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Oct. 21, 2010, 8:47 p.m. EDT

TUI finance chief quits after accounting error

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By Kaveri Niththyananthan

LONDON—TUI Travel PLC, Europe's largest travel operator, Thursday said Chief Financial Officer Paul Bowtell had resigned after an accounting error forced the company to write off another £88 million ($139.4 million) in "irrecoverable balances" and restate its earnings for fiscal 2009. Its shares tumbled 11% in London.

The company said an audit for the fiscal year ended September 2010 had highlighted the accounting error in the integration of IT systems at its U.K. mainstream business that had accrued over a period of four to five years. The error let the company's total write-off for 2009 to rise from £29 million to £117 million.

Chief Executive Peter Long said the issue had been identified when it reported its third-quarter results in August, but continued to investigate the matter and "only last night were we able to determine the scale of the problem."

As a consequence, the company restated operating profit for the fiscal 2009 down to £401 million from £443 million. Earnings per share were lowered to 21 pence from 23.8 pence.

TUI also reduced opening reserves at Oct.1, 2008, to £2.21 billion from the £2.29 billion previously reported.

A spokeswoman said the issues were identified at the company's retail and tour operators businesses in the U.K. and stemmed from a discrepancy between two IT systems. The retail system documents prices at which holidays are sold and includes discounts and any free items that agents may offer, while the tour-operator system doesn't take discounts into account.

The discrepancy wasn't significant in previous years but became "more obvious" and was spotted during the economic downturn when more concessions were offered to help boost demand, the spokeswoman said.

The two systems were inherited through the merger in 2007 of First Choice Holidays PLC of the U.K. with the tourism operations of Germany's TUI /zigman2/quotes/206714402/delayed DE:TUI1 +2.58% AG that created TUI Travel, but responsibility still lies with its U.K. unit, which made the choice to continue using them.

TUI Travel said it is satisfied that weaknesses in the system had been rectified, but investors were rattled by the disclosure. In trading in London, TUI Travel's shares dropped 25.40 pence, or 11%, to 205 pence.

Mr. Long said Mr. Bowtell took the step to resign because he felt events "happened on my watch." Mr. Bowtell wasn't available to comment.

Mr. Bowtell, 42, joined the board of TUI Travel in June 2007. He was previously finance director at First Choice.

Before that, his finance career included a period as finance director at British Gas, a unit of Centrica PLC.

TUI Travel said it remained confident that results for fiscal 2010 would be in line with previous guidance and that net debt will be lower than previous guidance.

/zigman2/quotes/206714402/delayed
DE : Germany: Frankfurt
3.02
+0.08 +2.58%
Volume: 42,044
Sept. 25, 2020 8:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€282,968
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