Tui Travel chief executive Peter Long put a brave face on half-year results to end-March, and there were some encouraging signs from the tour operator, notably higher load factors and better margins on UK sales. But the broader picture remains tough and, while the business is usually loss making in the first half, underlying operating losses widened from £307m to £317m. More importantly, the outlook for the summer season, when TUI makes all its profit, is beset with uncertainties: higher costs, consumers tightening their belts and a number of holiday destinations off limits all justify management's predictably cautious stance.
Trading over the winter was, not surprisingly, affected by lower than expected demand for North African destinations and Thailand, which suffered from flooding, although there was no repeat of the prior year's hefty repatriation costs of holidaymakers due to political unrest in Tunisia and Egypt. However, the unstable backdrop in the region is still having an impact on Tui's French business and half-year losses there ballooned from £39m to £61m. Steps are being taken to consolidate the various tour operators there into a single business unit, although with Tunisia, Morocco and Egypt still relatively unattractive as holiday destinations, France remains a tough market to operate in.
On a more positive note, underlying losses from Germany - the group's largest market - narrowed from £67m to £61m, helped by an earlier Easter and higher load factors. Losses in Belgium dropped, too, from £13m to £9m, boosted by volumes up by 10 per cent and better airline utilisation. And a change in flight programmes to include more tourist routes helped; Jet4You, the group's Moroccan low cost airline, report narrower losses of £8m. In April, this part of the business was consolidated into the Belgian operation.
Prospects for the summer season offer some encouragement, too, with 55 per cent of the UK holiday programme already sold, and customer numbers for Sensatori and Holiday Village products up by 11 per cent. Online bookings are stronger, too, rising 5 percentage points to 41 per cent.
Analysts at Investec Securities are forecasting full-year normalised pre-tax profits of £372m and EPS of 23.7p (from £359m and 23p in 2011).
| TUI TRAVEL (TT.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 189p | MARKET VALUE: | £2.1bn | |
| TOUCH: | 188-189p | 12-MONTH HIGH: | 252p | LOW: 132p |
| DIVIDEND YIELD: | 6% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 124p* | NET DEBT: | 83% | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 5.21 | -366 | -24.9 | 3.30 |
| 2012 | 5.45 | -457 | -26.0 | 3.40 |
| % change | +5 | - | - | +3 |
Ex-div: 5 Sep Payment: 3 Oct *Includes intangible assets of £4.57bn, or 409p a share | ||||
