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TUI Group Confident On Earnings As It Sidesteps Tourism Sector's Woes

Published on Dec 14 2018 9:30 AM in General Industry tagged: Trending Posts / TUI Group

TUI Group Confident On Earnings As It Sidesteps Tourism Sector's Woes

European travel and tourism group TUI has posted an 11% rise in annual earnings, and said next year would generate similar growth, as its higher-margin hotel and cruise businesses help it eclipse smaller rival Thomas Cook.

Thomas Cook last month posted an almost 20% fall in annual earnings and suspended its dividend, blaming a heatwave in summer in northern Europe which it said had hit demand in the most profitable part of its season.

TUI was much less affected thanks to the set-up of its hotel and cruise business and said it was confident of delivering future growth despite what it described as a "challenging" market environment.

"Uncertainties are increasing, look at Brexit developments, look at the weather. The nice thing, our business model and transformation, seems to be not affected," CEO Fritz Joussen told reporters on a call on Thursday December 13.

The company owns many more of its hotels than Thomas Cook and also owns a large cruise ship business, boosting its margins compared to its rival, which buyshotel space in advance, and meaning TUI profits are less exposed to unpredictable trading.

Last year, it derived 70% of its earnings from the cruise, hotel and related businesses.

Like Thomas Cook, however, TUI's markets and airlines division was hurt by airline disruption, hot summer weather and a weaker pound, dragging down earnings by about 15% in that unit.

Confident On Future

But on a group basis, TUI's earnings were barely dented by those difficulties.

For the 12 months that ended on September 30, TUI reported core earnings (EBITA) of €1.147 billion at constant currency, beating a consensus forecast of €1.145 billion, and up 10.9% compared to its forecast for growth of at least 10%.

For the current 2018-19 year, TUI said it would deliver underlying earnings of at least 10% at constant currency, despite it flagging that winter trading was just below last year's level, with bookings trailing by 1%.

Looking at uncertainties next year, when Britain, one of its biggest markets, will leave the European Union in March, possibly without a deal, Joussen said that TUI's business model was robust and he expected the UK market to "stay intact".

TUI proposed lifting its annual dividend to €0.72 per share from last year's payout of €0.65.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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