13th May 2014 08:06
LONDON (Alliance News) - Holiday operator TUI Travel PLC Tuesday said it narrowed its pretax loss in the first half of its financial year, despite the later timing of the key Easter trading period, boosted by strong trading in the UK and Germany and demand for its all-inclusive packages, as well as cost reductions as it reined in losses from its French business.
TUI Travel, the owner of Thomson and First Choice, reported a statutory pretax loss of GBP386 million for the six months ended March 31, compared with a GBP410 million loss the prior year.
Revenues for the first half dipped to GBP5.19 billion, down 3.9% on last year's GBP5.40 billion, which it said was due to the later timing of Easter and capacity reductions in France and Egypt.
The group reported an underlying operating loss of GBP277 million excluding Easter, narrowed from last year's GBP289 million, excluding the GBP23 impact of later Easter trading, a key trading period for the travel sector, which this year falls in the second half TUI's financial year.
Travel companies traditionally make a loss over the winter period and the first half of the year, compared with a profit in the second half of the year and the year as a whole, as they make the most of their money over the summer period, when travel is much more active.
TUI Travel made an underlying operating profit of GBP589 million in its last financial year to September 30, 2013, up from GBP490 million a year earlier.
The underlying results exclude items like acquisition-related expenses, goodwill impairments and taxation of its joint ventures.
The company said that modest winter trading has flowed through into summer. It said that despite strong comparatives, it is still confident of growing its underlying operating profit by 7% to 10% in the full financial year.
Analyst consensus is for the travel operator to make an underlying operating profit of GBP635 million for the current financial year, which would represent an increase of 7.8%. A 10% increase would result in profit of about GBP648 million.
The travel firm raised its interim dividend by 8.0% to 4.05 pence, up from 3.75 pence.
"We are particularly pleased with the result in Germany, where we are making significant headway in improving operating margin and are on a similar journey to that of the UK. In France the turnaround plan to break even is making good progress," said Chief Executive Officer Peter Long in a statement.
TUI Travel said that its winter programme closed out as expected, with strong pricing across the mainstream sector, albeit with lower profits from the Nordic region after a challenging trading environment, where bookings are down 7% with flat average selling prices. The group also experienced a tough winter trading environment due to unrest and political issues in Thailand, Egypt and Eastern Europe, as well as rescheduling capacity and inventory.
"We had a tough first half of the year, as a consequence of curtailment in Egypt, and problems and demonstrations which hit our Thailand programme, which meant to we had to mix quickly to, for example, Canary Islands," Long told journalists Tuesday.
"It was a tough first half, but I think we will see a significant improvement coming through in the summer period," he added.
TUI Travel said it has sold 60% of its summer programme to date, helped by 2% higher average selling prices, as more customers booked more inclusive holidays. It said that this offset a slight decrease in overall volumes against strong comparatives.
The travel firm said that its continues to see strong demand for its unique holidays, which are holidays available exclusively via TUI, accounting for 70% of sales in the first half of the year, up 3% on the year. TUI said that two thirds of its unique holidays are all-inclusive holidays.
"In short-haul destinations, we've seen a huge resurgence in demand for Greece. In terms of long-haul, one of our huge success stories is Jamaica. New destinations of Thailand and Mauritius have also started strongly," Peter Long told journalists Tuesday.
It also said that it has seen significant growth in online booking, accounting for 38% of sales in the period.
Sales in the group's Specialist & Activity division were supported by the divisions' restructuring, primarily across the education, marine and sport businesses, after suffering from several years of significant profit declines within in the division.
TUI also had to reshape its programme in selected markets last year, including the loss-making long-haul programme of its troubled French business, and it reduced its Egypt programme to increase capacity elsewhere, after it was hit by the political turmoil in the country.
Since then, TUI's French business has reported a decrease in operating loss, driven by a significant reduction in capacity on loss-making routes and efficiency savings. During the first-half TUI said that it reduced losses in its French business by GBP7 million, excluding the impact of currency translation.
"France is on journey to break even, having made significant losses in reductions in the first half of the year," Long said Tuesday.
However, Long said its French business will now take even longer to break even, as recovery hopes in North Africa did not materialise to help support its self-help initiatives.
"The timing of break even is more likely to be going into 2016 as opposed to 2015, as we are not getting those benefits coming through in terms of the recovery coming through in North Africa which we had hoped," Long told journalists.
TUI said its accommodation wholesaler business, which supplies hotels online to the leisure travel industry, continues to grow significantly, driven by a strong performance in Asia and Latin America.
TUI Travel shares rose at the open Tuesday, but then reversed and are trading 1.7% lower at 434.00 pence Tuesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
TUI.L