A failure in Thomson back-office systems triggered by cost-cutting measures lies behind the £117-million black hole in Tui Travel UK’s accounts.
The subsequent roll out of the system across the group following the merger of First Choice and Tui in 2007 exacerbated the problem up to its discovery last August. The FTSE-100 company revealed the full extent of the error in its UK division in its latest annual figures, triggering the resignation of finance director Paul Bowtell.
Tui Travel’s annual report reveals: “Thomson implemented a new retail booking system in its distribution network of shops, call centres and website [in 2004].” Controls to ensure the booking system recorded the same data as the existing tour operating system “operated well for the first few years”.
The problems came when “as part of a drive for cost savings and efficiencies, processes around the two systems were streamlined, roles were consolidated and parts of the process were transferred to an outsource provider”.
As a result, discounts on the price of holidays were inaccurately recorded. According to a company source: “Basically, the [tour operator and retail] systems were not talking to one another. They were supposed to be reconciled, but they were not. This did happen in some instances, but not in all.”
The result was an exaggeration in revenue of £87 million over six years, plus £30 million in what Tui Travel calls “unmatched credits”.
However, this would have been a fraction of the value of transactions processed in the period.
Tui Travel has dismissed reports of tension within the group following the resignations of two non-executive directors and the group’s auditor, insisting there was no connection between the departures.
Auditor KPMG resigned just before New Year after helping to reveal the accounting error, and directors Jeremy Hicks and Giles Thorley resigned on Friday. Hicks chaired the group’s audit committee.