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TUI Group reiterates full year estimate as it undergoes a restructuring

Last updated: 14:00 29 Mar 2017 BST, First published: 07:35 29 Mar 2017 BST

Tui
TUI says 48% of its summer programme has been sold

TUI Group (LON:TUI) has repeated its full year estimates as the travel company continues its restructuring to contend with tough competition and macro-economic challenges.

In a trading statement ahead of reporting its interims in May, the group said it expects a 10% increase in underlying earnings (EBITA) for fiscal year 2016/17.

TUI said 48% of its summer programme had been sold, driven by strong demand for holidays in Greece, Spain’s Canary Islands and long haul destinations. Travellers continued to avoid Turkey as a holiday destination amid worries about terrorist attacks.

Excluding Turkey, summer bookings rose 7% with an 8% increase in Germany and a 9% gain in the Nordics.

The winter programme was 97% sold, as a robust performance in its cruises, Riu hotels business and Robinson package holiday arm offset weak demand in Turkey and North Africa.

Due to the later timing of Easter this year, TUI expects about a €30mln to €35mln phasing impact in its source markets and hotels in the second quarter.

Chief executive Friedrich Joussen said its overhaul of the business to focus on its own cruise and hotel brands is on track.

TUI has been selling off non-core assets as part of its restructuring. Last April TUI said it was selling Hotelbeds Group to private equity firm Cinven and the Canada Pension Plan Investment Board for €1.19bn.

In February the company announced it would dispose its specialist holiday business Travelopia to KKR for €381mln.

 “We are progressing our transformation as the world’s leading integrated tourism business focussed on own hotel and cruise brands, financed by our strong cash flows and proceeds from the disposals of Hotelbeds Group and Travelopia, creating a more competitive and less seasonal business for the long term,” said Joussen.

“Whilst the impact of macroeconomic and geopolitical challenges is evident in certain source markets and destinations, our balanced portfolio of markets and destinations, our focus on growth in own hotel and cruise brands and our strong balance sheet put us in a robust position.”

Shore Capital reiterated a ‘buy’ rating and target price of 1,135p, saying the trading statement was in line and the group has reaffirmed its full year expectations.

The broker has forecast EBITA of €1.168bn for the year and said it continues to view the stock as attractive given the increasing proportion of profits from higher value cruise and hotels.

However, shares fell 1.39% to 1,119.28 in afternoon trade as investors seemed to focus more on the challenges the travel and leisure sector faces, particularly after Prime Minister Theresa May triggered Article 50 and kicked off the Brexit process. 

Ryanair added to these worries this morning after warning there was a possibility that it would not be able to operate flights beween the UK and Europe for some time after Britain leaves the European Union in March 2019 unless the government negotiates a bilateral agreement. 

"Ryanair, like all airlines, plans its flights 12 months in advance, so there are just 12 months to go until we finalise our summer 2019 schedule, which could see deep cuts to our flights both to, from and within the UK from March 2019 onwards," it said.

 

-- Adds broker comment and Brexit remarks, updates share price -- 

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