Interactive Investor

ii view: TUI beats forecasts as investors mull listing move

Hit hard by the pandemic, shares for this holiday company remain down by more than 70% over the last five years. We assess prospects.

13th February 2024 13:22

Keith Bowman from interactive investor

First-quarter results to 31 December

  • Revenue up 15% to €4.3 billion
  • Adjusted profit of €6 million, up from a loss of €153 million
  • Reported loss of €84 million, up from a loss of €232 million
  • Net debt down 24% to €4 billion

Guidance:

  • Continues to expect adjusted profit for the year ahead to increase by at least 25%

ii round-up:

Holiday company TUI AG (LSE:TUI) today detailed sales and profits ahead of City forecasts with management reiterating its expectation for full-year 2024 adjusted profit to grow by at least a quarter.

A 6% rise in customer numbers pushed first-quarter sales up 15% year-over-year to €4.3 billion, helping it to report a surprise adjusted profit of €6 million compared to analyst forecasts for a loss of €64 million and up from a loss of €153 million this time last year. 

Shares for the FTSE 250 company rose 2% in UK trading having come into this latest news down by 36% over the last year. That compares to a near 5% fall for the 250 index itself and a near one-third gain for cruise operator Carnival (LSE:CCL) over that time.  

TUI’s operations include more than 400 owned hotels, over 125 aircraft, 16 cruise ships and more than 1,000 travel agencies.

The German-headquartered company expects both winter and summer capacity to be close to 2019 levels with holiday prices 4% higher during the quarter. 

To date, 87% of its winter season has been sold, in line with last year, with summer 2024 bookings of 32% marginally shy of a 33% average for this time of year. 

Improved cash flows and a previous €1.8 billion fund raising helped net debt fall by almost a quarter year-over-year to €4 billion. 

TUI investors will today vote on a potential move in its stock market listing from London to Frankfurt given high European share ownership.

First-half results are scheduled for 15 May.  

ii view:

In 2007, German tour operating business TUI AG merged with First Choice Holidays of the UK. Today, TUI provides holidays to around 180 worldwide destinations with brands including Robinson, RUI and Crystal Ski holidays. Its airline fleet competes with the likes of easyJet (LSE:EZJ), Wizz Air Holdings (LSE:WIZZ) and even International Consolidated Airlines Group SA (LSE:IAG). The group’s sustainability policy is committed to reducing emissions across its airline, cruise and hotel operations by 2030.

For investors, heightened geopolitical tensions including those now present in the Middle East cannot be ignored. Elevated mortgage and rental payments continue to pressure consumer spending. The group’s dividend payment remains halted, while the many factors which can hinder performance such as air traffic control strikes and the weather should not be forgotten. 

On the upside, winter and summer holiday provision or capacity are almost back to their 2019 levels given the recovery in consumer demand following the pandemic. Costs such as fuel have eased. A focus on reducing debt persists, while TUI’s integrated business model looks to give it more control than, say, the relatively new easyJet Holidays business. 

For now, and while some caution remains sensible, trading momentum and expected 2024 adjusted profit growth is likely to keep existing shareholders patient at least. 

Positives: 

  • Diversified asset portfolio
  • A lower cost base following the pandemic

Negatives:

  • Tough economic and geopolitical backdrop
  • Dividend payment suspended

The average rating of stock market analysts:

Strong hold

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