Tui shares plummet 17% as travel firm forced to cut earnings forecast after being hit by ‘extraordinary’ hot weather and weak pound
- Earnings now expected to come in flat at around £1billion
- Tui had previously been expecting growth of around 10%
Shares in holiday group Tui have fallen over 17 per cent after the firm cut its annual earnings forecast.
Battling against ‘extraordinary hot weather’ and a weak pound, Tui said it expects adjusted earnings for the year ending 30 September to come in flat at around £1billion.
This compares to previous guidance for at least 10 per cent growth in earnings in the three years to 2020.
Reduced expectations: Tui now expects its annual earnings to come in flat on a year ago
A shift in demand from the western to the eastern Mediterranean also created overcapacity in places such as Spain’s Canary Islands, Tui said.
Hot weather and a weak pound had made it ‘difficult to improve margins on holidays sold to UK customers’, the firm added.
The pound’s weakness has been weighing on the purchasing power of UK-based holidaymakers and means that holiday firms would have to put up prices to maintain profit margins.
Tui added: ‘Previously, it was anticipated that these headwinds would impact primarily the first half (winter), however we are seeing from current bookings an additional impact on the second half (summer), and have updated our guidance accordingly.’
Jitters over Brexit also seem to be taking their toll on the holiday sector, with Tui recently saying it remained concerned over flying rights in the event of the UK crashing out of the EU without a deal.
Tui is in talks with ministers and regulators in the hope of securing a ‘special agreement’ and has begun contingency planning for a hard Brexit.
The group said this includes drawing up ‘scenarios and mitigating strategies for various outcomes.’
Shares in Tui are currently down 16.88 per cent or 199.8p to 984.2p.
In the red: Travel group Tui’s share price fell over 17% this morning
Earlier today, Thomas Cook revealed it was carrying out a ‘strategic review’ of its airline operations, which could include putting it up for sale.
The holiday group’s announcement that it was considering ‘all options to enhance value to shareholders’ sent the firm’s shares up over 13 per cent this morning.
In its first quarter trading update, Thomas Cook said it had swung to a £60million operating loss.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘Reading between the lines of Thomas Cook’s latest trading statement, Brexit is dampening summer holiday bookings, as consumers sit on their hands, waiting for more clarity on the UK’s withdrawal from the EU.’