TUI AG

Good morning, ladies and gentlemen, and welcome to the TUI AG conference call regarding the Q1 results for the financial year 2024. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your hosts, Sebastian Eber and Matthias Kiepp.

Thank you. Good morning, and a very warm welcome from today's sunny Hanover. It will be a long day for us. We have our AGM today and we are pleased to have the call with you after we had very early press calls in the morning. Like the quarters before, the agenda is set. I will do a short summary about the Q1 numbers and the strategic highlights. Matthias will go into the details of the Q1 results and will give you a trading update and outlook and then a short followed by a very short summary from my side. We had a good Q1, an excellent Q1 performance. For the first time, we achieved underlying EBIT, positive underlying EBIT with a record revenue of 4.3 million and the underlying EBIT up 100, almost 160 million compared to the same quarter last year. We do see a good booking momentum. Winter plus eight, very, very strong the last day, so we assume that the winter will end strong. Summer plus eight and both seasons with an average sales price increase of 4%. We do see strong customer demand for our products, so we are very confident of the coming month. And based on that, we can reconfirm our guidance to increase EBIT by at least 25%, even in light of some additional costs due to the rerouting of our cruise ships due to the incidents in Suez. Thank you. And why can we report on that? We do see that the strategic initiatives are driving very much the transformation and the delivery of our transformation position as well for profitable growth. Every quarter, we do see a positive impact of what we are implementing. If we go into the details, holiday experience up 56 million compared to a strong previous quarter, 91 million. And I think it's now the sixth or seventh consecutive quarter where we have seen improvements. We have increased the occupancy and the daily rate. Cruise is back to normal. You see an occupancy of 96%. So this compares with 100% at best times during the year. So we are very, very close to the historical heights, which we do expect for the coming years. month and quarters. So for the first time in the first quarter, positive again with 34 million and also TUI amusement is doing well. Experience up 16% and you know there the profitability will come in the summer months and it was for us very important that we can increase our customer base and therefore we are happy about the number of experience sold. Many of them are new customers to the TUI ecosystems. If you look at 2E market and airlines, strong improvements by 100 million, which means halving the losses and departed tax plus 6%. And what is very nice to see is that all the measures we have taken to increase the share of dynamic packaging is working well, plus 24%. And upside, although still absolute on low numbers, getting momentum, especially in the U.K., where we have seen a very big step forward, load factor plus 1%. If we look into the regions, we can see that the northern regions, so U.K., Ireland, and the Nordic countries have improved profitability by 70 million. Germany, or the central region, is at break-even. Western region slightly worse. That is just an effect on valuation of maintenance reserves. Operationally, they have done very well like the other areas. So this is more a balance sheet P&L impact from valuation. So also a very good start into the season. If we look at some highlights of our progress of our strategic initiatives, one I mentioned, dynamic packaging doing very well. And it's not only that the numbers are increasing, but when we now see what we bring to the customer in the next month, we do see that there can expect a significant growth there as well. But also, to amusement, we signed the agreement with EasyJet to provide tours and activities after bookings and others, a milestone for us. By the way, EasyJet is also a very good partner for providing tours a seat only for us to dynamic packaging, so very good collaboration. We relaunched the TUI amusement app, so if you compare our app with the main competitors, you will see how big the progress is. We have made location-based service, a lot of third-party products, but that is a very strong focus for us on own-produced, high-margin product, so very, very well, very good development. On the hotel side, of course, we grow. We have in the pipeline more than 40 hotels. We started with our new brand, the Mora, our new luxury hotel brand. The first opening we will see in the coming weeks on Zanzibar. By the way, Zanzibar getting more and more important like the cupboards to our system. And it's really a great achievement to see also TUI in this market segment. And one will stay and will even be accelerated is our way forward on sustainability. We are the pioneer in the tourism industry by measuring and mitigating our tech carbon footprint. You know that we had agreed to the SPTI targets. We are well underway to achieve the given targets. Our internal targets are by far more... more ambitious. Thank you. And this, for example, IT has been also recognized by independent organizations. So it's very important what we do there. We do see a positive impact on customer behavior. And of course, it's important for us as a company and for the world. That is a short update from my side, and Matthias will go more into the details when it comes to numbers. Matthias. Thank you very much, Sebastian, and good morning, everyone.

As Sebastian said, let me cover the details to the quarter. We also have today the AGM, where shareholders will vote on the future listing structure, so I would like to use one or two sentences on that, recap on our refinancing strategy. And then let me just summarize bookings and how this quarter then puts ourselves into the outlook. So as Sebastian said, a very strong quarter, record revenue, record EBIT, and also the balance sheet net debt improved the same way versus last year we had as of 13th of September. That's a really good achievement. This was also recognized by the rating agencies with a further upgrade now by Standard & Poor's from B to B+, with a positive outlook. That's another step in our journey to move back to the rating that is probably a good one for the company and the right one. We need to get back to bubble B territory, but it will be a journey and a stepwise development. As I said, today shareholders will vote on a listing structure, but before I come to that, Let me just go into the details of the quarter on the next couple of pages. I like this page because it shows what Sebastian described in detail on the operational result. As you can see, the improvement actually comes from all segments. And as we expected and discussed in December, the biggest contributors with markets and with cruises, both one from the ramp-up and one from a mixture of being hatched this quarter at the same time, also operational improvement. So really good in terms of development. If you look at the details of the P&L, I would say all in all, all within expectations, adjustments, effectively PPA left only, net interest expense, if you take the 100 million times four, then you're broadly at our outlook. Normally, Q2 has a higher interest cost, and Q3 is more or less in line with Q1. And then you go into a better cash position, particularly in the fourth quarter, so interest cost reduces. If you take this all together, that is a good confirmation of our guidance. And also on the tax rate, we don't see any further movements. In the cash flow, we are quite happy with that because the key driver for Q1, where we have our biggest seasonality and we go into the winter volumes and the winter revenue level with the 1.758, that's more or less in line with what we saw last quarter. And if you compare that, we have had a much higher revenue in the summer, much more higher revenue level in the late summer and autumn. And still the drop into the seasonality, the seasonal low in winter is more or less the same that we had 12 months ago. Two reasons for that. One, winter is developing stronger than last year. And secondly, also the discipline on working capital and cash is continuing. So these two drive that we have a really good number there. The rest of the cash flow is in line. You see here a dividend to minorities. That's the funding structure of the new Rio joint venture. The respective investment will be in the second quarter. Then you will see the same position in cash net investments. If I go to the balance sheet, what I already said, the $1.3 billion improvement, that's really a good development. And also that we can reconfirm that we didn't draw a cave W investment. That was exactly the strategy and that was the big reason for the capital raise to get rid and not to use the government funding anymore. Now, before I end the quarter and put this into perspective with bookings and guidance, let me just give you some few further details on the potential vote, potential change of the listing structure. As I said, the vote will be today. I think it's fair that we've had, that I've had very good discussions on that. Effectively, good momentum in the discussions. Everyone really understanding or quite supportive. Put volume in one place. That was a comment that we always received. And also to de-complex structure. That's, of course, relief for the company, but that would also be something shareholders would go for. Again, the votes today, 75%. majority of votes present required. And to be fair, that's probably also the key reason you have an AGM to have such decisions for shareholders. If shareholders were to go for this, then we would go for the full listing in April in Frankfurt. And after a certain period of trading in Frankfurt, we would then go into the MDAX probably in June and that would be the key next steps. One further comment in terms of financing strategy before I go to the bookings is on the capital allocation. I mean, one key element is still the refinancing. I think step one was this quarter not to use KfW, so that's something we always planned and we fulfilled that. Now, the one billion that we still have as unused facility, we will continue to work on the right instruments on the debt finance potential to refinance debt. I think it's fair that the good thing is now with the December results, with the full year and with our outlook and also the further improvement on the rating quality, we are assessed in a fair view by the market. So I think we have a full set of options available to put the right debt instruments against the KfW going forward. With that, I would like to end the quarter and summarize what Sebastian already said on the bookings. Maybe, Sebastian, one or two comments from your side before I go to the details? Good. No, sorry. Just do it. I think, as Sebastian said, bookings are really, really good. One thing which is prevailing is that whatever we look at in research, whatever we discuss and whatever we talk, whoever we talk to, we always get the feedback, consumers rank and prioritize holidays very high. And it's fair, it's not the best consumer environment that we are in, but holidays, wherever you look, are prioritized and ranked really high. And all the stats that we have on our side, they're also confirming then whether it's savings or spend saving to spend, but also our package holiday sites, which were the most visited in Q1 in the UK and in Germany. Now, booking Sebastian said plus eight for the winter and plus eight for the summer. Both look healthy. I think we have a good momentum. The point is, of course, this is a bit lower than December, but this is what's expected because The comparable time last year in January was really, really strong. And, of course, then the advantage goes down a bit. But this is a 30% sold for the summer. That's a really good start into the summer. And the same accounts for the product businesses. I think that's something we always said. Whenever the volume business is developing well, you see it even more in the product business and hotels, cruises. really with strong bookings ahead, even more than we had the same period in last year. Amusement, we continue to see a nice take-up of this 30%, and that's also supporting this theme that consumers prioritize holidays and leisure spending really high. What does it mean for our outlook? We have two key outlook themes, which is revenue and underlying EBIT. Revenue to plus 10%. First quarter was plus 15%. Now the summer is plus eight and pricing plus four. I think these elements support our revenue guidance very well. Underlying EBIT, again, if you do the mathematics, 25% of broadly a billion of last year, that gives you 250 million euro. With the 167, that's more than half of this. It's a big step. I think that, of course, as Sebastian said, supports very well our guidance. Important, we cannot expect the same magnitude in the second quarter. Two major reasons for that. One, we had bigger FX volatility 12 months ago in the first quarter. Just maybe be reminded on the impact that the short-term government in the UK had on the British pound. And then secondly, we also at that time still had our Canadian business which were quite seasonal with a significant loss in the first quarter and a significant profit in the second quarter. And we would now in the second quarter work against this significant profit. So I think overall, our guidance can be confirmed. And I will jump over the next page because that we discussed all the details, the cornerstones, markets and crews that will continue to deliver At the same time, Sebastian mentioned there will be an impact from Suez, but it will not be in terms of changing the overall picture. I can also reconfirm our modeling guidance, and that's something I also discussed already when we went through the quarter numbers. With that, thank you very much from my side. I would hand over back to Sebastian for final comments.