Tui Travel shares hit by turbulence

Thomson owner Tui Travel is on course to deliver full-year profit growth of “at least” 10 per cent, but the tour operator’s shares fell heavily amid signs that the recent heatwave has dented its UK sales growth.
Tui said consumer confidence was looking much more positive  Picture: AFP/Getty ImagesTui said consumer confidence was looking much more positive  Picture: AFP/Getty Images
Tui said consumer confidence was looking much more positive Picture: AFP/Getty Images

The group said that 84 per cent of its summer 2013 holidays were already sold and it has seen an “encouraging” start to trading for the winter season.

UK sales for the summer season were up 11 per cent during the three months to 30 June compared with the same period last year, slowing from the 13 per cent year-on-year increase it reported in May.

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Despite the slight slowdown in sales growth, Tui chief executive Peter Long said consumer confidence was “clearly looking much more positive”.

He added: “Only marginally, it’s been slightly weaker than it was before this very nice weather. But, fundamentally, we are well sold.”

Shares in Tui, which hit a record high of 405.1p on Tuesday, closed down 20.7p, or 5.2 per cent, at 380.8p today.

Traders attributed the fall to profit taking, with Panmure analyst Simon French blaming “an earnings upgrade that hasn’t materialised”.

Long said: “Given our current position we remain very confident of achieving full-year underlying operating profit growth of at least 10 per cent on a constant currency basis and are well positioned to continue to deliver our five-year growth roadmap.”

Tui Travel was formed in 2007 through the combination of First Choice Holidays with the Thomson division of German giant Tui. The two groups held talks over a possible merger this year, but were unable to reach a deal.

Operating profits for the third quarter rose 3 per cent to £76 million, on revenues 5 per cent higher at almost £3.9 billion.

However, total bookings were down 2 per cent, hit by weakness in Germany and France, which fell 5 and 22 per cent respectively. The group said it will put “far less emphasis on north African destinations” in the wake of political turmoil in the region, which has affected demand among French travellers.

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Britain and Germany both account for about a third of Tui’s full-year revenues, while France and the Nordic region each account for roughly 10 per cent.

Rival travel group Thomas Cook last week reported its first third-quarter profit since staving off bankruptcy in 2011 and said it had sold about 85 per cent of its planned capacity for the summer 2013 season.

Net debts fell to £183m, from £556m a year ago, helped by an increase in customer deposits and a VAT refund in Belgium.

Analysts expect the group, which owns six European airlines, including Thomson Airways, to post a full-year operating profit of about £560m for the year to 30 September, up from £490m last year.

Tui serves more than 30 million customers in 31 markets around the world and employs about 54,000 people.

Elsewhere in the travel sector, Irish airline Aer Lingus yesterday announced a 2.9 per cent rise in passenger numbers to 1.1 million for July following a strong rise in long-haul travellers, which were up 17.2 per cent on the same month last year.

Rival International Airlines Group, owner of British Airways and Iberia, said earlier this week that its July passenger numbers edged up 0.5 per cent to 7.2 million, while fellow Irish carrier Ryanair grew 1 per cent to more than 8.8 million.