Is This Travel Related Stock Set To Turn Its Performance Track - TUI (LSE: TUI)?

  • Feb 11, 2019 GMT
  • Team Kalkine
Is This Travel Related Stock Set To Turn Its Performance Track - TUI (LSE: TUI)?

TUI Group (TUI.L), formed through the merger of TUI AG and TUI Travel in 2014, is the leading European tour operator with operations spread across 180 destinations. The Company specialises in sales and marketing, as well as holiday experiences. Customers can create their own holiday schedule, choosing their own hotels, cruises and flights thanks to the firm’s owned and third-party flying capacity. The group’s sales division provides over 20 million customers every year with personalised holiday experiences through multiple channels and travel agencies. Further, sales and marketing vertical is the major revenue driver with 44% earnings contribution. Accounting for the rest of earnings are hotel and cruise activities including 380 hotels globally in hotspots such as the Western and Eastern Mediterranean, North Africa, the Caribbean and Egypt. Hotels operate under an ownership, lease, management or franchise model, while TUI’s own brands include Robinson, TUI Magic Life and TUI Blue. Whether customers are looking for a luxury cruise or expedition experience, TUI can accommodate a range of preferences through 16 cruise ships across three brands, TUI Cruises, Marella and Hapag-Lloyd.

FY18 Segment Turnover Performance (Source: Company Reports)

If you look at the turnover numbers, the same reflect a mixed result while the group reported for a double digit earnings growth for fourth consecutive year. The other fundamental factors like return on equity and so forth have been better than the industry medians.

The group’s markets and airlines unit saw earnings decline to €452.5 million in FY18 from €526.5 million the previous year despite a single digit growth in customers, and further increases in direct and online distribution. The company has admitted that the ability of markets and airlines to outperform was limited by the prolonged hot weather this summer in northern Europe and significant levels of airline disruption. The company’s northern region under Holiday Experiences saw earnings decline to €254.1 million against €345.8 million a year earlier.

Meanwhile, TUI Group, reiterated its FY19 guidance of at least 10% growth in underlying earnings [EBITDA] in the next 12 months with growth from investments, digitalisation and efficiency, as well as a “double-diversified” business model, helping to mitigate market challenges. The turnover for FY19 is also expected to witness a 3% growth.

Financial Performance

Financial Performance in Euros million (Source: Company Research, Thomson Reuters)

Key Points on latest Developments

  • On 3rd January 2019, the family holiday association collaborated with TUI care foundation for supporting the struggling families, giving a short break holiday. This agreement has been designed for five years.
  • The company saw increased demand for holidays in Turkey, North Africa, Greece and the Caribbean while growth in cruise was helped by new ship launches in the UK and Germany with high occupancy and average daily rates.
  • The company is implementing processes on blockchain technology for capacity enhancement for hotels and better occupancy and profitability of the yield management system.

Stock Performance

As at February 08, 2019, the stock traded at GBP 913.4, down by 4% post a steep fall of about 19% noted on February 07, 2019. 52 Week high / low of the stock has been rebased at GBP 1816.00/GBp 912.40. It is worth noting that the stock has fallen about 42.4% in last one year. While the guidance has been maintained, the overall challenging scenario with weather related disruptions impacted the group performance. It is yet to be seen how this travel related group moves the scenario going ahead.

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