On Tuesday, tour operator TUI Travel reported a wider loss for the first half of its financial year. It’s blaming the increased loss on lower demand for North African destinations than expected and floods in Thailand. However, overall trading for its second half is in line with expectations due to improvements in all key markets – excluding France.
The group has reported a 5% rise in revenue from £5,207 million to £5,447 million for the last six months ending March 31. The rise in revenue was driven by 4% organic growth, as well as foreign currency translation and acquisitions of 1%. The organic growth was driven by higher average selling prices and volumes in several source markets.
At the same time, its operating loss increased 3% from £307 million to £317 million. Loss before tax widened from £366 million to £457 million, while underlying pre-tax loss only rose slightly from £364 million to £367 million. The company’s bill for jet fuel accounts for 10% of its cost base, and it expects the bill to rise 10% next year. The board has proposed an interim dividend increase from 3.3p, which was paid last year, to 3.4p for shareholders of record on September 7 and payable on October 3.
In France alone, the company reported an underlying operating loss of £61 million – up from £39 million last year. This was due to a weaker performance from French tour agents and airline Corsair. France continues to have a later bookings curve due to a challenging trading environment. However, TUI Travel has reported a robust performance in the UK, with a £48 million in underlying operating loss for the first half. This was driven by a rise in sales of exclusive and differentiated content, while 47% of its holidays were booked online.
Overall trading for this summer is still in line with expectations, and the market in the UK is due to outperform again. Bookings in the UK are up seven percentage points compared to last year, at 64%. Meanwhile, controlled distribution for the season is at 90%, which is six percentage points more than last year, and online bookings continue to account for half of this. Additionally, bookings are up five percentage points in the Nordic countries, at 76%.
TUI Travel chief executive Peter Long says they are pleased with their overall performance for the first half. The UK had a robust winter performance, which demonstrates their focus on exclusive and differentiated product, as well as being driven online – both of which are key elements in their modern mainstream strategy. Their out-performance in the UK is continuing into the summer, and they will ensure their position is continuously optimised.
Long added that, in their online accommodation only division, they continue delivering healthy growth, which is driven by new markets and increasing market share in markets that have recently been established. With the challenging economic climate, they are still cautious about the future, but overall trading performance is in line with the expectations of the board.
This comes as Thomas Cook continues to suffer from losses as well, and TUI claims to have benefited from its struggles. The rival reported a widening pre-tax loss from £99.3 million to £151.7 million for the three months ending December 31, 2011. Shares have fallen from 170p a year ago to just 21p as of May 4. In addition to a £200 million bailout signed in November, the company has recently announced that its 17 lenders have agreed to a £1.4 billion debt-refinancing deal to ensure the group’s future.
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