Thomson Holidays operator, Tui Travel Plc (LON:TT.) reported underlying operating profit, excluding the volcanic ash impact, in line with the prior year at £103m. However, the group said incremental synergy benefits have been offset by a weaker trading result. Revenue of £3.416bn was down 4% in the nine months to end-June. Underlying operating profit was up 1% at £103m, with underlying operating margin 3%, compared to 2.9%, +0.1pp.
The total impact of the volcanic ash disruption, including the impact of further airspace closures in May, is estimated to be £105m and almost 400,000 of customers were affected. TUI said booking volumes have been strong across source markets over the last twelve weeks with the exception of the UK and the Netherlands: Nordics up 14%, Germany up 12%, France up 5%, Belgium up 15%, UK down 2%, Netherlands down 3%.
Whilst bookings to date are up 2% in the UK, the market has been particularly affected by the disruption caused by airspace closures, good weather and the uncertainty around the emergency budget, resulting in a later booking pattern which has adversely affected profitability.
The German market has seen strong booking volumes during the period but in lower margin products. Following the difficult trading conditions in these markets and an anticipated adverse foreign exchange translation impact in the final quarter TUI now expects full year results to be at the lower end of expectations. Early Winter 2010/11 and Summer 2011 trading has started positively. Peter Long, CEO, commented:
'The strong booking trends experienced up until the volcanic ash disruption in mid-April and the subsequent rebound in early May were not sustained throughout the early summer period. This was particularly marked in the UK source market where trading was affected by further airspace closures, good weather and post election uncertainty regarding the emergency budget. All of these factors have had an impact on consumers' booking patterns. Consequently, the booking curve has shortened and the mix of lates market sales for Summer 2010 has increased. The higher than expected proportion of sales in the lower margin lates period will inevitably affect UK profitability. Additionally in Germany, although volumes have been good, there is continued price pressure in commodity segments.
'When we take the later booking curve and the adverse impact of foreign exchange translation into account, we believe that the results for the year will be…
