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Tui faces challenging market

The travel group reported falling profits, but believes its diversified business makes it more resilient than its peers
December 13, 2018

A rally in Tui's (TUI) shares on results day suggests the market was pleased – or at least relieved – by these full-year numbers. It’s been a turbulent year for travel stocks as the recent British heatwave put many would-be tourists off travelling abroad. And Tui hasn't found itself immune to a consequent profit hit, either. Adjusted pre-tax profits fell 10 per cent to €972m (£872m) despite a 6.3 per cent increase in sales to €19.5bn. Bosses admitted the market was "challenging", but said the group's "double diversification" – both across destinations and markets – had made it more resilient.

IC TIP: Hold at 1205p

Top-line growth was mainly driven by holiday experiences, with demand for Tui’s portfolio of hotels and clubs, cruises and destination experiences helping push the division’s operating profits up 147 per cent to €794m at actual exchange rates. This compensated for a 74 per cent decline in markets and airlines profits, which suffered following hot weather at home and general sector disruption. Overall, group operating profits increased 45 per cent to €1.15bn.

Analysts at UBS expect EPS of 134¢ during the year to September 2019, increasing to 152¢ in FY2020.

TUI (TUI)    
ORD PRICE:1,205pMARKET VALUE:£7.08bn
TOUCH:1,204-1,205p12-MONTH HIGH:1,816pLOW: 1,075p
DIVIDEND YIELD:5.4%PE RATIO:11
NET ASSET VALUE:629¢NET CASH:€124m
Year to 30 SepTurnover (€bn)Pre-tax profit (€bn)Earnings per share (¢)Dividend per share (¢)
2014**18.50.502633.0
201520.00.546456.0
201617.20.626163.0
201718.51.0813665.0
201819.50.9711872.0
% change+5-10-13+11
Ex-div:11 Feb   
Payment:15 Feb   
*Includes intangible assets of €3.53bn, or 600¢ a share **Pro-forma figures reflecting the merger of Tui and Tui AG in December 2014                         £1=€1.11