-Revenues of $1,129.1 million, up 5.0 % from $1,075.2 million for the corresponding quarter of in 2008, reflecting increases in the numbers of travellers in Canada and the strength of the euro.
-Margin(1) of $39.1 million, compared with $70.7 million in 2008, the variance being attributable to the impact of selling prices of intense competition.
-Net income of $42.2 million ($1.27 per share fully diluted), compared with $41.7 million ($1.25 per share) in 2008.
-Net income of $20.7 million or $0.62 per share fully diluted, compared with $41.4 million or $1.24 per share in 2008, before impact of non-cash items (adjusted net income).
Montreal, June 11, 2009
Transat A.T. Inc., one of the largest integrated tourism companies in the world and Canada’s holiday travel leader, posted revenues of $1,129.1 million for the quarter ended April 30, 2009, compared with $1,075.2 million for the corresponding period of 2008—an increase of $53.9 million or 5.0%. The Corporation recorded a margin1 of $39.1 million, down from $70.7 million in 2008, and net income of $42.2 million, or $1.27 per share on a fully diluted basis, compared with $41.7 million ($1.25 per share on a fully diluted basis) in 2008.
“We saw a record number of travellers this past winter, despite the economic downturn. Margins remain under pressure due to excess supply in sun destinations,” stated Jean-Marc Eustache, President and Chief Executive Officer of Transat A.T. Inc.
Second quarter and first six-month period highlights
Revenues increased by $53.9 million for the quarter and by $143.8 million for the six-month period, resulting from revenue growth of 3.3% for the quarter and 6.0% for the six-month period in North America; and 12.9% for the quarter and 16.6% for the six-month period in Europe. These increases are attributable in part to greater commercial activity, but also to the strength of the euro versus the Canadian dollar. Overall, the number of travellers increased by 2.9% for the quarter and 6.1% for the six-month period.
In proportion of revenues, margins1 decreased from 6.6% in the second quarter of 2008 to 3.5% for the 2009 period, and from 4.8% to 1.5% for the six-month period. The variance results mainly from the pressure on selling prices resulting from the combination of excess supply and intense competition, especially in North America.
In North America, revenues increased by $29.4 million, or 3.3%, for the quarter, and by $93.5 million, or 6.0%, for the six-month period, compared with the same 2008 periods. These improvements are attributable to increases in the numbers of travellers of 2.2% for the quarter and 6.0% for the six-month period, compared with 2008. During the winter season, the Company increased its capacity to sun destinations and decreased it to Florida, translating into increases in the number of travellers of 16.2% for the quarter and 17.7% for the six-month period, compared with 2008. For the quarter, the Corporation recorded a margin1 of 4.2%, compared with 7.3% in 2008; for the six-month period the margin stood at 2.4%, compared with 5.8% in 2008. The variance in margins results mainly from lower selling prices, especially to sun destinations, due to the combination of excess supply and intense competition.
Revenues of European business units increased by $24.6 million, or 12.9%, during the quarter, and by $50.3 million, or 16.6%, during the six-month period, compared with 2008. These increases are mainly attributable to the strength of the euro compared to the dollar and to an increase in the number of travellers (6.9% for the quarter and of 6.6% for the six-month period, compared with 2008). In Europe, the Corporation recorded a margin1 of $0.3 million (0.1%) for the quarter and an operating loss of $9.5 million (2.7%) for the six-month period, compared with a margin of $6.1 million (3.2%) and an operating loss of $1.3 million (0.4%) respectively in 2008. The decrease in margin is due in part to the Corporation not being in a position to benefit fully from the decrease in the price of aircraft fuel due to its fuel hedging position.
Net income for the six-month period ended April 30, 2009, was $12.8 million, or $0.39 per share on a fully diluted basis, compared with $33.9 million ($1.01 per share on a fully diluted basis) for the corresponding year-ago period.
As at April 30, 2009, the Corporation had $239.8 million in cash and cash equivalents, compared with $145.8 million at October 31, 2008.
Non-cash and non-operating items
Based on updated assumptions, the Corporation has increased its provisions for writedowns on asset-backed commercial paper (ABCP) by $5.2 million ($4.2 million after tax) during the quarter. In addition, during the quarter, Transat recorded $0.4 million ($0.3 million after tax) in receivables linked to ABCP. In the second quarter of 2008, the Corporation had recorded a non-cash loss of $17.9 million ($13.8 million after tax) related to its ABCP holdings. The total provision for writedowns of $55.3 million at April 30, 2009, represents 40.6% of the new nominal value on ABCP holdings of $136.1 million.
The Corporation also recorded a non-cash and non-operating gain of $37.4 million ($25.7 million after tax) in the second quarter of 2009, compared to a non-cash and non-operating gain of $20.9 million ($14.1 million after tax) in the second quarter of 2008, representing the change in the fair value of the forward contracts it uses to manage fuel price fluctuation risks.
Highlights and impact of non-cash items on results
(in thousands of CAD)
Outlook for the summer 2009
With regard to Canada-Europe travel, reservations from Canada are similar to their 2008 levels, whereas reservations from Europe are trailing slightly. In total, our passenger load factor is similar to 2008 at the same date, with prices slightly lower. However, we are currently noting increased price pressure that could adversely affect margins for the remainder of our inventory for sale.
Reservations and the passenger load factor for sun destinations from Canada are similar to 2008. The outbreak of influenza A(H1N1) resulted in a shift of volume from Mexico to other countries, but does not seem to have significantly impacted overall demand. For now, margins remain under pressure due to the current business environment. Given that a significant portion of our inventories has yet to be sold, it is difficult to estimate where reservations will stand at season-end and assess the ultimate impact on margins.
In France, medium-haul travel is tracking higher than in 2008, whereas long-haul travel with ground services is trailing. For now, margins remain under pressure.
Transat A.T. Inc. is an integrated international tour operator with more than 60 destination countries and that distributes products in over 50 countries. A holiday travel specialist, Transat operates mainly in Canada and Europe, as well as in the Caribbean, Mexico and the Mediterranean Basin. Montreal-based Transat is also active in air transportation, accommodation, destination services and distribution. (TSX: TRZ.B, TRZ.A)
NOTES
(1) MARGIN: Revenues less operating expenses (non-GAAP financial measure used by management as an indicator to evaluate ongoing and recurring operational performance).
(2) ADJUSTED INCOME: Income before income taxes, non-controlling interest in business units’ results, impact of fuel hedge accounting and ABCP revaluation.
(3) ADJUSTED NET INCOME: Net income before impact of fuel hedge accounting and ABCP revaluation.
Conference Call
Second quarter 2009 conference call: Thursday June 11, 2009, 10.00 a.m. Dial 1-877-922-4773 or 514-392-1478. Name of conference: Transat. Webcast www.transat.com. The archived call will be available at 1-800-408-3053 or 514-861-2272 access code 5813703 pound sign, until July 10, 2009.
Non-GAAP measures
Transat prepares its financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”). We will occasionally refer to non-GAAP financial measures in the news release. These non-GAAP financial measures do not have any meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. They are furnished to provide additional information and should not be considered as a substitute for measures of performance prepared in accordance with GAAP.
Caution regarding forward-looking statements
This news release contains certain forward-looking statements regarding the Corporation’s expectation that the assumptions used in the valuation of the ABCP securities will materialize, and that travel reservations will follow the trends. In making these statements, the Corporation has assumed that the trends in reservations will continue throughout the remainder of the season. If this assumption proves incorrect, actual results and developments may differ materially from those contemplated by the forward-looking statements contained in this press release. Factors that could lead actual results to differ also include general economic conditions, competition, extreme weather conditions, disease outbreaks, war, terrorism, and other risks detailed from time to time in the Corporation’s continuous disclosure documents.
These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. The Corporation considers the assumptions on which these forward-looking statements are based to be reasonable, but cautions the reader that these assumptions regarding future events, many of which are beyond its control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect the Corporation. For additional information with respect to these and other factors, see the Annual Information Form and Annual Report for the year ended October 31, 2008, filed with Canadian securities commissions. The Corporation disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.