Winter bookings down at TUI Travel

 

Britain's biggest holiday firm TUI Travel outperformed its rival Thomas Cook today but warned winter bookings in the UK had slowed down in the face of weak consumer sentiment.

The Thomson Holidays and First Choice owner reported a 12% year-on-year drop in winter 2011/12 bookings as at November 27, compared to an 11% decline at its last update on September 11, as capacity - hit by turmoil in Egypt and Tunisia - was reduced 9%.

But the recent weak trade followed a record full-year performance as higher margin holidays helped drive a 15% increase in underlying operating profits in the UK to £147 million and an 18% rise in group profits to £471 million in the year to September 30.

TUI said sales of differentiated products - concept holidays unique to TUI brands - such as water park SplashWorld, Holiday Village resorts and child-free Couples holidays, grew 14% in the UK in the year to September 30.

The robust performance comes shortly after Thomas Cook spooked holidaymakers and investors when it turned to its banks for extra support in the wake of deteriorating sales.

Shares in TUI were more than 2% higher following the full-year results.

TUI said it was experiencing a later booking profile, reflecting the continuing issues in North Africa and the consumer spending squeeze, driven by higher prices and muted wage growth.

TUI said capacity in the UK had reduced as it moved aircraft within the group to serve higher demand in its markets in Canada and Scandinavia.

The group, which serves around 30 million customers and operates in 180 countries, said average selling prices are up 5%, reflecting cost inflation of around 4% but also the higher proportion of differentiated products, which are up 12% in current trading.

Peter Long, TUI chief executive, said: "We are very pleased with our robust performance in 2011 and have delivered another year of profit growth, against a backdrop of unrest in key North African destinations and weak consumer sentiment in some source markets."

Looking ahead, TUI said it was early in the booking cycle for summer 2012 as most of its markets launch their main edition brochures in December.

But so far it has sold 19% of the season's programme, with bookings 11% lower than the year before, partly reflecting the reduction in capacity, while average selling prices are up 9%.

There was some cheer for shareholders as TUI unveiled a 2.6% increase in its final dividend to 8p a share, bringing the full year dividend to 11.3p.

Thomas Cook secured an additional £200 million in funding headroom last month after it revealed sales had deteriorated as a result of low consumer confidence and the unrest in North Africa.

TUI took out a series of adverts in print and online shortly after Thomas Cook revealed the issues, which sparked criticism because it drew consumers' attention to Thomas Cook's financial problems.

The adverts read: "Unlike a certain holiday company we could mention, you don't need to worry about the way we run our business."

But Mr Long said the adverts were designed to "clarify" the difference between the two companies and said it was hard to determine what effect the issues at Thomas Cook were having on TUI's business.

Mr Long said the unrest in Cairo and the snow this time last year blurred the performance in the last two weeks.

"If Thomas Cook lose volume, we are the natural beneficiary," Mr Long said.

He added that sales had improved in the last two weeks but this could not be solely attributed to the problems at Thomas Cook.

TUI is currently expected to deliver underlying operating profits of £485 million to £490 million for next year but brokers at Numis Securities have forecast £608 million in the wake of Thomas Cook's woes.

Wyn Ellis, analyst at Numis, said: "We believe that TUI management will know exactly how to capitalise on Thomas Cook's problems."

He added: "It is too early to predict with accuracy the impact of Thomas Cook's recent poor publicity but we believe it will be very positive for TUI."

PA

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