TUI AG

Good morning, ladies and gentlemen. A warm welcome to TUI's second quarter results presentation here in London. My name is Nicla and I'm here on stage with our CEO, Sebastian Ebel, and our CFO, Matthias Kiepp. They will present the second quarter results, which I think are a strong set of numbers. We will give an update on the trading and as well as our outlook expectations before we then conclude with the update on our strategic transformation. And as always, afterwards, you will have the opportunity to ask some questions. And with that, Sebastian, the floor is yours.

Thank you. Thank you. So my voice is a little bit, I don't know what the right word is. I haven't been to the pub yesterday, but it's the effect of a flu, but I'm well again. So welcome from my side as well. Happy to be here to talk about the progress of TUI. And you see us all in a good mood today. The presentation will be very similar to what you are used to it. I will give a summary of the highlights. Matthias will go into the numbers, the trading outlook from my side, and also a recap of our strategy, of the measures, how do we move forward, what you can expect from us, and then, of course, we try and we'll answer all the questions you may have. So, quarter two was strong. Strong improvement of revenues, also significant improvement of our EBIT. So we are well underway with what we want to achieve this year. There are a few interesting things, what you do see in the second quarter, what you can expect for the third and fourth quarter, how the transformation has started to impact positively the business. So a lot of interesting things. Market and airlines. had a very strong late business, which led to 9% more bookings, ASP 3%. And I've never seen such a strong late business like we had in the second quarter. And we all learn new things during what we do. The summer bookings are good, strong, very solid. We try to find the right balance between margin and volume. and it's a lot of good development we can do see the holiday experience business especially the the hotel and the cruise business extremely strong both and this is is really good to see that is not only the market there are a lot of things why we are benefiting also as TUI in this market segment, and I will give you some more details. And that's why we can reconfirm our guidance, and we would pronounce very much at least 25%. We still need to book 40% of the summer, which is the same level than the year before, but it's still 40%, and that's why we are still cautious. And what we do see, and I said it, the strategic initiatives which we had defined, which we are putting in place, are seeing the first results. I said a couple of times before, it's a three-year program. It's a marathon. It's not a sprint. And it's always important that you see the benefits of what you are doing, and that's what we do. If we look into the different segments, holiday experience, you see another increase in the hotel and resorts business, very strong increase in the rate. And you can ask why is that the case. We are benefiting from a lot of things, but especially also from by far broader distribution than we had before. We put a lot of new channels into place. So the tour operator and the markets and airlines organization will be also in future very important. And again, we are not depending only on this distribution channel. We have built a lot of other distribution channels. Cruise is phenomenally strong. It's an exciting business. It's back to great levels. Occupancy is high. I always say, don't expect an increase in occupancy because last year the ships were full. And they will be full. With 102%, there's not much more to get into it and How strong the business is can be very much explained. We have the rerouting because the Suez Canal is maybe not closed, but we're not going there. And all the additional costs we could have set by better business. To amusement on the same level, a slight shift in what we are doing. When we looked at the economics, we saw that acquisition costs for new customers are not always paying off on a short time. So we said we focus on the B2B business, which is doing very well, and we focus very much on selling of own-produced products where the margin is significantly lower. But nevertheless, we will see a significant growth there as well. On the market and airlines part, on a very similar level, we have to keep in mind that last year we still had Sunwing, the Canadian tour operator, which we had to sell. in the portfolio. This had last year's second quarter a 30 million positive impact. It has no impact on the full year. That is also important. We don't lose that something on the full year. It was just a special effect on the second quarter. And therefore, we are on the same If you look into the different markets, central region doing well, improving their results. Northern region, the Canadian result was in the northern region, so slightly better. In western region, it looks as there has been operationally a worse situation. It hasn't been. There were some one-off effects which had an impact. So also this is very important. stable. And I will give some more details later on. What is really important is that we start to see the growth on the dynamic packaging. And we are confident to achieve 2 to 2.5 million dynamic packaged products. We said there are millions more to come. This is a very profitable business, at least in today's market environment. And therefore, it's important that what we do is paying off and the app sales is growing also significantly the 50 growth is wonderful if you see where we are today with six point eight percent seven percent you see how big the potential looking forward is and one thing which we stressed very often quality is in the DNA of TUI is key of our DNA. After COVID, we didn't came out or we weren't where we should have been or where we wanted to be. And we have seen significant improvement. In May, we had even weeks with 60. And this brings us into the lead in the market, in the different markets. And that is very important. It's important for retention. It's important for cost because one of the reasons why have you been able to improve it so much. We haven't canceled. We have a very, very stable flight plan, especially in all the markets. But we very much distinguish to other competitors, especially in Germany, who cancel flights like from one minute to another. We didn't cancel any flight. The denied boarding compensation is at a very low level because we are flying like a clock, we would say in Germany. I don't know if that is an English expression as well. So it's going well. Yes, we invested a lot in standby aircrafts and it's paying off. And that's why if we keep that in the summer, One, it's important for the customer. Second, it's important for the P&L. And the second thing is, I always said we want to have a broad choice, but we want a choice of good quality hotels. So we skipped a lot of non-performing hotels from a customer perspective. And the CSATs are in all parts of the travel journey, customer journey, good. Sustainability update. Also, this is in our DNA, and I could, as it is a special hobby of myself, I could talk for hours, but don't get worried. We are having the SPTI targets. The internal targets are more ambitious. We have seen huge progress on the different parts of the program. We said we want to reduce significantly the consumption of fossil fuel because what you don't consume, you don't have to to get green or sustainable. This is working where every investment now has to follow a rule, which means if it's a computer, if it's a vacuum cleaner, if it's a part for the ship, to make sure that everything except aircraft, because that's technically not possible, should only consume half. Second, the production of green energy. We are moving very much ahead. We have the first solar fields in Turkey, so Turkey will be the first hotel destination where we will see carbon-free operation. And I always say, and that's the good thing, there's a lot of great new technology now available. And that makes it even more commercially sound. So it's not altruistic. It's really also commercially important. And that has been a complete mind shift. The mind shift seven, which we will get in June, will be methanol, green methanol. Already then next year, the two LNG ships can consume ELNG. We are now... a shore power at the process of having all ships ready for that. So it's a great development and commercially sensible. Reduction of foothways, some quite often forgotten. One of the first AI applications we have. which helps us to reduce food waste or cost of buying food by one quarter. Again, it's commercially sensible, it's morally sensible, and it's great. By the way, the growth of our own forest is also doing very well. And the last point is, and we should not forget, you probably have heard, about the protest on the Canary Island. When we defined our sustainability agenda, we said social sustainability is as important as the others. part of the sustainability program because we had foreseen that this could happen. And so we were well prepared communication-wise what we do with the governments of the destinations and how we try to transport what's happening into our markets. And one of the messages was that our customers sleep in beds of hotels they don't take beds away from anyone else our customers are brought mainly by bus into the resort not by 50 individual cars our customers stay 10 to 12 days and in in in the resort and not coming for three days flying out flying in this is a very high and protected product and Actually, if you have seen at the protests, looked at the protests, it was never against this part of tourism. What we are not doing is taking away... living room, living space from the local authorities because that is the main problem. On the Canary Islands, a very high percentage of all houses sold were sold to foreigners or to Spanish mainlanders. So the normal family couldn't afford to buy a hotel because the foreigner always could pay more. There are a lot of apartments, houses which are rented out directly through other intermediaries, and that has put a lot of pressure onto the population, and you will see that in the bar lakes as well, and that is the main source. So we are in a very constant discussion with the local authorities to see what could be the right measures, how we can support. We are building, as one or the other may recall, staff housing, which is open also for others to help in a small environment what we can do. can do. And the other thing is also very clear. If we would now invest into 10 more hotels, it wouldn't be the Canary Islands or the Balearic Islands because it would be very difficult to get the acceptance for that. It will be Egypt. It will be Turkey. It will be covered. It will be Dominican a republic or the Far East. So this is part of our strategy, which we explain. Sometimes more difficult is it in the source market, in England, in Germany, because at least what I've read in Germany, tourists are not welcome anymore, and this is very, very much over-exaggerated. Tourists are welcome, and we have to put that into context. I've given a lot of interviews every day to explain it, and at least in Germany it has worked well. So, Matthias. Thank you. after the nice pros are the numbers.

Thank you. And welcome everyone from my side as well. I think we have a very good quarter that you can look at. And before we go into the details, I think there are three messages, one on the development of the capital structure and three kind on the quarter. On the quarter, record revenue again, and I think this shows the preparedness of our customers for spending for holidays. I think if you look at consumer preferences, holidays is super important, and we wouldn't have a record revenue level if there was not such preparedness. I think that's a very good sign. The other point is another improvement as Sebastian just described on the operational development. First quarter, that we are EBITDA positive in the second quarter. I think the second quarter, you may all know, is the softest of our business because of January to March. In the first quarter, we have still the October, the strong summer end included. So this is the softest quarter. First time we are EBITDA positive. And then another improvement on the capital structure, more than a billion of improvement. And I think that improvement that's also something that we see on the capital markets in terms of accessing the debt market when we went out to further refinance the balance sheet. We went out for a high yield, and in terms of that, I think they're absolutely in line with market standards. We're actually much better than our rating would suggest. We shared our view on the rating. I think there's a journey that we want and need to go with the agencies, but in the end, I think it shows where we are in terms of assessment externally. That makes us very confident because with this capital structure we have the right capital structure to grow the business and we have the right capital structure to further reduce interest costs and to make sure that we can grow profits but not increase leverage but deleverage the company going forward. Now, to the details. I think the bridge and then P&L cash flow and balance sheet as always before I come to a final word on the listing structure because we are on the way to finalize that. Now, As Sebastian said, progress on operational side effectively in all units. Very strong growth in the hotel business. I think that's something we've seen quarter by quarter, and this will continue over the summer. Cruises, this compares against the ramp-up phase that we had last winter, so really strong improvement. Half of this is attributable to the UK business, Morella. Half of this is coming from the German-speaking area, TUI Cruises. So we see really the product is driven by strong demand and is developing very well. On amusement, you see a negative, but there was a positive one of last year. So overall, operationally, the business is on track. And the markets and airlines reduction, this is in particular driven by 30 million that we had last quarter, a positive from operations in our Canada business. Canada Sunwing, we sold the two operator, the two operator business was sold. In the full year, you don't see an impact last year because it was positive in one quarter, negative in one quarter. But in the comparison against last year, there's a 30 million positive last year, which is missing now. So that's why you see a negative while operationally markets and airlines is up. So overall, I think the important message is H1, really, really positive. And this contributes to our targets that we can grow the firm significantly this year. On the P&L details, I think, as I said, one important factor is a positive EBITDA for the first time. The rest of the P&L, the elements are quite under control. Adjustments, if you look at the 12 million that we have now for the full EBITDA, six months. If you take this times two, then you're at the lower end of a range for adjustments. There are still some elements that may come over the summer, but effectively no reason to change our guidance of 25 to 35 on that basis. Interest, if you look at that, 240 5 million broadly last half year and now down to 208 so that savings that we anticipate today really comes through and again you could take this times two in the summer we are not having the same credit costs like in the winter so maybe a little bit of upside But overall, I think what we can do and what we should do is we can confirm now that we will move to the lower end of our interest guidance. And that's a real positive. And we had quite some ambitious targets with the capital raise 12 months ago. Now with the refinancing, now with all the initiatives that we do operationally to make sure that we have the best cash flow in also intra-months, That's something where you see this is the result. Income tax and minorities as we planned and the 18% underlying tax rate is something we expect to continue. Now, on cash flow, you see effectively that the operational developments is reflected there as well. Again, interest is coming down nicely. Also there on the cash interest side, which is much more important effectively for the business than including the non-cash interest, we are looking at something 165 million against 215 last year. And last year, you also need to add the 17 million that we had on the silent participation still from the state. I mean, this is all gone. And if you take the numbers, then we are already at something like 50 million plus the 17 of savings, cash savings against last year. Also here, we are confident that we can get to the lower end of our interest guidance of 330 to 350, which is a really good progress. On the investment side, you may ask why there is an increase, which is something like 200 million in the quarter. This is one financing the new Rio joint venture. This is something that we announced already, which was on the way. There was the special dividend payment coming from the Rio joint. entity to both shareholders, and we reinvested that as planned in the second quarter into funding of this new joint venture, which is another pillar for growth in the future. And then secondly, there was a bigger plot of land which was acquired in Rio, which is also driving this number up. So I think these are the main reasons. Overall, we are still within our guidance, and this is something we're going to look at In the rest of the year, how this will develop, but again, it's all as planned. Overall, again, also on the cash flow side, a very normal quarter, I would say. And if you look at the resulting balance sheet, this is a very different firm compared to 12 months ago. We have discussed this with each of you quite in detail already, but this 1.1 billion improvement is, of course, quite substantial, and at the same time, all the unnormal financing really went out. KfW is now down to 550. Again, reconfirmed, it's not drawn, and we have a good plan to get completely rid of this and to hand it back at time, at the right time, to the state. Other than that, if you could look at this, interest development, balance sheet development, operational development in terms of earnings, this will also contribute to our leverage target to move net leverage below one time. Last word before I hand over to Sebastian on trading. On the stock exchange, again, in February, our shareholders voted to de-complex our listing structure and to move from London to Frankfurt into the prime standard. A big expectation linked to that was to move into the MDAX. Now, we started trading in the prime standard early April. I think this was perceived quite well. The feedback that at least I received was very positive. Now, the next important milestone is to actually go into the MDAX, and this is expected to for early June. All the simulations and analysis that we do support that we got into that. But again, the trading will be in May and then the final decision early June. The final then mechanics to leave the London Stock Exchange, that will be then by end of June. And I think what we can look forward is then a simplified listing structure, which will hopefully help and very probably help trading of the shares. And I think with that, looking backwards, now looking forwards to you, Sebastian, on the bookings.