6th Dec 2023 12:52
(Alliance News) - Tui AG reported a sizeable lift to its annual earnings, though some analysts continue to prefer the likes of Jet2 PLC, and the tour operator announced it may depart from the London Stock Exchange.
Tui traded 12% higher at 571.00 pence each in London on Wednesday afternoon.
For the 12 months ended September 30, the Germany-based tour operator swung to pretax profit of EUR551 million, following an EUR146 million loss the prior year.
Revenue jumped 25% to EUR20.67 billion from EUR16.55 billion. Reported earnings before interest and tax more than tripled to EUR999 million, and Tui swung to underlying earnings of EUR0.74 per share from an EUR0.45 loss.
The tour operator attributed these gains to growth in its Holiday Experiences segments, as well as improvements in its Markets & Airlines division, which has just gained a new chief executive officer.
David Burling will resign on January 5, with David Schelp becoming the new Markets & Airlines CEO with effect from January 1.
Largely, the analyst view of Tui shares is to 'hold' them. Among those to fall short of a positive rating for the stock is Peel Hunt.
"The share price has bounced off the bottom, along with other leisure travel shares, reflecting increased confidence in consumer demand. However, we remain cautious around Tui's ability to convert profit to cash and continue to prefer other, simpler, companies exposed to the same macro trends such as Jet2 and On the Beach," Peel analyst Ivor Jones commented.
Stifel, which also rates Tui at 'hold', similarly flagged its preference for Jet2. Stifel noted Tui's booking outlook looks "encouraging" and that as long as household budgets do not get too squeezed, travel demand will still be high.
Also on Wednesday, Tui noted a shareholder approach to discuss whether its listing structure is as "optimal and advantageous" as it could be.
Subsequently, the firm is considering delisting from the London Stock Exchange and upgrading to a "Prime Standard" listing in Frankfurt with inclusion on the MDAX index. It told investors that it may put forward a resolution on the subject at its next annual general meeting in February.
However, Tui "may not be massively missed" in London if it follows through on this suggestion, said AJ Bell's investment director Russ Mould.
While the company set high expectations for the current financial year, with revenue to be up at least 10%, and underlying earnings before interest and tax to increase by at least 25%, Mould warned that Tui's "share performance has been turbulent to say the least and its operational track record has been far from flawless too".
"There is obvious logic to the move, given Tui is very much a German business which even received a bailout from the country's government during Covid. It will be interesting to see how investors vote in February – with the required 75% approval a high bar to clear," Mould added.
"You can see the company's reasoning," he reasoned, before adding: "Its claim that index inclusion in the MDAX would be beneficial is harder to judge as the firm is already in the FTSE 250 and chasing passive, index-tracking flows is not necessarily a good idea, as that can work for or against you.
"Moreover, management teams should be in the business of managing the assets to best effect, and getting the best, risk-adjusted returns, not managing the share price. If they do the former properly, the latter should take care of itself over time."
By Holly Beveridge, Alliance News reporter
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