ii view: TUI confident about 2023 profit but still high risk

Having fallen by over 40% in 20222, shares in this FTSE 250 holiday company are up 30% in 2023. We assess prospects. 

First-quarter results to 31 December

• Revenue of €3.8 billion, up from €2.4 billion a year ago
• Underlying loss of €153 million, improved from a loss of €274 million in Q1 2022
• Net debt little changed at €5.3 billion

Guidance:

• Reiterated expectation to increase underlying or adjusted profit significantly over 2023

ii round-up:

TUI AG (LSE:TUI) is a German headquartered integrated holiday company. 

Its operations include more than 400 hotels, over 130 aircraft, 16 cruise ships and more than 1,000 travel agencies. Its brands include RIU hotels and resorts and Marella and Hapag-Lloyd cruises. 

For a round-up of these latest results announced on 14 February, please click here.

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ii view:

In 2007, German tour operator TUI AG merged with First Choice Holidays of the UK. Today, the FTSE 250 company provides holidays to around 180 worldwide destinations. Its owned hotels offer more than 200,000 beds in around 30 different countries, while its airline fleet rivals the likes of Wizz Air Holdings (LSE:WIZZ), Ryanair and even International Consolidated Airlines Group SA (LSE:IAG). Its sustainability policy is committed to achieving net-zero emissions across its operations and supply chain by 2050 at the latest.

For investors, a recovery in bookings and revenues from the pandemic affected quarter a year ago is clear to see. Rising costs are being countered with rising prices, TUI’s integrated business model gives it more control than the relatively new easyJet Holidays business, while the German government provided financial assistance during the depths of the Covid crisis. 

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Less favourably, consumers continue to face rising interest rates and a cost-of-living crisis. Geopolitical tensions raised by the war in Ukraine could still spread, net debt of $5.3 billion, or £4.7 billion compares with a stock market value of £3.2 billion, while the need to strengthen its finances following the pandemic means the dividend remains suspended. 

On balance, and while the share price has improved, the many factors outside of management’s control which can impact the business leave the stock of interest mainly to higher risk investors.

Positives: 

• Diversified asset portfolio
• A lower cost base following the pandemic

Negatives:

• Highly uncertain economic outlook
• Dividend payment halted

The average rating of stock market analysts:

Sell