Kuoni’s profit falls, cautious over future

Kuoni has shown a fall in first half net profits due to the fact that last year’s figures were boosted by a tax gain. However, sales got a boost on the back of recent acquisitions. The Swiss firm saw its stock fall sharply Thursday, with analysts’ expecting a disappointing outlook. The group’s results were also hit by continuing weakness in its Swiss unit.

Kuoni said July and August bookings are healthy. It has also bolstered its confidence for 2007 but warned that competitive pressure will continue to dominate the markets in the U.K. and Switzerland.

The company purchased six travel firms last year, helping to boost its volumes. On Wednesday it also announced the acquisition of Danish rival Falk Lauritsen Rejser.

Full statement

Group turnover totalled CHF 2 027 million, a 15.6% improvement on the CHF 1 753 million of the prior-year period. Organic growth increased turnover by 5.1%, while acquisitions and currency movements added 7.9% and 2.6% respectively.

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Earnings before interest and taxes (EBIT) improved from the CHF 0.5 million of the prior-year period to CHF 5.7 million.

Cash flow from operating activities remained broadly at prior-year levels at CHF 143.3 million. Free cash flow was improved from the CHF 128.4 million of the prior-year period to CHF 130.1 million.

The Kuoni Group’s adopted strategy of growth in the specialist segment was further pursued with the acquisitions of Dorado Latin Tours (Switzerland), UTE Megapolus (Russia), CV Travel (UK) and Les Ateliers du Voyage (France).

The transformation communicated in June 2007 will provide Kuoni with the best possible corporate organisation for its future business success.

Outlook

Booking levels on August 19, 2007 for the Kuoni Group’s tour operating business were 13% above their 2006 equivalents in Swiss-franc terms. Year-on-year booking trends for key business units:

Switzerland + 5%

Scandinavia + 19%

France + 11%

United Kingdom + 15%

India + 28%

Group EBIT for July, which accounts for over a third of total EBIT for the year, was largely in line with the highly favourable result achieved for July 2006, strengthening Kuoni’s confident outlook for 2007 as a whole. While prospects are promising in booking-level terms, however, precise full-year projections remain difficult to make, given the markets’ present volatility.
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