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TUI’s Travel Business on Track to Deliver Ambitious Profit Goals Says New Boss

Aug 08, 2013 7:14 am

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TUI AG’s new Chief Executive Officer Friedrich Joussen said a plan to deliver 1 billion euros ($1.3 billion) in operating profit in 2015 is progressing as he seeks improvements at the hotel and cruise units.

“The current financial year is a year of transition on our path towards resuming dividend payments,” Joussen, who took over from Michael Frenzel in February, said today in a statement as the company announced third-quarter earnings. A business review continues that could lead to disposals, he said.

The company has sold a business jet, ended sponsorship agreements and arranged for the reduction of employees at its headquarters from to 90 from 200, Hanover-based TUI said.

TUI, which last paid a dividend in 2008, has struggled to maintain profitability as consumers increasingly book flights and hotels on the Internet, and it failed to build up a strong presence in the thriving market for cruises. The so-called oneTUI turnaround plan is aimed also at boosting to 100 million euros within two years.

Hapag-Lloyd Exit

“We are well on track and very confident of achieving the communicated financial targets,” Joussen said.

TUI fell as much as 14 cents, or 1.5 percent, to 9.56 euros in Frankfurt, and traded at 9.66 euros at 12:08 p.m. The stock has advanced 23 percent this year, valuing the company at 2.4 billion euros.

The company still wants to exit its stake in Hapag-Lloyd shipping unit either through a sale or initial public offering once market conditions improve after a prolonged freight slump, Joussen told analysts.

“There seems to be a a little bit of improvement on the horizon,” he said, while adding there was no pressure to act.

The company is also monitoring the progress of Hapag-Lloyd cruise lines in turning around the business. An assessment will be made before too-long on whether it remains a good fit for TUI, Joussen said. TUI Cruises will be retained, he said.

Hotels that are not returning their cost of capital may also be unloaded, Joussen said. Two have been sold already with eight more under review, he said.

Net income attributable to shareholders in the third quarter reached 15.3 million euros, compared with a loss of 3.3 million euros a year earlier. Sales contracted 1 percent to 4.67 billion euros, compared with a 4.6 billion-euro estimate among five analysts surveyed by Bloomberg.

The largest earnings contributor, TUI Travel Plc, said yesterday political turmoil in northern Africa was damping demand among French customers. Summer customer numbers in the mainstream business declined 2 percent through July 28, after holding stable at the prior year’s level as of May 5, it said.

TUI said today average per-bed revenue at its hotels and resorts business rose 3.4 percent to 52.58 euros, while revenue contracted 1.8 percent to 556 million euros in the first nine months. The cruise line activities saw revenue advance to 188 million euros in the same period, with the rate passengers were paying advancing around 8 percent.

Editor: Benedikt Kammel. To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net. To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net. 

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