ii view: TUI optimistic about profits in 2022

Revenue up, and losses and net debt down. We assess prospects for this major holiday company. 

Second-quarter results to 31 March

• Revenue up 758% to €2.13 billion from Q2 2021
• Adjusted loss almost halves to €330 million
• Available liquidity as of 6 May 2022 of €3.8 billion
• Net debt down 42% to €3.93 billion

ii round-up:

Holiday company TUI AG (LSE:TUI) today flagged its expectations for a return to adjusted profit in 2022 as revenues soared following a lifting of pandemic restrictions and travel demand proved strong. 

Second-quarter revenues climbed to €2.13 billion from last year’s €248 million, helping the adjusted loss to the end of March almost halve to €330 million. That beat City expectations for a loss nearer to €350 million.

TUI shares rose by more than 4% in UK trading, leaving them down by just under 3% year-to-date. Shares for operationally challenged and British Airways owner International Consolidated Airlines Group SA (LSE:IAG) are down by around 11% in 2022, while Eastern Europe focused budget airline Wizz Air (LSE:WIZZ) is down nearer to 30%. 

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Bookings across TUI’s key UK, German and Benelux markets have been largely unaffected by the war in Ukraine. 

Summer 2022 booking have been running at 85% of Summer 2019 levels. Total bookings had been trending strongly with the last six weeks’ bookings firmly surpassing Summer 2019 levels. The UK market in particular remains its most advanced booked, with bookings up 11% versus the pre-Covid Summer of 2019.

Revenues for the first half to the end of March of nearer €4.5 billion contrast with last year’s pandemic hindered €716 million.  

TUI management gave no full-year adjusted profit figures outside of its expectations for it to prove positive.  

A third-quarter trading update is likely to be announced in August. 

ii view:

Headquartered in Hanover, Germany, TUI is an integrated holiday company which is a constituent of the FTSE 250 index. Its operations include 1,600 travel agencies and a collection of online booking portals. It also operates five airlines with around 150 aircraft, over 400 hotels and 16 cruise liners. 

For investors, a lifting of pandemic travel restrictions and an estimated return to adjusted profit for the full year is clearly good news. A focus on costs remains, as does reducing debt and returning cash back to the German government following its previous assistance. A digital strategy and an expansion in the use of its app is also not to be overlooked. 

However, with so many factors outside of management’s control, investing in the holiday business remains volatile and higher risk. The global pandemic of 2020 and 2021 has tested the tourism industry and TUI. For now, and with the consensus analyst estimate of fair value standing at 225p per share, close to the current share price, the shares may be up with events. 

Positives: 

• Diversified asset portfolio
• Pursuing cost savings

Negatives:

• Elevated fuel costs
• Uncertain economic outlook

The average rating of stock market analysts:

Sell