Package holiday operator and airline TUI yesterday revealed it had achieved record third-quarter revenues, and reported rises in prices, passenger numbers and earnings.
Its solid trading update followed mixed news from others in the travel sector in recent weeks, with Ryanair having revealed fares in its current quarter to end-September were set to be “materially lower” than in the same period of the prior year and easyJet striking an upbeat tone.
TUI yesterday reported its highest-ever revenues for any April to June period, the third quarter of its financial year. Revenues for the quarter were 5.8 billion euros, up by 9.5% on the same period of the prior year.
The travel group highlighted the fact that, during the quarter, 5.8 million customers had travelled with it, up by 4% on the same period of the prior financial year.
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TUI reported “a significant improvement” in third-quarter underlying earnings before interest and tax (EBIT) across all of its businesses.
Overall, EBIT in the April to June quarter was, at 231.9 million euros, up by 62.4 million euros or 36.8% on the same period of the prior year.
TUI noted that record underlying EBIT for the first nine months of its financial year, of 49.2 million euros, was an improvement of 275 million euros on its adjusted loss before interest and tax of 225.9 million euros in the same period of the prior financial year.
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It added that, based on this, it was “pleased to reconfirm” its guidance that it would increase underlying EBIT by at least 25% in the current financial year to September.
TUI declared bookings taken for summer 2024 had strengthened since its last update in May, “supported by accelerated momentum in recent weeks at robust prices”.
It added that, following the sale of 88% of the season, bookings are up 6%, with the average selling price also ahead, by 3%.
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And TUI revealed “early signs for winter 2024/25 bookings are promising across our source markets”.
TUI reported that it had, since its last update in May, added 4.3 million bookings, achieving a total of 13.3 million for the season to date.
It revealed that “the UK is 90% sold for the season with bookings up 5%”.
Julie Palmer, partner at professional services firm Begbies Traynor, said: “Europe’s largest tour operator has delivered another record-breaking quarter. Revenues leapt nearly 10% to 5.8 billion euros and there’s been some significant improvements to EBIT, which saw double-digit [percentage] growth to 231.9 million euros.
“TUI’s Q3 results prove that the travel sector is more resilient than some corners of the market thought it could be this summer as price increases across the sector resulted in some weakness in demand. That’s not the case at TUI, where customer demand remained resilient throughout the period. This meant that even the airline division was able to offset increased input costs thanks to improved pricing and higher volumes. Guidance is also unchanged for the full year, which is good to see.”
She added: “The travel sector's recovery trajectory is proving to be more of a steady climb than a rapid ascent, with consumer confidence and spending still regaining their footing in a world that has been reshaped by global events.
“Looking ahead, TUI will need to ensure it adapts to changing consumer preferences, taps into emerging travel trends and capitalises on any upturn in market conditions if it is to truly take off in an increasingly competitive market.”
Derren Nathan, head of equity research at stockbroker Hargreaves Lansdown, said: “Nearly six million holidaymakers have propelled TUI to a record third quarter. The top line came in a little under market expectations, although operating profits surprised on the upside by around 15 million euros.
“The profitable growth was helped by solid gross margins and impressive cost control. The outlook for the key summer period now also looks positive, with bookings up 6% and prices increasing 3% on average. Net debt remains a little sticky but the recent refinancing pushes repayments further down the line and leaves scope to reduce interest costs which continue to be a significant drag on the bottom line.”
TUI shares are now listed solely in Frankfurt, with the company having delisted from the London Stock Exchange in June.
Mr Nathan said: “It’s hard to tell whether the recent slide in the share price relates to index trackers exiting following the closure of its London listing, or stems more broadly from recent market volatility and some poorer results elsewhere in the travel industry.
“But the current valuation doesn’t fully reflect the current levels of strong trading, which now seem to have solidified as a trend rather than a recovery from the pandemic. Of course, concerns abound about the cyclical nature of the industry but TUI has a lot more flex in its capacity than it used to and for now there’s little sign that it’s struggling to fill plane seats or sunbeds.”
TUI shares were trading around 0.3% higher at 5.56 euros yesterday afternoon.
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