TUI Group: Expecting double-digit earnings growth also for 2018

Group again delivers profitable 9M result
9M 2018: Turnover up by 6.3 per cent
Second year of profitable 9M underlying EBITA: up +57.7 million euros to
65.0 million euros1
Current booking levels ahead of prior year despite prolonged hot summer
Impact from airline disruption in Europe of around 13 million euros
Full-year guidance reiterated: underlying EBITA growth of at least +10 per cent1
CEO Fritz Joussen: “Expecting 2018 fourth consecutive year of double-digit growth. TUI delivers a strong operational performance and has a good strategic positioning. Hotels and Cruises deliver sustained earnings growth all year round.“

Hanover, 9 August 2018. “A good third quarter, very good nine-month results,” said Fritz Joussen, TUI Group CEO, at the presentation of the results for the completed quarter. TUI Group has delivered its second consecutive year of profitable 9M results. In the period from 1 October 2017 to 30 June 2018 and based on constant currency, underlying EBITA improved by 57.7 million euros year-on-year to 65.0 million euros. Turnover grew by 6.3 per cent to 11.830 billion euros. At constant currency turnover growth was 7.6 per cent. Fritz Joussen: “Our sector earns its profits in the fourth quarter. We have delivered a profitable operating result already after nine months for the second year in a row. For the full year, we expect to deliver double-digit earnings growth for the fourth consecutive time. We have considerably reduced our seasonality and thus our susceptibility to external challenges through the Group’s transformation focussing on hotels and cruises. TUI is in good health, we are flexible, deliver a strong operational performance and invest in our growth segments while maintaining our cost discipline. Early bookings and sustained growth at hotels and cruises limit the impact of the prolonged warm weather across Northern Europe. We reiterate our guidance for the full financial year and expect our underlying EBITA to grow by at least 10 per cent¹.“

Overview 9M and Q3 2018
In the first nine months of financial year 2018, TUI Group delivered turnover growth of
6.3 per cent to 11.830 billion euros (previous year 11.129 billion euros). On a constant currency basis turnover grew by 7.6 per cent. Underlying EBITA grew by 57.7 million euros to 65.0 million euros at constant currency. Including the currency effect underlying EBITA climbed by 27.5 million euros to 34.8 million euros. In the reporting period Q3 2018, turnover rose by 5.0 per cent to 5.016 billion euros (previous year 4.775 billion euros). On a constant currency basis and excluding the impact from the earlier timing of Easter, underlying EBITA totalled 227 million euros, up 2.4 per cent year-on-year (221.6 million euros). Including foreign exchange translation and the Easter impact, it declined by 12.7 per cent to 193.4 million euros.

Overview of the segments – Holiday Experiences

TUI Hotels & Resorts delivers good performance with high levels of occupancy

In Q3 2018, Hotels & Resorts delivered a strong overall performance. On a constant currency basis, the operating result rose to 86.0 million euros (previous year 77.7 million euros). Average occupancy in the segment improved considerably, while average rates remained broadly in line with prior year despite a negative impact of foreign currency translation.

• Underlying EBITA: -3.9 per cent to 74.7 million euros (previous year 77.7 million euros)
• Underlying EBITA at constant currency: +10.7 per cent to 86.0 million euros
• Average revenues per bed: 59 euros (previous year 59 euros)
• Average occupancy: 80 per cent (previous year 75 per cent)

Cruises: sustained growth roadmap – Additional capacity, higher rates, better earnings

Cruises continue to deliver a strong performance in 2018. All trends indicate that the growth of the cruise sector will continue in the next decade. TUI is prepared for that trend. It will expand its entire fleet by newbuilds scheduled for delivery in 2019, 2021, 2023, 2024 and 2026. The performance delivered by all three brands, TUI Cruises, Marella Cruises and Hapag-Lloyd Cruises, confirms the strong demand. The underlying result was substantially increased in the reporting period:

• Underlying EBITA: +35.5 per cent to 90.9 million euros (previous year 67.1 million euros)
• Underlying EBITA at constant currency: +36.1 per cent to 91.3 million euros
• Average rate per passenger per day:
  • TUI Cruises 200 euros (previous year 183 euros)
  • Marella Cruises 138 GBP (previous year 126 GBP)
  • Hapag-Lloyd Cruises 571 euros (previous year 562 euros)
• Average occupancy:
  • TUI Cruises 99 per cent (previous year 101 per cent)
  • Marella Cruises 100 per cent (previous year 100 per cent)
  • Hapag-Lloyd Cruises 76 per cent (previous year 73 per cent)

Destination Experiences
TUI Destination Experiences (based in Palma de Mallorca) delivered a good operational performance in the third quarter. Q3 arrival guests grew by eight per cent. TUI continued to expand its business with services, excursions and experiences in the destinations. The acquisition of Destination Management announced in the period under review was completed in early August. With this, TUI will become one of the world’s leading providers of destination services and leisure activities as well as handling agent for its own and third-party cruise lines in the ports.

• Underlying EBITA at constant currency: +16.4 per cent to 15.6 million euros
• Underlying EBITA: +14.2 per cent to 15.3 million euros (previous year 13.4 million euros)

Markets: +4.4 per cent growth in customers, +4.7 per cent growth in turnover across all regions

In Q3 2018, Central Region (Germany, Austria, Switzerland, Poland), the Nordic countries, Belgium and the Netherlands delivered a good operational performance. This was offset by margin effects in the UK due to the weaker pound sterling, a negative Easter effect of
19 million euros and a one-off effect of around 13 million euros as a result of airline disruption, driven by air traffic control strikes in France. Customer volumes increased by
4.4 per cent across all regions, with turnover up by 4.7 per cent to 4.41 billion euros (previous year 4.21 billion euros).

• Underlying EBITA all regions: -54.5 per cent to 42.5 million euros (previous year
  93.5 million euros)
• Underlying EBITA all regions at constant currency: -56.4 per cent to 40.8 million euros

In Northern Region (UK & Ireland, Nordics, Canada, Russia), the Nordics continued to perform very well. The business continues to benefit from the use of the centrally introduced Group-owned Yield Management and CRM systems. In the UK, demand remained resilient in the quarter under review, however, margins continued to be impacted by the weaker pound sterling. Earnings in the UK were also impacted by airline disruption in Europe and the negative Easter effect.

• Underlying EBITA Northern Region: -80.2 per cent to 16.0 million euros (previous year 81.0 million euros)
• Underlying EBITA Northern Region at constant currency: -82.3 per cent to 14.3 million euros

-        We are very satisfied to see that the Nordic market continues to perform so well in the third quarter. The global brand is paying off and we are seeing strong results in all four Nordic countries. I feel confident in continuing on our ambitious strategic path. Our goal is to manifest TUI as the go-to holiday brand for all Nordic customers as well as a top employer for digital talent, says Alexander Huber, CEO TUI Nordic.

Central Region (Germany, Austria, Switzerland, Poland) delivered five per cent growth in customer volumes in the period under review. Germany recorded a very good trading performance in the third quarter. TUI also continued to gain market share in Poland. Earnings by Central Region were also impacted by airline disruption and the Easter effect.

• Underlying EBITA Central Region: +44.5 per cent to 35.4 million euros (previous year 24.5 million euros)

In Western Region (Belgium, the Netherlands, France), Belgium and the Netherlands performed well and also managed to deliver an increase in customer volumes. France leveraged additional synergies from the takeover of Transat, achieved cost reductions and streamlined costs processes and structures. Nevertheless, the competitive environment remains challenging in France. The flight cancellations in Europe and the Easter effect also impacted Western Region.

• Underlying EBITA Western Region: +25.8 per cent to -8.9 million euros (previous year -12.0 million euros)

Good trading performance – hotels and cruises continuing to perform well,
Summer 2018 bookings of markets ahead of prior year
Hotels and Cruises remain the Group’s growth pillars and continue to perform well. While Jandia Playa, the first Robinson Club ever to open its doors, will remain closed for comprehensive renovation and refurbishment work until the end of the year, the Group’s Turkish and North African hotels are again recording a considerable increase in booking levels. High demand is also seen for Greece. TUI hotels in Spain continue to deliver good booking levels, in particular against strong prior-year comparatives.

The cruises segment delivers higher rates and better earnings whilst at the same time significantly increasing capacity.

Trading performance for Summer 2018 (as at 29 July 2018) is good, bookings are ahead of the previous year. The high level of early bookings helps to offset the impact of the sustained good weather in our key markets this Summer. Spain remains the top destination. Turkey has caught up strongly and continues to record strong growth in bookings, along with North Africa and Greece. Destinations such as Cyprus, Croatia or Bulgaria also report good growth in bookings.

• Source market turnover: +5 per cent¹
• Bookings: +4 per cent