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8/6/2019 Tui Information From Articles

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Tui strikes deal with Intrepid Travel to form

new adventure holiday firm

Tui and Intrepid hope to save 10m year in merged group

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y Alex Hawkesy guardian.co.uk, Thursday 17 February 2011 14.38 GMTy Article history

Adventure holidays,

including anything from country walking to yoga breaks, are growing in popularity. Photograph: Alamy

Tui Travel is joining forces with an Australian adventure travel specialist to take advantage of

the fast-growing and lucrative trend for alternative breaks.

Tui has struck a deal with Intrepid Travel, setting up a merged company owned 60% by Tui and

40% by Intrepid.

Adventure holidays, which include everything from country walking, trekking in Nepal and yoga

holidays, generate higher margins than conventional package holidays. While packages mightonly generate a profit margin of 3-5%, adventure holidays generate profits of around 10%, a

spokeswoman for Tui said.


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The new venture will have revenues of 255m and comprise 20 different brands. Darrell Wade,the chief executive and co-founder of Intrepid Travel, will become chief executive of the new

company, to be called Peak.

Its nearest rivals in the adventure or "holiday experience" sector are Explore, owned by Holiday

Break, and Gap. Both are smaller in terms of revenues than the new Tui/Intrepid venture.

Tui and Intrepid hope to make savings of 10m a year by merging their brands.

Intrepid Travel was set up in 1989 by Wade and Geoff Manchester. Based in Melbourne,Australia, it handles 100,000 customers a year and had revenues of 69.4m in the year to the end

of June 2010, with profits before tax of 5.3m.

The new venture will include all of Intrepid and Tui's adventure business. For the financial yearended 30 September 2010 Tui's adventure brands had revenues of 185.3m and profits before tax

of 6.8m.

Brands involved in the venture include: Adventure Center, The Adventure Company, AdventureTours Australia, Country Walkers, Exodus, Gecko's Adventures, Guerba, Headwater,

Imaginative Traveller, Intrepid Suntrek, Intrepid Travel, Oz Experience, Peregrine, PinnacleTours, Sawadee, TrekAmerica and WesternXposure.

Tui Travel in humiliating climbdown over

PwCTui Travel strikes deal with shareholders that could see PricewaterhouseCoopers dropped

y Simon Bowersy guardian.co.uk, Thursday 3 February 2011 19.52 GMTy Article history


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KPMG were replaced as

auditors to Tui Travel by PWC, causing some consternation among shareholders.

Tui Travel has struck a backroom deal with institutional shareholders, which is expected to seethe FTSE-100 tour operator ditch the recently appointed auditors PricewaterhouseCoopers in a

humiliating climbdown.

The board hopes its concessions will draw a line under a corporate governance row that hasdogged the group for months, triggered the resignation of two independent directors and attracted

unprecedented criticism from the investor groups Pirc and the Association of British Insurers.

Investors had been growing increasingly concerned that the board was being dominated by thetour operator's majority shareholder, the German group Tui AG, which holds a 54% stake.

Specifically, they were worried by the announcement in December that Tui Travel's auditorKPMG, which blew the whistle on a 117m accounting black hole, was to be replaced withPwC, auditors to Tui AG.

However, the 11th-hour deal was enough to quell a full-scale investor rebellion at today's annual

shareholder meeting, held at the offices of Tui's legal advisers Herbert Smith, in central London.

There was a tense atmosphere in the room as the glum-faced board sat on the podium beneath animage of a sun-kissed beach and Tui's strapline "More than a smile". Chairman Michael Frenzel,

also chief executive of Tui AG, rushed through the agenda, rarely looking up from his notes.Despite promises that all directors would remain behind to answer any questions, he departed

immediately.

Tui AG's majority stake was always going to be enough to ensure a controversial resolution to

appoint PwC as auditors was comfortably passed. But after stripping out the Tui AG voting bloc,about 30% of remaining shareholders who cast a vote chose to either vote against the

appointment of PwC or abstain.


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The behind-the-scenes deal to placate minority investors was brokered at the last minute by Tui'ssenior independent director, Sir Michael Hodgkinson, in a rushed series of talks with angry

shareholders ahead of the meeting.

During the meeting, attended by about a dozen shareholders, Nick Brischetto, of Hermes, asked

the chairman if a new audit committee would be given a brief to review the appointment of anauditor, ensuring the firm would be fully independent. In what appeared to be a well-choreographed exchange, Hodgkinson, rather than Frenzel, took the question. It gave him an

opportunity to state formally that a new audit chairman who would be confirmed in two tothree weeks would immediately be asked to review the appropriateness of having PwC as

auditor. "We want them not just to look at the quality of the audit, but the independence of ourauditor," Hodgkinson said. "He will get completely free run to do the job of an independent audit

committee chairman."

Jennifer Walmsley, head of UK engagement for Hermes, explained: "When we talk about an'independent auditor', in this case we don't just mean independent from the company, but from

the majority shareholder." PwC is auditor to Tui AG.

The likely removal of PwC is not expected to be formally announced until a new chairman of

Tui Travel's audit committee has been appointed. and had time to conduct an internal review Heor she will replace previous committee chairman Jeremy Hicks, who resigned in December,

along with fellow committee member Giles Thorley, in protest at Tui's decision to replaceKPMG as auditor.The change of auditor came shortly after KPMG had blown the whistle on

117m book-keeping black hole in Tui Travel's British business. Clearly upset at being sacked,KPMG took the unusual step of referring to "increasingly strained" relations between auditors

and certain Tui Travel directors over the need to restate past years' accounts.

Holiday firm Tui counts the cost of Egypt andTunisia unrest

Tui has cancelled all holiday bookings for Egypt from Germany, France, Belgium, the

Netherlands and Scandinavia, but is still running holidays booked in the UK for the Red Searesorts 'in line with government advice'

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y Comments (2)y Julia Kollewey guardian.co.uk, Thursday 3 February 2011 08.53 GMTy Article history


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Thomson Holidays and

First Choice holiday brochures, part of TUI Travel's portfolio which warned the politicalunrest in Egypt

and Tunisia could hit earnings by up to 30m Photograph: Rui Vieira/PA

Tui Travel, Europe's biggest travel company, has warned that the unrest in Egypt and Tunisia

will cost it up to 30m as customers cancel or reschedule holidays.

As the clashes in Egypt turned increasingly violent, Tui said this morning that the current"economic and geopolitical uncertainty" casts a shadow over its outlook for 2011.

"Early indications are that customers are choosing to rebook to alternative destinations and weare taking action to remix our programmes in line with customer demand," said the company,

which runs Thomson Holidays and First Choice. "The Egypt and Tunisia situation could impact

the second-quarter result by 25m to 30m."

Tui has cancelled all holiday bookings for Egypt from Germany, France, Belgium, the

Netherlands and Scandinavia, but is still running holidays booked in the UK for the Red Searesorts "in line with government advice". This means that, at present, UK customers would not

get a refund if they cancelled their trip.

"If we are not able to operate any further holidays to Egypt for the rest of the winter from any

source market except for the UK, we estimate the second-quarter impact will be approximately20m. If UK government advice changes and we can no longer operate from that source market

we would expect the impact to increase by approximately 5m," Tui said.

It has incurred further costs of 5m in Tunisia to repatriate customers and from the cancellationof holidays.

The comments came as the travel company reported a smaller underlying operating loss of 84m

in the quarter to December (its first quarter), compared with 107m a year earlier.


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The Middle East turmoil is the fourth blow to Tui in the last year. The eruption of theEyjafjallajkull volcano left around 100,000 customers stranded last spring, and bookings late

last year were hit by the poor wintry weather. The company has also discovered a 117m blackhole in its accounts.

"The short-term impact from the events in North Africa is overshadowing the underlyingstrategic progress that is being made at Tui Travel," said Nick Batram at Peel Hunt.

"The impact on underlying earnings is uncertain at this stage and will depend on the margin deltaon re-bookings. Our underlying profit forecast for 2011 is therefore under review."

Tui Travel faces shareholder rebellion over

re-employing PwC as auditorPirc advises blocking PricewaterhouseCoopers reappointment at Tui after worries over black

hole

oy Simon Bowersy guardian.co.uk, Tuesday 25 January 2011 18.07 GMTy Article history

Tui has holidays available

in Greece, but in Britain it is facing a far from relaxing time with shareholders. Photograph: The Travel

Library/ Rex Features


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Tui Travel is facing a shareholder rebellion next week over its controversial decision to part withKPMG as its auditorshortly after the accounting firm discovered a 117m bookkeeping black

hole in the tour operator's British business.

Powerful shareholder advisory groups Pirc and the Association of British Insurers have both

highlighted serious concerns about Tui's treatment of KPMG ahead of the FTSE 100 firm'sannual meeting in London next Thursday.

Pirc has recommended investors oppose a resolution to appoint PricewaterhouseCoopers asreplacement auditors. The ABI meanwhile has issued what is believed to be its first "red-top"

governance warning in relation to a vote to change an auditor.

It is the latest stakeholder protest over an affair that critics claim raises serious questions about

the conduct of the majority shareholder, German group Tui AG.

While a damaging protest vote is now expected, Tui AG's 54% shareholding ensures the vote on

appointment of PwC which is already auditor to the German group is passed.

Early last year KPMG discovered a basic error in book-keeping processes at the tour operating

firm's British subsidiary, Tui UK Limited. The discovery was made within months of taking overas auditors from PwC.

In its advice to shareholders, Pirc says: "The company is now seeking to reinstate PwC as auditorof the continuing entity which we regard as unacceptable."

The ABI said: "We have red-topped the report to highlight serious concerns regarding due

process and overall governance."

Late last year Tui was forced to issue a series of statements to investors detailing how some117m, said to be owed to Tui, was in fact an illusory figure in its accounts. This error at Tui UK

had been building over 5-7 years but had not been spotted by PwC.

The episode led Paul Bowtell, finance director at parent group Tui Travel, to resign and forced a

complete overhaul of Tui UK's management team.

The embarrassing blunder became a corporate governance scandal four weeks ago when Tuirevealed relations with KPMG had reached such a low that they could no longer work together.

In a highly unusual move the accountancy firm set out the background to the falling out in the

statutory letter it is required to file at Companies House on stepping down as auditor.

"We have had extensive discussions with the directors of [Tui] over the background to these

[failures] Over the course of these discussions our relationship with certain directors becameincreasingly strained," wrote Oliver Tant, KPMG's most senior UK audit partner. "As a result,

we are not confident that in the future we could carry out an audit of the company to theappropriate standard."


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A week later the Tui audit committee chairman, Jeremy Hicks, the man who had led the internalpostmortem of the accounting blunder, resigned in protest at the board's treatment of KPMG.

Fellow audit committee member Giles Thorley also quit.

This month, one major shareholder said: "Why is it that Hicks has resigned? And who on earth is

going to be the next chairman of the audit committee?"

Tui's tale of accounting errors and

boardroom resignations

The City institutions should do what they can: vote against PwC's election

yy Comments (1)

yyo Nils Pratleyo guardian.co.uk, Tuesday 25 January 2011 20.20 GMTo Article history

Tui Travel's headquarters

in Hanover, Germany. Shareholder group Pirc advises investors to block Tui reappointing PwC.

Photograph Kai-Uwe Knoth/AFP

Here's a real corporate governance bust-up a tale of accounting errors and boardroom

resignations laced with accusations that the majority shareholder is abusing its position. The


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wonder is that almost nobody is talking about it. Tui Travel is a 3bn company, and a member ofthe FTSE 100 index; its tour operators, Thomson and First Choice, are household names.

The story so far: Tui confessed to a 117m accounting error last October relating to discounts

offered to holiday-makers over several years. The company's accounts for 2008-09 had to be

restated and finance director Paul Bowtell did the honourable thing by resigning. So far, sostraightforward.

Tui's investigation into the cock-up is where the story becomes interesting. KMPG, despite beinggroup auditor, had been auditor of the relevant subsidiary for only the past year and the

accounting mistakes it uncovered dated back five years (at least). It might have expected praisefrom the board for unearthing errors that happened when its predecessor,

PricewaterhouseCoopers, was at the helm of the subsidiary.

Instead, relations between KPMG and Tui broke down. Oliver Tant KPMG's senior audit

partner, which makes him one of the UK's most senior auditors wrote a blistering letter on

stepping down. The firm's relationship with "certain directors" had become "increasinglystrained" and it was no longer confident it could carry out an audit "to the appropriate standard."Jeremy Hicks, chairman of Tui's audit committee, sided with KPMG. He resigned from the

board, as did fellow non-executive director Giles Thorley.

Now comes the real eye-popper. Tui wants to install PwC as group auditor yes, the same firmthat appears to have failed to spot the overstatement of receivables at the subsidiary.

"Unacceptable," says Pirc, the shareholder advisory firm. Absolutely right.

Shareholders will naturally fear they are being softened up ahead of lowball bid by Tui AG, theGerman firm that owns 54% of the shares. It can be perilous to be a minority shareholder. The

City institutions should do what they can: vote against PwC's election. And make PwC'srepresentative stand up at the annual meeting to explain why a supposedly top-drawer member of

the auditing profession thinks it proper to accept the job in these circumstances.

Troubled Tui is shaken by more unscheduled

departures

Heads rolled at the travel operator when a 117m accounting error was found last year. Now,suddenly, two more directors have resigned and investors are becoming alarmed

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y Comments (0)


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yyo Simon Bowerso The Observer, Sunday 9 January 2011o Article history

One of the Sensatori range

ofluxury hotels set up by Thomson, which merged with First Choice in 2007 to create Tui Travel.

As Thursday morning showers trickled down the windows at Tui Travel's head office in an

anonymous-looking business park just south of Gatwick airport, staff would have been forgiven

for occasionally glancing up at the group's Thomson Airways planes taking off, imaginingthemselves jetting away to sunnier climes.

Any idle daydreams would have come to an abrupt end, however, with the arrival of a brace ofresignation letters from two of the company's most senior non-executive directors. It quickly

became clear the two men audit committee chairman Jeremy Hicks and fellow committeemember Giles Thorley were stepping down in protest at some of the company's recent actions.

Their departures came three months after finance director Paul Bowtell announced he was

stepping down following the discovery of a 117m black hole in the company's books, and just aweek after an unexpected severing of ties with KPMG, the company's auditors. KPMG had

previously been credited with spotting the accounting error. They have lifted the lid on divisionswithin one of Britain's highest-profile tour operators and raised questions about the intentions

of its German controlling shareholder.

The letters could not have come at a more damaging time. Tui's annual report and accounts had

just been printed and copies were already in the post. Along with the report was a meeting noticedetailing items investors would be asked to vote upon. Ordinary resolutions 14 and 15 to re-

elect Hicks and Thorley would now have to be struck out.


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Within hours, Tui was forced to publish an announcement to the stock exchange disclosing theresignations. No explanations were given, but it would not be long before more astute

shareholders began to put two and two together.

Of particular concern was the exit of Hicks, an experienced accountant and the former finance

director of marketing firm Aegis Group. According to Tui's annual report, he had been leading apost-mortem of the events leading up to the discovery of the accounting mess, revealed toshareholders in October. "Why is it that Hicks has resigned? And who on earth is going to be the

next chairman of the audit committee?" one big shareholder said. "It is strange that the auditors,who found what was wrong, could not stay; and that the chairman of the audit committee has

now resigned. Most strange."

But the main question on his mind was whether the latest developments suggested that thegroup's largest shareholder, Germany's Tui AG, had been throwing its weight around. The

London-listed tour operator has been firmly under German control since it was created via the2007 merger of First Choice and Tui AG's travel business Thomson. Indeed, the German

company increased its stake from 56% to 57% last week.

The exact chain of events leading to the resignation of Hicks and Thorley is unlikely ever to be

made public, but it is thought the two men had fallen out with Tui AG over the way the auditcommittee's investigation was proceeding.

In particular, Hicks and Thorley are believed to have been dismayed by the loss of both KPMG

and Bowtell. In fact, so angry was Hicks at a story in theFinancial Times that he wrote to thepaper correcting what he saw as a "strong implication that Tui is sacking its auditor, KPMG, as a

result of its failure to detect accounting errors".

A further glimpse of the level of acrimony surrounding the investigation came in a third lettersent to Tui's Gatwick HQ this time by Oliver Tant, KPMG's most senior UK audit partner. Tui

was obliged to publish it it is a regulatory requirement when auditors step down. Andunusually for such letters, the language was extremely punchy.

"We have had extensive discussions with the directors of [Tui] over the background to these[failures] Over the course of these discussions our relationship with certain directors became

increasingly strained," Tant wrote. "As a result, we are not confident that in the future we couldcarry out an audit of the company to the appropriate standard."

One institutional shareholder said he feared Tui AG might be using the turmoil to press home its

agenda at Tui Travel, with the ultimate goal of buying out minority investors "with a lowballoffer". Tui AG last month appointed advisers to pursue a flotation of the Hapag-Lloyd shipping

line, in which it holds a major stake. Many analysts believe the proceeds are likely to be used tobuy those shares in Tui Travel that Tui AG does not already own.

Others have suggested that the departure of Hicks and Thorley might send a strong message toindependent-minded directors about the limits of their powers at a company where one strong

shareholder has majority control.


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Several industry insiders believe the scandal has reopened old rivalries after years of apparentharmony following the Thomson-First Choice merger. Those from the First Choice side are said

to be upset that the credibility of the business has been called into question because of financial-systems failings within Thomson that stretch back to 2005.

Adding to investors' frustrations is the fact that most of those who are leaving in the wake of theproblems do not appear to be particularly culpable. Bowtell came from First Choice; even Tui'schief executive, Peter Long, insisted Bowtell was not to directly to blame. Asked why he had to

go, Long said: "Paul has done the honourable thing. It was on his watch."

Hicks and Thorley had been on the board at First Choice, and as non-executive directors couldcarry no blame for the reporting failures. Dermot Blastland, again from a First Choice

background, retired as managing director of Tui Travel's UK operations in October, aged 60, hisreputation dented by association with the errors even though they had largely taken place prior to

his arrival.

David Taylor, Blastland's finance director, was alone among the wave of departures in having aclose involvement with Tui's UK operation and a history with the Thomson side of the business.

For months Tui has been trying and failing to draw a line under the poisonous recriminationsthat have engulfed it since it admitted to accounting blunders. It now seems all too likely that

further accusations will surface as Tui's chairman Michael Frenzel, who is also chief executive ofTui AG, prepares to fly in from Hanover and preside over the tour operator's annual meeting.

Tui Travel's motto is "More than a smile". It is hard to imagine that Frenzel or his colleagues will

be wearing anything like a grin as they take their seats.

PETER LONG: A JOURNEY IN TRAVEL

Tui Travel's chief executive, Peter Long started out in the travel industry at International Leisure

Group, an ambitious tour operator run by the flamboyant entrepreneur Harry Goodman that

collapsed under too much debt in 1991. There he met Manny Fontenla-Novoa, who is now hiscounterpart at rival tour operator Thomas Cook.

The two men joined forces to set up Sunworld in partnership with Spanish hoteliers, later selling

the business to Thomas Cook for 40m. Long bought a villa in Mallorca with his share, but soonreturned to the boardroom, helping to turn around struggling First Choice and becoming chief

executive in 1999.

The landscape of the industry changed eight years later when two colossal mergers crunched the

four leading players into two large businesses. Thomas Cook came together with MyTravel; FirstChoice, jilted at the altar, was left to pair with the travel operations of Germany's Tui AG.

It wasn't the marriage Long had been holding out for. Outmanoeuvred, he was determined that

First Choice not be left on the shelf, and struck the deal with Tui AG at breathtaking speed.


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While Long and other First Choice directors, including finance director Paul Bowtell, took keyroles at newly created Tui Travel, the ultimate power rested with Tui AG, which took a majority

stake in the combined business.

Troubled Tui Travel loses two more directors

http://www.guardian.co.uk/business/2011/jan/07/tui-travel-directors-resign

Resignations of Jeremy Hicks and Giles Thorley come a week after the departure of Tui'sauditor, KPMG

y guardian.co.uk, Friday 7 January 2011 15.23 GMT

( Simon Bowers)

Two directors have resigned from the scandal-hit tour operatorTui Travel in what is believed to

be a protest amid a flurry of poisonous recriminations since the discovery of a 117m black holein the group's accounts.

No public explanation has been given for the resignations of Jeremy Hicks, chairman of thecompany's audit committee, and his fellow committee member Giles Thorley. They will prove

acutely embarrassing for Tui, as Hicks had been leading an internal post-mortem on thebookkeeping scandal.

The departure of the directors comes only a week afterthe FTSE 100 business's auditor, KPMG,walked away, claiming its relationship with Tui had become "increasingly strained".

In an unusually candid statutory letter, required from any departing auditor under company law,KPMG said: "We are not confident that in the future we could carry out an audit of the company

to the appropriate standard, but others may be able to do so."

The resignations follow the announcement in October that the company's finance director, Paul

Bowtell, was to step down in the wake of Tui's admission that KPMG had discovered a blackhole in the books of the tour operator's British operations.

It is thought that Hicks and Thorley were dismayed by the departure of both KPMG and Bowtell.A number of industry insiders have suggested that the group formed by the merger of theGerman company Tui AG's Thomson travel business with First Choice is bubbling with

internecine tensions. Those from the First Choice side of the business are frustrated that thecredibility of the company has suffered because of a legacy issue stemming from Thomson

financial reporting systems.


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The accounting black hole had built up over about six years, long before Bowtell and KPMG hadan involvement in Tui Travel UK Ltd. Prior to the merger, Bowtell was at First Choice, where

KPMG acted as auditor. Dermot Blastland, managing director of Tui Travel UK, who retired at60 last October, also came from a first First Choice business. However, his finance director,

David Taylor, who also left the business, had a long-standing role in Tui Travel UK's finance

department.

In a rushed statement on Thursday afternoon Tui said that Hicks and Thorley had decided to quit

at the end of the month, leaving the prospect of two empty chairs at the group's annualshareholder meeting on 3 February. "The group has begun the process of identifying potential

new non-executive directors and announcements will be made in due course," it said.

The resignations came too late to feature in Tui's annual report, but the departures are set out inan accompanying investor circular detailing the resolutions on which shareholders will be invited

to vote.

According to Tui's annual report, the audit committee had started "a full and thorough controlsand compliance review across the organisation" after the discovery of the bookkeeping scandal.The review has been chaired by Hicks and supported by KPMG and PricewaterhouseCoopers.

Tui, best known in Britain for its Thomson and First Choice brands, told investors in October

that it had discovered a 117m bookkeeping black hole in its UK operations, which had built upover at least four years. As a result, the holiday group was forced to restate its 2009 figures,

wiping 42m, or 10%, from operating profits as well as cutting 70m off starting reserves. Afurther 5m hit was taken in accounts for the year to 30 September 2010.

Just two weeks earlier, Tui, which is 57% owned by Tui AG, had issued a trading update

insisting that it was "confident that full-year results would be in line with previous expectations".

Investors had been told in August of the need for a 29m writedown relating to what it called

"small receivable balances" built up over about seven years, which management believed couldno longer be recovered.

By the time of the October statement, however, a further 88m of writedowns had been

identified. A fuller description of the problem clarified that failures in financial reportingprocesses within Tui's UK operations and not shortcomings among its trading partners were

to blame for past overstatements.

Tui's annual report reveals that executive directors, despite receiving millions of pounds worth ofthree-year share-based awards, did not receive an annual cash bonus for 2010. "Notwithstanding

the fact that the underlying [earnings] and cash-flow measures were met in full, the remunerationcommittee decided that, in the context of an appropriate claw-back of prior year bonus due to the

profit restatement and substantial one-off costs during the year, a cash bonus would not bepayable."


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Last weekend the Observer revealed that long-term incentivepayouts to five executive directorsat Tui during the last 12 months had reached almost 8m, despite revelations over the accounting

scandal at the UK division.

y Businessy

Tui Travel

Directors at error-hit Tui awarded 4.9m in

bonuses

Five executives, including former finance director, granted more shares despite discovery of

117m accounting error last year

oy Simon Bowersy The Observer, Sunday 2 January 2011y Article history

Tui found a 117m black

hole in its accounts

last year, forcing it to restate figures for 2009. Photograph:

Kai-Uwe

Knoth/

AFP

Tui Travel's chief executive Peter Long and four fellow directors received nearly 8m inperformance-based payouts last year, despite auditors discovering a 117m accounting error in

the tour operator's books.


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The latest awards took place last week, releasing 4.9m in shares to the five men, on top of 3min February. The payouts, disclosed in stock market filings, do not include salary, cash bonuses

or pension contributions, all of which will be detailed in Tui's annual report on 7 January.

Among the executives benefiting from the long-term incentive payouts is Paul Bowtell, who was

replaced as Tui's finance director in October following revelations about accounting failures atthe company's UK operations. He received share-based rewards worth 580,000 in February anda further 757,000 last week.

About two months ago Tui, best known in Britain for its Thomson and First Choice brands, told

investors it had discovered a 117m book-keeping black hole in its UK operations that had builtup over at least four years. As a result, the holiday group was forced to restate its 2009 figures,

wiping 42m, or 10%, from operating profits as well as cutting 70m off starting reserves. Afurther 5m hit was taken in accounts for the year to 30 September 2010.

Just two weeks earlier Tui, which is 57% owned by Germany's Tui AG, had issued a trading

update insisting it was "confident that full-year results would be in line with previousexpectations".

Investors had been told in August of the need for a 29m writedown relating to what it called"small receivable balances" built up over about seven years, which management believed could

no longer be recovered.

By the time of the October statement, however, a further 88m of writedowns had beenidentified and a fuller description of the problem clarified that failures in financial reporting

processes within Tui's UK operations and not shortcomings among its trading partners wereto blame for past overstatements.

At that point Bowtell announced his resignation, "following discussions with Peter Long". TheTui boss was at pains to stress Bowtell's move was "honourable", adding he was "one of the most

capable chief financial officers I know". The fiasco has also led to a breakdown in relationsbetween Tui and its auditors KPMG; they parted company last week.

In a sign of the level of bad blood between the two sides, KPMG has filed a letter at Companies

House detailing "increasingly strained" relationships with directors, leaving it unable to continueas auditor. "We are not confident that in the future we could carry out an audit of the company to

the appropriate standard, but others may be able to do so," it said.

Tui drops KPMG after it found 117m hole inaccounts

KPMG steps down from Tui Travel months after revealing embarrassing internal accountingerror


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y Simon Bowersy guardian.co.uk, Thursday 30 December 2010 17.18 GMTy Article history

Tui owns UK brands such

as Thomson and First Choice. Photograph: David Sillitoe for the Guardian

A bitter row between Tui Travel and KPMG has led to the accountancy firm being dropped as itsauditor just months after blowing the whistle on a 117m black hole in the travel group's books.

The removal of KPMG comes as a surprise because the auditors had been credited with tellingTui's board about the embarrassing internal accounting error at its UK division.

Just two months ago, Tui chief executive Peter Long said: "KPMG identified some system

weaknesses and ledgers that had not been reconciled ... Yes, they identified some of these controlweaknesses which had then manifested themselves into the issues subsequently identified

through a detailed investigation."

The internal accounting failures and the way they were reported to the stock market led inOctober to the announcement that the finance director, Paul Bowtell, was to leave the group. Atabout the same time Dermot Blastland, managing director of Tui Travel UK, retired at 60, and

his finance director, David Taylor, also left the business.

Behind the scenes, however, efforts to draw a line under the affair by KPMG and Tui, which isbest known in the UK for its Thomson and First Choice brands, struggled to reach a resolution.

The two sides have now agreed they cannot work together. In a highly unusual move, the


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accountancy firm has set out the background to the falling out in the statutory letter it is requiredto file on stepping down as auditor.

KPMG said its relationship with "certain [Tui Travel] directors became increasingly strained"

following "extensive discussions with the directors". Among the areas where KPMG had raised

concerns, the letter added, were the implications arising from the restated accounts and "theirdisclosure and accounting treatment in the financial statements".Relations had reached such alow ebb, KPMG concluded, that "we are not confident that in the future we could carry out an

audit of the company to the appropriate standard, but others may be able to do so."

The firm is understood to have signed off Tui's accounts for the year to 30 September 2010without any qualifying remarks. These are to be published on 7 January. Tui plans to appoint

PricewaterhouseCoopers to succeed KPMG in February.

Shares in Tui Travel, which is 57% owned by the German group Tui AG, dropped 11% two

months ago after the company disclosed the need to restate its past accounts, writing off 117m.

That announcement followed an earlier update in August in which Tui Travel said it had found29m of what it called "small receivable balances", built up over about seven years, which

management believed could no longer be recovered.

By the time of the October statement, however, a further 88m of write-downs had beenidentified and a fuller description of the problem clarified that failures in financial reporting

processes within TUI's UK operations and not shortcomings among its customers were toblame for past overstatements.

The intra-group accounting failures related to thousands of small cash discounts given to British

holidaymakers that were not recognised properly in Tui's books. Tui said discounts related tooccasional reductions offered by Thomson travel agents, such as the waiving of booking chargesand discounts for e-tickets, as well as some cancellations.

KMPG has audited Tui Travel since the group was formed three years ago by the merger of First

Choice and the travel business of Tui AG. It had previously been auditor to First Choice.However, the accountancy firm only took over as auditor of the subsidiary group Tui Travel UK

from PwC in March of this year. KPMG auditors are understood to have started raising concernsabout the relevant accounting issues at Tui Travel UK with the Tui Travel directors almost

immediately. These concerns did not stop it signing off the subsidiary's 2009 accounts in June ofthis year.

European shares rise on hopes ECB will ease

monetary policy; Tui Travel gains ( 2 Dec 2010)

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European stock markets rose today, on hopes that the European Central Bank will unveil newmeasures to contain the spread of the sovereign debt crisis.

The ECB is expected to leave interest rates unchanged at 0.5% today, as any rise could threaten

even more the ailing economies of Spain, Ireland and Portugal. The ECB will announce its

decision at 12.45pm London time, and its president Jean-Claude Trichet will offer a pressconference at 1.30pm.

The FTSE 100 rose 39.45 points, or 0.7%, to 5,683 points at 9.20a.m., while the CAC 40 Indexadded 0.3% to 3,682 in Paris, and Germany's DAX Index also rose 0.3% to 6,886 points.

In London, gainers were led by Tui Travel, which added 7.2p, or 3.3%, to 221.6p, after reportingfull-year profit at the top of market expectations. Europe's biggest travel firm said operating

profit rose 11% to 447m in the year to the end of September, fuelled by strong demand andsavings from the merger between Germany's Tui travel unit and Britain's First Choice.

Peter Long, Chief Executive, said in a statement: "'In a difficult trading environment we havecontinued to achieve incremental synergy benefits and made good progress in delivering theturnaround opportunity during the year. The 2010 result was, however, affected by a weaker

trading performance in the UK, primarily due to increased winter losses resulting from capacity-led volume reductions in anticipation of lower demand."

Tui Travel finance chief to quit after accounts

glitchTour operator Tui Travel's chief finance officer Paul Bowtell to leave at end of 2010 after it was

forced to restate 2009 accounts

yoo Shareoo

y Julia Kollewey guardian.co.uk, Thursday 21 October 2010 09.38 BSTy Article history


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Europe's largest travel

operator Tui Travel has been forced to restate its 2009 accounts following an error. Photograph: PR

Tui Travel's finance chief Paul Bowtell is leaving the company after it was forced to restate its2009 accounts. Europe's largest travel operator blamed the integration of accounting systems

following the 2007 mergerof the UK's First Choice Travel with the tourism division ofGermany's Tui AG.

Bowtell, 42, offered his resignation and will leave at the end of the year.

Tui shares fell 6.6% on the news, dropping 15.1p to 215.3p, after it announced write-offs of

117m in its UK tour operator business.

Tui declined to indicate whether Bowtell would get a payoff, saying "any terms are underdiscussion". He previously worked for First Choice as finance director and before that BritishGas and WH Smith.

Chief executive Peter Long paid tribute to him: "It is now clear that at the time of merger there

were weaknesses in the legacy systems we chose to use in the Tui UK business. Despite the factthat this situation had built up over a number of years, Paul is behaving honourably and I am

disappointed that he will be leaving the group. He is one of the most capable chief financialofficers I know and we have had an extremely good working relationship over the six years that

we have been a team."

Announcing the 117m write-offs, Tui said that these were caused by "failures to reconcilebalances in the IT systems of the retail and tour operators businesses in the UK".

Tui said that following a 29m write-off at the time of its third quarter results in August, anongoing audit had uncovered a further 88m of irrecoverable balances.

This means that underlying operating profit in the year to September 2009 was 401m, 42m

lower than previously reported. The write-offs will not have a negative impact on the group's


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cash position and net debt. The impact in 2010 has been limited to 5m and the company isconfident of meeting forecasts with its full-year results, adding that debt will be lower than

previous guidance.

Tui UK is now under a new leadership team of Johan Lundgren, managing director of the

northern region, and Colin McKinlay, who joined on 1 October as finance director fromHomeserve.

The company said the stronger trading highlighted in its last trading update had continued.

Tui Travel takes a financial wrong turn

Finance director packing his bags after embarrassment of 117m write-offs

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y Nils Pratleyy guardian.co.uk, Thursday 21 October 2010 20.38 BSTy Article history

Peter Long, chief executive ofTui Travel, says he is disappointed that Paul Bowtell "one of the

most capable chief financial officers I know" is leaving. But he has accepted Bowtell'sresignation any way, which is probably the only credible option afterthe embarrasment of a

117m write-offrelating to discounts offered to UK holidaymakers over the past five years.

It seems amazing that the scale of the accounting problem could have gone undetected for so

long. Chaotic internal IT systems, compounded by the merger of Thomson and First Choice in2007, seems to have the cause.

Even so, this is basic territory: surely head office knew the agents in the shops were offering

discounts.

Tui Travel finance director steps down after

117m accounting errorLong-standing oversight going back years meant tour operator Tui's accounts system werefailing to allow for cash discounts

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o Share15oo

y Simon Bowersy guardian.co.uk, Thursday 21 October 2010 20.22 BSTy Article history

Tui AG's headquarters in

Hanover, Germany. Photograph: Kai-Uwe Knoth/AFP

Tui Travel's finance director, Paul Bowtell, and two top UK managers have left the tour operator

after it was forced to admit that it had overlooked 117m of small cash discounts given to British

holidaymakers in its accounts.

Occasional reductions offered by Thomson travel agents, such as waiving of booking charge fees

and discounts for e-tickets, as well as some cancellations, were not picked up when UK cashsales data was transmitted from high street shops to Tui Travel's accounts department.

The long-standing accounting error began well before the 2007 merger between German group

Tui AG's travel division and First Choice that created Tui Travel, and was not identified untilauditors KPMG raised concerns this year.

In August Tui Travel said it had found 29m of what it called "small receivable balances", built

up over seven years, which management believed could no longer be recovered.

Today, it made clear that a further 88m of "irrecoverable balances" had been identified. It

further clarified that a chaotic reporting process, and not shortcomings among suppliers, was toblame for the missing amounts, which have been written off.


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The accounting failures were a legacy of Tui AG's British business, which largely traded underthe Thomson brand; the deficient Thomson booking system survived the merger while the First

Choice system was shut down.

Tui Travel will now restate its accounts for past years, with 42m, or almost 10%, wiped from

the 443m operating profit reported by Tui for the year to 30 September 2009. The sum in effectwipes out much of the strong operating-profit gains recorded by Tui's UK and Irelandmainstream holidays business during that year. The impact on the year to 30 September 2010 has

been limited to 5m.

Last night, shares in Tui Travel, which is 57% owned by Tui AG, closed down 25.4p, or 11%, at205p.

"This episode is likely to reinforce current investor perception that the quality of earnings in thetour-operator sub-sector is poor," said Sam Hart, an analyst with Charles Stanley. "It also draws

attention to the consistently high level of exceptional items in tour operators' accounts."

He added: "Trading conditions for Tui Travel are likely to remain tough over the medium termas consumers start to feel the full impact of austerity measures, although we ultimately expect

demand to be relatively resilient, with consumers continuing to attribute a high priority to theirannual summer holiday."

Tui Travel's chief executive, Peter Long, emphasised that the accounting problem had now been

cleared up and that the UK business was now under the new leadership team of Johan Lundgren,who runs the broader Tui Travel business in northern Europe, and former Homeserve finance

director Colin McKinlay, who joined as divisional head of finance at the start of this month.

Respectively, the two men took over from Dermot Blastland, who is retiring, and David Taylor,who has left. Taylor had been in charge of the finance function at Thomson in the UK prior tothe merger.

In addition to these changes, the embarrassing blunder led group finance director Paul Bowtell

who came from the First Choice side of the business to tender his resignation. He will leaveafter Christmas. "This is a huge issue for us," said Long. "And Paul, who I've got a huge amounts

of time for, has done the honourable thing. It was on his watch."

Tui also hinted today that recent strong booking trends for winter holidays appeared to beholding up well. A critical test, however, will come in the new year when bookings for summer

start to peak.

Tui Travel enjoys late summer surge

Tui Travel reports surge in late bookingsTurnaround follows August profit warning


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yoo Shareoo

y Simon Goodleyy guardian.co.uk, Tuesday 5 October 2010 18.52 BSTy Article history

Tui Travel said with the

surge in late bookings its summer 2010 tours were now mostly sold out Photograph: Guardian

Tui Travel, the owner of Thomson, cheered the sector's embattled investors today by reporting aturnaround in late summer trading.

The more positive tone contrasted with the tour operator'sprofit warning in August, as well aslast week's downbeat statement by rival Thomas Cook, which warned that operating profits

would be hit by a further 10m and job losses would be inevitable.

Peter Long, Tui Travel chief executive, said: "Since our last update, we have performed well inthe 'lates' market for summer 2010 and the majority of our programmes are now almost fully

sold. The failure of a number of smaller tour operators and airlines has emphasised the securitythat travelling with a leading tour operator brings. We have benefited from this flight to quality

as well as the return to more normal weather conditions across northern Europe after the earlierperiod of good weather."

Two months ago Tui blamed falling profits on volcanic ash, the emergency budget and goodweather in the UK. Since then, UK bookings have increased by 5%, while the Nordic region has

enjoyed a 16% rise. Tui admitted extra sales had been won by discounting and City broker JPMorgan Cazenove reiterated its profit forecast for the company of around 440m before interest

and tax.


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Tui shares, which fell 10% on the August warning to around 200p, added 9.1p to 225.9p asinvestors were also pleased by lower debt expectations. Analysts are expecting hefty one-off

restructuring costs, partly due to UKjob cuts. Wyn Ellis, at broker Numis, said: "High levels ofexceptional costs are a sadly recurrent feature for the tour operators, resulting in a questionable

quality of earnings and contributing, in our view, to the apparent low rating."

Tui Travel shares jump 5% after encouraging

start to summer 2011 bookings

Posted by Nick Fletcher Tuesday 5 October 2010 11.12 BST guardian.co.uk

Tui Travel is topping the FTSE 100 risers at the moment as investors warm to its trading updateshowing a strong start for bookings for next summer.

The company said it was confident that its full year results would be in line with expectations,with winter bookings and sales for summer 2011 in the UK and Nordic region both doing well. Itsaid it was benefitting from the recent collapses of a number of smaller rivals. Tui chief

executive Peter Long said (in no way smugly):

The failure of a number of smaller tour operators and airlines has once again emphasised to holiday

makers the security that travelling with a leading tour operator brings. We have benefited from this

flight to quality as well as the return of more normal weather conditions across northern Europe after

the earlier period ofgood weather.

But there was a note of caution, with Tui saying it was taking a prudent view on the outlook for the

coming year, since it was early in the booking cycle. And it is continuing to look for cost cuts to increaseits competitiveness.

In August the company issued a profit warning, hitting its shares despite hopes of a possible bidfrom major shareholder Tui AG. But today's news that it is sticking to its revised guidance has

helped lift the company's shares by 10.7p to 227.5p. In a hold note KBC Peel Hunt said:

Tui painted a similar picture to Thomas Cook but managed to avoid the cost hits that impacted the

latter. A solid start to Winter and Summer 2011 should help sentiment. However, while bid speculation

helps justify some of the premium to Thomas Cook, on underlying fundamentals the latter looks

significantly better value. Without the spectre of a possible bid from Tui AG, the current rating relative

to Thomas Cook is hard to justify. Indeed, for those who believe such a bid is highly unlikely then a

switch to Thomas Cook looks the logical call. While there are a number of events that would have to

occur before Tui AG stepped up to the plate, given their historic comments, it would be difficult to

completely ignore the potential for a bid in the future; hence our hold recommendation.


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Buyout talk boosts Tui Travel

yoo Shareoo

Shares in Tui Travel, which last month warned on profits, have shot to the top of the FTSE 100leaderboard on the back of a report that its largest shareholder is mulling an all-out bid.

Germany's TUI owns 42.5% of its namesake and according to a report in Financial Times

Deutschland, its supervisory board will meet this week to discuss whether to buy the rest.

Shares in Tui added 10.4p to 211.7p, a rise of just over 5%.

Last month, Tui warned on profits, blaming the uncertainty created by the emergency budget

which had caused British holidaymakers to leave it to the last minute to book their foreign travelas they search for cheap deals. Its shares dropped 10% on that news.

Across the general market, the FTSE 100 index is up more than 57 points at 5,282.38 points

with mining stocks boosted by strong economic data from China overnight.

Fresnillo is up 39p at 139p, Kazakhmys up 32p at 1188p and Vedanta Resources up 20p at 136p.

Overnight, data from China showed that the country's official purchasing managers' index rose to51.7 in August from 51.2 in July.

Data out this morning about the UK, however, was slightly more mixed.

The Markit/Chartered Institute of Purchasing and Supply Manufacturing PMI shawed that theUK's manufacturing sector slowed more than expected last month - predominantly because of

low new orders. It fell to 54.3 in August - below forecasts - from a downwardly revised 56.9 inJuly.

Posted by Richard Wray Wednesday 1 September 2010 10.11 BST guardian.co.uk

Tui Travel blames spending cuts as it warns

on profits


27/28

Group says profit will be at bottom of forecasts Shares fall almost 10% in early trading

Uncertainty over emergency budget means later bookings

yy Richard Wrayy guardian.co.uk, Tuesday 10 August 2010 10.29 BSTy Article history

Economic uncertainty and

good UK weather mean more people are opting for UK holidays, say Tui Travel. Photograph: Graham

Turner for the Guardian

Europe's largest travel company has warned on profits, blaming the uncertainty created by the

emergency budget which has caused British holidaymakers to leave it to the last minute to booktheir foreign travel as they search for cheap deals.

Tui Travel said its annual profits will be at the bottom end of forecasts, sending its shares down

almost 10% in early trading this morning and wiping 230m off the value of the FTSE 100-listedbusiness. Shares in rival Thomas Cooklost more than 5% in early trading.

While bookings to date in the UK are actually up 2%, Tui is having to offer better deals in order

to get people to travel. The good summer weather has also prompted British travellers to wait

until the last minute before deciding whether or not to go abroad.

The company still has about 650,000 flights and holidays left to sell in the UK this summer,according to Tui's chief financial officer Paul Bowtell, suggesting late-comers may get some real

bargains. He reckons Tui's capacity in the UK for next summer will be roughly the same as inthis year, but that may have to be reduced if the current tough trend continues.


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The company has also been hit by the closure of European airspace as a result of the ash cloudwhich caused travel chaos in April and May. It cost Tui 105m as almost 400,000 of its

customers had their plans disrupted.

The coalition government's clampdown on public spending, which is likely to lead to massive

job losses across the country, is having an increasingly significant impact on the private sector.From construction firms and care home operators to retailers, companies have warned that theyare seeing revenues and profits squeezed as public bodies halt their spending and consumers shut

their wallets while they worry about their jobs.

"The strong booking trends experienced up until the volcanic ash disruption in mid-April and thesubsequent rebound in early May were not sustained throughout the early summer period," said

Tui's chief executive Peter Long said. "This was particularly marked in the UK source marketwhere trading was affected by further airspace closures, good weather and post-election

uncertainty regarding the emergency budget.

"All of these factors have had an impact on consumers' booking patterns. Consequently, thebooking curve has shortened and the mix of 'lates' market sales for summer 2010 has increased.The higher than expected proportion of sales in the lower-margin lates period will inevitably

affect UK profitability. Additionally in Germany, although volumes have been good, there iscontinued price pressure in commodity segments.

"When we take the later booking curve and the adverse impact of foreign exchange translation

into account, we believe that the results for the year will be at the lower end of the range ofexpectations."

Long also warned that predicting how the later booking pattern will change over the next 12-18

months is very hard "in the light of the current economic environment".

Analysts forecasts for Tui's full-year earnings before interest and tax ranged between 439m and

495m.

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