The unusually hot weather across Europe may garner mixed reactions from those accustomed to a lacklustre summer in the UK. For Tui (TUI), there’s no doubt this has been bad for summer holidays as would-be travellers don’t need to go anywhere to find sunshine. Management said the high level of early bookings helps to limit the impact of prolonged stretch of good weather, but that outperformance is still unlikely. This was one of numerous factors that contributed to the 13 per cent decline in cash profits during the third quarter to €193m.
It’s not just good weather that hurt Tui during the third quarter, but a perfect storm of unfavourable factors that sent shares tumbling on the day of the figure's release. Performance in northern Europe was particularly bad with an 80 per cent drop in adjusted cash profits during the third quarter to €16m, and down 83.3 per cent to a €57m loss for the region during the first three quarters. Weak sterling has acted as a drag on margins, as has added capacity in European airlines routes, particularly to Spain. Airline disruption from air traffic controller strikes in France cost the group €13m. The timing of Easter also acted as a headwind.
It wasn’t all bad news. Holiday experiences made up the bulk of group cash profits, up 14 per cent during the period to €181m, while profits from cruises were up by more than a third to €91m. Management is aiming to deliver around 3 per cent sales growth to an estimated €18.5bn by the full year, with growth in adjusted cash profits of at least 10 per cent to €1.1bn.
