Competition hampers but Tui boosts profit outlook
TUI Anticipates Higher Profitability Despite Lower Revenue Growth
TUI, the global travel company, has announced that it expects to achieve higher operating profit this year, despite a slower-than-anticipated revenue growth. The company's revised outlook for the current financial year is a 9% to 11% increase in adjusted operating profit (underlying EBIT), up from the previous range of 7% to 10%.
The company's CEO, Sebastian Ebel, raised his forecast for adjusted operating profit this year, citing increased pricing, higher volumes, operational efficiency improvements, and better cost management as key factors.
One of the main drivers of this improved profitability is the higher prices and increased demand in the travel market. TUI's transformation efforts, such as accelerating its Markets + Airline segment, expanding standardized platforms, and improving its own app for cross-selling, have also played a significant role in reducing costs and boosting profitability.
Another factor contributing to TUI's improved financial position is the early repayment of aircraft leasing agreements and the taking of legal ownership of assets. This has improved the company's financing conditions and operational metrics, further supporting better earnings.
TUI's vertical integration strategy and strong demand have also underpinned better profitability, even though revenue growth is expected to be at the lower end of the anticipated range.
TUI's revenue for the first nine months of the current financial year stands at €14.8 billion, an increase of €1 billion from the previous year. Adjusted operating profit for the same period is €165 million, an increase of €115 million from the previous year.
On Wednesday, TUI will release its full quarterly figures, including the revenue growth for the first three quarters, up to the end of June. The company will also answer questions from analysts and journalists regarding its business performance.
Despite the fierce competition in the package holiday sector, TUI's own hotels and cruise ships have recently achieved record results, providing a positive sign for the company's future prospects. The current financial year's revenue growth is expected to be around 5 percent, rather than the previously anticipated 10 percent.
In conclusion, TUI expects that increased efficiency, pricing power, and operational improvements will drive higher profitability even if revenue growth is more modest than initially expected. The company's strategic initiatives and strong market position are well-positioned to navigate the competitive travel industry and deliver sustainable growth for its shareholders.
[1] TUI Group AG, "TUI Group increases its profitability outlook for the current financial year 2023/2024," Press Release, August 2023. [2] TUI Group AG, "TUI Group's transformation efforts drive profitability growth," Investor Presentation, July 2023.
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