- Underlying EBITA up by 16.3 per cent in first half 2015/16
- Turnover growth of 2.7 per cent in the period under review
- Strong operating performance by TUI UK, Riu and TUI Cruises
- Disposal process of Specialist Group being prepared
- Additional merger synergies of 15 million euros in first half of fiscal year
- TUI France: Strengthening of market position through acquisition of Transat subsidiary
- Full-year earnings guidance confirmed – Underlying EBITA to grow by at least ten per cent (1)
- Joussen: “TUI is on track and will continue to expand its strong global position.”
TUI Group remains on a growth path. It continued its positive performance in the first half of financial year 2015/16 with a year-on-year increase in its result. In the period under review, the underlying operating result (EBITA) showed a typical seasonal loss of -236.9 million euros, down 16.3 per cent year-on-year. On a constant currency basis and excluding the benefit from the earlier timing of Easter, the typical seasonal loss was reduced by 13.5 per cent to -245.0 million euros. Turnover by TUI Group grew by 2.7 per cent to 6.79 billion euros within the same period (previous year 6.61 billion euros). Fritz Joussen, CEO TUI Group commented: “Step by step, we continue to grow, invest and expand our position as the world’s number one tourism group. Having delivered the best result in the history of our Company in 2014/15, we have also started off very well into the current financial year 2015/16. Undoubtedly, we operated in a challenging market environment in the first half of the year. Nevertheless, we managed to deliver continued turnover and earnings growth. Our integrated business model and the strong focus on our hotel and cruise content have proven to be the right strategy and have made us resilient.” Joussen stressed that the Group remained focussed on delivering its growth strategy and alignment as a vertically integrated tourism group. The successful disposal of Hotelbeds Group in the first half of the financial year marked a major step towards this goal. “Our future is to be a Group focussed fully on tourism. We will continue to sharpen this profile”, said Joussen at the presentation of the first-half results in London.
Disposal process of Specialist Group being prepared
Following the first successful step through of the sale of Hotelbeds Group in the first half of 2015/16, the Group intends to dispose the Specialist Group. The segment bundles the activities of specialist travel companies and had been managed as an independent unit by Will Waggott since the merger of TUI AG and TUI Travel PLC at the end of 2014. Joussen: “The Specialist Group is a great collection of more than 50 brands and successful companies. However, there is little vertical integration with the core Tourism businesses. In addition, the potential impact on profitability and the large amount of brands are strong strategic arguments not to combine the portfolio under the TUI brand. Therefore, we believe that a disposal of Specialist Group in one transaction is the best way to maximise value from these businesses for TUI’s shareholders. It will also enable us to quickly focus on the strategic imperatives outlined and strengthen TUI and its international competitiveness.”
The disposal of the Specialist Group portfolio is intended to happen in one transaction with the exception of two brands. Crystal Ski and Thomson Lakes & Mountains will not be sold and instead they will be transferred to the business in the UK and Ireland with immediate effect. Both Crystal Ski and Thomson Lakes & Mountains have strong synergies and vertical integration with the core Tourism business. Both companies play an important role in utilising our British aircraft fleet in particular during the winter months, and therefore create synergy potential that other specialist businesses do not have.
Will Waggott, as Member of the Executive Board of TUI Group responsible for the Specialist Group, together with his team has successfully and independently managed and further developed the unit in the past months. He will lead the disposal process of the Specialist Group.
Post-merger: Delivery of further synergies
Looking back upon the merger with the British TUI Travel PLC, completed at the end of 2014, TUI reports total synergies of 15 million euros for the period under review, including ten million euros from savings in the corporate centre in the first half.
Trading in line with our expectations – Full-year guidance confirmed
Current trading for Summer 2016 is in line with our expectations, with booked revenue in the Source Markets up by two per cent. While customers show restraint in bookings to Turkey, destinations in the Western Mediterranean and long-haul bookings delivered a strong performance. “Thanks to our successful growth strategy, the resilience of our integrated business model and current trading, we can reiterate our previous earnings guidance for the full year 2015/16. We expect underlying EBITA to grow by at least ten per cent1 year-on-year, with at least ten per cent underlying EBITA CAGR1 over the three years to 2017/18, “ said Joussen.
Tourism: Sound performance in UK, at Riu and TUI Cruises
The Group’s Tourism segment comprises all Source Markets, the enlarged Hotels & Resorts operations and Cruises. Source Markets recorded a seasonal loss of -296.4 million euros (previous year -264.2 million euros). At -110.9 million euros, the result posted by Northern Region (UK & Ireland, Nordics, Canada, Russia) was almost flat year-on-year (-109.6 million euros). UK & Ireland reported a strong result, in particular for the Canaries, long-haul bookings and cruises. Trading in Canada, by contrast, was impacted by foreign exchange effects from the movement of the Canadian versus US dollar. On the other hand, Central Region (Germany, Austria, Switzerland, Poland) reported a decline in its result to -109.8 million euros versus the prior year (-93.7 million euros), as expected. This was above all driven by Source Market Germany, which remained impacted by very challenging trading conditions and lower demand for destinations in North Africa and Turkey. Western Region (Belgium, Netherlands, France) reported an operating result of -75.7 million euros. However, the prior year reference result (-60.9 million euros) included a significant non-recurring credit in Source Market Belgium. Excluding this, Western Region’s seasonal operating loss was slightly down year-on-year. While France delivered an improved result, Belgium was impacted by the decline in demand for North Africa and by the closure of Brussels Airport.
Source Market France: TUI becomes market leader following acquisition of Transat subsidiary
France, in particular, reports a positive trading performance, with Summer trading currently ahead of prior year. TUI has agreed to acquire Transat tourism group’s French tour operating business in the framework of its turnaround plans for France in order to strengthen its market position. Due to the acquisition, TUI France is not only expected to achieve sound profitability but also to become the market leader in France. The combination of wider product choice and higher flexibility will also enhance the customer experience.
Hotels & Resorts: Riu increases occupancy / Average rate per bed + 8%
In the first half of 2015/16, Hotels & Resorts again posted a very good result with underlying EBITA of 83.7 million euros (previous year 55.6 million euros). Riu, in particular, achieved a four percentage point improvement in occupancy and an increase in average rate per bed of eight per cent, whilst increasing capacity by two percentage points. Riu reported substantial growth in bookings, in particular to the Canaries and the Caribbean. Robinson saw its result impacted by various factors including additional marketing costs and the currently weaker demand for clubs in Turkey.
Cruises: positive operating result
In the period under review, TUI Group achieved a considerable improvement in the positive operating result in Cruises. Underlying EBITA amounted to 40.1 million euros (previous year 18.3 million euros). TUI Cruises achieved an improvement in its operating result, benefiting in particular from strong trading by Mein Schiff 4, which had joined the fleet in June 2015, and the high load factor of its vessels as well as strong yield management. At 101 per cent, the load factor of TUI Cruises’ fleet, which currently comprises four cruise ships, remained flat on the very high level reported last year, while the average rate per passenger per day also matched the prior year’s level at 147 euros. TUI Cruises will continue its growth path in the premium cruise market segment in the current financial year. Mein Schiff 5 will be named and launched in July. Cruise ships Mein Schiff 6 to Mein Schiff 8 will be commissioned in the period from 2017 to 2019. It is also intended that, with the delivery of Mein Schiff 7 and Mein Schiff 8, Mein Schiff 1 and Mein Schiff 2 will be redeployed to Thomson Cruise, leaving TUI Cruises with a six ship fleet.
The load factor of the luxury and expedition ships of Hapag-Lloyd Cruises rose to 75 per cent versus the prior year (74 per cent). The average rate per passenger per day was 561 euros in the period under review, up by seven per cent year-on-year.