Kuoni Travel Holding Ltd. Half-year report 2005 - Kuoni Group

Kuoni posts a solid performance in a difficult environment
Kuoni Travel Holding Ltd.
Half-year report 2005
2005 first-half consolidated results
up on prior-year levels
Income statement
(CHF million) 1.1. to 30.6.2005 1.1. to 30.6.2004
Turnover 1 577 1 572
Gross profit 339.7 353.7
Gross profit margin (%) 21.5 22.5
Earnings before interest, taxes and amortisation of goodwill (EBITA) –14.8 5.6
EBITA margin (%) – 0.9 0.4
Net result –7.2 –12.9
– With 17% of its turnover generated in the regions affected, Kuoni has felt the repercussions of the Asian tsunami disaster
more than other major European tour operators.
– First-half turnover for the Kuoni Group amounted to CHF 1 577 million, up 0.3% on the prior-year period
(CHF 1 572 million). Organic growth 1 stood at 0.9%, a positive result that was achieved despite the tsunami disaster.
1 Organic growth = internal growth net of acquisitions, divestments and currency influences.
– Gross profit margin declined from 22.5% to 21.5%, though 0.3% can be ascribed to the sale of the German retail business.
Gross profit amounted to CHF 339.7 million, a 4.0% decline on the CHF 353.7 million of the prior year. Organic growth
amounted to –1.4%.
– First-half earnings before interest, taxes and amortisation of goodwill (EBITA) declined from CHF 5.6 million of 2004 to
CHF –14.8 million. This was in line with expectations since, as predicted in April, the effect of the Asian tsunami disaster
did indeed reduce EBITA results by CHF 20 to 25 million.
– The net result of CHF –7.2 million was a 44.2% improvement on the CHF –12.9 million of the prior-year period. Key components
in this improvement were the higher financial result and the cessation of goodwill amortisation in the intervening
period.
– The consolidated balance sheet showed shareholders’ equity of CHF 724.6 million on 30 June 2005 (31 December 2004:
CHF 658.5 million) and a balance sheet equity ratio of 37.4% (31 December 2004: 36.2%).
– Cash flow from operating activities increased to CHF 106.0 million (prior year: CHF 102.1 million).
– In view of the exceptional events in the tourism sector in the year to date, it is difficult to predict business results for 2005
as a whole. We are confident, however, that the present recovery will continue, especially in those regions which were
adversely affected by the Asian tsunami disaster in the first half of the year.

Kuoni half-year report 2005
Business for the first half of 2005 was strongly influenced by the
continuing effects of the Asian tsunami disaster at the end of the
previous year. With 17% of its turnover generated in the regions
affected, Kuoni has felt the repercussions of the disaster more
than other major European tour operators. The subsequent cancellations
and booking declines resulted in underutilisation of
both Kuoni’s own and bought-in flight capacities. And this – as
predicted at the Annual General Meeting in April 2005 – has
reduced EBITA results by some CHF 20 to 25 million. “In an environment
so marked by unexpected events, the Kuoni Group delivered
a favourable performance,” comments Armin Meier, Chief
Executive Officer of the Kuoni Group.
Results of the Kuoni Group
The first-half turnover of CHF 1 577 million was a 0.3% improvement
on the CHF 1 572 million of the prior-year period. Organic
growth added 0.9%, the net negative impact of currency movements
reduced turnover by 0.9% and the net effect of acquisitions
and divestments 2 added 0.3% to the overall turnover result.
Gross profit margin slipped from the 22.5% posted for the first
half of 2004 to 21.5%, though 0.3% of this decline is due to the
sale of Kuoni’s German retail business. Gross profit margin was
also adversely affected by the turnover declines following the
Asian tsunami disaster. Gross profit fell 4% to CHF 339.7 million
(prior year: CHF 353.7 million).
Operating costs rose by CHF 6.4 million. The increase was due in
particular to the expansion of activities in the Asian market. Earnings
before interest, taxes and amortisation of goodwill
(EBITA) were reduced as a result of the adverse effects of the
Asian tsunami disaster to CHF –14.8 million (prior year: CHF 5.6
million). The EBITA margin declined from the 0.4% of the prioryear
period to –0.9%.
The net result for the traditionally weaker first six months was
44.2% up, improving from the CHF –12.9 million of first-half
2004 to CHF –7.2 million. Key contributors here included the cessation
of goodwill amortisation in accordance with IFRS accounting
standards and a substantially improved financial result.
The consolidated balance sheet showed shareholders’ equity of
CHF 724.6 million on 30 June 2005 (31 December 2004: CHF
658.5 million) and a solid equity ratio of 37.4% (31 December
2004: 36.2%). The strengthened equity base is the result of net
recognised gains on financial instruments and positive translation
differences. The par value repayment of 8 July 2005 approved by
the 2005 Annual General Meeting will have its balance-sheet
impact in the second half-year.
Cash flow from operating activities amounted to an encouraging
CHF 106 million (prior year: CHF 102.1 million). Free cash flow
totalled CHF 92 million for the period.
2 Acquisitions and divestments: the purchase of Royal Hansa Cruises Netherlands and the business
activities of CIT-Frantour SA, and the sale of Kuoni Reisen GmbH Deutschland and the
Caribbean hotels.

Kuoni half-year report 2005
Results by business area
Switzerland
In a still difficult market environment, Strategic Business Unit Switzerland
generated turnover of CHF 339 million for the first six
months of 2005, an 8.6% decline on the CHF 371 million of the
prior-year period. While the Kuoni brand saw positive trends,
results were less encouraging for Reisen Netto and Helvetic Tours.
EBITA declined 66.7% from the CHF –7.8 million of the prior-year
period to CHF –13.0 million. The Kuoni Group acquired all the
business activities of CIT-Frantour SA effective 30 April 2005.
Scandinavia
Strategic Business Unit Scandinavia reported a positive trend in its
first-half turnover, which, at CHF 300 million, was a 15.8%
improvement on the CHF 259 million of the prior year. Sweden
made the biggest contribution, exceeding its prior-year turnover
by 11.7%. Norway raised its first-half turnover by as much as
41.4% year-on-year, while turnover for Denmark was 4.4% above
the prior-year period. First-half EBITA for Scandinavia declined
from the CHF –5.4 million of the prior year to CHF –7.0 million.
Sweden suffered most from the effects of the Asian tsunami disaster,
while Kuoni’s Scandinavian airline incurred extraordinary
expenditure amounting to CHF 4 million.
Europe
First-half results for the country organisations within Strategic
Business Division Europe were largely in line with prior-year levels.
Total turnover showed a minimal 0.4% rise to CHF 252 million.
Once again, the greatest turnover contribution came from Kuoni
France. First-half EBITA for the division declined from the CHF
–3.3 million of the prior-year period to CHF –3.9 million. The
Kuoni Group sold Kuoni Reisen GmbH, domiciled in Friedrichshafen
(Germany), effective 1 January 2005.
United Kingdom & North America
Turnover for Strategic Business Division United Kingdom & North
America amounted to CHF 354 million for the first six months of
2005, a 9.2% decline on the CHF 390 million of the prior-year
period. While operating results were improved in North America,
first-half EBITA for the division declined 32.6% year-on-year from
CHF 27.6 million to CHF 18.6 million. The reduction is due to the
turnover losses following the Asian tsunami in the Maldives, Sri
Lanka and Thailand, which are all long-established leading Kuoni
UK destinations.
Incoming & Asia
Strategic Business Division Incoming & Asia increased its first-half
turnover by 9.5% in 2005, from the CHF 326 million of the prioryear
period to CHF 357 million. In view of the further expansion
of the Group’s Asian business, first-half EBITA for the division
declined 30.8% from CHF 2.6 million to CHF 1.8 million.
Second half-year developments and outlook
By 14 August 2005, Swiss-franc booking levels for the Kuoni
Group’s tour operating business were 1% up on their prior-year
equivalent. Year-on-year booking levels for the key business areas
were as follows:
– Switzerland –12%
– United Kingdom –11%
– France +01%
– Scandinavia +21%
Kuoni opened its second Chinese representative office – in Shanghai
– on 18 August. Having opened its first such office in Beijing
in mid-March 2005, Kuoni thus continues to pursue its growth
strategy in the Asian market.
The strategic reappraisal of Intrav, the Kuoni Group’s US-based
subsidiary, is continuing according to plan, and should be completed
by year-end. All options, including a possible sale, are being
considered in terms of their value-adding potential. This will
enable Kuoni to assess the continued value of its investments by
the end of the year.
In view of the exceptional events in the tourism sector in the year
to date, it is difficult to predict business results for 2005 as a
whole. We are confident, however, that the present recovery will
continue, especially in those regions which were adversely affected
by the Asian tsunami disaster in the first half of the year. The
fact that July 2005 exceeded our expectations in both turnover
and EBITA terms gives additional cause for confidence in the
weeks and months ahead.
Zurich, 23 August 2005

Kuoni half-year report 2005
Agenda
The Kuoni Group will present details of its
further business performance on the following dates:
10 November 2005 Nine-months 2005 Results
16 March 2006 Annual Results 2005
Contact
Kuoni Travel Holding Ltd. Phone +41 44 277 45 29
Investor Relations Fax +41 44 277 40 31
Mrs. Laurence Bienz laurence.bienz@kuoni.com
Neue Hard 7
CH-8010 Zurich
www.kuoni.com
This half-year report is also available in English.
The German original is binding.
Der Halbjahresbericht ist auch in englischer Sprache erhältlich.
Massgebend ist der deutsche Originaltext.

Kuoni Travel Holding Ltd.
Interim Consolidated Financial Statements
at 30 June 2005

Consolidated income statement for the first half of 2005
CHF million 1.1.–30.6.05 1.1.–30.6.04 change in % 1.1.–31.12.04
Turnover 1 577 1 572 0.3 3 581
Direct costs –1 237.2 –1 218.8 –1.5 –2 762.1
Gross profit 339.7 353.7 –4.0 818.9
Personnel expense –192.8 –184.7 –4.4 –373.3
Marketing and advertising expense –52.4 –53.4 1.9 –99.9
Other operating expense –87.0 –87.1 0.1 –172.7
Depreciation –22.3 –22.9 2.6 –45.4
Earnings before interest, taxes
and amortisation of goodwill (EBITA) –14.8 5.6 –364.3 127.6
Amortisation of goodwill 0.0 –16.3 100.0 –32.5
Earnings before interest and
taxes (EBIT) –14.8 –10.7 –38.3 95.1
Financial result 12.7 6.7 89.6 10.9
Result before taxes –2.1 –4.0 47.5 106.0
Income taxes –5.1 –8.9 42.7 –31.9
Net result –7.2 –12.9 44.2 74.1
Of which:
Net result attributable to minority interests 0.2 0.0 100.0 0.3
Net result attributable to
Kuoni Travel Holding Ltd. shareholders –7.4 –12.9 42.6 73.8
Pre-goodwill earnings –7.2 3.4 –311.8 106.6
Basic earnings per registered share B in CHF –2.48 –4.37 24.88
Diluted earnings per registered share B in CHF –2.48 –4.37 24.86
Breakdown of Turnover by business area
CHF million 1.1.–30.6.05 1.1.–30.6.04 change in % 1.1.–31.12.04
Switzerland 339 371 –8.6 890
Scandinavia 300 259 15.8 595
Europe 252 251 0.4 597
United Kingdom & North America 354 390 –9.2 827
Incoming & Asia 357 326 9.5 730
Less revenues generated between segments –25 –25 0.0 –58
Total 1 577 1 572 0.3 3 581
Breakdown of EBITA by business area
% of % of % of
CHF million 1.1.–30.6.05 turnover 1.1.–30.6.04 turnover 1.1.–31.12.04 turnover
Switzerland –13.0 –3.8 –7.8 –2.1 34.2 3.8
Scandinavia –7.0 –2.3 –5.4 –2.1 16.4 2.8
Europe –3.9 –1.5 –3.3 –1.3 15.3 2.6
United Kingdom &
North America 18.6 5.3 27.6 7.1 63.1 7.6
Incoming & Asia 1.8 0.5 2.6 0.8 17.8 2.4
Corporate –11.3 n.a. –8.1 n.a. –19.2 n.a.
Total –14.8 – 0.9 5.6 0.4 127.6 3.6

Consolidated balance sheet (condensed)
CHF million. 30.06.05 31.12.04 30.06.04
Non-current assets
Tangible fixed assets 321.1 318.0 329.2
Goodwill 323.2 299.9 330.2
Other intangible assets 9.2 6.5 6.8
Financial assets 133.8 165.2 158.5
Current assets
Cash and cash equivalents 685.5 677.1 694.2
Time deposits and securities 34.2 78.9 71.4
Other current assets 429.0 273.0 371.7
Total assets 1 936.0 1 818.6 1 962.0
CHF million 30.06.05 31.12.04 30.06.04
Equity 724.6 658.5 611.9
Long-term liabilities 153.8 143.4 158.3
Advance payments by customers 483.9 305.7 440.0
Other short-term liabilities 573.7 711.0 751.8
Total equity and liabilities 1 936.0 1 818.6 1 962.0
Changes in equity (condensed)
CHF million 2005 2004
Equity as at 1 January 658.5 614.8
Net result –7.2 –12.9
Profits distributed –0.1 –20.8
Disposal of treasury shares 4.5 2.5
Reduction of minority interests 0.0 –0.7
Recognised gains or losses on financial instruments 40.7 18.4
Translation differences 28.2 10.6
Equity as at 30 June 724.6 611.9
Cash flow statement (condensed)
CHF million 1.1.–30.6.05 1.1.–30.6.04
Net result –7.2 –12.9
Depreciation 22.3 22.9
Amortisation of goodwill 0.0 16.3
Other non-cash expenses and income –7.0 –18.0
Changes in net working capital 97.9 93.8
Cash flow from operating activities 106.0 102.1
Net cash from investing activities 51.8 104.5
Net cash used in financing activities –170.1 –84.8

Kuoni half-year report 2005
Notes to the interim consolidated
financial statements
The unaudited interim consolidated financial statements at 30
June 2005 have been prepared in accordance with the accounting
principles set out in International Accounting Standard 34 (IAS 34)
“Interim Financial Reporting” and, being an updated version of
previously-published information, should be read in connection
with the consolidated financial statements for the business year
ended 31 December 2004. These interim consolidated financial
statements were approved for publication by the Board of Directors
on 18 August 2005.
With the exception of the changes listed below, the accounting
principles applied to and the presentation of these interim consolidated
financial statements are unchanged from those of the consolidated
financial statements for 2004. Comparable figures have
been reclassified or expanded where necessary to reflect changes
in the presentation of the interim consolidated financial statements.
The International Accounting Standards Board (IASB) issued a revised
version of IAS 32 “Financial Instruments: Disclosure and Presentation”,
a revised version of IAS 39 “Financial Instruments:
Recognition and Measurement” and a general revision of its International
Accounting Standards (IAS) which included revisions of
14 existing standards in 2003. In 2004 the IASB published standards
IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations”,
IFRS 4 “Insurance Contracts”, IFRS 5 “Non-current Assets
Held for Sale and Discontinued Operations”, revised versions of
IAS 36 “Impairment of Assets” and IAS 38 “Intangible Assets”
and further additions to IAS 39. The Kuoni Group has applied
these standards with effect from 1 January 2005. The effects of
these changes on the interim consolidated financial statements of
the Kuoni Group are presented below.
IFRS 3 “Business Combinations”: The new standard requires, inter
alia, the cessation of the systematic straight-line amortisation of
goodwill from 1 January 2005. Such amortisation of goodwill
amounted to CHF 16.3 million in the first half of 2004. In the case
of new acquisitions, identifiable intangible assets must now be
recognised separately from goodwill and must be amortised over
their expected useful lives.
The Kuoni Group has assessed the impact of the other revised and
newly-applicable standards, and has concluded that they have no
significant effect on the consolidated financial statements.
The scope of consolidation changed as a result of acquisitions and
disposals in the first six months of 2005. The most significant of
these are:
– the disposal of Kuoni Reisen GmbH, Friedrichshafen,
Germany effective 1 January 2005 and
– the acquisition of the business activities of CIT-Frantour SA,
Geneva effective 30 April 2005.
Kuoni Reisen GmbH, Friedrichshafen, Germany: Kuoni Travel
Holding Ltd. sold its German-based Kuoni Reisen GmbH subsidiary
to Otto Freizeit und Touristik GmbH. Results for of this subsidiary
were previously included within Business Area Europe.
Business activities of CIT-Frantour SA, Geneva: Kuoni Travel Holding
Ltd. acquired the business activities and the workforce consisting
of around 100 employees of CIT-Frantour SA after the company
sought “Nachlassstundung” administration and protection
from creditors under Swiss law as a result of liquidity problems.
If the creditors’ meeting (scheduled for spring 2006) approves the
proposed brand transfer, the total purchase price will amount to
approximately CHF 9 million. The company’s net assets were
acquired in May 2005.
The Kuoni Group repaid the 1% convertible bond with a nominal
value of CHF 178.6 million shown under short-term liabilities in
the first half of 2005. Although seasonal trends tend to make the
first six months the weaker half of the year in business terms, and
despite the negative net result, equity showed a positive trend
thanks to translation differences and net recognised gains on
financial instruments. No dividend was distributed to Kuoni shareholders;
but the nominal value of the Kuoni share was reduced
with a corresponding repayment to shareholders, as approved by
the 2005 Annual General Meeting. Since this was not effected
until 8 July 2005, however, the resulting change in equity is not
reflected in the first-half financial statements.
No subsequent events have occurred since 30 June 2005 which
would require adjustments to the carrying amounts of the Kuoni
Group’s assets or liabilities or would have to be disclosed here.