Thomson Cruises operator TUI (TUI) confirms guidance for at least 10% growth in underlying earnings before interest, tax and amortisation (EBITA) in its September 2017 financial year.
Investors are excited by the news, marking the stock 5% higher to £12.15.
TRADING IN LINE WITH EXPECTATIONS
Trading for the key summer holiday period is in line with expectations as bookings are up 4% under its Source Markets’ programme, despite a shift in trading away from Turkey over terrorism concerns.
Management is confident about its key market, the UK, as first quarter revenue is up by 12% and bookings are up 3% over the summer period.
Destinations in the Western Mediterranean, Canaries, Cyprus, Cape Verde and the Caribbean are behind rising sales, as people are lured abroad for a hot summer holiday.
Investors should not be too concerned about the loss revealed in its first quarter results, as travel operators suffer from seasonal demand and the winter period is traditionally quieter.
TUI also announces it will sell its portfolio of specialist travel brands Travelopia to KKR for £325m, and will hold talks over the sale of TUI Fly to Etihad.
CASH FLOW CONCERN
However, stockbroker Panmure Gordon & Co analyst Mark Irvine-Fortescue is unconvinced despite the market's excitement, reiterating his ‘sell’ advice as he estimates free cash flow is not strong enough to cover dividend payments.
