TT. Tui Travel

TUI Travel PLC (TT.LN) Tuesday raised its dividend and said it remains confident of meeting its full year targets as it continues to manage capacity to meet the current downturn, but reported wider first-half losses.

Peter Long, chief executive of Europe's largest travel operator, said: "Despite the ongoing economic weakness, we are encouraged by current trading patterns and consumer sentiment across the breadth of the group."

The company, which has managing to cut costs and raise prices by reducing the availability of holidays, said that it will further assess capacity and will use its dominant position to reduce hotel rates in the next financial year.

It said it still has the ability to align supply with demand given that third party flying accounts for about 30% of its tour operator capacity, while only about 20% of bed stock is committed. Long said the company would look to cut aviation costs.

Some analysts warned that the company is still facing challenges, but Long remained upbeat on consumer demand.

Mark Brumby, analyst at Blue Oar Securities, said holiday decisions are often made up to a year in advance and warned 2010 may be a tough year "when taxes, interest rates, pension contributions and unemployment could be rising." He reiterated a sell recommendation.

Long said the company's typical customers were actually seeing disposable income rise about 20% and they wouldn't be affected by the tax increases that would be imposed next year. He said the question would be whether travelers decided to save more money or spend it.

At 0754 GMT, the company's shares were up 3 pence, or 1.2%, at 261 pence, after recovering from early losses.

The company said its pretax loss widened to GBP455.3 million for the six months to March 31, from GBP424.8 million a year earlier, as it booked a GBP30 million foreign exchange impact.

Earnings were also hit by the timing of Easter, which this year fell in the company's fiscal second-half, weak trading in Canada and disruptions in France and the Nordic region.

However, due to seasonal distortions associated with the leisure industry, travel operators usually make a loss in the first half of the year.

Its operating loss for the period widened to GBP411.6 million, from a GBP380.8 million loss a year earlier, even though revenue rose to GBP5.38 billion, from GBP5.15 billion, on the back of the price increases for its holidays.

Although holiday bookings are still down on the year, TUI Travel said it has been encouraged that better demand in February and March continued into April and May.

It said it would deliver synergies of GBP115 million this year due to its recent merger and GBP200 million a year by 2010.

The company proposed an interim dividend of 3 pence, up 7% from the 2.8 pence it paid last year.

Shore Capital called this payment a "little disappointing," and said it suggested the full-year dividend would be 10.4 pence a share compared with its own expectations of 12 pence.

TUI Travel's net debt position widened to GBP1.10 billion at March 31, up from GBP896 million a year earlier, due to sterling's weakness, a later summer booking profile and lower capacity.

Company Web site: www.tuitravelplc.com

-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com

Grafico Azioni TUI Travel (LSE:TT.)
Storico
Da Giu 2024 a Lug 2024

Grafico Azioni TUI Travel (LSE:TT.)
Storico
Da Lug 2023 a Lug 2024