Cruise holidays sail ahead amongst further growth in all markets
Shares up as TUI reiterates 10% rise in full-year earnings
- Demand remains for cruise holidays and bookings for winter season are ahead of last year
- Figures are pleasing given recent profit warning from peer Thomas Cook and shares have reacted positively up 2% in early trading
- We recommend TUI as a ‘buy’ for medium risk investors
Global tourism group TUI reassured the market today with a fourth quarter trading update which showed that sales did not wilt in the summer heat as other companies have found. TUI said the number of customers buying holidays had grown in all its major markets and trading for future seasons is also in line with expectations.
There continues to be strong demand for its cruise holidays and investors should appreciate that the launch of three new ships in the next financial year should help with further growth in that area. The destination experiences division, which provides leisure activities at holiday destinations, also saw good growth and has been boosted by a recent acquisition. For the winter season, bookings in most markets are ahead of prior year.
The only negative aspect today is the news that the weakness in the Turkish lira means that the company now expects an adverse foreign exchange impact of €70m on full-year earnings, up from €35m in the third quarter.
The market welcomed these figures with a 2% rise in the shares in early trading. Given the recent profit warning from peer Thomas Cook these figures are pleasing and the fact that the company again reiterated its previous guidance of a 10% rise in full-year earnings was also good news. We continue to recommend TUI as a ‘buy’ for medium risk investors thanks to the growth potential, the benefits of scale and healthy dividend yield.
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