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Hard Work Pays Off

Message to Shareholders

Dear shareholders,

Kuoni can look back on an eventful and, for the company, very significant 2010. On the one hand, external factors such as the volcanic eruption in Iceland in April 2010 and the euro “crisis” required our full attention. On the other, the reorganisation of the Group set an important operational course and will allow Kuoni to tackle the current and future challenges more effectively. The reorganisation, which forms an integrated part of the investment and cost reduction programme launched at the start of 2009, is transfering Kuoni from its former decentralised organisation to a functional global structure. The new approach has a twin focus: marketing and sales on one side, and a global Procurement and Production Unit on the other. This new unit started operations in March 2010 and has already realised some substantial initial gains in terms of its purchasing capabilities. Various markets have been able to increase their margins as a result. At the same time, the reduction in fixed costs has also shown a positive effect on results.

The worldwide financial and economic crisis, which hit the tourism industry hard in 2009, gave way to more positive consumer mood and improved economic data in most markets in 2010. In the second half of the year in particular, there was a sustained increase in holiday bookings. By contrast, costs associated with the suspension of flights in the wake of the volcanic eruption in Iceland had a substantial one-off impact on results. Overall, this exceptional cost for Kuoni amounted to CHF 14.5 million.
In all markets affected by the eruption of Eyjafjallajökull in April 2010, Kuoni carried out an unparalleled campaign to support and repatriate more than 15 000 stranded customers. Demonstrating enormous dedication, our employees proved exactly what kind of added value Kuoni and its brands offer their customers in such situations. Our successful management of the crisis met with an exceptionally positive response from customers. The company also showed great commitment and customer focus in coping with the consequences of violent protests in Thailand, demonstrations and strikes in Greece, and heavy snowfall in much of Europe in January and December 2010.

“The volcanic eruption led to an unparalleled campaign to consult clients.”

In the wake of the financial and economic crisis, the steep fall in the values of important currencies against the Swiss franc had a negative effect on results. Kuoni’s key currencies were all affected, the euro falling by 8.5 %, the UK pound by 5.2 %, and the US dollar by 4.0 %. At the same time, the value of the Swedish krona (+ 1.5 %) and the Indian rupee (+ 1.6 %) rose against the Swiss franc, so the overall currency translation effect on Kuoni Group’s underlying EBIT result was only CHF – 0.5 million.

Despite the numerous significant external influences, Kuoni posted a clear increase in earnings for 2010. Turnover during the year came to CHF 3 984 million. This represents an increase of 2.3 % on the previous year. Earnings before interest and taxes (EBIT) came to CHF 58.4 million (2009: CHF 15.1 million). After adjustments, underlying EBIT doubled to CHF 127 million (2009: CHF 60.5 million). This underlying figure is the EBIT after adjusting for the cost of the investment and cost reduction programme, the exceptional cost caused by the ash cloud and the consequent disruptions to flights, and the planned depreciation of acquired intangible assets (IFRS3).