"We believe travel helps make life's journey richer and morefulfilling than perhaps anything else; and we will continue to ensure that our brandpatrons are the protagonists of their own unique travel stories."
I am delighted to present to you the maiden Integrated Annual Report ofThomas Cook (India) Limited. In line with our ethos and that of our parent FairfaxHoldings annual stakeholder communication and round-the-year engagements have always beena priority for us. This year however we have taken a decisive step forward throughIntegrated Reporting that relies on a multiple-capital-centric approach where capitals asinputs influence the outputs and outcomes derived across every facet of the business. Itis my belief that our efforts will help you and our shareholders evaluate our performancefor FY19 and overall group strategy in a holistic and transparent manner.
FY19 was a dynamic and promising year as we executed severalinitiatives centred around - Customer Experience Technological Investments and enhancingour portfolio of offerings - all of which are pivotal to our position as a leadingintegrated player in the
Asia Pacific travel industry. We truly believe that our employeesacross the globe are an important asset for the realization of our Group's truepotential hence it continues to be our endeavour to continually focus on the developmentof human capital.
We are cognisant that success comes when we listen to our customersunderstand what they value and then with a single-minded focus deliver in line with theiraspirations. In our journey to constantly delight customers among several otherdevelopments we launched our Customer Experience Improvement
(CX) programme Project Udaan' which spans across a widerange of end-to-end initiatives from upskilling our teams to augmenting processestechnology engaging better with our customers and so on.
In FY19 we performed well across all our lines of businesseswitnessed a progressive turnaround of our international Destination Management entitiesand explored new growth frontiers by acquiring stake in both DEI Holdings Limited (DEI)and Ithaka. A detailed review of each segment has been presented in the report from page25 to page 39. I will take this opportunity to also discuss the broad operating contextwithin which we performed.
The global economy in FY19 was characterised by ongoing volatility anduncertainty fuelled largely by geopolitical developments regional conflicts andpotential disruption to the global trade regime. Several instances such as the US-Chinatrade friction and its sizable global economic consequences trade related uncertaintiesin China weakening global demand for automobiles Italian fiscal concerns backlash fromFrench reforms German politics across the Euro area and Brexit uncertainties in theBritish economy engulfed the global markets.
Our omnichannel approach combined with a clear strategy and a provenbusiness model empowers us to deliver consistent customer delight and create exceptionalvalue for all our stakeholders.
On the other hand the US economy saw encouraging growth supported byfiscal stimulus. To help spur growth the US Federal Reserve and the European Central Bankhave ruled out rate hikes in 2019 adopting a largely accommodative monetary policy.
In FY19 India's GDP at 6.8%
(Source: CSO) is reflective of the sluggish economic environment led bya slowdown in demand driven by dampening purchasing power drop in employment rate andinactivity and liquidity crisis in the NBFC sector. The situation was accentuated by thecrisis in the aviation industry as well. Going forward GDP performance according toInternational Monetary Fund (IMF) in its World Economic Outlook report is projected at7.3% in FY20 and 7.5% in FY21 supported by the continued recovery of investment androbust consumption amid a more expansionary stance of monetary policy and some expectedimpetus from fiscal policy.
Overview of travel and tourism
In 2018 global international tourist arrivals crossed the 1.4-bn marksurpassing the UNWTO's target for 2020. During CY18 tourism added US$8.8 trillion tothe global economy and for the seventh consecutive year its growth rate surpassed globalgrowth figures (3.9% vs 3.6%).
Travel and tourism sector in India continued as one of the top 10contributors to global travel and tourism GDP. In India the industry plays a significantrole in economic and social aspects generating US$247.3 bn in 2018 growing by 6.7% andcontributed 9.2% to the country's economy. It has also earned foreign exchange to thetune of US$28.9 bn accounting for 5.4% of total national exports.
India's travel and tourism landscape is experiencing a sea changewith travel being considered an integral part of one's annual calendar. A recentGoogle and Bain & Company report indicated that Indian travellers took approximatelytwo billion domestic and international trips in 2018. Online access to travel is creatingadditional demand and is increasing the market size. Within the travel sector it isexpected that nearly US$24 billion incremental travel bookings will be clocked online by2021 which translates to 35% of all travel bookings being made online during the year.
The Government of India along with the State governments are alsoplaying a key role in enabling the travel and tourism ecosystem. Strategic initiativesincluding relaxed FDI policies revamping of the Incredible India' campaignthe
UDAN (Ude Desh Ka Aam Nagrik) PRASAD (Pilgrimage Rejuvenation andSpirituality Augmentation Drive) National Heritage City Development Augmentation Yojana(HRIDAY) schemes and extension of e-visa to 166 countries have helped expand thenation's travel and tourism scenario. Foreign tourist arrivals (FTAs) in 2018 stoodat 10.56 million compared to 10.04 million in 2017.
Amid such opportunities the year also witnessed events whichnegatively impacted the world of travel and tourism. One was the ominous terrorist attacksin New Zealand Pulwama (India) and Sri Lanka which significantly impacted travel demands.Additionally closer home the turmoil in the Indian aviation sector has had a directimpact on the travel cost and prices. The collateral damage caused by the downfall of along-established airline with significant seat capacity on both domestic and internationalroutes has triggered players in the travel and tourism industry to proactively identifysystemic risks and plan mitigation actions for the same.
Our encouraging performance
The Thomas Cook India Group today has truly emerged as a global serviceprovider with presence in five continents and 29 countries as we expand both organicallyand inorganically. Our operations span across nine business segments within travel andtravel related financial services. Our 9700+ employees across 55 nationalities
During the year we have successfully completed over 3.4 milliontransactions related to travel and financial services
we believe are true embodiment of our business values and ethics. Ourperformance in FY19 is underpinned by sound fundamentals across operations despite thedisruption in the aviation sector led by higher air fares and supply constraints. Duringthe year we have successfully completed over 3.4 million transactions related to traveland financial services. In the domestic industry we are further committed to ourleadership across our business segments with an expansive retail presence of more than 660touch points combined with our online presence. FY19 income from operations increased by18% at a consolidated level from ` 56 bn to Rs 66 bn. Our profit before tax grew by 985%to ` 573 mn from ` 53 mn (post exclusion of Quess Corp Limited). Let me also take thisopportunity to report that during the fiscal our standalone entity Thomas Cook (India)Limited has become effectively debt free on account of pre-payment of our debentureobligations. This has been made possible using the stable and strong cash flows that theCompany has accrued and focused on generating year over year. As of March 31 2019 ourcash and bank deposits stand at Rs 60588 mn. Income from operations of the travel segmentshowcased growth of 19% y-o-y whereas EBIT performance improved 34% y-o-y. This wasdriven by sustainability in profitability across key segments-
Outbound India DMS and MICE alongside successful turnaround of theacquired entities (International DMS) supported by the negative working capital cycle ofmost of our travel businesses. Our progress in the non-banking forex space has remainedstrong. While revenues increased by 4% to ` 2764 mn in the financial services segmentour concerted drive towards the retail segment led to a sharp increase of 19% at the EBITlevel. Our Thomas Cook Borderless Prepaid card sales registered a growth of 12% y-o-y. Thetotal load volume on the card stands at US$1.8 bn since inception. Acquisitions: YourCompany whilst exploring opportunities to expand its portfolio remained steadfast in itsacquisition discipline and continued to seek attractive opportunities. In FY19 we madeprudent investments to further our capabilities and sustainability.
DEI Holdings Limited (DEI): While adding on to our existingcapabilities we have also ventured into an exciting new business space adjacent to ourcore travel services portfolio with a majority (51%) stake acquisition in DEI. DEIthrough its operating company Digiphoto Entertainment Imaging is a global market leaderproviding digital souvenir imaging solutions. The company is both PAT and free cashaccretive and will definitely add value to our overall performance going ahead. One ofthe largest in the world with offices across
Orlando Kuala Lumpur Singapore Bali Hong Kong and Mumbai - DEIemploys a team of over 1800 professionals in 14 Countries with 120+ Partners across 250of the most visited tourist attractions in the world. It has also successfully launchedKlassAkt in the field of school photography.
Ithaka: in our pursuit of agile solutions for our new age customers wehave partnered with Traveljunkie's Ithaka with a 24% strategic stake. Ithaka operatesin the travel-tech space with a chat-based platform through its network of experiencedtravel influencers.
It aims at servicing the Indian millennial traveller by creating themost personalised travel planning experience. It has successfully powered over 50000+travellers across 20 destinations. We are seeing visible synergistic benefits from thisassociation given our extensive scale and their cutting-edge technology.
Both acquisitions significantly add to our portfolio of end-to-endtravel offerings enabled by technology and delivered by people.
During the year we have progressed on corporate restructuring exerciseaimed at simplifying the overall holding structure of our Group including Quess CorpLimited.
Interplay of customer experience and technology
Our technological advancements and aim to provide the best customerexperience within our industry have enabled us to transcend from being just a travelsolutions company to an experience provider. Through the various initiatives that we haveembarked on our Group has transformed its focus - from a product-centric to a customerexperience driven organization. As a result we are increasingly - using analytics tobetter understand preferences and provide customised products/ services
Our Group aims to work responsibly to achieve the balance between theeconomic social and environmental aspects of our business
- adopting technology that empowers our customer with information andreduces human touch points enhancing customer intimacy We continue to build on ouromnichannel approach to address customer needs and enhance operational efficiency ascustomers today choose their preferred mode of interaction and expect customization on thego. As we take cognisance of such developments we are committed to augmentingstate-of-the-art end-to-end digital capacities and full-fledged call centres inaddition to our physical touchpoints. Today we are actively using Robotics and
Artificial Intelligence (AI) for a gamut of functions right fromcreating a robust recommendation engine building dynamic packaging capabilities reducingour turnaround time for better customer service to even fraud risk management within Forexoperations. Very recently we have launched TeeCee Thomas Cook India's TravelChat Bot which is a first of its kind in the industry with the aim to provide prompt andefficient assistance for all travel and forex related needs of our customers.
Driving synergies with shared services
With the objective of driving cost efficiency through standardisationand automation across common support functions of our Group's entities we institutedour Shared Services Centre (SSC) in FY18 based out of India. Within just over a year ofits introduction the SSC has helped improve group-level synergies drive efficiencies andstandardisation.
Our Group aims to work responsibly to achieve the balance between theeconomic social and environmental aspects of our business. Our initiative ProjectDialysis along with Fairfax India Charitable Foundation (FICF) are dedicated towardsaddressing one of the significant and dire issues plaguing our society- limited dialysisinfrastructure. FICF is associated with the Pradhan Mantri National Dialysis Programme(PMNDP) under a Public Private Partnership (PPP) scheme. The programme is aimed atenhancing sustainable free/ affordable dialysis access in remote areas of the country forrenal patients. Till date the programme reached 15 Indian states with 370 total dialysismachine installations free to use at 70 dialysis centres offering 99041 free/affordabledialysis sessions to rural poor population. We plan to support the initiative with a totalof 1000 machines in the coming years.
Reaching beyond with optimism
We believe travel helps make life richer and more fulfilling thanperhaps anything else and we will continue to ensure that our brand patrons remain thehappy protagonists of their own travel stories.
The long-term growth and sustainability of the business lies inelevating customer experiences every step of the way. We continue to learn more about ourcustomers to make their travel experiences richer and more rewarding. Our omnichannelapproach combined with a clear strategy and a proven business model empowers us todeliver consistent customer delight and create exceptional value for all our stakeholders.
Our agility and strength are manifested through our employee strengthwho are our true brand ambassadors. The talent and constant dedication of our people arethe foundation for a stronger Thomas Cook India Group. Together we are focused onproviding our customers with elevated experience including best-in-class solutions fortheir ever-changing requirements.
I take this opportunity to thank them for their ideas hard work andcommitment. On behalf of the Board and the entire leadership team I convey my gratitudeto all our customers colleagues business partners the Government of India shareholdersand the wider community.
Chairman and Managing Director
Thomas Cook (India) Limited