Investor Presentation - Rhodes, June 2017 - Thomas Cook

Investor Presentation - Rhodes, June 2017 - Thomas Cook
Investor Presentation
Rhodes, June 2017
Investor Presentation - Rhodes, June 2017 - Thomas Cook

Overview       Introduction                  Peter Fankhauser
               Customer At Our Heart         Dennis Hochberger
               Caring for our customers      Michael Scheidler

Contact        Customer engagement           Magnus Wikner
               Own-brand hotels              Ingo Burmester
               Our holiday offering          Magnus Wikner
Services       Letting our airline fly       Christoph Debus

               Streamlining our operations   Thomas Hohn

                                                                 Page 2
Investor Presentation - Rhodes, June 2017 - Thomas Cook


           Peter Fankhauser – Group CEO

                                          Page 3
Investor Presentation - Rhodes, June 2017 - Thomas Cook
Creating value by putting customers first
          We introduced Customer At Our Heart as an initiative in 2015…
                  Holistic view on customer care and
                            customer contact
                  Quality and service focus across all    ›   More satisfied customers
                        customer touchpoints
                                                          ›   Enthusiastic colleagues
                  A bold 24-hour satisfaction promise
                                                          ›   Whole company energised
                    Introduction of NPS and link to
                         management bonus                 ›   Profitable growth engine

                 Refreshed culture aligned with our 3
                         customer promises

               … and partnered this with our New Operating Model
                                                                          Page 4
Investor Presentation - Rhodes, June 2017 - Thomas Cook
Result: our strategy on a page

   Customer At Our Heart is the cornerstone of our strategy for profitable growth

                                                                         Page 5
Investor Presentation - Rhodes, June 2017 - Thomas Cook
What makes us different from our competitors

    Clear strategy directly linked to growth AND structural efficiencies

    Focus on customer care and contact as the engine of growth

    Excellent holiday experiences through our differentiated products, services and reassurance

    Growth levers beyond core markets: China JV, Russia and financial services

    Asset-light with a focus on higher capital returns

    Deleveraging strategy to transfer value from debt to equity holders

             Strongest brand in travel with a portfolio of strong local brands

                                                                                    Page 6
Investor Presentation - Rhodes, June 2017 - Thomas Cook

         Customer At Our Heart

       Dennis Hochberger – Customer Experience

                                                 Page 7
Investor Presentation - Rhodes, June 2017 - Thomas Cook
Our way to customer centricity

                                 Page 8
Investor Presentation - Rhodes, June 2017 - Thomas Cook
What is Customer At Our Heart?

› Group-wide initiative to improve our customer experience
› Happy customers are more likely to return and recommend us to their family and friends

                              Higher                          More
                        customer retention              recommendations
                         (repeat bookings)               (new customers)

                                 Lower customer acquisition costs

                                                                                       Page 9
Investor Presentation - Rhodes, June 2017 - Thomas Cook
How we are implementing it

› Group Customer Experience Team created in 2015
› Working across all our source markets to set our Customer Experience strategy
› Develops and implements customer experience improvements

A structured 4 year plan
2015: Fix the basics
› Identify satisfaction      2016: Deliver
  drivers                    › Voice of the Customer
                                                        2017: Differentiate
› Implement NPS as           › Implement changes
  Group’s single customer                               › Roll out of new values  2018: Delight
                               from fixing the basics
  satisfaction KPI, linked                              › Customer-led operations › Consistently exceed
  to incentive structures                               › Differentiation           expectations

                                                                                          Page 10
NPS is our main customer satisfaction KPI

                        › Measured across entire customer journey using questionnaires
                        › Lead indicator of customer loyalty and recommendation
                        › Helps us to improve the customer experience in a structured way

                                                                            Page 11
Culture: our customer promises and values

                                            Page 12
Customer-led operations

         Examining and improving the customer journey at every stage…

                                        › Systematic approach
                 Share   Dream
                                        › Consistent experience
        Return                   Plan

                                        › Qualitative insight
       Experience             Book
                                        › Customer segmentation
             Transfer    Depart

                                        … and getting the details right

                                                                          Page 13
Managing hotel quality through NPS

                  Hotel review cycle
                        NPS, Complaints, ORM
                                                                     › Continuous feedback loops

                                                                     › Automated monitoring and flagging
         1                                 2
             Bi-weekly                         Define
              Bi-weekly                         Define
               Review                          actions
                                                Actions              › Rigorous quality management:

                                                                        ̶ 100 UK hotels removed over Winter 16/17

                                                                        ̶ > 60 hotels improved through our Training
   Improvement                                       Actions Phase
                           3                                              & Consulting and Online Reputation
                               NPS /
      Terminate             Customer KPI
                                                                          Management services since Summer 2016
      consistent            Improvement

                                                                                                      Page 14
Training, consulting and online reputation management

      Training &                Sunny Heart              Online Reputation
      Consulting                 Academy                      Services

› Improving hotel           › Open seminars for          › Online Reputation
  processes and functions     interested hotels            Management on behalf of
› Focus on customer         › Platform for E-Learning,
  excellence                  networking and follow up   › Answering of Reviews,
                                                           Content Management
› External trainers

                                                               Page 15
Good progress so far

                  Strong increase in NPS...                                       … and NPS has a clear link to loyalty3

                                    points1                                       NPS
                         Group overall NPS                                                                                 Europe

                                                                                        Netherlands                       Loyalty
                               Airline NPS

1. Overall Group NPS improved from 37 to 45 in H1 FY17
2. Airlines NPS (including 3rd party flying) improved from 24 to 31 in H1 FY17
3. Graph plots latest NPS for each source market versus loyalty rate in H1 FY17

                                                                                                                Page 16
Why NPS matters to our financial performance

                                Higher NPS leads to growth in bookings and improved margins

                       NPS growth linked to bookings growth                                              NPS growth linked to margin improvement

                                                                                       Change in margin vs average
  Change in bookings

                       +10%                                                                                          +40%

                                                                                              2016 to 2017
     2016 to 2017

                                                                                                                            < -10%   < 0%    > 0%   > +10%     > +20%
                               < -10%   < 0%    > 0%    > +10%   > +20%
                                   Change in hotel NPS 2015 to 2016                                                            Change in hotel NPS 2015 to 2016

Note: Based on Summer performance of >700 hotels sold by our UK business between 2015 and 2017

                                                                                                                                                     Page 17
What makes us different – Customer At Our Heart

                     › Customer values and promises foster a culture
                       of customer excellence

   Customer-led      › We systematically review the customer journey     More satisfied
    operations         to improve every customer interaction             customers

  Hotel portfolio    › We regularly review our hotel portfolio to help   Higher loyalty
     review            ensure quality thresholds are met
 C@OH training for   › We train hotel staff in our values to provide
     hotels            consistency of customer service                   Growth
                     › We identify innovative holiday features
                       through workshops and innovation labs

                                                                             Page 18

        Caring for our customers

       Michael Scheidler – In-Destination Services

                                                     Page 19
What Care means at Thomas Cook in destination

   Advice & customer service            Quality assurance          Help if something goes wrong

                                        Proactive quality
     Staff in destination                                              Complaint resolution

      Connected service           24 hour satisfaction promise          Crisis management

               Care package provided to customers by In-Destination Services (iDS)

                                                                                  Page 20
What our In-Destination Services business does

                         iDS is key to delivering our unique care package

 2,500 colleagues in         19m customers from
      Summer                                              100 offices
                               all of our source                              11 languages
  1,000 in Winter                   markets

     Service & Quality       Destination Management   Connected & Crisis    Entertainment

                                                                                 Page 21
Quality assurance

                      What our 24h promise means                                                          Quality management

             If, on arrival, your hotel isn’t as we described,                               › 49 dedicated quality managers in Summer 16
   we’ll sort the issue out within 24 hours. If we can’t
   resolve it, we’ll offer a 25% discount voucher for your                                   › Ensure all suppliers offer best quality
   next holiday (or a full refund and early flight home)1
                                                                                             › Work with local hoteliers on quality
                                                                                               improvement plans
            Key 24h promise figures from Summer 16
             › 1,600 hotels where 24hr promise applied                                       › Over 5,500 hotel visits conducted in 1,800 hotels
             › 3.5m guests
                                                                                             › Over 500 quality improvement plans
             › 23 vouchers issued                                                              implemented

1. This is a summary. Please see our website for the full terms of the 24h Promise

                                                                                                                                  Page 22
Help if something goes wrong

 Helping our customers in times of crisis             Turkey72coup
                                                      “Within    hours TC had repatriated
                                                    thousands of holiday makers … – acting
› Crisis Management becoming increasingly          rapidly to do whatever was necessary to
  important given frequency of disruptive               secure their safe return home”
  events                                               Chris Grayling Dept of Transport

› Special Assistance Teams provide support on
  the ground in response to major incidents      “You have every right to be proud of your
                                                 staff … I am and will continue to tell
› Welfare Teams in-destination provide day-to-   everyone, about how you treat your
  day support to customers                       customers in general and in particular,
                                                 when they need your help in a desperate
› Positive customer feedback                     situation. I will never forget your help and

                                                                                  Page 23
We are delivering results

 NPS Accommodation                         CSQ Rep Service            CSQ Transfer            Complaints resolved in
             +18 pts                            +14%                        +11%                       +27%

                           45                     78%     80%                        87%                         50%
                39                       66%                                 84%
      27                                                                                               38%
                                                                    76%                        23%

   2014/Q4 2016/ Q4 2017/Q2             2014/Q4 2016/ Q4 2017/Q2   2014/Q4 2016/ Q4 2017/Q2    Su 15   Su 16     Su 17

Note: Figures are from Central Europe

                                                                                                       Page 24
And there is more to come…

                                                            • TC promises and
                                                              values training
                                                            • Customer
     Expanding                                              • Happy Hearts
  24-hour promise                          Initiatives to     Budget
        to all      Single view of the      strengthen      • Mystery
   differentiated       customer         customer culture     Traveller
       hotels                                               • Best Practice

                                                                   Page 25
What makes us different – Care

    Unique care        › We look after our customers throughout their
      system             holiday

 Local knowledge       › Over 2,500 staff working in-destination in     Reassurance
   and support           Summer to ensure holidays go smoothly
                                                                        Peace of mind
                       › Customers know our holidays will match our     More satisfied
 Quality assurance
                         quality thresholds                             customers

 Your holiday is our   › We take responsibility for the customer’s
   responsibility        holiday from start to finish

                                                                           Page 26

          Customer engagement

          Magnus Wikner – MD Northern Europe

                                               Page 27
What do we mean by Contact?

                How we attract our customers         Customers interact with us throughout
  Content &      ̶ Rich, inspirational content              their holiday journey
  marketing       ̶ “One campaign”
                   ̶ Social, digital
                                                                    Share   Dream
                How we sell to our customers
                 ̶ Growing online                          Return                   Plan
                  ̶ Reshaping retail
                   ̶ Omni-channel approach
                                                          Experience             Book
                How we stay close to our customers
                 ̶ Pre-departure emails                         Transfer    Depart
                  ̶ Companion App
                   ̶ Personalisation

                                                                                     Page 28
Developing rich, inspirational content & marketing

    +80,000 images…

      +1,000 floor

                      … added to
                          our websites
      +130 hotel           since January

                                                     Page 29
Hotel plans help customers select room type and location

                                                           Page 30
Detailed visualisation through 3D room plans

                                               Page 31
Investing in our websites

 Our actions to improve our websites…                                                            … are leading to strong growth in web
                                                                                                    bookings for our major markets
 › Rolling out OneWeb in Benelux
                                                                                                            Growth in web bookings, H1 FY17
       ̶ UK and Belgium now fully migrated to OneWeb
       ̶ Netherlands migration underway
 › New platform launched in Germany
       ̶ Recently ranked one of Germany’s best online portals1
       ̶ Significant acceleration in bookings                                                                                   +15%
 › Northern Europe technology upgrade
       ̶ Faster and more responsive
       ̶ Mobile-first
1. Survey by ntv and German Institute for Service & Quality rated first for “offer and performance” in May 2017

                                                                                                                                       Page 32
Increasing our digital presence

                  Group share of web sales                           Web metrics by by device type1

                                               43%               Sessions   35%         20%                45%

                                                                 Bookings 10% 20%                          70%

                FY14            FY15           FY16   FY17 YTD          Mobile Tablet         Desktop

1. For all Group websites, FY17 year to date

                                                                                                 Page 33
Staying close to our customers – apps

                             Our Companion App supports the whole customer journey
                                                                            App features1
› Extends the value of customer
  contact                                                 ›   Easy-to-find flights & hotels
                                                          ›   Personalised offers & search results
› Develops closer customer                                ›   Best-in-class booking
  relationships                                           ›   Pre-departure checklist
                                                          ›   Ancillaries and excursions
› Customers can manage their
                                                          ›   Flight check-in and boarding pass
  holiday via their smartphone
                                                          ›   Hotel and holiday info
› Leverages technology to                                 ›   Hotel check-in and room key
  improve customer experience                             ›   Local restaurants
                                                          ›   Easy-to-contact reps
› Live in Northern Europe, the                            ›   Customer appreciation
  UK and Germany                                          ›   Post-travel survey

1. Not all features currently available in all countries; some under test

                                                                                                     Page 34
What makes us different – Contact

                       › Unique personal customer relationships by
Customer closeness
                         providing entire holiday experience

  Omni-channel         › Accessible via mobile, tablet, desktop, stores,
   approach              contact centres and in-destination staff          More effective
                       › Focus on controlled distribution to ensure a      engagement
 Own distribution
                         better customer experience

Rich & inspirational   › Close hotel relationships allow us to provide
      content            rich, inspirational and interactive content

                                                                              Page 35
      Page 36
Page 37

             Own-brand hotels

           Ingo Burmester – Hotels & Resorts

                                               Page 38
Why are own-brand hotels important?

                 Own-brand hotels are at the heart of our holiday offering

    More satisfied customers – higher NPS and higher loyalty
    More exclusivity – less price competition and more differentiation

    More influence and control over service levels and quality standards

    Deeper, longer-lasting relationships with hoteliers

    Additional source of margin for the Group as a hotelier – management, incentive and franchise fees

    Increased brand value

         Own-brand hotels are operated and franchised by Thomas Cook Hotels & Resorts

                                                                                         Page 39
Our hotel brand architecture

                                                         Adults only   Families

           Our hotel concepts

 Developed for both families and adults with
  consistency in design, rooms and features     Better
   Clear customer segmentation between
           families and adults only             Good

            Our hotel brands
  Synonymous with quality and value, with
  differences in design and features across
                 the portfolio                 Budget

                                                                             Page 40
Our portfolio of own-brand hotels

                We operate or franchise over 180 hotels in 17 destination countries
                                 11 new hotels for this Summer
      68                                                           66
                                                                              ›   Austria           ›    Italy
  NEW:            NEW:       NEW:        NEW:        NEW:       NEW:
                                                                              ›   Bulgaria          ›    Maldives
  1x Bulgaria     1x Spain   1x Greece   1x Cyprus   1x Spain   1x Croatia
                                                                              ›   Cape Verde        ›    Morocco
  1x Croatia                                                    1x Maldives
                                                                              ›   Croatia           ›    Portugal
  1x Italy                                                      1x Spain
                                                                              ›   Cyprus            ›    Spain
  1x Turkey
                     15                                18                     ›   Egypt             ›    Thailand
                                           13                                 ›   Gambia            ›    Tunisia
                                2                                             ›   Germany           ›    Turkey
                                                                              ›   Greece

                                                                                               Page 41
Quality improvements are reflected in NPS improvements

                            NPS is highest in own-brand hotels – and improving

           Improvement in own-brand hotel NPS by brand1       Overall improvement in own-brand hotel NPS1

                            +2 pts
                                +4 pts
                                         +7 pts
                                           +8 pts
                                                    +14 pts

1. Summer 16 vs Summer 15

                                                                                          Page 42
How Thomas Cook creates value in own-brand hotels

                     Brand features and tour operator sales focus leads to margin uplift

                                               Brand premium
                                                                                                       Brand premium example:
                                                                     +5%                ~35%
                                                    +5%                                                › Sunwing Fanabe (Tenerife)
                                   +5%                                                                   average room rate EUR 85
                                                                                                       › Market rate of unbranded
                              › Upgrade to      › Add brand      › Joint selling                         peer hotel in same location
                                brand             features and     power of 16                           EUR 60 – 65
                                requirements      training         source markets
                                                                                                       › Brand premium 30 – 40%
     Initial gross  Refurbishment                 Quality &       Sales focus        Uplifted gross
   operating profit                               software                          operating profit

Note: Margin uplifts are illustrative

                                                                                                                     Page 43
Growing our own-brand hotel business

             Growth levers                     Further 11 hotel launches for Summer 2018
› Refine brand propositions
› Further develop unique features                             x2                            x3
› Add new hotels to the portfolio – focus on      Cape Verde                      Greece
  Spain, Greece, Cyprus and Croatia                                         x2
› Target new management and franchise                              Cyprus
                                                              x2                            x2
› Invest in long-term hotel relationships
                                                    Croatia                         Spain
› Develop sales channels

                                                                                 Page 44


           Our holiday offering

           Magnus Wikner – Northern Europe

                                             Page 45
Differentiated and complementary hotels


                                    Own-brand                         Selected           Complementary
                             › Franchised, managed or     › Contracted by Thomas    › Contracted and sourced
                               owned by Thomas Cook         Cook and developed in     by partners/third parties
                                                            partnership with

                                                                  Classic package
                                                              Dynamic package
 Upsell         Cross sell
                                                                    Hotel only
                                                                    Flight only

                                                                                             Page 46
Our product strategy: focusing our holiday offering

Number of
                    ~2/3 of holiday
                        customers     › Focus on added value to our customers    Own-brand sales up
                                      › Greater influence on hotel quality       Rationalising hotel portfolio
                                      › Leverage scale across the Group          Sharing more inventory

                    ~1/3 of holiday
                        customers     › Automated low-cost production            Webjet partnership
                                      › Source electronically                    4,000 contracts by Summer 18
                                      › Expands choice for customer              Access to WebJet’s existing
                                                        of Hotels
     ~ 3,000            ~ 30,000
     Own-brand hotels       Differentiated hotels

                                                                                                 Page 47
Progress in our product strategy

      Growth in own-brand hotel bookings                     Reduction in directly contracted hotels2
                                ‘000 customers1
                  758                                               ~6,000

                                                                     3,630           3,480         ~3,000

                  FY15                 FY16       FY17 YTD        Summer 16      Summer 17      Summer 19
                                                                    Differentiated hotels
                                                                    Complementary hotels – directly contracted
1.   Excludes Turkey, Egypt and Tunisia                             Complementary hotels – outsourced
2.   Figures shown only for sun & beach hotels

                                                                                                    Page 48
Higher share of wallet through personalised ancillaries

       Ancillary sales to tour operator customers increased by 14% in H1 2017
              Example of ancillaries opportunity – Sunwing Arguineguin, Gran Canaria

           Booking                        › Basic package                       EUR 2,735
          Feb 2017           Original
                                          › Room upgrade                        +400
                                          › All-inclusive board                 +690
                                          › Spa treatment                       +80
                                          › Lollo & Bernie visit                +20
                                          › Flight meal and transfer            +135
         Departure                        › Flight seating and tax-free goods   +210
          July 2017                       › Total price                         EUR 4,270

                                                                                            Page 49
What makes us different – Holidays

 Focused holiday    › Focusing our efforts on a much smaller number
     offering         of directly contracted hotels

                    › Fewer, deeper hotel relationships enable us to
  Differentiation                                                      More efficient
                      offer more unique holidays
                                                                       More unique
                    › Value add to the customer by personalising
                      their holiday                                    Better able to grow

 Outsourcing non-   › Strategy to partner for complementary hotels
      core            simplifies our business

                                                                           Page 50

             Letting the airline fly

           Christoph Debus – Chief Airlines officer

                                                      Page 51
Thomas Cook Group Airlines at a glance

                                                                                            Key facts and figures

                                                                                    94 aircraft                17m passengers
                                                                                    +19 summer-only leases
              33                                                                    8,000 employees            £2.6bn revenues
                                                                                                  Our brands
                                                 No. of
                                             aircraft in
                                           each region                         UK, Scandinavia, Belgium*            Germany

* Until the end of 2017, when TCA Belgium will be combined with Brussels Airlines
                                                                                                                     Page 52
Our airline vision

                  … is to be the best leisure airline, part of Thomas Cook,
                              the most loved holiday company


  Employee Engagement              Customer                       Profitable              Operational Efficiency
   & strong leadership            @ our Heart                      Growth                       & Safety

› One airline, one team    › Fully modernised fleet    › Significant growth in seat     › Reduced 3 hour delays by
                                                         only and long haul               70% since 2013
› Staff engagement score   › NPS higher year-on-year
  up 4 years in a row                                  › Seat only & 3rd party share,   › Safe@heart
                                                         now ~50%

                                                                                                 Page 53
The improvements are recognised by our customers

                                                   Page 54
Significant growth in seat-only and long haul

       Seat only & 3rd party                        Long haul
   tour operator passengers (m)                   passengers (m)
              +20%                                     +30%
                       8.2                                    3.0

      FY13             FY16                     FY13               FY16
                                                                   Page 55
Low cost long-haul carrier with a broad network of destinations

› Strong position in profitable
  leisure long-haul market:

   ̶   Maintain leading position in Germany

   ̶   Building up strong presence in UK

› 30% long-haul growth in last 3 years,

   ̶   Good long-haul unit cost position

   ̶   Strong and unique multi-channel
       distribution capabilities

                                                            Page 56
We have unique multi-channel distribution capabilities

                  Thomas Cook
                  tour operator
                                                            50%                                                         …
                    3rd party
                  tour operator

                             Web                  20%                      Web sales grew by 12% in FY16
              Seat only

                          OTA/Travel                                       “GDS” provide direct access to all relevant IATA
                           agencies         10%
                                                                           travel agencies

                           Interline       5%                              40 interline agreements for long-haul feed/defeed

Note: Percentages indicate proportion of seats sold through each channel

                                                                                                                        Page 57
Focus on ancillaries to drive profit

          Extras (in GBP)
                                                                                 £270m ancillary revenue in FY16
                                £11m                                                                       £16/passenger


  “An Ancillary is any value adding product that is sold on top of standard airline ticket at any point of the customer journey”

                                                                                                                Page 58
Managing cost is key to sustained advantage

                                                     Cost management levers

                                                    › Lean overhead structures
                                                    › Increased productivity
                                                    › New maintenance strategy
                               Aeroflot             › Improve reliability and
                                TC Airlines ‘13
                                                      operational performance
                                  TC Airlines ‘17   › Improve seasonality with new
                                                      Winter partners
                                                    › Optimised structure for
                                                      stronger governance

                                                                     Page 59
More financial disclosure about our airline

      We introduced new disclosure of our financial performance by business
          line for FY16 and now report performance KPIs every 6 months

                  Group Airlines (£m)

                                                       › EBIT decline in FY16 due to market disruption
                                                         impacting Condor in Summer 2016
            4.4%               5.4%
    2,748                                       2.9%   › Initiatives to return Condor to a full year profit
                                                         in FY17 are on track

      FY14 LfL          FY15 LfL           FY16

            Revenue       EBIT        EBIT Margin
                                                                                          Page 60
What makes us different – Airlines

    Tour operator       › Tour operator customer base (50% of
       backed             seats) supports load factors

      Strength in       › Track record of profitable long-haul
       long haul          growth (+30% in the last 3 years)          Competitive cost position
  Unique distribution   › Own & 3rd party tour operators             Attractive value-for-
       model            › Seat-only via own web, agencies & GDS      money offering
                        › Strategic partnerships (summer & winter)   Basis for further growth
                        › 40 interline agreements

      Integration       › Potential for more efficiencies from
        benefits          further airline integration

                                                                              Page 61


               Streamlining our operations

                Thomas Hohn – Chief of Source Markets

                                                        Page 62
Our approach to operational efficiency

                          Our growth and cost agendas are tightly linked

     Benefits from implementing our strategy            Group-wide and local efficiency programmes

  Our strategy leads to efficiencies:                 Improve efficiency and reduce costs through:
  › More focused differentiated hotel offering        › Better Group-wide coordination
  › Lower cost sourcing of complementary hotels       › Greater use of Group buying power
  › Simplified IT platforms                           › Best practice sharing
  › More web distribution; optimised retail estate    › More functional integration across the Group

                        Lower cost base allowing for further investment in growth

                                                                                         Page 63
Managed through the New Operating Model

          £41m of net EBIT benefits achieved by H1 FY17, with a further £100m
                                   expected by 2019

                  Expected to be delivered through our                   ~50m      130m – 150m
                  efficiency programmes

  Expected to be delivered from                          ~50m
  benefits from implementing our
  strategy: own-brand hotels,
  differentiated, CRM & ancillaries

                        FY16           H1 FY17           To be delivered by FY19      FY19

                                                                                                 Page 64
We’ve done this before, and it remains a constant focus

        Wave 1 achieved significant cost reductions and EBIT improvements
                             between 2012 and 2015

               UK turnaround
                                                      EBIT improved by £182m
        Integrated air travel strategy

          Organisational structure                    EBIT margin up from 2.0% to 4.3%

                                                      Overheads reduced by £146m


                                                                         Page 65
Potential for further improvements

        Internal benchmarking between our own businesses shows there is
            plenty of opportunity for further reductions in the cost base

                    Overheads as % of gross profit (pre-commissions) in FY16
          40%                                                          Other costs

          20%                                                          Distribution costs

                Northern Europe        UK           Continental

                                                                                        Page 66
Key initiatives for further operating efficiencies

                                            Efficient sourcing of complementary sun & beach
         Partnership with Webjet
                                            hotels; further opportunity in City & Domestic

  Harmonisation and Centres of Excellence   Reduce duplication in source markets

    Local cost-out in the source markets    Local efficiency projects using Group scale

                                            Online and controlled distribution especially in UK
        More efficient distribution
                                            and Germany

                                                                             Page 67
Benefits from the Webjet partnership

         Webjet partnership allows us to focus on our core holiday offering



       % of tour
                         Differentiated                                   Complementary

                                   3,000 hotels                                       > 30,000 hotels

          Before                             In house production

           After   In house production            Outsourced / automated production

                                                                                                   Page 68
Harmonisation and Centres of Excellence

                      Moving from country siloes to Group-wide functions

       Examples of process harmonisation                   UK    Germany   West/East       Nordics
             and Group functions
 › Process harmonisation in Continental Europe
 › Creation of tour operating Centres of
   Excellence in Frankfurt and Ghent
 › Single Group contracting and destination team           UK     Continental Europe       Nordics
 › Marketing integration
 › IT harmonisation
 › Finance shared service centre in Palma

                                                                                 Page 69
Local efficiencies in the source markets

                            Examples of local efficiency programmes

                 Russia turnaround                               France turnaround
  › Integrating scattered locations and systems   › Reducing overhead staff by a third
  › Reducing the overhead cost by >50%            › Closing unprofitable stores
  › Building up new business and source markets   › Improving B2C and B2B retail channels

         UK contact centre transformation                      UK retail optimisation
  › New systems and tools                         › Digitally led, integrated with online
  › Improved efficiency and handling times        › Right-sizing store portfolio
  › Internal benchmarking and training            › Focus on larger format “concept” stores

                                                                                        Page 70
In conclusion

             Streamlining our business will help to deliver profitable growth

  Operating efficiencies
  allow us to…                     Supporting investment into…
   › Reinvest in growth             › Marketing spend
   › Counter inflation and
     other cost in                  › Customer value and
                                      uniqueness                     Profitable growth
   › Deliver our New                                                   and increased
     Operating Model                › Thomas Cook Hotels &
                                                                     shareholder value
     efficiency targets               Resorts
   › Strengthen our                 › Sales channels
     competitive position

                                                                            Page 71
What makes us different – Efficiencies

 Our strategy leads     › Growth strategy connected to cost
  to efficiencies         management and restructuring

                                                                        More efficient
                        › Good track record of reducing costs and it
    Track record                                                        operations
                          remains a constant priority
                                                                        Lower cost base
   High potential       › Opportunity through integrating activities
                                                                        Reinvestment in
   through scale          across our source markets

Culture of continuous   › Initiatives part of broader programme to
    improvement           achieve sustainable structural efficiencies

                                                                               Page 72
      Page 73

             Summary and wrap-up

              Peter Fankhauser – Group CEO

                                             Page 74
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