TUI Travel Sees Profit at Lower End of Expectations
TUI Travel CEO Peter Long
Holger Lorenz/Bloomberg
TUI Travel CEO Peter Long said, “The strong booking trends experienced up until the volcanic ash disruption in mid-April and the subsequent rebound in early May were not sustained throughout the early summer period.”
TUI Travel CEO Peter Long said, “The strong booking trends experienced up until the volcanic ash disruption in mid-April and the subsequent rebound in early May were not sustained throughout the early summer period.” Photographer: Holger Lorenz/Bloomberg
TUI Travel Plc, Europe’s largest travel operator, dropped the most in almost two years in London trading after saying reduced holiday spending by Britons and Germans will affect profitability.
A slowdown in U.K. bookings since April led to an increase in the number of cut-price holidays sold near to the time of departure, while German customers are buying cheaper tours, Crawley, England-based TUI Travel said today. Full-year earnings will be at the “lower end” of analysts’ estimates, it said.
TUI Travel fell 10 percent in London trading, the biggest intraday drop since Oct. 16, 2008, while shares of smaller rival Thomas Cook Group Plc declined 7.4 percent, the most since April 20, 2009. InterContinental Hotels Group Plc also slid in London after saying the economic climate remains “uncertain.”
“With consumer markets likely to remain tough across major markets, the shares have little appeal,” Nick Batram, a KBC Peel Hunt analyst in London, said today in a research report on TUI Travel. He cut his estimate of 2010 pretax profit by 7 percent to 330 million pounds ($521 million) and kept a “hold” recommendation on the stock.
Consumers across Europe are spending less because of government cutbacks aimed at preventing a continent-wide debt shock. Electrolux AB, Imperial Tobacco Group Plc and liquor maker Pernod Ricard SA are among companies that have reported slowing demand, while Unilever said on Aug. 5 that sales in western Europe declined in the second quarter.
Ash-Cloud Effect
TUI Travel’s third-quarter sales fell 4 percent to 3.42 billion pounds. The tour operator had a net loss of 81 million pounds compared with year-earlier profit of 32 million pounds. Air-traffic shutdowns caused by May’s volcanic ash cloud over Europe cost 105 million pounds, more than a previous estimate of 90 million pounds.
Chief Executive Officer Peter Long said strong booking patterns that were experienced until the ash-cloud disruption weren’t sustained throughout the early summer period.
Bookings in the U.K. fell 2 percent over the last 12 weeks as fewer Britons went abroad because of warmer weather in the U.K. and after May’s parliamentary election brought in a government that plans budget cuts.
“We have concerns for our September U.K. business,” Chief Financial Officer Paul Bowtell said on a conference call today, adding that the tour operator has still “a lot” of package tours to sell. It may take years to “re-educate” British customers not to wait for the cheaper last-minute offers which are currently available, the executive said.
InterContinental Hotels said today that booking windows are “short” and forecasting ability is “limited.” The owner of the Holiday Inn brand also reported a first-half profit of $141 million compared with a year-earlier loss after business travel improved.
TUI Travel slid 22.5 pence to 206.1 pence at the 4:30 p.m. close in London. InterContinental Hotels fell 46 pence to 1,078 pence. Thomas Cook dropped 14.6 pence to 183.9 pence.
To contact the reporters on this story: Holger Elfes in Dusseldorf at helfes@bloomberg.net; Paul Jarvis in London at pjarvis@bloomberg.net.
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