Interactive Investor

ii view: TUI results overshadowed by Omicron

Is the travel recovery at this major holiday company now under threat? We assess prospects.

8th December 2021 13:30

Keith Bowman from interactive investor

Is the travel recovery at this major holiday company now under threat? We assess prospects.

Fourth-quarter results to 30 September

  • Revenue up 173% to €3.4 billion
  • Adjusted loss of €97 million from a Q4 2020 loss of €1.03 billion
  • Available liquidity as of 6 December of €3.5 billion
  • Year-end net debt of €4.95 billion

ii round-up:

Holiday company TUI AG (LSE:TUI) today warned that it might have to trim its winter capacity as news of the Omicron Covid variant dented traveller booking confidence. 

Trading remains in line with its winter capacity assumption of 60-80%, although will likely be modified towards the lower end of the range. The news came as the travel firm reported an adjusted loss for the fourth quarter of €97 million, below analyst forecasts for a loss closer to €22 million. 

TUI shares fell by more than 5% in UK trading, with the threat of further UK government restrictions overhanging travel stocks. Shares for low-cost airline easyJet (LSE:EZJ) and cruise ship company Carnival (LSE:CCL) are also down today. 

Summer 2022 bookings for TUI are now 3% below their 2019 level compared with a previous 54% above. Management offered no full-year guidance given the ongoing trading uncertainty. 

TUI, whose biggest markets are both the UK and Germany, reported a full-year loss before tax of €2.46 billion, better than its 2020 loss of €3.15 billion.

Cash or liquidity held as of early December stood at €3.5 billion, boosted by its previous €1.1 billion equity fund raise. Net debt reduced to just under €5 billion compared to €6.42 billion a year ago, aided by the sale of assets and a return to positive cashflow. 

The dividend payment remains suspended. 

ii view:

TUI is a German headquartered integrated holiday company. Its operations include 1,600 travel agencies and a collection of online booking portals. It also operates five airlines with around 150 aircraft, over 400 hotels and 15 cruise liners. 

For investors, a rebound in revenues given major vaccination programmes and the prior easing of travel restrictions is not to be ignored. An adjusted loss of €97 million was close to breakeven, with an additional 535,000 summer bookings received since its last trading update in early October. The German government has previously moved to assist the company, and the exact level of risk from the new Omicron variant is still under review. 

That said, travel related uncertainty is now back on the rise. Both the UK and Germany, TUI's major markets, have added to travel restrictions since the discovery of Omicron, with the immediate impact to customer confidence clearly evident. In all, and with its tentative recovery now back under threat, investors may wish to take no action for now. 

Positives: 

  • Diversified asset portfolio
  • Pursuing a reduced cost base

Negatives:

  • Renewed pandemic uncertainty
  • Dividend remains suspended

The average rating of stock market analysts:

Sell

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