Tui Group trimmed traditional winter losses by almost 31% to €158.6 million as turnover grew by 7.2% to €6.81 billion.
Europe’s largest travel group reported a “very strong” trading performance for the six months to March 31 from its northern region, including the UK and Ireland, Scandinavia, Canada and Russia.
The region achieved a “substantial increase” in earnings, with demand in the UK remaining strong.
“The rebranding from Thomson to Tui was successfully completed with an additional cost of €20 million in the period under review,” the company said today.
“Earnings by the region also include a benefit of €15 million from the earlier timing of Easter in 2018.”
Underlying earnings for the region improved by 12.7% to give a seasonal loss of €120.5 million against €138 million in the previous winter period.
Summer 2018 trading across the group was described as “very good” with a performance matching company expectations due to a 5% rise in overall bookings.
“Demand for Spain remains strong. Particularly strong growth in bookings is recorded for Turkey, North Africa and Greece. Destinations such as Cyprus, Croatia or Bulgaria also report a sound increase in bookings,” Tui said.
The company is to order a third Hanseatic class new build for Hapag-Lloyd Cruises due for delivery in 2021 as it reported that cruise had “great future potential”.
Due to the continued rise in demand, Tui revealed plans to expand the cruise segment through additional new builds.
The group expects annual earnings growth of 10% for the full financial year despite incurring costs from the collapse of the Niki airline over the winter period.
Demand for summer 2018 holidays from the UK was described as “resilient”, with bookings up 1% on the same time last year.
The margin performance “continues to normalise in line with our expectations, reflecting the impact on the cost base of the weaker pound sterling,” Tui said.
“As expected, the UK is seeing a growth in demand for non-euro destinations such as Turkey, North Africa, Bulgaria and Croatia, as well as a shortening of the average duration of holidays.”
Tui Group CEO Fritz Joussen said: “We continue to deliver growth, all trends remain intact, and our very good trading performance for summer 2018 fully matches our expectations.
“At growth of 26% in our operating result and seven per cent in turnover, Tui Group concludes the first half of financial year 2018 with a very strong set of results, and we reiterate our full-year guidance.
Presenting the group’s first half results on board the new Mein Schiff 1 cruise ship in Hamburg, he added: “The very good earnings growth of 26% in H1 2018 is driven by the continued strong demand for our holiday experiences.
“We offer the right products in the market – Tui hotel brands such as RIU, Robinson and Tui Blue and in particular Tui Cruises’ Mein Schiff fleet are setting standards around the globe.
“Forecasts for cruising are excellent. German and European holidaymakers are beginning to embrace this way to travel.
“Due to demographic change, traditional target groups are growing. At the same time, sea voyages are becoming increasingly popular among families and younger people.
“The convergence of these two very promising trends will further accelerate growth over the next five to ten years. And we are only at the beginning of this trend.”
Additional new vessels will be delivered to Tui’s cruise subsidiaries in 2018, 2019 and 2023 in order to further expand their market positions.
Confirming expansion of the Hapag-Lloyd fleet, Joussen said: “This market is growing strongly. Thanks to its experience, competence and high quality standards, Hapag-Lloyd Cruises offers great potential to attract new international customer groups and deliver stronger growth in the expedition cruise segment.”
Additionally, Tui will continue to expand its 380-strong portfolio of own hotels, including Riu Astoria in Bulgaria, a Tui Sensatori in Rhodes and the recently acquired Riu Palace Zanzibar.
Fiona Cincotta, senior market analyst at Cityindex.co.uk, said: “There was a lot to like about Tui’s release with revenue jumping higher and losses narrowing as customers sought out warmer climates in the likes of Spain, Greece and North Africa, hardly surprising given that harsh weather conditions here until recently.
“Tui’s focus on growing its cruise part of the business appears to be paying off with strong demand evidenced by the need for a new cruise ship, already approved for construction and by solid summer trading quarter numbers; a quarter which is traditionally weak.
“We are still talking about an operating loss but the group remains on target for an annual 10% rise in earnings, a significant achievement given the challenging environment that Tui faces across Europe as consumers are stretched and consumer spending low.
“Under tough financial conditions larger purchases, such as a holiday are often one of the first costs to go.
“However, with UK inflation easing and wages on the up, Tui looks well positioned to capitalise on stronger consumer spending as and when it happens.
“In reflection of the firm’s strength, its share price closed the previous session trading at an all-time high.”