Tui Travel a tour operator, a company formed in 2007 from the merger of German group Tui AG’s travel division and First Choice, disclosed that the company had overlooked £117 million of small cash discounts given to British holidaymakers. The finance director of the organization is stepping down due to the disclosure of the accounting issues.
These discounts comprised of reductions offered by Thomson travel agents, such as waiving of booking charge fees and discounts for e-tickets, as well as some cancellations, were not picked up when UK cash sales data was transmitted from high street shops to Tui Travel’s accounts department. In August the company announced that it had found £29 million , which was called “small receivable balance” that was built up over a few years, and the management believed that these are unrecoverable. But low and behold, in October they announced that the small receivable balance of £29 million was not the only unrecoverable balance, they had found another £88m of unrecoverable balance. And this time it was not called a “small receivable balance”. The company will be restating their financials, taking a hit of £42m wiping out almost 10% of its operating profits for the year to 30 September 2009. The impact on the year to 30 September 2010 has been limited to £5m.
The company clarified that the error was due to a “chaotic reporting process” , and not shortcomings among suppliers. Well that definitely builds confidence in the investor community about the company and its accounting. One might wonder if there are any more surprises creeping up from the chaotic reporting process! Lets wait and watch!
