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Investors Presentation
Investors Presentation Interim Results – Q3 / 9M 2007 Disclaimer Interim Results – Q3 / 9M 2007 November 2007 This presentation contains certain 'forward-looking statements', which can be identified by use of terminology such as 'expect', 'expectation', 'intend', 'continue', 'achieve', 'maintain', 'improve', 'foresee', 'anticipate', 'outlook', 'forecast', or similar wording. Such forward-looking statements reflect the current views of management and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance or achievements of the Group to differ materially from those expressed or implied herein. Should such risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this presentation. Kuoni is providing the information in this presentation as of this date and does not undertake any obligation to update any forward-looking statements contained in it as a result of new information, future events or otherwise. 2 Key Facts 9M 2007 Turnover growth of 14.8% whereof 4.9% organic Particularly strong growth in Scandinavia and Asia&Destination Management Favorable circumstances in Scandinavia Transformation process on Group level, restructuring in Switzerland and UK on track Acquisitions in Q3: Interim Results – Q3 / 9M 2007 November 2007 Three acquisitions to strengthen position in premium market One acquisition to further improve market position in Scandinavia Higher amortisations of intangible assets from several acquisitions Favorable tax rate due to profit mix Record high Free cash flow at CHF 218.1 m Shoestring launch in UK and Germany From the current perspective the Kuoni Group expects: Group Turnover of above CHF 4.5 bn Group EBIT of above CHF 130 m 3 Acquisitions Q3 and 9M 2007 share of direct sales consolidation per Interim Results – Q3 / 9M 2007 November 2007 annualized turnover in CHF million Dorado Latin Tours, CH 70% April 8 CV Travel, UK Les Ateliers du Voyage, France UTE Megapolus-Group, Russia Falk Lauritsen Rejser A/S, Denmark 100% 68% 30% 100% July July September September 35 22 51 74 4 Combined these acquisitions account for additional annual turnover of approx CHF 190 m 2006 acquisitions were made with an annualized turnover of approx CHF 290 m Interim Results – Q3 / 9M 2007 November 2007 Highlights Q3 2007 Q3 2006 ∆ Q3 2007 total Turnover CHF 1 309 m + 13.7 % CHF 1 488 m Gross profit (GOP) Gross profit – margin CHF 278.0m 21.2 % + 18.7 % CHF 330.0 m 22.2% EBITDA EBIT EBIT – margin CHF 99.2 m CHF 87.8 m 6.7 % + 13.7 % + 11.4 % CHF 112.8 m CHF 97.8 m 6.6% Net result CHF 78.6 m + 21.8 % CHF 95.7 m 1) Includes amortisation of intangible assets of around CHF 4m (Q3 2006: CHF 1m) 5 1) Interim Results – Q3 / 9M 2007 November 2007 Highlights 9M 2007 Improvements 9M 2007 vs 9M 2006 Turnover Organic growth + 14.8 % + 4.9 % + CHF 453 m CHF 3.5 bn Gross profit (GOP) Gross profit - margin + 16.5 % + 30 bps + CHF 107.0 m CHF 756.6 m 21.5% EBITDA EBIT EBIT – margin + 19.7 % + 17.2 % -- + CHF 23.9 m + CHF 15.2 m CHF 145.3 m CHF 103.5 m 2.9% Net result + 14.4 % + CHF 12.5 m CHF 99.2 m Free cash flow + 22.9 % + CHF 40.7 m CHF 218.1 m 1) Includes amortisation of intangible assets of around CHF 9m (9M 2006: CHF 2m) 2) 9M 2006 was positively influenced by a tax provision release of CHF 10 m 6 9M 2007 total 1) 2) Turnover driven by organic growth and acquisitions (in %) Interim Results – Q3 / 9M 2007 November 2007 2.7 7.2 14.8 4.9 Organic 7 Acquisitions/ Divestments Currency effect Total Growth Interim Results – Q3 / 9M 2007 November 2007 Summary by SBU 9M 2007 Turnover (CHF million) 9M 2007 EBIT 9M 2006 Δ% 9M 2007 9M 2006 Δ% Switzerland 745 724 + 2.9 4.3 6.8 - 36.8 Scandinavia 743 636 + 16.8 41.2 25.6 + 60.9 Europe 564 506 + 11.5 16.3 15.4 + 5.8 UK 573 492 + 16.5 31.1 37.3 - 16.6 Asia & Destination Mgmt 959 756 + 26.9 32.3 25.1 + 28.7 -- -- -- - 21.7 - 21.9 + 0.9 3 515 3 062 + 14.8 103.5 88.3 + 17.2 Corporate Group 8 Interim Results – Q3 / 9M 2007 November 2007 SBU Switzerland CHF million 9M 2007 9M 2006 Δ% Turnover 745 724 +2.9 EBITDA 25.6 27.4 -6.6 4.3 6.8 -36.8 EBIT Continuously challenging market environment Encouraging EBIT improvement in Q3 07 of 6.5% vs last year Restructuring process on track Outlook Turnover and EBIT expected to be around last year’s level 9 Interim Results – Q3 / 9M 2007 November 2007 SBU Scandinavia CHF million 9M 2007 9M 2006 Δ% Turnover 743 636 +16.8 EBITDA 47.3 26.8 +76.5 EBIT 46.1 25.6 +80.1 New Ventures -4.9 -- EBIT 41.2 25.6 + 60.9 Demand in Q3 exceptionally boosted by poor summer weather Lower risk profile: redelivery of two long haul aircraft completed (A-330) Strengthened market position in Denmark with acquisition Falk Lauritsen New Ventures: Shoestring launched in UK and Germany Outlook Exceptionally favorable circumstances are expected to generate some 20% higher sales and an EBIT margin of > 5% (Scandinavia only) Shoestring launch costs expected around CHF 7m for full year 10 Interim Results – Q3 / 9M 2007 November 2007 SBU Europe CHF million 9M 2007 9M 2006 Δ% Turnover 564 506 +11.5 EBITDA 20.2 19.4 +4.1 EBIT 16.3 15.4 +5.8 All countries achieving volume growth of > 10% All organic with exception of France (acquisition of Les Ateliers du Voyage) Expansion of successful Flagship store concept in France Continued strong performance of Spain, Benelux and Italy Outlook Turnover growth of > 10% and an EBIT margin of above 2.5% are expected 11 Interim Results – Q3 / 9M 2007 November 2007 SBU UK CHF million 9M 2007 9M 2006 Δ% Turnover 573 492 +16.5 EBITDA 38.8 38.5 +0.8 EBIT 31.1 37.3 -16.6 New CEO started mid August Top line growth solely acquisition and currency driven As expected Q3 2007 profitability considerably below last year Includes restructuring costs Specialists continuously successful (Kirker, Journeys of Distinction and CV Travel) Premium products are outperforming the market – launch of new World Class Europe brochure in Q3 Outlook EBIT contribution is expected to be above CHF 40 m After amortisation of intangible assets of around CHF 8m 12 SBU Asia & Destination Mgmt CHF million 9M 2007 9M 2006 Δ% Turnover 959 756 +26.9 EBITDA 39.3 30.6 +28.4 EBIT 32.3 25.1 +28.7 Interim Results – Q3 / 9M 2007 November 2007 Strong performance of Asian Trails in Southeast Asia Growth rates for DM USA and Africa in Q3 at 19% and 27% respectively Weak USD rate helps increase attractiveness of destination USA Ongoing excellent performance of DM Africa India turnover growth by 63% in Q3 Visa Facilitation Services (VFS) – roll out UK contract on track China improving turnover and profitability in Q3 Outlook Strong top line growth around +25% and similar EBIT improvement 13 Interim Results – Q3 / 9M 2007 November 2007 Net Result CHF million Net result 9M 2007 9M 2006 Δ% 99.2 86.7 + 14.4 Favorable tax rate in 2007 as a result of profit mix 9M 2006 result positively impacted by release of tax provision in the UK of CHF 10 m Net result per registered share B +16.3% (CHF 33.67 vs. CHF 28.96) 14 Strong financial position Interim Results – Q3 / 9M 2007 November 2007 Solid equity ratio of 28.4% (vs. 33.5% 31.12.2006) Decrease as a result of seasonally higher Balance Sheet total Net liquid funds of CHF 188 m Liquid funds CHF 657 m including advance payments by customers of CHF 469 m Financial debts of CHF 71 m Net cash position of CHF 118 m after: Several acquisitions Dividend payment Share buyback CHF 100 m (terminated October 2, 2007) Best ever free cash flow of CHF 218 m (9M 2006: CHF 177m) deriving from improvement of operational performance 15 Outlook Interim Results – Q3 / 9M 2007 November 2007 Bookings for Tour Operating of Kuoni Group in CHF as at November 11, 2007 + 14 % From the current perspective, the Kuoni Group expects to post for the full year 2007: A turnover of more than CHF 4.5 bn An EBIT result above CHF 130 m 16 Group information 17 Interim Results – Q3 / 9M 2007 November 2007 Interim Results – Q3 / 9M 2007 November 2007 New Organisation Structure: Why? The tourism industry is changing at a phenomenal pace: extensive consolidation increasing pressure on costs and margins changes in customer behaviour rapid growth of online channels. Profitable growth remains a key corporate priority: improve the profitability of our core business facilitate further growth in promising markets. Our ability to master these challenges will be crucial to our continued success. 18 Interim Results – Q3 / 9M 2007 November 2007 Strategic focus To own and develop leading brands for exclusive travel service offerings To achieve sustainable organic growth that is clearly above overall market rates To generate additional growth through acquisitions, and derive full benefit from the same To adopt and maintain the most efficient processes in the industry To focus on customer needs in both source and destination markets To build and maintain an integrated service chain, from source to destination market 19 Strategic targets Value drivers Strategic initiatives Turnover Growth Cost efficiency Reduced distribution cost through technology optimization Exploitation of synergies by Future Business & IT Architecture (leverage size and geographical presence) Increase of buying power Knowledgeable, trained staff → increased sales conversion rates Capital efficiency Further improvement of Working Capital Management Optimization of Cash Management on group level Investment and acquisition decisions based on strict hurdle rates 20 Development of new markets and customer segments Adaptation of successful products to other markets Exploitation of new distribution potentials through e-channels Further enhancement of brand value and pull Interim Results – Q3 / 9M 2007 November 2007 Targets 2009 (excl. acquisitions) 6 – 8% p.a. Sustainable EBIT improvement ROIC 18% – 20% Interim Results – Q3 / 9M 2007 November 2007 Organisational setup CEO A. Meier Assurance Management SBD STYLE R. Wilhelm Kuoni UK IT Human Resources Branding Corporate Communications SBD SMART/BU SPIRIT/BU SWITZERLAND S. Leser BU Switzerland S. Leser SBD SMART S. Leser BU SPIRIT F. Brusselmans Kuoni France Scandinavia Kuoni Netherlands Kuoni Italy Kuoni Austria Corporate Responsibility SBD DESTINATIONS R. Schafroth FINANCE M.E. Katz Sales Asia Pacific Corporate Controlling Sales Europe & USA Business Analysis Shoestring Kuoni Belgium Kuoni Spain Corporate Development Global FIT / MidEast Sweden Russia Destination Europe Norway Corporate Treasury Mergers& Acquisitions Destination USA Investor Relations Denmark Kuoni India Destination Africa Legal & Compliance Kuoni Hong Kong/China 21 Executive Board: A. Meier, M.E. Katz, R. Wilhelm, S. Leser, R. Schafroth Destination Asia Destination India Benefits 22 Interim Results – Q3 / 9M 2007 November 2007 Stronger focus on brands (specifically Kuoni), destinations, businesses and consumers Accessible synergies through shared business focus People working in units with a similar dynamic, and with the “same job to be done” Further decentralisation for optimum alignment and responsiveness to specific market needs Swift implementation of groupwide and SBD-wide programmes Enhanced opportunities for employee development Better mileage for marketing money spent Operating Principles Interim Results – Q3 / 9M 2007 November 2007 Business Model: Model is prevailingly 'merchant', i.e. Limited risks Asset light Low commitments setup Dynamic optimization of business model mix (risk – reward trade off) Operating Model: 23 Flexible and dynamic operating model Integration of 'traditional' with 'dynamic' elements Differentiation through appropriate processes and technology deployments Leverage of scale across countries i.e. reduction of transaction costs through economies of scale, standardization of processes and technology House of brands (Tour Operating) 1/2 Switzerland Luxury Segment World Class Scandinavia France EmotionS Upper Segment Middle Segment Direct Sales Specialists Retail Airline 24 *) subject to the approval of the Russian competition authorities Spain Italy Benelux Emozioni EmotionS Austria Russia*) Interim Results – Q3 / 9M 2007 November 2007 UK World Class India China Interim Results – Q3 / 9M 2007 November 2007 House of brands (Destination Management) Individual Travel (Global FIT - B2B) Leisure & Special Interest Groups, MICE Asia Leisure Travel MICE 25 Africa 2/2 Europe India USA Interim Results – Q3 / 9M 2007 November 2007 Customer access in tour operating Third Parties 51% Own Shops 17 % Internet 14% Call Center 18% Share of direct customer access: UK: Scandinavia: Switzerland: Europe: 56% - mainly through call centers 69% - with highest Internet share of over 40% 42% - mainly through own shops 21% - main contributors are Benelux and France Groupwide: 49% is sold through direct channels 26 Interim Results – Q3 / 9M 2007 November 2007 Competition of internet vs other distribution channels in CH 90% none 80% slight strong 70% 60% 50% 40% 30% 20% The more complex the product the lower the internet competition. 27 Source: Credit Suisse Economic Research/SRV, 2007 Rou ex End trips urop e Rou n Eurd trips ope Bea c ex h holid Eur ay ope s F ex light Eu s rop e Be ach Eu holid rop ay e s trip s Ho tel s Cit y Fli gh ts 0% Eu ro pe 10% Market environment - Trends Interim Results – Q3 / 9M 2007 November 2007 Politics/demographics: Aging societies and changing social/cultural patterns More available funds for leisure activities General economic upswing Geopolitical situation remains volatile, but people get used to it Asia with excellent growth perspective for many years to come Customer segments Growth in premium segments expected in all markets High importance of brand franchise, product and service differentiation Hybrid, individualistic customers Distribution Growing importance of customer access / CRM Accelerating growth of online distribution 28 Interim Results – Q3 / 9M 2007 November 2007 Corporate and Social Responsibility Our 4 priorities for the next years Child and Adolescent protection Kuoni has signed the Code of Conduct for the Protection of Children from Sexual Exploitation in Travel and Tourism and implemented requested measures Improving labor conditions Harmonize suppliers requirements within the group Build awareness and organize training among suppliers/partners Two projects of education in tourism in India and the Dominican Republic realized Water management Water saving and cleaning projects will be conducted and financed in some main destinations Climate change Various Group wide carbon compensation projects (e.g. myclimate and climate care) 29 Market position Interim Results – Q3 / 9M 2007 November 2007 No 1 Swiss tour operator and retailer with own charter fleet (4 aircraft) No 3 in Scandinavia with own charter fleet (3 aircraft as of fall 2007) specialist to Greece Strong position as outstanding long haul tour operator in France Italy Netherlands UK strong position in long haul sector Best long haul tour operator for 25 years in a row Market leader in India in in- and outbound Market leader in Destination Management into the USA Amongst the Leaders in Destination Management into Europe and Southand East Africa as well as Asia 30 Interim Results – Q3 / 9M 2007 November 2007 Share capital structure Registered Share A Registered Share B Total 2’956’800 75,00% 3’942’400 93,75% 3’153’920 (in CHF) # of shares Nominal value Share capital 985’600 25,00% 0.20 197’120 1.00 6,25% Not listed 100% owned by Kuoni and Hugentobler Foundation 31 2’956’800 Broad international shareholder base Why invest in Kuoni? Interim Results – Q3 / 9M 2007 November 2007 Long term growth trend of tourism sector will continue Strong market position in premium and specialist segment Solid Balance Sheet Only small part of turnover are partially 'vertically' integrated Purest play tour operator Low asset ownership Cash generation out of net working capital High free cash flow generation (low capex) Traditionally high ROIC Strong position in India and China Global Destination Management with focus on FIT and MICE 32 Thank you for your attention!
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