August 9, 2018 / 5:17 AM / a year ago

TUI cautions that summer heatwave to dampen holiday demand

BERLIN/LONDON (Reuters) - European travel and tourism group TUI Group (TUIT.L) said a summer heatwave in northern Europe would prevent it from beating its forecasts, falling in line with rival Thomas Cook TCG.L which has also warned about the impact of hot weather.

FILE PHOTO The TUI logo is seen on a wall at a prototype preview event in London, Britain, October 17, 2017.REUTERS/Hannah McKay/File Photo

TUI stuck to its guidance for underlying earnings to rise at least 10 percent at constant currency this year, but its chief executive warned not to expect results to come in higher than that, sending its shares down 9 percent.

“I would be a little bit cautious this year...We have good visibility of at least 10 percent but to caution that there will not be a massive outperformance on top of 10 percent,” TUI Chief Executive Fritz Joussen told reporters after the company reported third-quarter results.

Last year, TUI exceeded its guidance for growth in core earnings (EBITA) of at least 10 percent when the figure came in at 12 percent.

But the warmer than average weather across its main customer base in northern Europe made outperformance “a little bit less likely” said the CEO. Hot weather means fewer people fly south to the Mediterranean in search of summer sun.

“Tourism companies don’t usually like it when it’s hot, and it is hot. People want to go on holiday when it rains,” Joussen said.

Thomas Cook last week said profit would come in at the lower end of expectations after the summer heatwave kept holidaymakers from booking last-minute trips overseas.

TUI's stock was down 9.4 percent to 1434 pence at 0820 GMT, making the company the top faller on Britain's bluechip index .FTSE.

“Various moving parts including soft UK/France trading and a one-off airline disruption impact in the third quarter indicate some small downside risk to company consensus constant currency earnings of around 11 percent,” Barclays analysts said.

For the third quarter, TUI reported underlying earnings before interest, tax and amortisation down 7.4 percent at 205.1 million euros ($238.1 million). The company tends to make the bulk of its profit in its final quarter when many northern Europeans go on holiday.

TUI, whose customers come from Britain, Germany and Scandinavia, could face disruption next year if Britain leaves the European Union without a deal. The company said it was prepared should that happen.

“If you don’t know, you prepare for the worst case scenario. That is our duty as a company,” Joussen said.

“Are we ready if it happens? Yes.”

Asked for examples of what those preparations entail, Joussen declined to go into detail.

“The list is’re talking about people customers, everything is involved,” he said.

Reporting by Victoria Bryan and Sarah Young; Editing by Ludwig Burger/Keith Weir

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