TUI Shares Slump 8% Despite Return To Profit. Here’s What The Analysts Say

The TUI share price sank on Wednesday following the release of full-year trading numbers.

Closing at 135.5p per share it was down 8% on the previous night’s close.

The travel group swung back into the black during its fiscal year ending in September, it said. Underlying earnings before interest and tax (EBIT) came in at €409 million.

The year before TUI recorded an adjusted loss of €2.1 billion as Covid-19 lockdowns affected trading.

Full-year revenues leapt to €16.5 billion in financial 2022 from €4.7 billion a year earlier, the FTSE 100 business announced.

Q4 Revenues More Than Double

TUI said that trading in the fourth quarter was “strong” thanks to the return of “a more normalised trading environment.”

Revenues more than doubled to €7.6 billion between July and September from €3.4 billion in the same 2021 period.

As a result, TUI recorded underlying EBIT of €1 billion in the quarter. The business endured a loss of €97 million a year earlier.

Strength In Depth

TUI said that all of its business segments reported positive earnings for the first time following the public health emergency.

At Holiday Experiences — which includes the Hotels & Resorts and Cruises business segments — underlying EBIT jumped 368% year on year to €433 million. Earnings at its Markets & Airlines units rocketed 750% meanwhile, to €612 million.

TUI provided holidays for 13.7 million people in the final quarter. Customer numbers reached 93% of financial 2019 levels on a like-for-like basis.

A Sunny Outlook

Looking ahead, TUI said that it expects underlying EBIT to increase “significantly” in the current financial year. This is in spite of “the backdrop of the continuing short-term booking environment and the considerable market uncertainty.”

The business said that it intends “to operate a programme for Winter 2022/23 close to pre-pandemic levels” for its Markets & Airlines division.

Winter season bookings are up 134% year on year, it noted. Bookings have also reached 84% of the levels enjoyed in financial 2019’s winter season.

TUI added that “positive trading momentum has continued into financial 2023 for Holiday Experiences, with volumes and booked occupancy in all segments well ahead of prior year.”

What The Analysts Said

Following the results Richard Finch, consumer analyst at Edison Group, said that TUI’s full-year statement “demonstrates that the group has put the Covid crisis of the last couple of years behind it.”

He noted that “the group has been able to increase its prices by almost double digits without scaring off customers.” However, he added that “investors will be keen to see how much pain households will continue to bear as the group continues to raise prices in the new year.”

Meanwhile Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said that “TUI is back on track, as pent-up travel demand and a return to more normal travel patterns helped jet-fuel profits in the fourth quarter.”

She added that “demand for winter bookings is also looking bright which means all-in-all, TUI is doing well.”

But Lund-Yates warned that “a cost-of-living crisis means it’s almost impossible to map demand accurately,” noting that “sunny getaways are far from front of mind for much of TUI’s core demographic these days, and exactly what this will mean for the first quarter is yet to be seen.”

Lund-Yates and Finch also warned of the dangers of forthcoming industrial action in the UK. Border Force staff are scheduled for walkouts over Christmas and the New Year.

“With TUI and easyJet warning travellers of major disruption and cancellations, there is a risk that prolonged action may impact the industry as it moves into a new post-pandemic phase of growth,” Finch said.