TUI (LON:TUI) have given shareholders a mixed update on Tuesday, following a turbulent period of trading for all names in the airline and travel industry.
The travel and holiday operator reported a widened first quarter adjusted loss, and therefore changed its guidance range for annual earnings.
The firm also said that continued delays with Boeing (NYSE:BA) with the delivery of 737 aircrafts had affected trade, and subsequently led to a slower than expected period of trading.
For the three months ending December 31, the company’s underlying loss before interest & tax increased 77% to €146.9 million from €83.1 million the year prior.
Notably, TUI did see revenue rising 7.7% to €3.85 billion from the €3.57 figure just one year ago.
TUI attributed this loss to stunted growth and performance in the Holiday Experiences Unit, along with higher costs in the cruise sector and a €45 million replacement charge following ongoing supply issues from Boeing.
First quarter underlying earnings before interest, tax, depreciation and amortisation totaled €111.5 millions from €27.2 million a year ago, as net loss narrowed by just under 6% to €105.5 million.
TUI gave shareholders a positive tone when they announced expectations to record high single digit percentage growth across 2020, which seemed to boost the share price on Tuesday.
Annual EBIT is now expected to be between €850 million to €1.05 billion versus previous €R950 million to €1.05 billion guidance range.
Going forward the firm said:
“FY20 in terms of booking trends has started exceptionally well, with the UK delivering its best bookings volume month in the company’s history. We are pleased with customer booking development to date for both programmes however the Boeing 737 Max grounding continues to weigh on our operational performance, with an extended grounding now expected for the rest of the financial year. We will continue to focus and deliver on our four strategic initiatives as outlined in our FY19 full-year results update; progress of our initiatives and our Markets and Domain Transformation Programme are on track.
For our Hotels & Resorts business, as indicated at our FY19 full-year results, we plan to grow this segment through both asset-right and asset-light approaches. We currently have 17 hotel openings planned for the year, with a number in our key brands Riu and Robinson through an asset-right approach. For our flagship leisure brand TUI Blue, we plan expand to almost 100 hotels through asset-light re-positioning of our existing hotel portfolio. During Q1, one new TUI Blue hotel was opened and nine re-positioned.”
TUI’s new dividend policy
In December, the firm announced that they had completed their financial year in steady footing despite difficulties in the market.
In addition to this, TUI made changes to its payout policy for dividends, in effect from 2021.
The firm said the new policy is expelled to result in lower payouts, but shareholders will be guaranteed a minimum distribution irrespective of the market environment of the tourism industry.
TUI intends to pay a core dividend payout of between 30% and 40% of the its underlying EAT, with a guaranteed minimum payout of €0.35 per share a year.
Forecasting for the future the firm expects underlying earnings before interest and taxes for current financial 2020 in the range of between €950 million to €1.05 billion.
New routes for 2020
As mentioned, TUI also made plans to expand their offering of routes this Summer.
In October, the firm said that they would be adding extra services and destinations to a number of UK airports.
An extra 194,000 seats have been posed increasing Birmingham Airport’s capacity for TUI customers. Flights from Glasgow airport have also been announced from 2020.
New flights from Glasgow Airport have gone on sale today with Bodrum Flights operating on Mondays and Fuerteventura on Sundays.
TUI expanded the length for inclusive holidays, by now offering 10 or 11 day packages to eight destinations including Orlando, Antalya and Zakynthos.
2020 will be a year of consolidation for TUI, however the future does look bright as the firm looks to integrate its new services and routes into its’ portfolio.
Shares in TUI AG trade at 959p (+12.13%). 11/2/20 10:34BST.
