Tui full-year earnings rise 11%, expects more of the same for 2019

In the year to 30 September, underlying earnings before interest, tax and amortisation rose to €1.15bn from €1.10bn the year before, on turnover of €19.52bn, up 6.3%.

Tui said the performance was driven by a strong showing from the holiday experiences division, with continued high demand for its portfolio of hotels and clubs, cruises and destination experiences.

Looking ahead, it continues to expect to deliver superior annual earnings growth, with improved seasonality, strong cash conversion and strong return on invested capital performance.

The group reiterated its guidance of at least 10% compound annual growth rate in underlying EBITA for the three years to FY20. In the nearer term, it expects to deliver 10% underlying EBITA growth in 2019 as growth from investments, digitalisation and efficiency, as well as its double-diversified business model help to mitigate market challenges.

Chief executive officer Friedrich Joussen said: "2018 was another growth year for TUI. We delivered on our promises in a challenging market environment. Our operating result again delivered double-digit growth for the fourth time in a row - it grew by nearly eleven per cent at constant currency in the completed financial year.

"The robust results delivered in 2018 are particularly gratifying given that we were operating under exceptional circumstances last year. In the UK, the exchange rate and purchasing power of sterling were adversely affected by Brexit. Air traffic in Europe faced particular challenges. And in our European home markets, we experienced a record summer - with a summer heatwave lasting right into the autumn. This brought its weight to bear on results in our sector in the course of the financial year."

Tui said its main concern as far as Brexit goes is whether its airlines will continue to have access to EU airspace.

"We will continue to address the importance of there being a special agreement for aviation to protect consumer choice with the relevant UK and EU ministers and officials, and are in regular exchange with relevant regulatory authorities," it said, adding that it is currently developing scenarios and mitigating strategies for various outcomes, including a 'hard' Brexit.

Russ Mould, investment director at AJ Bell, said: "The diverging fortunes of travel groups Tui and Thomas Cook continues to widen, as evident by the former’s full year results which show a fourth consecutive year of underlying earnings growth.

"Anyone expecting Tui to follow in the footsteps of its sector peer Thomas Cook with a profit warning will be severely disappointed. Tui is soldiering ahead with expansion of its own hotel and cruise offering and its experience holidays are seeing considerable growth, offering the likes of Italian cookery classes in Tuscany or wine tasting at a Portuguese vineyard.

"There is clear evidence that consumers increasingly want experiences over material goods. Tui has spotted this trend and repositioned its proposition accordingly.

"Rather than simply fly a customer to a different country and plonk them in a hotel and not bother about what they do in the day or night time, Tui is now curating the whole experience. It’s a clever move and one that Thomas Cook may look at in envy."