An excellent start to summer
For the third quarter:
- Revenues of $733.2 million, compared with $663.6 million in
2016.
- Operating income of $41.0 million, compared with an operating loss of $3.0 million in 2016.
- Adjusted operating income1 of $59.1 million, compared with $16.0 million in 2016.
- Net income attributable to shareholders of $26.6 million, compared with $9.4 million in 2016.
- Adjusted net income3 of $26.9 million, compared with $2.5 million in 2016.
For the nine-month period:
- Revenues of $2.3 billion, compared with $2.3 billion in
2016.
- Operating loss of $24.8 million, compared with $57.2 million
in 2016.
- Adjusted operating income1 of $23.5 million, compared with an adjusted
operating loss1 of $20.7 million in 2016.
- Net loss attributable to shareholders of $13.8 million, compared with $76.7 million in 2016.
- Adjusted net loss3 of $17.3 million, compared with $39.7
million in 2016.
MONTREAL, Sept. 7, 2017 /CNW Telbec/ - Transat A.T. Inc., one
of the largest integrated tourism companies in the world and Canada's holiday travel leader,
posted revenues of $733.2 million for the quarter ended July 31,
2017, compared with $663.6 million for the same period in 2016, an increase of
$69.6 million, or 10.5%. The Corporation recorded adjusted operating income1 of
$59.1 million, versus $16.0 million in 2016, and net income
attributable to shareholders of $26.6 million ($0.72 per share
basic and diluted) for the third quarter of 2017, against $9.4 million ($0.26 per share basic and diluted) in 2016. Before non-operating items, Transat reported adjusted net
income3 of $26.9 million ($0.73 per share) for the
third quarter of 2017, compared with $2.5 million ($0.07 per
share) in 2016.
"The third quarter was very positive," said Jean-Marc Eustache, President and Chief Executive
Officer of Transat. "First, as we announced on August 21, our results are back up to the levels we
saw in the years prior to 2016. Second, our projects have taken huge steps forward with the announcement that we will be leasing
new A321neo LR aircraft and the news that we are selling our interest in Ocean Hotels."
Third-quarter highlights
The Corporation posted revenues of $733.2 million, compared with $663.6 million for the same 2016 quarter. The increase of $69.6 million
(10.5%) was driven by an 8.7% rise in total travellers in the transatlantic market, the Corporation's main market for the period,
resulting from a 7.2% increase in its product offering in that market. The increase was accentuated by a 1.9% increase
of the product offering in sun destinations market, resulting in a 2.9% rise in total travellers in that market. In
addition, average selling prices increased across all markets.
The Corporation reported adjusted operating income1 of $59.1 million, compared
with $16.0 million in 2016. This $43.1 million improvement
resulted primarily from higher average selling prices, especially since the beginning of June, combined with increases in total
travellers and load factors across all markets, as well as to a decrease in air costs, due in particular to a better utilization
of wide-body aircraft.
On July 19, 2017, the Corporation entered into an agreement with H10 Hotels to sell
its 35% minority interest in Ocean Hotels for an anticipated amount of US$150.5 million ($183.6 million). As at July 31, 2017, this
interest represented an asset amounting to $100.7 million, reported as an asset held for sale
in the statement of financial position. The agreement entered into with H10 Hotels, which already owns 65% of the company
formed in 2007, is enforceable and subject to certain customary conditions. The selling price is subject to adjustments upon
closing, which is expected to take place by November 2, 2017 or afterward if necessary. Transat remains committed to
becoming a full-fledged hotel operator and sold its minority interest in Ocean Hotels to accelerate the development of its own
sun-destination hotel chain.
Together, Transat's shares of the income of Ocean Hotels and Rancho Banderas All-Suites Resort, the Corporation's hotel
businesses, accounted for $1.6 million, compared with $2.5 million for the corresponding quarter in 2016. The decrease for the quarter was attributable to an
unfavourable foreign exchange effect.
Nine-month highlights
As announced on August 21, the Corporation's third-quarter revenues were superior to those of
2016, which offset the decrease recorded during the winter season. For the nine-month period, the Corporation posted revenues of
$2.3 billion, compared with $2.3 billion in 2016.
The decrease in revenues in winter resulted from a higher proportion of flight-only versus holiday package sales compared with
2016. During the winter season, the 1.4% decrease in total travellers to sun destinations, the Corporation's main market for the
period, resulted primarily from the decision to reduce the product offering in this market by 2.3%. The impact of this decrease
was offset by the 9.6% increase in the Corporation's transatlantic market product offering which led to a 6.5% rise in total
travellers. During the winter season, average selling prices increased in the sun destinations market but decreased slightly in
the transatlantic market.
For the nine-month period, the Corporation reported adjusted operating income1 of $23.5 million, compared with an adjusted operating loss1 of $20.7 million in 2016, an improvement of $44.2 million. The increase in
adjusted operating income1 originated from the summer-season, driven primarily by higher average selling prices,
combined with increases in total travellers and load factors across all markets, as well as to a decrease in air costs. During
the winter season, the higher operating loss resulted from the increase in air costs and an unfavourable foreign exchange effect
which, combined with an increase in fuel prices, resulted in a $39.3 million increase in
operating expenses that the higher average selling prices for sun packages could not offset.
For the nine-month period, Transat's shares of the income of Ocean Hotels and Rancho Banderas All-Suites Resort, the
Corporation's hotel businesses, have accounted together for $11.0 million, compared with
$10.6 million in 2016. The increase was attributable to Ocean Hotels' higher operating
profitability, partially offset by an unfavourable foreign exchange effect.
Financial position
As at July 31, 2017, the Corporation's free cash totalled $580.7 million, compared with $470.1 million at the same date in 2016.
The working-capital ratio was 1.26, versus 1.05 as at July 31, 2016. Deposits from customers for
future travel amounted to $509.9 million, versus $440.4 million a year earlier; the increase is attributable to the higher number of bookings compared with
last year, and to higher selling prices. Off-balance-sheet agreements, excluding contracts with service providers, stood at
$1,410.3 million as at July 31, 2017, compared with $710.3 million as at October 31, 2016. The $700.0 million increase reflects the agreements entered into during the quarter to lease 10 Airbus A321neo
LR aircraft, to be gradually integrated into the Air Transat fleet starting in spring 2019, as the carrier's Airbus A310s are
retired—as well as agreements entered into during the nine-month period for four Airbus A330s. The increase was partially offset
in part by the repayments made and by the strengthening of the dollar against the U.S. dollar.
Outlook
Summer 2017 – The transatlantic market outbound from Canada and
Europe accounts for a substantial portion of Transat's business during the summer season. For
the period from August to October 2017, total industry capacity is higher by 5%, while that of the
Corporation is higher by 8%. To date, 80% of that capacity has been sold, load factors are lower by 0.7% versus those of summer
2016, and selling prices of bookings taken are higher by 3.2% than those recorded at the same date in 2016. The impact of
increased fuel costs, combined with currency exchange fluctuations, will result in a decrease in operating expenses of 1.3% if
fuel prices remain stable and the dollar remains at its current level against the U.S. dollar, the euro and the pound.
On the sun destinations market outbound from Canada, for which summer is low season,
Transat's capacity is higher by 4% than that marketed at the same date last year. To date, 73% of that capacity has been sold,
load factors are higher by 5.8%, and selling prices are higher by 6.5%. The impact of increased fuel costs, combined with
currency-exchange fluctuations, will result in a decrease in operating expenses of 1.5% if fuel prices remain stable and the
dollar remains at its current level against the U.S. dollar. Unit margins are currently higher by 6.0% compared with those
recorded at the same date last year.
If the current trends hold, taking into account the costs of implementing Air Transat's feeder flights program, and despite
the recent increase in fuel prices following hurricane Harvey, which will be attenuated by the hedging program, the Corporation
expects its adjusted operating income1 for the fourth quarter to be similar to 2015, which was $70.8 million for continuing operations. It is especially worth noting that other hurricanes, like Irma, could
impact these forecasts.
Winter 2018 – For the winter season, 20% of capacity on the sun destinations market has been sold to date,
versus 18% at the same date in 2016. Moreover, the outlook for the Canadian dollar's value against its U.S. counterpart is far
more favourable compared with the same date in previous years. Despite these indicators, the Corporation considers that it is too
soon to provide any indication regarding winter season results.
Additional information
The results were affected by non-operating items, as summarized in the following table:
Highlights and impact of non-operating items on results
|
(in thousands of $ Cdn)
|
|
|
|
CONTINUING OPERATIONS
|
Third quarter
|
First nine months
|
2017
|
2016
|
2017
|
2016
|
Revenues
|
733,152
|
663,591
|
2,306,794
|
2,277,535
|
|
|
|
|
|
|
Operating income (loss)
|
40,952
|
(2,990)
|
(24,780)
|
(57,233)
|
|
Lump-sum payments – collective agreement
|
—
|
4,200
|
—
|
4,200
|
|
Restructuring charge
|
1,350
|
3,700
|
1,350
|
3,700
|
|
Depreciation and amortization
|
18,077
|
12,111
|
49,435
|
35,335
|
|
Premiums related to derivatives matured during the period
|
(1,324)
|
(1,057)
|
(2,521)
|
(6,723)
|
Adjusted operating income (loss)1
|
59,055
|
15,964
|
23,484
|
(20,721)
|
|
|
|
|
|
Income (loss) before taxes
|
37,731
|
11,755
|
(18,996)
|
(95,064)
|
|
Lump-sum payments – collective agreement
|
—
|
4,200
|
—
|
4,200
|
|
Restructuring charge
|
1,350
|
3,700
|
1,350
|
3,700
|
|
Fuel-related derivatives and other derivatives
|
341
|
(13,922)
|
(3,533)
|
24,042
|
|
Loss on disposal of a subsidiary
|
—
|
—
|
—
|
843
|
|
Asset impairment
|
—
|
—
|
—
|
15,809
|
|
Premiums related to derivatives matured during the period
|
(1,324)
|
(1,057)
|
(2,521)
|
(6,723)
|
Adjusted pre-tax income (loss)2
|
38,098
|
4,676
|
(23,700)
|
(53,193)
|
|
|
|
|
|
Net income (loss) attributable to shareholders
|
26,588
|
9,439
|
(13,839)
|
(76,668)
|
|
Net (income) loss from discontinued operations
|
—
|
(1,735)
|
—
|
5,645
|
|
Lump-sum payments – collective agreement
|
—
|
3,074
|
—
|
3,074
|
|
Restructuring charge
|
988
|
2,708
|
988
|
2,708
|
|
Fuel-related derivatives and other derivatives
|
250
|
(10,190)
|
(2,586)
|
17,600
|
|
Loss on disposal of a subsidiary
|
—
|
—
|
—
|
615
|
|
Asset impairment
|
—
|
—
|
—
|
12,222
|
|
Premiums related to derivatives matured during the period
|
(969)
|
(773)
|
(1,845)
|
(4,921)
|
Adjusted net income (loss)3
|
26,857
|
2,523
|
(17,282)
|
(39,725)
|
|
|
|
|
|
Diluted earnings (loss) per share
|
0.72
|
0.26
|
(0.37)
|
(2.08)
|
|
Net (income) loss from discontinued operations
|
—
|
(0.05)
|
—
|
0.15
|
|
Lump-sum payments – collective agreement
|
—
|
0.08
|
—
|
0.08
|
|
Restructuring charge
|
0.03
|
0.07
|
0.03
|
0.07
|
|
Fuel-related derivatives and other derivatives
|
0.01
|
(0.28)
|
(0.07)
|
0.48
|
|
Loss on disposal of a subsidiary
|
—
|
—
|
—
|
0.02
|
|
Asset impairment
|
—
|
—
|
—
|
0.31
|
|
Premiums related to derivatives matured during the period
|
(0.03)
|
(0.02)
|
(0.05)
|
(0.13)
|
Adjusted net income (loss) per share3
|
0.73
|
0.07
|
(0.47)
|
(1.08)
|
Hedging – The Corporation records in the statement of income any gains or losses resulting from
mark-to-market adjustments of the derivative financial instruments used to manage aircraft fuel-price risk, as well any gains or
losses resulting from mark-to-market adjustments of certain hedging instruments used to mitigate exchange-rate exposure stemming
from its expenses and/or revenues in foreign currencies. For the third quarter of 2017, this translates into a $0.3 million non-cash loss ($0.3 million after income taxes), compared
with a gain of $13.9 million ($10.2 million after income
taxes) in 2016. For the nine-month period, this translates into a $3.5 million non-cash gain
($2.6 million after income taxes), compared with a $24.0 million loss ($17.6 million after income taxes) in 2016.
The Corporation uses hedging instruments to mitigate exchange-rate exposure stemming from its expenses and/or revenues in
foreign currencies. Accordingly, under applicable accounting standards, any fluctuations resulting from mark-to-market
adjustments of these instruments are recorded in the consolidated statement of financial position and consolidated statement of
comprehensive income rather than in the consolidated statement of income. For the third quarter of 2017, Transat recorded a loss
of $23.8 million ($17.4 million after income taxes) on
these foreign-currency hedging instruments, compared with a gain of $11.8 million
($8.7 million after income taxes) in 2016. For the nine-month period, Transat recorded a loss
of $18.1 million ($13.2 million after income taxes) on
these foreign-currency hedging instruments, compared with a loss of $23.4 million
($17.1 million after income taxes) in 2016.
Summary of non-operational items – Before non-operating items, Transat posted an adjusted net
income3 of $26.9 million for the third quarter of 2017 ($0.73 per share), compared with $2.5 million for the third quarter of
2016 ($0.07 per share). For the nine-month period, the Corporation recorded an adjusted net
loss3 of $17.3 million ($0.47 per share)
compared with one of $39.7 million in 2016 ($1.08 per
share).
Transat A.T. Inc. is a leading integrated international tourism company specializing in holiday travel and active in air
transportation, accommodation, travel packaging and distribution. It operates mainly in Canada,
Europe, Mexico and the Caribbean, with some 25 destination countries, and distributes products in over 50 countries. Based in
Montreal, the company has 5,000 employees. Transat is firmly committed to sustainable tourism
development, as reflected in its multiple corporate responsibility initiatives over the past 10 years, and was awarded
Travelife Partner status in 2016. The vacation travel companion par excellence, Transat celebrates its 30th anniversary in 2017
(TSX: TRZ).
NOTES
The following are non-IFRS financial measures used by management as indicators to evaluate ongoing and recurring operational
performance.
- Adjusted operating income (adjusted operating loss): Operating income (loss) before depreciation and amortization
expense, restructuring charge, lump-sum payments related to collective agreements and other significant unusual items,
including premiums for fuel-related derivatives and other derivatives matured during the period. The Corporation uses this
measure to assess its operational performance before the impact of the above-mentioned factors, thus ensuring better
comparability of financial results.
- Adjusted pre-tax income (loss): Income (loss) before income tax expense before change in fair value of fuel-related
derivatives and other derivatives, gain (loss) on disposal of a subsidiary, restructuring charge, lump-sum payments related to
collective agreements, impairment of assets and other significant unusual items, including premiums for fuel-related
derivatives and other derivatives matured during the period. The Corporation uses this measure to assess its financial
performance before the impact of the above-mentioned factors, thus ensuring better comparability of financial results.
- Adjusted net income (adjusted net loss): Net income (loss) attributable to shareholders before net income (loss)
from discontinued operations, change in fair value of fuel-related derivatives and other derivatives, gain (loss) on disposal
of a subsidiary, restructuring charge, lump-sum payments related to collective agreements, impairment of assets and other
significant unusual items, including premiums for fuel-related derivatives and other derivatives matured during the period, net
of related taxes. The Corporation uses this measure to assess its financial performance before the impact of the
above-mentioned factors, thus ensuring better comparability of financial results. Adjusted net income is also used in
calculating the variable compensation of employees and senior executives.
Conference call
Third quarter 2017 conference call: Thursday, September 7, 10:00
a.m. Dial 1-800-926-9801. Name of conference: Transat. Webcast: www.transat.com. The archived call will be available at 1-800-558-5253, access code 21846663, until October 7, 2017.
Non-IFRS measures
Transat prepares its financial statements in accordance with International Financial Reporting Standards (IFRS). We will
occasionally refer to non-IFRS financial measures in the news release. These non-IFRS financial measures do not have any meaning
prescribed by IFRS 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 IFRS. All amounts are in Canadian dollars unless otherwise indicated.
Caution regarding forward-looking statements
This news release contains certain forward-looking statements regarding the Corporation's expectation that travel
reservations will follow the trends. In making these statements, the Corporation has assumed that the trends in reservations and
selling prices will continue, and that fuel prices, other costs and the value of the Canadian dollar against foreign currencies
will remain stable. If these assumptions prove incorrect, actual results and developments may differ materially from those
contemplated by the forward-looking statements contained in this news release. Factors that could lead actual results to differ
include, among others, extreme weather conditions, fuel prices, war, terrorism, market and general economic conditions, disease
outbreaks, demand fluctuations related to seasonality in the travel industry, ability to reduce operating costs and workforce,
labour relations, collective agreements and labour conflicts, issues related to pensions, exchange rate, interest rates, future
funding, evolution of legal environment, introduction of unfavourable regulations, lawsuits and legal challenges, 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, 2016, 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 securities
laws.
SOURCE Transat A.T. Inc.
View original content: http://www.newswire.ca/en/releases/archive/September2017/07/c1247.html