TUI finance chief faces long holiday after accounting cock-up

Tui Travel's CFO falls on his sword, after problems with its accounting systems lead to a £117m write-off.

by James Taylor
Last Updated: 19 Aug 2013
Poor old Paul Bowtell. Tui Travel's CFO will leave the company at the end of the year after an almighty cock-up on his watch: a problem with integrating two accounting systems following Tui's 2007 merger with First Choice has resulted in the company having to write off £117m in 'irrecoverable balances' - forcing it to restate its 2009 profits. CEO Peter Long says his finance chief 'behaving honourably' - but after a mistake of that magnitude, especially one that has remained undetected for several years, he didn't really have much choice...

Tui said these whopping write-offs (it's just unearthed another £88m, on top of the £29m it found last August) was caused by 'failures to reconcile balances in the IT systems of the retail and tour operators businesses in the UK,' it said. In other words, the Tui and First Choice systems didn't talk to each other properly, and the UK business entirely failed to resolve the problem when it moved to a single platform – meaning that it ended up with £117m of bad debts that it’s now no longer able to claw back. As a result, Tui's now had to revise its profits for the year to September 2009 to £401m, down £42m.

On the plus side, it does seem to have got the damage under control now: the impact this financial year will be 'just' £5m, and it won't adversely affect the cash or debt position. So there shouldn't be too many long-term consequences - indeed, it said today that it was still trading strongly at the moment. Nonetheless, that's a lot of profit to lose, and a seriously embarrassing gaffe - so it's no wonder that Tui's shares have taken a hammering today, falling nearly 7%.

Combining systems is of course one of the most difficult things about any big merger - and it's possible that since he’s previously worked at First Choice, British Gas and WH Smith, Bowtell hadn't had much experience of it. But in this day and age, with so many providers who specialise in this kind of thing, there's not really any excuse for a cock-up of this magnitude. There are so many other reasons why mergers can go wrong - notably on the people side - that this should be the least of your worries.

It's hard not to feel sorry for Bowtell, because he presumably wasn't directly responsible for the systems involved. But he's doing the right thing by carrying the can. Maybe in lieu of a pay-off, TUI can send him on a nice long holiday?

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