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I am delighted to present to you the maiden Integrated Annual Report of Thomas Cook (India) Limited. In line with our ethos and that of our parent, Fairfax Holdings, annual stakeholder communication and round-the-year engagements have always been a priority for us. This year, however, we have taken a decisive step forward through Integrated Reporting that relies on a multiple-capital-centric approach, where capitals as inputs, influence the outputs and outcomes derived across every facet of the business. It is my belief that our efforts will help you and our shareholders evaluate our performance for FY19 and overall group strategy in a holistic and transparent manner.
FY19 was a dynamic and promising year as we executed several initiatives centred around -Customer Experience, Technological Investments and enhancing our portfolio of offerings - all of which are pivotal to our position as a leading integrated player in the Asia Pacific travel industry. We truly believe that our employees across the globe are an important asset for the realization of our Group''s true potential, hence it continues to be our Endeavour to continually focus on the development of human capital.
We are cognizant that success comes when we listen to our customers, understand what they value and then with a single-minded focus deliver in line with their aspirations. In our journey to constantly delight customers, among several other developments, we launched our Customer Experience Improvement (CX) programme, ''Project Udaan'', which spans across a wide range of end-to-end initiatives, from up skilling our teams to augmenting processes, technology, engaging better with our customers, and so on.
In FY19, we performed well across all our lines of businesses, witnessed a progressive turnaround of our international Destination Management entities and 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 page 25 to page 39.
I will take this opportunity to also discuss the broad operating context within which we performed.
The global economy in FY19 was characterized by ongoing volatility and uncertainty, fuelled largely by geopolitical developments, regional conflicts and potential disruption to the global trade regime. Several instances, such as the US-China trade friction and its sizable global economic consequences, trade related uncertainties in China, weakening global demand for automobiles, Italian fiscal concerns, backlash from French reforms, German politics across the Euro area, and Brexit uncertainties in the British economy, engulfed the global markets.
On the other hand, the US economy saw encouraging growth, supported by fiscal stimulus. To help spur growth, the US Federal Reserve and the European Central Bank have 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 by a slowdown in demand driven by dampening purchasing power, drop in employment rate and inactivity and liquidity crisis in the NBFC sector. The situation was accentuated by the crisis in the aviation industry as well. Going forward, GDP performance, according to International Monetary Fund (IMF) in its World Economic Outlook report, is projected at 7.3% in FY20 and 7.5% in FY21, supported by the continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy.
Overview of travel and tourism
In 2018, global international tourist arrivals crossed the 1.4-bn mark, surpassing the UNWTO''s target for 2020. During CY18, tourism added US$8.8 trillion to the global economy and for the seventh consecutive year, its growth rate surpassed global growth figures (3.9% vs 3.6%).
Travel and tourism sector in India, continued as one of the top 10 contributors to global travel and tourism GDP. In India, the industry plays a significant role in economic and social aspects, generating US$247.3 bn in 2018 growing by 6.7% and contributed 9.2% to the country''s economy. It has also earned foreign exchange to the tune of US$28.9 bn, accounting for 5.4% of total national exports.
India''s travel and tourism landscape is experiencing a sea change, with travel being considered an integral part of one''s annual calendar. A recent Google and Bain & Company report indicated that Indian travellers took approximately two billion domestic and international trips in 2018. Online access to travel is creating additional demand and is increasing the market size. Within the travel sector, it is expected that nearly US$24 billion incremental travel bookings will be clocked online by 2021, which translates to 35% of all travel bookings being made online during the year.
The Government of India along with the State governments are also playing a key role in enabling the travel and tourism ecosystem. Strategic initiatives including relaxed FDI policies, revamping of the ''Incredible India'' campaign, the UDAN (Ude Desh Ka Aam Nagrik), PRASAD (Pilgrimage Rejuvenation and Spirituality Augmentation Drive), National Heritage City Development, Augmentation Yojana (HRIDAY) schemes, and extension of e-visa to 166 countries have helped expand the nation''s travel and tourism scenario. Foreign tourist arrivals (FTAs) in 2018 stood at 10.56 million compared to 10.04 million in 2017.
Amid such opportunities, the year also witnessed events, which negatively impacted the world of travel and tourism. One was the ominous terrorist attacks in 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 direct impact on the travel cost and prices. The collateral damage caused by the downfall of a long-established airline with significant seat capacity on both domestic and international routes, has triggered players in the travel and tourism industry to proactively identify systemic risks and plan mitigation actions for the same.
Our encouraging performance
The Thomas Cook India Group today has truly emerged as a global service provider, with presence in five continents and 29 countries, as we expand both organically and inorganically. Our operations span across nine business segments within travel and travel related financial services. Our 9,700 employees across 55 nationalities, we believe, are true embodiment of our business, values and ethics.
Our performance in FY19 is underpinned by sound fundamentals across operations, despite the disruption in the aviation sector led by higher air fares and supply constraints. During the year, we have successfully completed over 3.4 million transactions related to travel and financial services. In the domestic industry, we are further committed to our leadership across our business segments with an expansive retail presence of more than 660 touch points combined with our online presence. FY19 income from operations increased by 18% at a consolidated level from Rs,56 bn to Rs,66 bn. Our profit before tax grew by 985% to Rs,573 mn from Rs,53 mn (post exclusion of Quess Corp Limited). Let me also take this opportunity 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 debenture obligations. This has been made possible using the stable and strong cash flows that the Company has accrued and focused on generating year over year. As of March 31, 2019, our cash and bank deposits stand at Rs,10,588 mn.
Income from operations of the travel segment showcased growth of 19% y-o-y, whereas EBIT performance improved 34% y-o-y. This was driven by sustainability in profitability across key segments-Outbound, India DMS and MICE, alongside successful turnaround of the acquired entities (International DMS), supported by the negative working capital cycle of most of our travel businesses. Our progress in the non-banking forex space has remained strong. While revenues increased by 4% to Rs,2,764 mn in the financial services segment, our concerted drive towards the retail segment, led to a sharp increase of 19% at the EBIT level. Our Thomas Cook Borderless Prepaid card sales registered a growth of 12% y-o-y. The total load volume on the card stands at US$1.8 bn since inception.
Acquisitions: Your Company, whilst exploring opportunities to expand its portfolio, remained steadfast in its acquisition discipline and continued to seek attractive opportunities. In FY19 we made prudent investments to further our capabilities and sustainability.
DEI Holdings Limited (DEI):
While adding on to our existing capabilities, we have also ventured into an exciting new business space, adjacent to our core travel services portfolio with a majority (51%) stake acquisition in DEI. DEI, through its operating company Digiphoto Entertainment Imaging, is a global market leader providing digital souvenir imaging solutions. The company is both PAT and free cash accretive and will definitely add value to our overall performance, going ahead. One of the largest in the world, with offices across Orlando, Kuala Lumpur, Singapore, Bali, Hong Kong and Mumbai - DEI employs a team of over 1,800 professionals, in 14 Countries, with 120 Partners across 250 of the most visited tourist attractions in the world. It has also successfully launched KlassAkt, in the field of school photography.
Ithaka: in our pursuit of agile solutions for our new age customers, we have partnered with Traveljunkie''s Ithaka with a 24% strategic stake. Ithaka operates in the travel-tech space with a chat-based platform through its network of experienced travel influencers.
It aims at servicing the Indian millennial traveller by creating the most personalized travel planning experience. It has successfully powered over 50,000 travellers across 20 destinations. We are seeing visible synergistic benefits from this association, given our extensive scale and their cutting-edge technology.
Both acquisitions significantly add to our portfolio of end-to-end travel offerings, enabled by technology and delivered by people.
During the year, we have progressed on corporate restructuring exercise aimed at simplifying the overall holding structure of our Group including Quess Corp Limited.
Interplay of customer experience and technology
Our technological advancements and aim to provide the best customer experience within our industry have enabled us to transcend from being just a travel solutions company to an experience provider. Through the various initiatives that we have embarked on, our Group has transformed its focus - from a product-centric to a customer experience driven organization. As a result, we are increasingly
- using analytics to better understand preferences, and provide customized products/ services
- adopting technology that empowers our customer with information, and reduces human touch points, enhancing customer intimacy
We continue to build on our omnichannel approach to address customer needs and enhance operational efficiency, as customers today choose their preferred mode of interaction and expect customization on the go. As we take cognizance of such developments, we are committed to augmenting state-of-the-art, end-to-end, digital capacities and full-fledged call centres, in addition to our physical touch points. Today we are actively using Robotics and Artificial Intelligence (AI) for a gamut of functions, right from creating a robust recommendation engine, building dynamic packaging capabilities, reducing our turnaround time for better customer service to even fraud risk management within Forex operations. Very recently, we have launched TeeCee - Thomas Cook India''s Travel Chat Bot, which is a first of its kind in the industry, with the aim to provide prompt and efficient assistance for all travel and forex related needs of our customers.
Driving synergies with shared services
With the objective of driving cost efficiency through standardization and automation across common support functions of our Group''s entities, we instituted our Shared Services Centre (SSC) in FY18, based out of India. Within just over a year of its introduction, the SSC has helped improve group-level synergies, drive efficiencies and standardization.
Our Group aims to work responsibly to achieve the balance between the economic, social and environmental aspects of our business. Our initiative, Project Dialysis, along with Fairfax India Charitable Foundation (FICF) are dedicated towards addressing one of the significant and dire issues plaguing our society- limited dialysis infrastructure. FICF is associated with the Pradhan Mantri National Dialysis Programme (PMNDP) under a Public Private Partnership (PPP) scheme. The programme is aimed at enhancing sustainable, free/ affordable dialysis access in remote areas of the country for renal patients. Till date, the programme reached 15 Indian states with 370 total dialysis machine installations, free to use at 70 dialysis centres, offering 99,041 free/affordable dialysis sessions to rural poor population. We plan to support the initiative with a total of 1,000 machines in the coming years.
Reaching beyond with optimism
We believe travel helps make life richer and more fulfilling than perhaps anything else, and we will continue to ensure that our brand patrons remain the happy protagonists of their own travel stories.
The long-term growth and sustainability of the business lies in elevating customer experiences, every step of the way. We continue to learn more about our customers to make their travel experiences richer and more rewarding. Our omnichannel approach, combined with a clear strategy and a proven business model, empowers us to deliver consistent customer delight and create exceptional value for all our stakeholders.
Our agility and strength are manifested through our employee strength, who are our true brand ambassadors. The talent and constant dedication of our people are the foundation for a stronger Thomas Cook India Group. Together, we are focused on providing our customers with elevated experience, including best-in-class solutions for their ever-changing requirements.
I take this opportunity to thank them for their ideas, hard work and commitment. On behalf of the Board and the entire leadership team, I convey my gratitude to all our customers, colleagues, business partners, the Government of India, shareholders and the wider community.
Chairman and Managing Director Thomas Cook (India) Limited