As Brexit negotiations progress, travel companies anxiously await a decision on future travel arrangements between the UK and the rest of Europe. Tui (TUI) bosses believe Brexit is the largest risk currently facing the company, but are hopeful this will cease to be the case as either political negotiations secure continued access to EU airspace, or the company implements a strategy to help mitigate Brexit risks. Tui's plan of action includes lobbying UK and EU ministers to stress the importance of an open aviation market to consumer choice, and establishing a Brexit steering committee to assess any impacts on its business model.
Brexit fears aside, the company has made progress to own each component of a holiday rather than simply act as a tour operator. More than half of Tui’s earnings now come from its own hotel and cruise brands, supporting a third consecutive year of earnings growth and a 12 per cent increase in underlying cash profits to €1.5bn (£1.3bn).
Ten new hotels across Tui’s core brands opened during the year, bringing the total to 28 since the 2014 merger with Tui AG. Average occupancy rose to 79 per cent across hotels and resorts, with average revenue per bed up by 6 per cent. Popular destinations included Western Mediterranean and Caribbean, with improvements in Turkey and North Africa, following subdued demand as a result of global terror events. Despite an increase in Tui’s cruiseship capacity, average daily rates increased across all three fleets.
Other challenges faced by the group included the insolvency of Air Berlin, which cost €15m after Air Berlin defaulted on payments for aircraft and crew it had leased from Tui. Furthermore, an industrial dispute prompted a number of Tui Fly employees to call in sick, which led to flight cancellations and cost the group €24m.
Analysts at Panmure Gordon expect to make modest forecast upgrades. For now, the brokerage has pencilled in pre-tax profits of €1.08bn for the year to September 2018, giving EPS of 120¢ (up from 114¢ in FY2017).
| TUI (TUI) | ||||
| ORD PRICE: | 1,421p | MARKET VALUE: | £ 8.35bn | |
| TOUCH: | 1,421-1,422p | 12-MONTH HIGH: | 1,442p | LOW: 1,049p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 500¢* | NET CASH: | €583m | |
| Year to 30 Sep | Turnover (€bn) | Pre-tax profit (€bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2014** | 18.5 | 0.50 | 26 | 33.0 |
| 2015 | 20.0 | 0.54 | 64 | 56.0 |
| 2016 | 17.2 | 0.62 | 61 | 63.0 |
| 2017 | 18.5 | 1.08 | 136 | 65.0 |
| % change | +8 | +75 | +123 | +3 |
| Ex-div: | 12 Feb | |||
| Payment: | 16 Feb | |||
*Includes intangible assets of €3.44bn, or 585¢ per share £1 = €1.14 **Pro-forma figures reflecting the merger of Tui and Tui AG in December 2014 | ||||
