Paul Bowtell, CFO at travel operator Tui Travel, has handed in his resignation after the company was forced to restate its 2009 financial results due to an IT error.
The glitches were found following a systems merger in 2007, and Bowtell will leave the company at the end of the year.
According to the Financial Times, the accounting error resulted from Tui using two separate IT systems after the merger of First Choice and Thomson, to form Tui Travel, in 2007.
Tui's retail division used one system to take customer bookings, and tour operators working for Tui used another. Although both systems registered the initial customer bookings, any changes made to the bookings later, such as discounts, were only registered by Tui’s retail division’s systems.
In December 2009, the company said it had made annual savings of £93 million through the merger, helped by IT integration and standardisation projects such as First Choice's move onto Thomson’s in-house reservation platform, TRACS.
However, Peter Long, chief executive of Tui Travel, said today: “It is now clear that at the time of merger there were weaknesses in the legacy systems we chose to use in the Tui UK business. Despite the fact that this situation had built up over a number of years, Paul is behaving honourably and I am disappointed that he will be leaving the group.
“I have specifically asked Paul to remain with the business to see through the full year audit and production of our preliminary results.”
Tui Travel said that an ongoing audit of its finances for the full year ended September 2010 had revealed £88 million in irrecoverable balances that now need to be written off.
This was in addition to the £29 million in legacy receivable balances that the company had had to write off in August. These receivable balances, which had accumulated over an extended period of time, had been reported by Tui Travel on 10 August 2010, as part of its unaudited results for the third quarter and nine months ended 30 June 2010. The company said that the balances were written off following the completion of the integration of IT systems in its UK mainstream business.
“These [the total £117 million in irrecoverable balances] have arisen as a result of failures to reconcile balances adequately in legacy systems in the retail and tour operator businesses in TUI UK,” the company said in a statement.
“As a result, TUI Travel now believes it is appropriate to restate its results for the year ended 30 September 2009.”
The travel company has been forced to make a number of adjustments to its financial results for the year ended 30 September 2009, which it said are “non-cash in nature and have no impact on the company’s cash and net debt position”.
Changes include a reduction of £42 million in underlying operating profit for TUI UK, bringing the figure down from £443 million to £401 million, and a reduction in the earnings per share from 23.8p to 21p. The company also had to reduce its opening reserve funds as at 1 October 2008 by £70 million, from £2,286 million to £2,216 million.
TUI Travel said that it had carried a “full and detailed” review of its systems and processes as part of the year-end closing process, and claims to be “satisfied” that the problems in its systems have been rectified.
The company also said that TUI UK now has a new finance director, Colin McKinlay, who joined on 1 October 2010. He was previously finance director at home emergency business Homeserve.
In its interim results statement TUI said it had spotted back office functions between the two operations that can be consolidated at head and regional offices, and that it expected to generate a profit “of at least £6 million” as a result.
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