The Interim Financial Statements were prepared in conformity with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the relevant Interpretations of the IFRS Interpretation Committee (IFRS IC) for interim financial reporting applicable in the European Union.

In accordance with IAS 34, the Interim Financial Statements are published in a condensed form compared with the consolidated annual financial statements and should therefore be read in combination with TUI Group's consolidated financial statements for financial year 2020. The Interim Financial Statements were reviewed by the Group's auditors.

Going concern reporting in accordance with the UK Corporate Governance Code The TUI Group covers its day-to-day working capital requirements through cash on hand, balances and borrowings from banks. The TUI Group's net debt (financial debt plus lease liabilities less cash and cash equivalents and less short-term interest-bearing cash investments) as of March 31, 2021 was EUR6.8bn. 


Net debt 
 
EUR million                                     31 Mar 2021    30 Sep 2020    Var. % 
Financial debt                                4.847,9        4.269,0        + 13,6 
Lease liabilities                             3.377,8        3.399,9        - 0,7 
Cash and cash equivalents                     1.399,7        1.233,1        + 13,5 
Short-term interest-bearing investments       12,9           14,9           - 13,4 
Net debt                                      6.813,1        6.420,9        + 6,1

The global travel restrictions to contain COVID-19 had a strong negative impact on the Group's earnings and liquidity development from the end of March 2020. To cover the resulting liquidity requirements, the Group also received financing measures from the Federal Republic of Germany in fiscal 2020, in particular in the form of a credit line from KfW totalling EUR2.85bn and an option bond from the Economic Stabilization Fund (WSF) in the amount of EUR150m with option rights to around 58.7m shares. The option bond was issued to the Economic Stabilization Fund on 1st October 2020. In the second quarter of fiscal 2021, TUI secured further funds from a further financing package of EUR1.8bn agreed with Unifirm Ltd, a banking consortium and KfW as well as the Economic Stabilization Fund (WSF).

The preconditions for all components of the third financing package were created at the Extraordinary General Meeting of TUI AG on January 5, 2021. This included in particular the resolution to reduce the capital stock from EUR2.56 per share to EUR1.00 per share and the subsequent capital increase of around EUR509m.

The WSF and TUI AG subsequently signed the agreement on two silent participations totalling EUR1.091bn. The WSF measures comprise a silent participation convertible into shares in TUI of EUR420m (Silent Participation I) and a second silent participation of EUR671m. At March 31, 2021, silent Participation I was fully paid in and silent participation II in the amount of EUR500m. In the IFRS consolidated financial statements, the silent participations are shown as equity due to their nature and are therefore not included in the Group's net debt. As part of the third financing package, KfW also participated in an additional loan facility together with private banks in the amount of EUR200m.

TUI AG successfully completed its capital increase on January 28, 2021. The gross issue proceeds amounted to around EUR568m. The Group's share capital increased nominally by just under EUR509m to around EUR1.099bn.

TUI used the funds from the capital increase to repay the outstanding senior bond (October 2016 - October 2021) of EUR300m ahead of schedule on February 23, 2021, in accordance with the terms and conditions of the bond. In accordance with the agreement on the loans granted by KfW under the three financing packages, the early redemption of the senior bond extended their maturities. KfW's loans under the stabilization packages totalling EUR3.05bn will therefore now mature in July 2022.

The revolving credit facility (RCF) and the KfW credit line of TUI AG are subject to compliance with certain financial targets (covenants) for debt coverage and interest coverage. The review of these covenants is currently suspended and will resume in September 2021. Testing will be based on the four most recent reported quarters prior to September 2021. In light of the ongoing pressures from the COVID 19 pandemic, we are seeking a covenant suspension (referred to as a covenant holiday) for the testing period ending September 30, 2021 and beyond under the RCF.

On April 16, 2021, TUI AG successfully completed the issuance of a convertible bond. The unsubordinated and unsecured convertible bond matures in 2028 and has a total nominal amount of EUR400m. Unless the convertible bonds are converted, redeemed or repurchased and retired prior to maturity, they will be redeemed at their nominal value on April 16, 2028. Investors have the option to convert the convertible bonds into registered shares of TUI.

The successfully placed convertible bond is intended in particular to initiate the refinancing of loans from the Corona stabilization packages and also to strengthen the liquidity available in the short term. Additional funds were generated in H1 2021 from the sale and leaseback of aircraft and spare parts. We also expect cash inflows from hotel projects in the second half of the year.

Currently, the TUI Group continues to be affected by the negative financial impact of the COVID 19 pandemic. At the time of preparing this report (May 10, 2021), it is not foreseeable when the international travel restrictions will be lifted again and when we will be able to fully resume our travel program. In particular, it is not possible at this time to reliably predict how quickly vaccination against the COVID-19 virus can be completed in each country, whether new variants of the virus will emerge, and when medications will be available to treat COVID-19 disease. Also, a change in booking behavior cannot be ruled out at this time.

Taking into account the financing lines still available and the low operating cash inflows in the last six months due to the pandemic, there is a risk that, in the absence of an increase in new travel bookings in the coming months and related customer prepayments from summer 2021, the TUI Group will no longer have sufficient financial resources to continue its business operations without further support measures or the short-term sale of non-current assets. Overall, there is a risk that the TUI Group will not be able to continue its business operations without further external support measures and to realize its assets and service its liabilities in the normal course of business.

TUI's solvency could also be jeopardized if a further suspension of covenant compliance is not achieved for the test period ending on September 30, 2021 and beyond. Furthermore, the loans from KfW (both tranches) and the initial revolving credit facility totalling EUR4.6bn will have to be refinanced in fiscal 2022. Due to the uncertainty surrounding future business development, there is a risk that refinancing on the banking and capital markets may not be successful and an extension of the existing financing or further government support measures will be necessary.

The Executive Board assumes that the successful implementation of the measures described is possible. Due to the dependence of the TUI Group's solvency on the further development of travel bookings, risks with regard to the refinancing of the external loans and the necessary further suspension of compliance with the covenants as well as the uncertainty with regard to the future development due to the COVID 19 pandemic, there are significant doubts about the TUI Group's ability to continue its business operations. In this respect, there is a material uncertainty with regard to the Group's ability to continue as a going concern.

Based on the assumptions described above, we expect that, despite the existing risks, the TUI Group currently has and will continue to have sufficient funds, both from borrowings and from operating cash flows, to meet its payment obligations for the foreseeable future and to continue as a going concern.

In accordance with Regulation 30 of the UK Corporate Governance Code, the Board of Directors confirms that, in its opinion, it is appropriate to prepare the Interim Financial Statements on a going concern basis.

Accounting and measurement methods

The preparation of the Interim Financial Statements requires management to make estimates and judgements that affect the reported values of assets, liabilities and contingent liabilities as at the balance sheet date and the reported values of revenues and expenses during the reporting period.

At the end of the financial year 2020 TUI assumed that the travel activities could be resumed in the first half of the financial year 2021. Due to the later resumption of the travel business in comparison to the assumptions made at the financial year end 2020, there are indications that certain assets of TUI Group companies may be impaired. Accordingly, the assets of TUI Group, in particular the business entities carrying goodwill, as well as property, plant and equipment and shareholdings were tested for impairment as at 31 March 2021.

The impairment test required estimates and judgement regarding the underlying assumptions, in particular the weighted average cost of capital (WACC) used as a discounting basis, the growth rate in perpetuity and the forecasts for future cash flows including the underlying budget assumptions based on corporate planning. Changes in these assumptions may have a substantial impact on the recoverable amount and the level of a potential impairment.

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