TUI Travel Plc Ord 10p (TT.)

Company overview

Headquartered in Crawley, near Gatwick airport, the Group currently employs approximately 50,000 people and operates a pan-European airline consisting of over 150 aircraft. TUI Travel PLC is a leading international leisure travel group which operates in approximately 180 countries worldwide and serves more than 30 million customers in over 25 source markets. The group was formed back in September 2007 when the former holiday group First Choice was merged with the travel business of German travel and container shipping business TUI AG – listed in Germany. TUI AG is the biggest shareholder in the travel group. The company is a constituent of the FTSE-100 index.

HL Comment (10 May 2011)

The group’s half year results (10May2011) continued to see management highlighting in line trading. The group reported an underlying operating loss of £307m for the period, compared with a £322m loss in the half year prior – this was better than the consensus analyst forecast of £312m. The performance benefited from improvements made at previously struggling parts of its business, especially in Canada, and from stronger underlying trading, particularly in the Nordics and Corsair, the group’s loss-making French airline. Furthermore, a re-shaping of its tour operator programmes helped offset difficulties suffered thanks to political upheaval in the Middle East - the group switched its programmes to focus on other resorts in Spain, Greece and Turkey, despite travel restrictions now having been lifted in Egypt and Tunisia.

Negative Points:

• Management outlook comments continued to express caution, highlighting both the uncertain economic and geopolitical outlook.
• In the UK, booking volumes had slowed since the group’s last update, with net bookings in the period down 3pc on the prior year.
• The company said it estimated fuel costs to increase about 30pc in 2012 and has introduced fuel supplements in certain source markets to mitigate this increase.
• Competition within the tour industry remains intense.

Positive Points:

• A focus on improving underperforming businesses had proved successful.
• Total bookings to date were now flat against the prior year.
• Management highlighted both a good cash performance and a flexible business model.
• The second half of the year had started well, with April benefitting from the later timing of Easter.
• Foreign exchange translation improved the underlying operating result by £8m in the first half, primarily due to the recovery of Sterling against the Euro.
• Provision planning is being made. The group said it was factoring in a hit of up to £40m to its profits each year from the impact of conflicts and natural disasters.
• In February, the tour operator announced that it is planning £100million of cost savings a year over the next three years.

Consensus:
On balance, market consensus indicates a hold.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
30-09-2011	14,687.00	144.00	7.70	6.30	0.30	24.00	11.30	7.60
30-09-2010	13,514.00	(73.00)	(11.10)	11.30	n/a	(5.00)	11.00	5.10
30-09-2009	13,851.00	(94.00)	(4.80)	12.70	n/a	(2.00)	10.70	4.20
30-09-2008	13,932.00	(267.00)	(24.40)	10.60	0.30	42.00	9.70	4.50
30-09-2007	12,839.90	18.40	0.60	17.50	n/a	(16.00)	8.40	3.30