m gain). The periods in which the cash flows are 
expected to occur and when they are expected to impact the income statement are a loss of £25.3m (2011: £50.5m gain) within one year  
and a loss of £1.0m (2011: £3.5m gain) between one and five years.

Financial risk

23 
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 segments to identify and appropriately hedge all exposures in line with approved treasury policies designed to reflect the 
commercial risk of each underlying business. Each segmental hedging policy covers the hedge build up, instruments in use and further risk 
mitigation. The maximum hedge tenor is 18 months and in general each segment should achieve at least an 80% hedge ratio prior to the 
start of the season.

The Group uses currency forwards, currency swaps and 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 segments to identify and appropriately hedge all exposures in line with approved treasury policies designed to reflect the 
commercial risk of each underlying business. Each segmental hedging policy covers the hedge build up, instruments in use and further risk 
mitigation. The maximum hedge tenor is 18 months and in general each segment should achieve at least an 80% hedge ratio prior to the 
start of the season.

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.

108

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
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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 
2012, the sensitivity of these risks to the defined scenario changes are set out below:

Interest rate risk

1% (2011: 1%) increase in interest rates
0.25% (2011: 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

10% (2011:20%) increase in fuel price
10% (2011:20%) decrease in fuel price

2012

2011

Impact 
on profit
before tax
£m
1.2
(0.3)

Impact 
on equity

£m  
–  
–  

Impact 
on profit
before tax
£m
(7.1)
1.8

Impact 
on equity
£m
–
–

2012

2011

Impact 
on profit
before tax
£m
(12.4)
10.7
(18.1)
16.3

Impact 
on equity

£m  
19.0  
(15.5) 
56.9  
(52.5) 

Impact 
on profit
before tax
£m
11.2
(13.8)
7.2
(6.6)

2012

2011

Impact 
on profit
before tax
£m
0.1
(3.8)

Impact 
on equity

£m  
32.4  
(27.0) 

Impact 
on profit
before tax
£m
5.6
(15.5)

Impact 
on equity
£m
23.8
(21.3)
70.9
(63.9)

Impact 
on equity
£m
94.9
(78.0)

Given recent historical movements in fuel prices management believes a 10% shift is a reasonable possibility.

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 facility, the terms of which, including the covenant measures, are detailed in the borrowings note (refer to note 20).

The undrawn committed debt facility plus cash available to repay revolving credit facility ranged between £156m and £981m during the 
current financial year (2011: £188m-£1,098m).

Surplus 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 2012
Trade and other payables
Borrowings
Obligations under finance leases
Derivative financial instruments:

– payable
– receivable

Provisions arising from contractual obligations

Amount due

between 
3 and 12 
months
£m
141.6
27.0
36.4

between 
1 and 5 years
£m
111.6
1,180.3
170.6

in more than 
5 years
£m
3.0
0.7
84.8

Total
£m
1,913.2
1,219.4
304.2

in less than 
3 months
£m
1,657.0
11.4
12.4

2,264.3
(2,246.3)
31.7
1,730.5

1,007.0
(980.6)
127.8
359.2

10.1
(9.4)
183.9
1,647.1

–
–
29.7
118.2

3,281.4
(3,236.3)
373.1
3,855.0

Thomas Cook Group plc Annual Report & Accounts 2012

109

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

23 

Financial risk continued

At 30 September 2011
Trade and other payables
Borrowings
Obligations under finance leases
Derivative financial instruments:

– payable
– receivable

Provisions arising from contractual obligations

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 

in less than
3 months
£m
1,603.9 
143.5 
3.9 

1,858.3 
(1,843.6)
39.2
1,805.2

2,250.2 
(2,233.7)
106.1
316.3

397.7 
(395.8)
215.1
1,154.9

–
–
– 
456.4

Total
£m
1,832.3 
1,408.3 
98.7

4,506.2
(4,473.1)
360.4
3,732.8

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 £190.7m (2011: £218.3m) 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.

Insurance

24 
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.

110

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
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 2011
Net earned premium income
Premiums written
Claims incurred
Claims paid
At 30 September 2012

2012
£m

10.0
0.1
10.1

7.1
0.7
7.8

2012
£m

2.2
0.1
2.3

2.5
8.0
1.5
0.2
1.6
13.8

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

Deferred
income arising
from unearned
premiums
£m
2.0
(10.0)
10.5
–
–
2.5

Claims
accruals
£m
9.4
–
–
7.1
(8.5)
8.0

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111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

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 2010
(Charge)/credit to income
Charge to equity
Reclassifications
Acquisitions (note 15)
Transferred to assets held for sale
Exchange differences
At 30 September 2011
(Charge)/credit to income
Credit to equity
Reclassifications
Acquisitions (note 15)
Disposals (note 15)
Exchange differences
At 30 September 2012

Aircraft
finance
leases
£m
(1.7) 
(5.5)
–
–
–
–
–
(7.2)
(47.3)
–
–
–
–
–
(54.5)

Retirement
benefit
obligations
£m
70.2 
(12.2)
(17.0)
(1.5)
–
–
(1.4)
38.1 
(5.2)
12.3
2.7
–
–
0.8
48.7

Fair value
of financial
instruments
£m
5.5 
5.5 
(21.8)
–
–
–
5.1 
(5.7)
(7.5)
19.8
(4.2)
–
–
(0.3)
2.1

Other
temporary
differences
£m
(35.0)
(5.4)
–
1.5 
(9.1)
0.6 
0.2 
(47.2)
28.3
–
1.6
(2.6)
5.9
1.2
(12.8)

Tax losses
£m
256.0 
(73.6)
–
–
–
–
–
182.4 
(46.2)
–
(0.1)
–
–
(4.6)
131.5

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

2012
£m
(89.7)
204.7
115.0

Total
£m
295.0
(91.2)
(38.8)
–
(9.1)
0.6 
3.9 
160.4 
(77.9)
32.1
–
(2.6)
5.9
(2.9)
115.0

2011
£m
(120.9)
281.3 
160.4 

At the balance sheet date, the Group had unused tax losses of £2,460.2m (2011: £2,116.5m) 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 £1,933.9m 
(2011: £1,427.3m) 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 £253.5m (2011: £229.0m), also due to the unpredictability of future profit streams.

Deferred tax liabilities were offset against the corresponding deferred tax assets where both items fell within the responsibility of the same 
tax authority.

The deferred tax assets and liabilities at the year end, without taking into consideration the offsetting balances within the same jurisdiction, 
are £266.5 and £151.5m respectively.

The March 2012 Budget Statement announced a proposed reduction in the main rate of UK corporation tax from 26% to 24% from  
1 April 2012 and a further reduction to 23% effective from 1 April 2013. Finance Act 2012 included legislation confirming this rate change  
and the effect has been to reduce the deferred tax assets by £8.7m as at 30 September 2012 (2011: £9.2m). 

The Budget Statement also proposed a further reduction in the main rate of corporation tax in the UK to 22% by 1 April 2014. The overall 
effect of the further changes from 24% to 22%, if applied to the deferred tax balance at 30 September 2012, would be to reduce the deferred 
tax asset by approximately £5.5m.

112

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26  Provisions

At 1 October 2011
Additional provisions in the year
Unused amounts released in the year
Acquisitions (note 15)
Unwinding of discount
Utilisation of provisions
Disposals
Exchange differences
At 30 September 2012

Included in current liabilities
Included in non-current liabilities
At 30 September 2012

Included in current liabilities
Included in non-current liabilities
At 30 September 2011

Aircraft
maintenance
provisions
£m
216.0 
94.5
(0.9)
–
–
(52.9)
– 
(9.3)
247.4

81.0
166.4
247.4

73.2 
142.8 
216.0 

Other
provisions
£m
165.1 
86.1
(13.9)
6.1
4.9
(71.5)
(0.1) 
(8.3)
168.4

120.5
47.9
168.4

114.4 
50.7 
165.1 

Total
£m
381.1 
180.6
(14.8)
6.1
4.9
(124.4)
(0.1) 
(17.6)
415.8

201.5
214.3
415.8

187.6 
193.5 
381.1 

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

At 1 October 2011
Additional provisions
Unused amounts released
Acquisitions
Unwinding of discount
Utilisation of provisions
Disposals
Exchange differences
At 30 September 2012

Off-market 
leases 
£m
43.5 
0.3
–
–
2.8
(7.4)
– 
(5.5)
33.7

Insurance and 
litigation 
£m
36.8 
20.6
(5.6)
–
–
(15.3)
– 
(0.7)
35.8 

Reorganisation 
and 
restructuring 
plans 
£m
25.0 
40.3
–
0.3
–
(29.1)
– 
(0.7)
35.8

Deferred and 
contingent 
consideration 
£m
24.9 
1.2
(1.4)
3.7
2.1
(4.3)
–
–
26.2

Other 
£m
34.9
23.7
(6.9)
2.1
–
(15.4)
(0.1) 
(1.4)
36.9

Total 
£m
165.1 
86.1
(13.9)
6.1
4.9
(71.5)
(0.1) 
(8.3)
168.4

Off-market leases relate to leases acquired through the Hi!Hotels International Limited acquisition and The Co-operative Group and  
Midlands Co-operative, and MyTravel Group plc mergers, which have commitments in excess of the market rate at the time of the 
transaction. Insurance and litigation represents costs related to legal disputes, customer compensation claims and estimated costs arising 
through insurance contracts in the Group’s subsidiary, White Horse Insurance Ireland Limited. Reorganisation and restructuring plans 
predominantly represent committed restructuring costs in the UK and West Europe segments. Deferred and contingent consideration 
represents future purchase options on the Hotels4u.com Limited and Think W3 Limited acquisitions.

’Other’ represents liabilities where there is uncertainty of the timing or amount of the future expenditure required in settlement and includes 
such items as onerous contracts, dilapidations and emissions trading liabilities. This grouping contains no single category larger than £15m.

Provisions included in non-current liabilities are principally in respect of off-market lease contracts and 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.

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113

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

27  Non-current assets classified as held for sale

Assets
Property, plant and equipment:

– land and buildings
– other fixed assets

Intangible assets
Trade and other receivables
Tax assets
Inventories

Liabilities
Retirement benefit obligations
Trade and other payables
Borrowings
Obligations under finance leases
Tax liabilities
Revenue received in advance
Deferred tax liabilities

2012
£m

–
–
–
–
–
–
–

2012
£m

–
–
–
–
–
–
–
–

2011
£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

The non-current assets held for sale in 2011 relate to the assets and liabilities of Hoteles y Clubs Vacaciones S.A. (HCV) and a hotel property  
in Mexico. These have been disposed of in the current year.

28 

Called-up share capital

Allotted, called-up and fully paid
885,900,334 ordinary shares of €0.10 each (2011: 874,990,495)
Allotted, called-up and partly paid
50,000 deferred shares of £1 each, 25p paid (2011: 50,000)

2012
£m

60.0

–

2011
£m

59.2

–

Contingent rights to the allotment of shares
As at 30 September 2012, 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.

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 42,914,640 ordinary shares at a subscription price 
per share of 19.875 pence. On 10 May 2012 the Company issued warrants as part of the bank facility amendment announced on 5 May 2012 
to certain of its lenders giving holders the right, at any time until 22 May 2015, to subscribe for up to an aggregate of 43,749,516 ordinary 
shares at a subscription price per share of €0.10 per share. In addition, the warrants issued as part of the bank facility announced in 
December 2011 were re-priced to the same exercise price.

114

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 2012 by EES Trustees International Limited and Equiniti Share Plan Trustees Limited was 
3,551,668 (2011: 3,863,970) and 432,653 (2011: 128,316) respectively. The cumulative cost of acquisition of these shares was £13.4m  
(2011: £13.3m) and the market value at 30 September 2012 was £1.5m (2011: £1.6m). Shares held by the trust have been excluded  
from the weighted average number of shares used in the calculation of earnings per share.

Issue of company shares
A total of 10,909,839 warrants to subscribe for ordinary shares of the Group at a subscription price of €0.10 per share, were exercised  
during the year.

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.

The Group intends to strengthen its balance sheet and during the year it has already taken actions to do so, including the sale of non-core 
assets and the suspension of dividends. Reducing the level of debt remains a focus for the Group and as part of the Business Transformation, 
further measures are being put in place to achieve this.

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 £1,194.8m (2011: £2,037.8m).

29  Hedging and translation reserves

At 1 October 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
Foreign exchange translation losses
Fair value losses deferred for the year
Fair value gains transferred to the income statement
Tax on fair value gains and losses and transfers
At 30 September 2012

Hedging
reserve
£m
(16.4)
–
112.5 
(35.7)
(21.5)
38.9 
–
(31.9)
(48.4)
19.8
(21.6)

Available-
for-sale
investments
£m
(1.2)
–
–
1.5 
(0.3)
–
–
–
–
–
–

Translation
reserve
£m
317.1 
(39.1)
–
–
–
278.0 
(30.7)
–
–
–
247.3

Total
£m
299.5
(39.1)
112.5 
(34.2)
(21.8)
316.9 
(30.7)
(31.9)
(48.4)
19.8
225.7

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115

 
 
 
 
 
 
 
 
Notes to the financial statements continued

30  Note to the cash flow statement

Loss before tax
Adjustments for:
Finance income
Finance costs
Net investment (income)/loss
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
(Profit)/loss on disposal of assets
Share-based payments
Other non-cash items
Increase/(decrease) in provisions
Income received from other non-current investments
Additional pension contributions
Interest received
Operating cash flows before movements in working capital
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Cash generated by operations
Income taxes paid
Net cash from operating activities

2012
£m
(485.3)

2011
£m
(398.2)

(48.6)
216.2
(0.4)
0.9
(2.1)
126.3
45.6
28.5
323.4
–
(17.9)
2.0
–
23.1
0.4
(22.6)
5.8
195.3
6.7
40.8
(61.8)
181.0
(29.1)
151.9

(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 

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.

116

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
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
Obligations under finance leases

Total debt
Net debt

At 
1 October
2011
£m

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)

Cash flow
£m

Disposals  
£m

Exchange
movements
£m

Other
non-cash
changes
£m

At 
30 September 
2012
£m

120.9
120.9

10.0
65.6
4.0
73.9
(0.7)
0.1
22.5
175.4

(48.1)
0.9
(47.2)
128.2
249.1

–
–

–
18.3
–
–
21.1
–
0.1
39.5

–
0.3
0.3
39.8
39.8

(19.9)
(19.9)

0.8
4.6
–
1.9
1.7
–
1.6
10.6

37.0
11.5
48.5
59.1
39.2

–
–

460.3
460.3

–
–
–
(37.4)
–
–
(38.2)
(75.6)

(6.8)
(0.6)
–
(30.4)
–
–
(32.6)
(70.4)

1.3
(151.2)
(149.9)
(225.5)
(225.5)

(977.6)
(200.6)
(1,178.2)
(1,248.6)
(788.3)

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:

Within one year
Later than one and less than five years
After five years

Property 
and other 
2012
£m

Aircraft and 
aircraft spares
2012
£m

99.3
236.2
160.2
495.7

85.0
178.8
145.8
409.6

Total
2012
£m

184.3
415.0
306.0
905.3

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 

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.

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117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
2011
£m

2.8 
11.5 
1.4 
15.7 

Notes to the financial statements continued

32  Operating lease arrangements continued
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:

Property
2012
£m

Aircraft
2012
£m

Total 
2012
£m

Property
2011
£m

Aircraft
2011
£m

Within one year
Later than one and less than five years
After five years

Rental income earned during the year was:

1.7
4.2
1.2
7.1

2.8

4.7
–
–
4.7

6.3

6.4
4.2
1.2
11.8

9.1

2.8 
11.5 
1.4 
15.7 

–
–
–
–

4.7

3.6

8.3

Certain of the Group’s retail and other properties and aircraft, that are not being used in the Group’s businesses, are sub-let on the best terms 
available in the market for varying periods, with an average future committed period of 2.9 years for property (2011: 4.8 years) and 6 months 
for aircraft (2011: nil months).

At 30 September 2012, no aircraft held under operating leases (2011: nil) were sub-let by the Group.

33 

Contingent liabilities

Contingent liabilities

2012
£m
126.0

2011
£m
124.7

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.

Share-based payments

34 
The Company operates five equity-settled share-based payment schemes, as outlined below. The total charge recognised during the year in 
respect of equity-settled share-based payment transactions was £2.0m (2011: £3.2m income).

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), total shareholder 
return (TSR) and the Company’s share price 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), TSR and the Company’s share price 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.

118

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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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 
2012, 432,471 matching shares had been purchased (2011: 128,316).

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:

2012

Outstanding at beginning of year
Granted
Exercised
Cancelled
Forfeited
Outstanding at end of year
Exercisable at end of year

PSP

COIP

SAYE
17,480,878 5,991,751 5,608,535
–
18,157,456 2,332,514
–
–
–
(553,763) (3,206,060)
–
(124,071)
(9,077,106) (2,425,678)
26,561,228 5,344,824 2,278,404
–

174,233

–

CSOSP
774,594
–
–
–
(561,626)
212,968
–

RSP
513,304
–
(326,443)
–
(27,323)
159,538
159,538

Exercise price (£)
Average remaining contractual life (years)

nil
9.2

nil
8.7

1.81-1.88
1.3

1.97
8.3

nil
8.5

The weighted average share price at the date of exercise for the options exercised during the year ended 30 September 2012 was £0.17.

2011

Outstanding at beginning of year
Granted
Exercised
Cancelled
Forfeited
Outstanding at end of year
Exercisable at end of year

PSP

COIP

SAYE
18,686,727  8,600,129  7,294,552 
–
8,021,142  2,995,380 
–
–
(417,871)
(1,432,980)
–
(119,126)
(8,809,120)
(253,037)
(5,484,632)
17,480,878  5,991,751  5,608,535 
2,222,467 

174,233 

–

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.

Thomas Cook Group plc Annual Report & Accounts 2012

119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

Share-based payments continued

34 
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:

Weighted average share price at measurement date
Weighted average exercise price
Expected volatility
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

PSP
£0.17
nil
50%
3
0.3%
0%
£0.05

2012

COIP
£0.17
nil
50%
3
0.4%
0%
£0.04

2011

CSOSP
–
–
–
–
–
–
–

PSP
£1.70
nil
48%

COIP
£1.89
nil
48%

CSOSP
£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

RSP
–
–
–
–
–
–
–

RSP
£1.67
nil
31%
n/a 
n/a 
1
0.8%
7%
£1.56

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 £212.9m (2011: £188.6m) 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 the Northern Europe and West Europe segments.

The unfunded pension schemes are accounted for as part of liabilities for retirement benefit obligations in the balance sheet.

120

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
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

2012
%
4.14%
2.58%
1.51%

2011
%
4.99%
1.65%
1.50%

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 65 of 19 years  
for men and 23 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

2012
£m
8.5
–
(2.0)
(0.3)
10.9
17.1

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 losses/(gains)
Exchange difference
At end of year

2012
£m
227.8
8.5
–
10.9
(6.1)
(7.2)
(0.3)
37.1
(17.2)
253.5

2011
£m
11.2 
0.3 
(2.4)
–
11.3 
20.4 

2011
£m
239.1 
11.2 
0.3 
11.3 
(6.1)
(8.5)
–
(17.5)
(2.0)
227.8 

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

2012
%
4.32%
2.66%
5.49%
0.18%
0.42%

2011
%
5.13%
3.13%
5.78%
4.34%
2.86%

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121

 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

35  Retirement benefit schemes continued
The Thomas Cook UK Pension Plan accounts for approximately 86% (2011: 90%) of the total funded defined benefit obligations. The mortality 
assumptions used in arriving at the present value of those obligations at 30 September 2012 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 22.8 years  
for men and 25.9 years for women.

On 31 March 2011, the UK defined benefit schemes closed to all active members who were given the option of joining Thomas Cook’s 
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 was recognised in the income statement for the year ended 30 September 2011.

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 loss/(gain) included in the income statement

2012
£m
2.3
–
(41.4)
43.7
4.6

2011
£m
10.0 
(25.8)
(42.1)
43.4 
(14.5)

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 £63.9m (2011: £18.2m).

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
Disposal of businesses
Curtailments
Expenses paid
Contributions paid by plan participants
Actuarial losses/(gains)
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 gains/(losses)
Benefits paid
Transfers
Disposal of businesses
Expenses paid
Exchange difference
At end of year

122

Thomas Cook Group plc Annual Report & Accounts 2012

2012
£m
846.5
2.3
43.7
(19.8)
–
(1.2) 
–
(2.4)
0.2
21.1
(2.2)
888.2

2012
£m
743.3
41.4
28.7
0.2
22.5
(19.8)
–
(1.1) 
(2.4)
(1.9)
810.9

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 

 
 
 
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 2012 Thomas Cook UK paid four instalments totalling £22.3m in line 
with the recovery plan. As at 30 September 2012, the 2011 actuarial valuation had not been finalised. Since the year end, Thomas Cook UK 
has reached agreement with the pension trustees. It has agreed the deficit at £125.2m as at 30 June 2011 and a six-year recovery plan to  
clear this deficit. Deficit contributions will total circa £26m per annum including fees and expenses.

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

2012
Long-term
rate of return
%
6.6%
4.9%
3.1%
6.6%
5.6%

2011
Long-term
rate of return
%
7.1
5.6
4.0
7.1
6.2

2012 
£m
319.3
81.0
225.1
143.9
41.6
810.9

2011
£m
279.9
68.2
217.7
116.4
61.1
743.3

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

2012
£m
888.2
(810.9)
77.3
253.5
330.8

6.8
324.0
330.8

The cumulative net actuarial losses recognised in the statement of comprehensive income at 30 September 2012 were £358.6m  
(2011: £322.9m).

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

2012
£m
1,141.7
(810.9)
330.8

2011
£m
1,074.3 
(743.3)
331.0 

2010
£m
1,117.9 
(703.4)
414.5 

19.1
22.2

(9.4)
(24.1)

(10.1)
27.6 

2009
£m
993.0 
(621.9)
371.1 

(7.7)
(13.7)

2011
£m
846.5 
(743.3)
103.2 
227.8 
331.0 

6.8 
324.2 
331.0 

2008
£m
771.2 
(581.7)
189.5 

2.7 
(116.6)

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 £29.4m (2011: £25.2m).

The assets of these schemes are held separately from those of the Group in funds under the control of trustees.

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Thomas Cook Group plc Annual Report & Accounts 2012

123

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued

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
Interest receivable
Amounts owed by related parties**
Provisions against amounts owed
Amounts owed to related parties

Associates, joint venture 
and participations*

2012
£m
42.1
(22.9)
1.6
0.3 
23.2
(3.9)
(3.2)

2011
£m
31.6 
(36.3)
0.5 
– 
23.2
(4.2)
(5.7)

*   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 £11.8m (2011: £11.7m) 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 62 to 64.

Short-term employee benefits
Termination benefits
Share-based payments

2012
£m
3.3
–
–
3.3

Restated  
2011
£m
3.2
1.2 
(0.5)
3.9 

The 2011 short-term employee benefits figure has been restated to include £0.5m of employer social security payments. In 2012, this figure  
is £0.3m and is excluded from the Director’s Remuneration Report.

At 30 September 2011 termination benefits included £1.0m due to the former CEO of the Group in relation to remuneration over his 
contractual notice period. This consisted 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 64.

Subsequent events

37 
There were no events between the balance sheet date and the date of approval of these financial statements that required disclosure.

124

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
Company balance sheet
At 30 September 2012

Non-current assets
Property, plant and equipment
Investments in subsidiaries
Trade and other receivables

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets

Current liabilities
Trade and other payables
Short term provisions

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

The financial statements on pages 125 to 133 were approved by the Board of Directors on 27 November 2012.

Signed on behalf of the Board

Michael Healy
Group Chief Financial Officer

Notes 1 to 19 form part of these financial statements.

30 September
2012
£m

30 September
2011
£m

notes

5
6
7

7
8

9
 10

11

14

1.6
2,054.7
561.9
2,618.2

1,060.9
26.1 
1,087.0
3,705.2

2.6
2,619.8
3.9
2,626.3

1,267.1
– 
1,267.1
3,893.4

(408.1)
(2.0) 
(410.1)

(250.4)
– 
(250.4) 

(611.5)
(1,021.6)
2,683.6

(635.9)
(886.3)
3,007.1 

60.0
29.2
1,429.0
649.7
8.5
520.6
(13.4)
2,683.6

59.2 
29.2 
1,588.0 
888.7 
8.5 
446.8 
(13.3)
3,007.1 

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Thomas Cook Group plc Annual Report & Accounts 2012

125

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended 
30 September 
2012
£m

Year ended 
30 September 
2011
£m

(515.3)

(1,525.8)

(2.2)
61.5
0.2
–
0.6
–
2.0 
215.7
65.0
(172.5)

(1.6)
48.5 
0.2 
1,463.3 
–
(3.5)
– 
(281.4)
135.9 
(164.4)

292.8
292.8

303.5 
303.5 

(61.5)
(32.7)
(94.2)

26.1
–
–
26.1

–
26.1

(47.3)
(91.8)
(139.1)

–
–
–
–

–
–

Company cash flow statement
For the year ended 30 September 2012

Cash flows from operating activities
Loss before tax
Adjustments for:
Finance income
Finance expense
Depreciation of property, plant and equipment
Impairment of investment
Loss on disposal of assets
Share-based payments
Increase in provisions
Decrease/(increase) in receivables
Increase in payables
Net cash used in operating activities

Investing activities
Dividends received
Net cash from investing activities

Financing activities
Interest paid
Dividends paid
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

126

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company statement of changes in equity
For the year ended 30 September 2012

At 1 October 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

Loss for the year
Other comprehensive expense
Total comprehensive expense for the year
Equity credit in respect of share-based 
payments

Release of merger reserve
Purchase of own shares
Group relief not at the standard rate of  
UK tax
Issue of equity shares net of expenses
Dividends received
At 30 September 2012

Share
capital
£m
57.7
–
–
–

–
1.5 
–
–
–
59.2 

–
–
–

–

– 
–

–
0.8
–
60.0

Share
premium
£m
8.9
–
–
–

–
20.3 
–
–
–
29.2 

–
–
–

–

– 
–

–
–
–
29.2

Merger
reserve
£m
3,051.3
–
–
–

–
–
(1,463.3) 
–
–
1,588.0 

–
–
–

–

(159.0)
–

–
–
–
1,429.0

Capital
redemption
reserve
£m
8.5
–
–
–

Translation
reserve
£m
882.8
–
5.9
5.9

–
–
–
–
–
8.5 

–
–
–

–

– 
–

–
–
–
8.5

–
–
–
–
–
888.7 

–
(239.0)
(239.0)

–

– 
–

–
–
–
649.7

Retained
earnings
£m
199.2
(1,522.9)
–
(1,522.9)

(3.2)
–
1,463.3 
(92.5)
402.9 
446.8

(515.3)
–
(515.3)

2.0

159.0 
–

135.3
–
292.8
520.6

Own 
shares
£m
(13.3)
–
–
–

–
–
–
–
–
(13.3)

–
–
–

–

– 
(0.1)

–
–
–
(13.4)

Total
£m
4,195.1
(1,522.9)
5.9
(1,517.0)

(3.2)
21.8 
–
(92.5)
402.9 
3,007.1 

(515.3)
(239.0)
(754.3)

2.0

– 
(0.1)

135.3
0.8
292.8
2,683.6

The merger reserve arose on the issue of shares of the Company in connection with the acquisition of the entire share capital of Thomas 
Cook AG and MyTravel Group plc on 19 June 2007 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 with the 
Companies Act 2006, relieved part of 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 2012, the Company had distributable reserves of £520.6m (2011: £446.8m).

Details of the own shares held are set out in note 28 to the Group financial statements.

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Thomas Cook Group plc Annual Report & Accounts 2012

127

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements

Accounting policies

1 
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.

Loss for the year

2 
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 £515.3m (2011: £1,522.9m loss after tax).

The auditors’ remuneration for audit services to the Company was £0.4m (2011: £0.3m).

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.

2012
£m
21.1
1.3
–
22.4

2011
£m
17.4 
0.2 
(3.5)
14.1

2012
Number
109

2011
Number
101

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 62 to 64 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.

Dividends

4 
The details of the Company’s dividend are disclosed in note 10 to the Group financial statements.

128

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
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5 

Property, plant and equipment

Other fixed assets
Cost
At 1 October 2010
Additions
At 30 September 2011
Disposals
Exchange differences
At 30 September 2012

Accumulated depreciation and impairment
At 1 October 2010
Charge for the year
At 30 September 2011
Charge for the year
At 30 September 2012

Carrying amount at 30 September 2012
Carrying amount at 30 September 2011

6 

Investment in subsidiaries

Cost and net book value
At 1 October 2010
Adjustment in respect of share-based payments
Impairment
Exchange difference
At 30 September 2011
Adjustment in respect of share-based payments
Impairment
Exchange difference
At 30 September 2012

£m

1.6
1.4
3.0
(0.6) 
(0.2)
2.2

0.2
0.2
0.4
0.2
0.6

1.6
2.6

£m

4,073.3
(1.2)
(1,463.3)
11.0
2,619.8
1.8
(367.0)
(199.9)
2,054.7

A list of the Company’s principal subsidiary undertakings is shown in note 19 to the financial statements.

The additions in the current year relate to share-based payment charge related to subsidiaries’ employees.

During the year the Company recognised an impairment loss of £367.0m in relation to its investments in subsidiaries. The impairment 
primarily stems from the disposal of Thomas Cook India at a loss, deterioration in profitability of the French and Canadian businesses  
and a write off of deferred tax assets in the UK and West Europe segments.

Thomas Cook Group plc Annual Report & Accounts 2012

129

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements continued

7 

Trade and other receivables

Current
Amounts owed by subsidiary undertakings
Other receivables
Deposits and prepayments

Non-current
Amounts owed by subsidiary undertakings
Deposits and prepayments

2012
£m

2011
£m

1,013.2
3.8
43.9
1,060.9

1,244.9
0.6
21.6
1,267.1

558.9 
3.0
561.9

– 
3.9
3.9

2011
£m
– 
– 

Amounts owed by subsidiary undertakings are repayable on demand. The average interest on overdue amounts owed by subsidiary 
undertakings is 0.4% (2011: 0.4%). The Directors consider the fair value to be equal to the book value.

8 

Cash and cash equivalents

Cash at bank and in hand

2012
£m
26.1
26.1

Cash and cash equivalents comprise of balances which are considered to be restricted. £26.1m (2011: £nil) is held within escrow accounts  
in Denmark and Norway in respect of local regulatory requirements. The Directors consider that the carrying amounts of these assets 
approximate their fair value.

9 

Trade and other payables

Amounts owed to subsidiary undertakings
Social security and other taxes
Other payables
Accruals

2012
£m
368.9
1.7
19.7
17.8
408.1

2011
£m
188.6
2.0
53.2
6.6
250.4

The average interest on overdue amounts owed to subsidiary undertakings is 0.7% (2011: 0.0%).

Amounts owing to subsidiary undertakings are repayable on demand. The Directors consider the fair value to be equal to the book value.

10  Provisions

At 1 October 2011
Additional provision in the year
At 30 September 2012

Provisions relate to provisions for severance costs.

2012 
£m
– 
2.0
2.0

11  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.

130

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
Financial risk

12 
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 18 to 19. 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 £26.6m (2011: increase loss before tax by 
£23.4m), while a 5% weakening in Sterling would decrease loss before tax by £26.6m (2011: decrease loss before tax by £23.4m).

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 £0.1m (2011: 0.5% increase in interest rates decrease loss before tax by £1.2m), 
while a 0.5% decrease in interest rates would increase loss before tax by £0.1m (2011: 0.5% decrease in interest rates increase loss before  
tax by £1.2m).

The maturity of contracted cash flows on the Company’s financial liabilities is as follows:

At 30 September 2012
Trade and other payables
Borrowings

At 30 September 2011
Trade and other payables
Borrowings

Less than 
1 year
£m
(408.1)
–

(408.1) 

Between
1 and 5 years
£m
–
(785.8)
(785.8) 

In more
than 5 years
£m
–
–
– 

Less than 
1 year
£m
(250.4)
–
(250.4)

Between
1 and 5 years
£m
–
(432.1)
(432.1)

In more 
than 5 years
£m
–
(430.8)
(430.8)

Total
£m
(408.1)
(785.8)
(1,193.9) 

Total
£m
(250.4)
(862.9)
(1,113.3)

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.

13  Deferred tax assets

At 1 October 2010
Credit to income statement
At 30 September 2011
Debit to income statement
At 30 September 2012

2012 
£m
1.6
(1.6)
–
–
–

At the balance sheet date the Company had unused tax losses of £37.5m (2011: £46.5m) and other deductible short-term timing differences 
of £9.0m (2011: £5.4m) 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.

Called-up share capital

14 
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.

15  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:

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Within one year
Later than one year and less than five years
After five years

2012
£m
0.6
2.4
0.7
3.7

2011
£m
0.6
2.4
1.3
4.3

Thomas Cook Group plc Annual Report & Accounts 2012

131

 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Company financial statements continued

Contingent liabilities

16 
At 30 September 2012, 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 £707.5m (2011: £534.2m). This predominately relates to a guarantee on the 
drawndown portion of the Group banking facility (detailed in note 20 to the Group financial statements). 

Also included are guarantees related to aircraft finance lease commitments, estimated based on the current book value of the finance lease 
liabilities of £249.9m (2011: £44.7m).

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.

17  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

2012
£m

2011
£m

2.2
(4.0)
12.7
292.8

835.3
0.6
177.3
(322.5)
(46.4)

1.6 
–
10.6 
402.9 

1,208.9 
0.6 
35.4 
(146.5)
(42.1)

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.

Share-based payments

18 
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 nil (2011: credit of £3.5m) is stated net of amounts recharged to subsidiary undertakings.

132

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
 
 
 
19  Principal subsidiaries

Direct subsidiaries
Thomas Cook Investments (2) Limited
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
Neilson Active Holidays Limited
Central Europe
Bucher Reisen GmbH
TC Touristik GmbH
West Europe
Thomas Cook Airlines Belgium NV 
Thomas Cook Belgium NV 
Thomas Cook SAS
Northern Europe
Thomas Cook Airlines Scandinavia A/S 
Thomas Cook Northern Europe AB
North America
Thomas Cook Canada Inc. 
Airlines Germany
Condor Berlin GmbH*
Condor Flugdienst GmbH*
Corporate
Thomas Cook Group Treasury Limited

Country of
incorporation
and operation

Nature of the business

Proportion
held by
Company (%)

Proportion
held by
Group (%)

England
Germany

Holding Company
Holding Company

100
100

England
England
England
England
England
England

Germany
Germany

Belgium
Belgium
France

Denmark
Sweden

Airline
Travel Agent
Tour Operator
Tour Operator
Tour Operator
Tour Operator

Tour Operator
Tour Operator

Airline
Tour Operator
Tour Operator and Travel Agent

Airline
Intermediate Holding Company

Canada

Tour Operator

Germany
Germany

Airline
Airline

England

Financing Company

100
100

100
100
100
100
100
100

100
50.0023

100
100
100

100
100

100

50.0023
50.0023

100

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.

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Thomas Cook Group plc Annual Report & Accounts 2012

133

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 £300.0m (2011: £318.7m) largely attributable to the Central 
Europe division has been included.

†††  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 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.

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.

***  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 
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.

134

Thomas Cook Group plc Annual Report & Accounts 2012

 
 
 
Shareholder information

Annual General Meeting (‘AGM’)
The AGM will be held at The Lincoln Centre, 18 Lincoln’s Inn Fields, 
London WC2A 3ED on Thursday 7 February 2013 at 10.30am. The last 
date for AGM proxy votes to be received by the Registrar is Tuesday 
5 February 2013.

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 (excluding VAT) from a BT landline, other 
providers’ costs may vary. Lines are open 8.30am to 5.30pm (London time), Monday 
to Friday (excluding UK public holidays).

Shareholders should quote the Company reference number 3174  
and their shareholder reference number (which can be found on 
their share certificates), 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, financial results 

and share price information;

•	 details of shareholder meetings and poll results;

•	 biographies of the Board of Directors;

•	 the Company’s Articles of Association, the terms of reference for 

the Committees of the Board and the Board Appointments Policy; 
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 appears 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.

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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
18 March 2011
7 April 2011

Interim dividend for the 
financial year ended 30 
September 2011
3.75p 
9 September 2011
7 October 2011

No further dividends have been paid or declared since the interim dividend for the financial year ended 30 September 2011, paid on  
7 October 2011.

Thomas Cook Group plc Annual Report & Accounts 2012

135

 
 
 
 
 
 
 
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 (London time), Monday to Friday (excluding UK public 
holidays), or visit the website: www.shareview.co.uk/dealing. 
Shareholders will need the shareholder reference number  
shown on their share certificate(s).

Analysis of shareholders as at 30 September 2012

Distribution of shares by the type  
of shareholder
Nominees and institutional investors
Individuals
Total

Number of holdings
1,591
16,341
17,932

Number of shares
860,567,462
25,332,872
885,900,334

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 of holdings
9,568
3,411
1,152
2,850
680
127
46
98
17,932

Number of shares
307,123
821,588
906,329
11,186,073
21,315,429
32,180,739
32,245,252
786,937,801
885,900,334

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 (excluding VAT) from a BT landline, other 
providers’ costs may vary. Lines are open 8.30am to 5.30pm (London time), Monday 
to Friday (excluding UK public holidays).

Shareholder information continued

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 you have any queries relating  
to this, please contact the Registrar.

Warning to shareholders about share fraud
Share fraud includes scams where investors are called out of the  
blue and offered shares that often turn out to be worthless or 
non-existent, or an inflated price for shares they own. These calls 
come from fraudsters operating in ‘boiler rooms’ that are mostly 
based abroad. 

While high profits are promised, those who buy or sell shares in  
this way usually lose their money.

The Financial Services Authority (‘FSA’) has found most share fraud 
victims are experienced investors who lose an average of £20,000, 
with around £200m lost in the UK each year.

Protect yourself
If you are offered unsolicited investment advice, discounted shares,  
a premium price for shares you own, or free company or research 
reports, you should take these steps before handing over any money:

1.  Get the name of the person and organisation contacting you.

2. 

3. 

4. 

5. 

Check the FSA Register at www.fsa.gov.uk/fsaregister to ensure 
they are authorised.

 Use the details on the FSA Register to contact the firm.

Call the FSA Consumer Helpline on 0845 606 1234 if there are  
no contact details on the FSA Register or you are told they are 
out of date.

 Search the FSA’s list of unauthorised firms and individuals to 
avoid doing business with.

6.  REMEMBER: if it sounds too good to be true, it probably is.

If you use an unauthorised firm to buy or sell shares or other 
investments, you will not have access to the Financial Ombudsman 
Service or Financial Services Compensation Scheme (‘FSCS’) if things 
go wrong.

Report a scam
If you are approached about a share scam you should tell the FSA 
using the share fraud reporting form at www.fsa.gov.uk/scams, where 
you can find out about the latest investment scams. You can also call 
the Consumer Helpline on 0845 606 1234.

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.

136

Thomas Cook Group plc Annual Report & Accounts 2012

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

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Thomas Cook Group plc
6th Floor South 
Brettenham House
Lancaster Place
London WC2E 7EN

www.thomascookgroup.com