Tui Group sails ahead as cruises offset tour trouble

Revenues in six months to March 31 of €6.79bn rose 2.7% on last year and beat analyst forecasts of €6.61bn, helped by a strong uplift in hotels and cruises that offset declines in the core tour operator business, where the UK and Northern Europe were broadly flat.

Continued challenging trading conditions in Germany, compounded by lower demand for North Africa and Turkey meant its central region deteriorated versus the prior year but management said they expected corrective actions to improve profitability, including investment in marketing and online, would deliver benefit in the second half.

Improved sales plus a further €15m in post-merger synergies helped to shrink losses before interest, tax, debt and amortisation (EBITDA) by 16% to €236.9m.

Tui also reiterated its expectation of generating at least 10% underlying EBITA growth for the full year.

Underlying loss per share came in at €0.5, a 1% improvement from the €0.55 a year ago.

With €0.93bn of cash in the bank, net debt stood at €1.58bn on 31 March, excluding cash in the soon-to-be-disposed Hotelbeds.

As announced on 28 April, Hotelbeds is being sold for €1.2bn and the deal is expected to be completed by the end of September.

Specialist Group is also now being sold as management sees "limited linkage" to the new business model and limited ability to scale within the group, though some parts of the business will be kept before marketing of the sale begins in the autumn.

Chief executive Friedrich Joussen said the sale enables the company to "focus fully on our growth strategy and to strengthen our balance sheet".

"We are focused on delivering our TUI Group strategy in becoming a content centric, vertically integrated tourism business."

He added that Summer 2016 trading remains in line with expectations, with Source Market booked revenues up 2%, a strong performance in Western Mediterranean and long haul hotels, and continued growth in cruises.

"We therefore continue to expect to deliver at least 10% growth in underlying EBITA in 2015/16, and reiterate our previous guidance of at least 10% underlying EBITA CAGR over the three years to 2017/18."