TUI on track despite currency headwinds

Package tour operator TUI Travel has had a good summer trading season and, but for currency headwinds, would be set to exceed its expectations for the full year.

"Summer 2012 volumes have improved in most key markets since our last update. We are seeing strong demand and lates margins for the peak Summer period. Our Winter 2012/2013 programme has had an encouraging start," revealed Peter Long, Chief Executive of TUI Travel.

"We are confident of exceeding our full year expectations based on like-for-like exchange rates; however, the impact of retranslation of fourth quarter Eurozone profits at current exchange rates leaves us to believe we will perform in line with our expectations for the full-year," Long added.

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Underlying revenue in the three months to the end of June - the group's third quarter - were down 2% to £3,690m from £3,774m the year before, with organic growth of 3% more than wiped out by currency headwinds.

Underlying operating profit was down 16% to £74m from £88m in the fiscal third quarter of the previous year, reflecting the fact that Easter fell in an earlier quarter this time round, while the underlying operating margin dipped to 2.0% from 2.3%.

Summer 2012 seasonCumulative bookings from UK customers are 5% lower than the previous year, representing an improvement on the 6% decline reported at the time of the group's last update, which covered a period up to April 29th. Since that last update bookings have been down 3% year-on-year in the UK.

Germany is the other area to see a year-on-year decline (1%) since the last trading statement, though cumulative bookings to July 29th are still up 2%. Demand for Greece has improved, with volumes up by 4% in Germany since the last statement as a result of competitive pricing.

Bookings in France are picking up slowly as the French overcome their reticence about travelling to their favoured North African holiday destinations as things start to settle down in the region after the so-called Arab spring. Since the last TUI travel update on May 8th, bookings are up 9% year-on-year, though the comparison is distorted by the fact that in the corresponding quarter of last year bookings were down because of the bombings in Marrakech.

Winter 2012/2013 seasonIn the UK, winter bookings are flat, in line with capacity. So far TUI has sold 22% of its Winter programme in the UK. The average selling price is up 3% and sales of differentiated product are up 9% compared with this time last year.

In the Nordic region, the group has changed the mix of the programme to put less emphasis on long-haul, and has increased capacity to medium-haul destinations which tend to book later. As a result of this, as anticipated, volumes are down 2%. Booked load factor is currently 29%.

The net debt position (cash and cash equivalents less loans, overdrafts and finance leases) at 30th June was £556m, barely changed from £555m a year earlier.

JH