Tui is continuing to dispose of unwanted parts of its business by announcing the sale of the travel group’s specialist adventure and education operations.
The move follows last month’s announcement of the €1.2bn sale of its Hotelbeds business, and forms part of its restructuring in the wake of 2014’s merger of London-listed Tui Travel and parent group Tui AG. The group also plans to sell its near 12% stake in shipping group Hapag-Lloyd.
It said the specialist brands did not fit with its main holiday and cruise business which account for around 85% of its revenues. The proceeds of the sale and the Hotelbeds disposal will be invested in growth opportunities and to strengthen its balance sheet. Analysts said disappointment that there would be no cash return to shareholders helped sent Tui’s shares down 23p to £10.45 after the news.
Meanwhile half year turnover rose 2.7% and earnings climbed 16.3%, with the UK business and cruises doing particularly well. It said summer bookings were in line with expectations, although it has seen a shift away from Turkey to other destinations.
It confirmed it expected full year earnings growth of at least 10%.
UBS said the revenues were lower than expected but earnings were better, which was also likely to be putting pressure on the shares:
The shares have been strong into the results and [we] expect the lower revenue result could cause some softness, although EBITA is better than expected.
Shore Capital’s Greg Johnson said:
Having recently announced the disposal of its Hotelbeds division for €1.2bn the group has today announced its intentions to dispose of its Specialist Group, which made a profit of €56m last year. Net debt at the period end was €1.5bn, which broadly marks the seasons low point for cash flow and is effectively covered by the disposal of the Hotelbeds and the likely proceeds from the Specialist Division.
The current trading backdrop, interim performance and outlook are encouraging. We would expect to maintain our 2016 pretax profit estimate of €1,019m ( earnings per share €1.14) – pre any adjustment for the Hotelbeds disposal. The stock trades on a 2016 PE of 12 times. However, back-out Hotelbeds, cruises and hotels and the core tour operator trades on a mid-single digit. Obvious concerns remain over the ability to cover the shortfall of demand to Turkey but the rating looks highly attractive.
