London/Hanover, 11 December 2019

TUI Group: Operating result of 893 million euros in financial year 2019

Underlying EBITA result in line with expectations/ Good operating performance despite impact of Boeing 737 MAX grounding/ Significant growth in core business with hotels, cruises and activities/ Transformation to a digital group will continue to strongly transform and strengthen TUI

  • Group turnover climbs by 2.71 per cent to 18.9 billion euros 
  • In line with TUI’s announcement, underlying EBITA -25.6 per cent down year-on-year to 893 million euros (previous year 1.183 billion2 euros) due to 737 MAX grounding
  • Excluding the impact of the 737 MAX grounding, TUI’s underlying EBITA was in line with the record level delivered in 2018 at 1.186 billion euros
  • Hotels & Resorts, Cruises and Destination Experiences segments deliver strong operating performance – investments in further growth
  • Traditional tour operators (Markets & Airlines) face ongoing external headwinds – Focus: securing market share in an era of consolidation within the sector 
  • Proposed dividend of 0.54 euros
  • Guidance: increase underlying EBIT to a range of between approx. 950 million euros and 1.05 billion euros3 in 2020
  • Dividend policy to be adjusted from financial year 2020 – minimum dividend of 0.35 euros per share creates reliability for shareholders and leeway for the expansion of the digital business, investments in hotels and supported by a robust balance sheet policy
  • Joussen: “TUI successfully completed financial year 2019 at a profit of nearly 900 million euros. Its ongoing transformation is continued. The second stage, i.e. transformation to a digital group, will change our company considerably stronger than the first stage, pursued over the past five years, to deliver the transformation from a traditional tour operator to a highly profitable hotel and cruise group. Our strategy, investments and an adjusted dividend policy have been designed to support that change and will strengthen TUI’s position going forward.“

“At an operating result of 893 million euros, TUI Group delivered a successful financial year 2019. Even in a challenging year for the tourism sector, TUI delivered a strong operating performance, a robust balance sheet and growth in its Hotels & Resorts and Cruises core businesses,” said CEO Fritz Joussen, speaking in Hanover on Wednesday. Excluding the impact of the 737 MAX grounding, TUI would have reported underlying EBITA of 1.186 billion euros, matching the prior year’s high level, the best result in the history of the company. However, due to the grounding of the 737 MAX aircraft ordered in March 2019, underlying EBITA totalled 893 million euros, down 25.6 per cent on the prior year (1.183 billion euros4), in line with expectations and the announcement made in the course of the financial year. 

Holiday Experiences, the core business with hotels, cruises and destination activities, again delivered a strong performance and an increase in underlying EBITA, now accounting for 745 per cent of TUI’s underlying result. The Markets & Airlines business comprising the traditional tour operators, by contrast, continued to face a very challenging market and competitive environment. Apart from the grounding of the 737 MAX, the challenges included a continued Brexit uncertainty, airline overcapacities in Europe and changes in customers’ booking behaviour in the traditional tour operating business. Joussen: “Over the past five years, we have successfully transformed our Group. TUI is financially strong, economically robust and has made major investments in hotels, cruises and new digital businesses since 2014. The second stage of the transformation, launched to transform TUI to a digital group, will change our company considerably stronger than all steps taken over the past five years. Our strategy, investments and new dividend policy are aligned accordingly.”

Dividend: Proposed dividend of 0.54 euros per share; new dividend policy from financial year 2020
This far, TUI Group’s dividend has grown in line with underlying EBITA at constant currency. As underlying EBITA for the full year 2019 is 25.6 per cent down on the prior year, the calculated dividend proposed for financial year 2019 is 0.54 euros (previous year 0.72 euros). The Executive Board and the Supervisory Board are recommending this dividend to the Annual General Meeting on 11 February 2020.

From 2020, TUI Group will realign its dividend policy for the future: 

  • Payment of a core dividend of 30 to 40 per cent of underlying Group-EAT (Earnings After Tax)6
  • with a dividend floor (minimum payment) of 0.35 euros per share.

In this context, Fritz Joussen explained: “We are planning to invest in our digital strategy, continue to report a robust balance sheet and pursue an attractive dividend policy – this will create growth for the company and reliability for its shareholders. With the planned minimum dividend payment of 0.35 euros per share from financial year 2020, TUI will remain an attractive investment, and we will create sufficient leeway for further investments in growth.” Based on the current share price, the minimum dividend paid out would amount to around three per cent per share. 

Outlook: Target corridor for underlying EBIT
For financial year 2020, the Executive Board expects underlying EBIT to increase to a range of approximately 950 million euros to 1.05 billion euros7.

  • The target corridor includes approximately 130 million euros cost impact from the 737 MAX grounding, assuming return to service by end of April 20208.
  • Should the 737 MAX grounding continue until the end of financial year 2020, additional cost impact of approximately 220 million to 270 million euros is expected.
  • The guidance range does not include any potential grounding compensation from Boeing in any form.
  • The guidance range however includes a mid to high double-digit millions investment in digitalised platform growth.

Detailed assessment of financial year 2019 – Overview of the segments

Hotels & Resorts: Strong performance, higher average rates per bed 

Overall, Hotels & Resorts delivered a strong increase in its operating performance in financial year 2019. The strong performance was driven by the successful diversification of the hotel portfolio. While the normalisation in rates and occupancies in the Spanish hotels continued following the record levels achieved in prior years, TUI recorded an increase in demand for hotels in Turkey and North Africa. Demand also remained high for hotels in Greece and the Caribbean. At 82 per cent average occupancy was high again, and the average rate per room was five per cent up year-on-year to 66 euros. On a like-for-like basis, the underlying result of the segment grew versus the prior year; in absolute numbers, the underlying result was slightly down year-on-year as the prior year’s result had included a gain on disposal of 43 million euros from the sale of RIU hotels. Since the merger of TUI AG and TUI Travel PLC in 2014, 70 new hotels have been added to the portfolio.

  • Underlying EBITA on a like-for-like basis: +8.2 per cent to 451.5 million euros (previous year: 417.1 million euros)
  • Underlying EBITA at constant currency: -4.9 per cent to 437.5 million euros (previous year: 460.0 million euros)
  • Average rate per bed: +4.6 per cent to 66 euros 
  • Average occupancy: -1.0 percentage point to 82 per cent

Cruises: More ships, continued growth 
In financial year 2019, the Group’s three cruise brands continued their growth path and delivered significant improvements in their operating results. With the launch of Mein Schiff 2, HANSEATIC nature and Marella Explorer 2, TUI’s cruise ship fleet grew to a total of 17 ships in the period under review. Despite the capacity expansion, in particular in the German market, the segment delivered continued high occupancies and robust average rates or further growth in these indicators across the fleets. 

  • Underlying EBITA: +13.0 per cent to 366.0 million euros (previous year: 323.9 million euros)
  • Underlying EBITA at constant currency: +13.2 per cent to 366.7 million euros (previous year: 323.9 million euros) 

Average rate per passenger per day:

  • TUI Cruises: 174 euros (previous year: 178 euros)
  • Marella Cruises: 149 GBP (previous year: 141 GBP)
  • Hapag-Lloyd Cruises: 641 euros (previous year: 615 euros)

Average occupancy:

  • TUI Cruises: 101 per cent (previous year: 101 per cent)
  • Marella Cruises: 100 per cent (previous year: 101 per cent)
  • Hapag-Lloyd Cruises: 79 per cent (previous year: 78 per cent)

Destination Experiences: Significant growth in earnings, number of tours and activities sold more than doubled
TUI’s Destination Experiences segment (tours and activities in the destinations) is a strategic growth area and will be successively expanded. In autumn 2018, TUI acquired the technology company Musement as well as Destination Management. The number of tours and activities sold was more than doubled to 9.7 million in the period under review (+116 per cent). Destination Experiences delivered an increase in underlying EBITA of 22.2 per cent. Excluding the integration costs for Musement, underlying EBITA growth was twice as high.

  • Underlying EBITA: +22.2 per cent to 55.7 million euros (previous year: 45.6 million euros)
  • Underlying EBITA at constant currency: +20.4 per cent to 54.9 million euros (previous year: 45.6 million euros) 
  • Underlying EBITA excluding the Musement integration costs: +43.7 per cent to 65.5 million euros (previous year: 45.6 million euros)

Markets & Airlines: Underlying EBITA impacted by 737 MAX grounding, market environment remains challenging
In the period under review, the Markets & Airlines business saw a challenging market with a number of significant headwinds. The grounding of the 737 MAX aircraft caused an impact of 293 million euros across all markets, compounded by the knock-on impact of last year’s extraordinary hot Summer and Brexit uncertainty, which led to a later customer booking behaviour compared with prior years. Additionally, airline overcapacities, in particular on routes to Spanish destinations, resulted in increased competition and pressure on margins. In this difficult market environment one of TUI’s key competitors in the tour operation market went into insolvency.

  • Customer numbers in Markets & Airlines were down 0.6 per cent year-on-year. 
  • Underlying EBITA: -73.5 per cent to 131.8 million euros (previous year: 497.3 million euros)
  • Underlying EBITA at constant currency: -72.2 per cent to 138.1 million euros (previous year: 497.3 million euros)

Winter 2019/20: bookings +4 per cent, average rates +6 per cent Summer 2020 in UK: bookings +18 per cent, average rates +3 per cent
Following the insolvency of its key competitor in the tour operation market, TUI has experienced a significant number of new customers. TUI has therefore increased its planned capacity by two per cent for the current Winter 2019/20 season and by 14 per cent for Summer 2020. Currently, Winter 2019/20 bookings (as at 1 December 2019) are up four per cent year-on-year and average selling prices are up six per cent. Bookings for Summer 2020 are at a very early stage, however in the UK a quarter of the programme has already been sold. Bookings in UK are up +18 per cent, average rates are up by three per cent.

1) At constant currency and adjusted for retrospective application of IFRS 15.

2) Rebased in December 2018 to €1,187m to take into account €40m impact for revaluation of euro loan balance within Turkish lira entities in financial year 2018 and adjusted further to €1,183m for retrospective application of IFRS 15.

3) At constant currency and excluding the impact from IFRS 16; for further details, please refer to section on guidance.

4) At constant currency and after IFRS 15 adjustments.

5) Excluding impact of 737 MAX grounding.

6) Underlying EAT post minorities at constant currency is calculated as underlying EBIT minus interest expenses adjusted by one-off items minus tax based on underlying tax rate of currently 18% minus minorities adjusted for one-off items.

7) At constant currency; excluding the impact of IFRS 16.

8) Assuming that the grounding is lifted in February 2020 to plan for sufficient time preparing the start of operations until end of April 2020.

About TUI Group

TUI Group is one of the world's leading tourism groups and operates worldwide. The Group is headquartered in Germany. TUI shares are listed on the FTSE 250, an index of the London Stock Exchange, on the regulated market of the Hanover Stock Exchange and on the Open Market segment of the Frankfurt Stock Exchange. The TUI Group offers integrated services from a single source for its 27 million customers, 21 million of them in the European national companies.

The entire tourism value chain is covered under one roof. This includes over 400 hotels and resorts with premium brands such as RIU, TUI Blue and Robinson and 16 cruise ships, from the MS Europa and the MS Europa 2 in the luxury class and expedition ships to the Mein Schiff fleet of TUI Cruises and cruise ships at Marella Cruises in Great Britain. The Group also includes leading tour operator brands and online marketing platforms across Europe, five airlines with more than 100 modern medium and long-haul aircraft and over 1,000 travel agencies. In addition to expanding its core business with hotels, cruises via successful joint ventures and activities in holiday destinations, TUI is increasingly focusing on the expansion of digital platforms. The Group is transforming itself into a digital company.

Global responsibility for sustainable economic, ecological and social action is at the core of our corporate culture. The TUI Care Foundation, initiated by TUI, focuses on the positive effects of tourism, on education and training and on strengthening environmental and social standards with projects in 25 countries. It thus supports holiday destinations in their development.