Tui shares tumble after the travel agent reveals a plunge in profits as it pays the price for airline disruption
- Tui has suffered an 18 per cent drop in third-quarter earnings
- Its turnover for the third quarter rose 5 per cent to £4.5 billion however
- Shares down more than 9 per cent to 1434p following the update
Tui has suffered an 18 per cent drop in third-quarter earnings and warned summer bookings were unlikely to beat expectations due to the recent heatwave.
The company saw underlying earnings for the three months to June 30 fall to £174 million, with currency fluctuations and the earlier timing of Easter holding back the numbers.
Tui’s turnover for the third quarter rose 5 per cent to £4.5 billion however.
Tui has suffered an 18 per cent drop in third-quarter earnings
The travel company’s shares were down more than 9 per cent to 1434p following the update.
Airline disruptions seen in some parts of Europe recently have cost the business £11.7 million over the period, with air traffic control strikes in France the biggest culprit.
‘Action is being taken to address our operational resilience in light of this,’ Tui said.
The company said summer bookings were up 4 per cent, with a high level of early bookings limiting the impact the hot weather has had. However the company said ‘outperformance is unlikely.’
Across its UK business, bookings are ahead of the prior year but margins have been squeezed by the weaker pound and weather conditions.
Chief executive Fritz Joussen said it was a ‘good third quarter’, but stressed that the travel sector ‘earns its profits in the fourth quarter’.
‘We have delivered a profitable operating result already after nine months for the second year in a row. For the full year, we expect to deliver double-digit earnings growth for the fourth consecutive time,’ he added.
Ian Forrest, investment research analyst at The Share Centre commmted: ‘There is still some good growth in the business, but the fourth quarter will now be even more important than ever for the company this year. Due to the long term growth potential, the healthy dividend and reducing competition in the sector, we continue to recommend the shares as a ‘Buy’ for medium risk investors seeking a mixture of growth and income.’