December 8, 2016 / 7:27 AM / 7 months ago

TUI Group forecasts profit growth of 10 percent a year until 2019

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The website of German tourism group TUI AG, owner of Europe's largest travel company TUI Travel, is pictured on a mobile phone in this illustration picture taken in Lavigny May 20, 2012.Valentin Flauraud

LONDON (Reuters) - TUI Group (TUIT.L), Europe's largest travel company, announced an extended profit forecast on Thursday in a show of confidence after posting 12.5 percent annual core earnings growth despite disruption as holidaymakers avoided destinations such as Turkey.

TUI said it was extending its guidance for profit to rise by at least 10 percent a year to its 2018/19 financial year from the 2017/18 period, citing its strong outlook, and future investment in hotels and cruises.

"The transformation of the business from a trading company into a integrated company with hotels and cruises at the core of the business will deliver the results," Chief Executive Fritz Joussen told reporters.

Barclays analysts called TUI's profit guidance "robust in a challenging environment".

Looking to its new financial year, TUI said winter bookings were up 5 percent, while for the summer season, when it makes the bulk of its profit, bookings from the UK market were up 9 percent, TUI said, driven by demand for holidays to long-haul destinations in the Caribbean, Mexico and United States.

That growing appetite for holidays further afield helped TUI post core earnings growth of 12.5 percent in its 2015/2016 financial year, despite a difficult geopolitical backdrop.

Holidaymakers turned their backs on formerly popular Turkey in 2016 after a series of bombings and a failed coup, forcing travel companies to shift customers to Spanish and Portuguese destinations in the western Mediterranean.

TUI was less impacted by the Turkish issue than its smaller rival Thomas Cook (TCG.L), the market leader in that country.

Both companies, however, also had to contend with Britain's vote in June to leave the European Union, which sent the value of the pound plunging, and led to worries that Britons would have less money to spend on holidays.

But to date, British holidaymakers have not been affected.

"If you think about Brexit, I would say I don't see a negative impact," Joussen said.

"The early bookings are indicating that it will be a good summer also next year despite Brexit."

TUI said that at constant currency rates, core underlying profit (EBITA) came in at 1.030 billion euros (875.39 million pounds) in the 12 months ended Sept. 30, up 12.5 percent compared to the year before, and in line with its forecast for growth of between 12 and 13 percent.

Shares in TUI, which also said a plan to sell its Travelopia arm was on track, traded up 0.6 percent to 1,072.5 pence at 0920 GMT (10.20 a.m. BST).

Reporting by Sarah Young; editing by Kate Holton and David Evans

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