TUI on course for profit growth after merger

 
Billy Ehrenberg
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TUI: On track after merger (Source: Getty)

The figures

Tui Group has reported a 23.5 per cent jump in earnings before interest, tax, depreciation and amortisation in its first quarter, and a 5.4 per cent jump in revenues - in line with expectations. Hotels and resorts performed particularly well during the period, it added.

The newly formed entity, forged through a merger last year of UK-listed Tui Travel and its German sister company Tui AG, is confident of delivering 10 to 15 per cent growth in its first full year, it said.

Underlying revenue rose 5.4 per cent to €3.5bn, up from €3.4bn in the same quarter last year, a rise of €182.5m. Ebitda was still in the negative at -€107m, down from a loss of -€141m during the same period last year. The loss excluded the sale for €16bn of Riu Waikiki, from within the company's hotels and resorts sector.

Travel, which includes its airline arm, made a loss of €149m, in line with the group’s expectations. Hotels and resorts did its best to plug the gap, increasing profits to €51m.

Why it’s interesting

Post-merger, the company decided earlier this month Tui to strengthen its ailing airline operations, potentially putting 400-500 German jobs at risk. It's hoped that will allow Tui's airlines - TUIfly, Jetairfly and Thompson Airways - to compete with the likes of EasyJet and Ryanair. It looks like the first step is underway, but there is much work to be done.

What TUI said

Friedrich Joussen and Peter Long, joint chief executives of Tui Group, said:

Following completion of the merger between TUI AG and TUI Travel PLC in December 2014, the integration of our businesses is well underway, with a new executive committee in place.

Based on this result and our current trading, we remain confident of delivering full year underlying operating profit growth of 10 per cent to 15 per cent.

In short

These are important times for the group after the merger, and it needs to harness the low-oil-price environment to efficiently organise its travel operation. Hopefully the result will be another competitive low-cost airline, adding to healthy market competition in the sector and making the most of Tui's size and potential.

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