When 14 per cent of your customers fly to Turkey and a smaller but significant proportion go to Tunisia and Egypt, the events of the past year will have taken their toll.
TUI was forced to stop flying to Sharm-el-Sheikh after a Russian airliner came down in October. Holidays in Turkey understandably are less popular, too, given the news headlines, and TUI had to find alternative destinations. It bought €26 million of capacity in the Canaries, although this is at lower margins than the Middle East, while bookings to Spain were up by 10 per cent to 20 per cent.
In the event, then, as many of those Middle East holidays are winter ones, the third-quarter results held up quite well. The skiing side was affected by a lack of snow. So far, though, 82 per cent of holidays are sold for this winter, not substantially behind the 84 per cent last year.
The German market remains overcrowded and competitive, though new management is taking action. Stepping up to the plate are British holidaymakers, with bookings up 3 per cent in the winter and 9 per cent for next summer. Long-haul holidaymakers’ bookings are up by 10 per cent.
So third-quarter turnover was up by more than 5 per cent and the expected loss, at the earnings level, off by 3 per cent at €101.7 million. TUI is still seeing the benefits of the merger between the Thomson holidays operator TUI Travel and the German parent in December 2014. Total synergies will not finally arrive until three years into the deal, which provides a bit of uplift for the future.
The company is, however, confident enough to repeat earlier guidance that earnings will be up by at least 10 per cent this year — not bad, given those headwinds.
The formal sale of Hotelbeds, an online hotel booking business, is under way and should complete this year. This is a non-core business and Friedrich Joussen, the new chief executive, is keen to focus on hotels and cruises. The business should fetch €1 billion, according to travel trade press reports.
The shares, off 15p at £10.83, sell on about 12 times’ earnings. I would be nervous over anyone in the travel industry at present, though.
When 14 per cent of your customers fly to Turkey and a smaller but significant proportion go to Tunisia and Egypt, the events of the past year will have taken their toll.
TUI was forced to stop flying to Sharm-el-Sheikh after a Russian airliner came down in October. Holidays in Turkey understandably are less popular, too, given the news headlines, and TUI had to find alternative destinations. It bought €26 million of capacity in the Canaries, although this is at lower margins than the Middle East, while bookings to Spain were up by 10 per cent to 20 per cent.
In the event, then, as many of those Middle East holidays are winter ones, the third-quarter results held up quite well. The skiing side was affected by a lack of snow. So far, though, 82 per cent of holidays are sold for this winter, not substantially behind the 84 per cent last year.
The German market remains overcrowded and competitive, though new management is taking action. Stepping up to the plate are British holidaymakers, with bookings up 3 per cent in the winter and 9 per cent for next summer. Long-haul holidaymakers’ bookings are up by 10 per cent.
So third-quarter turnover was up by more than 5 per cent and the expected loss, at the earnings level, off by 3 per cent at €101.7 million. TUI is still seeing the benefits of the merger between the Thomson holidays operator TUI Travel and the German parent in December 2014. Total synergies will not finally arrive until three years into the deal, which provides a bit of uplift for the future.
The company is, however, confident enough to repeat earlier guidance that earnings will be up by at least 10 per cent this year — not bad, given those headwinds.
The formal sale of Hotelbeds, an online hotel booking business, is under way and should complete this year. This is a non-core business and Friedrich Joussen, the new chief executive, is keen to focus on hotels and cruises. The business should fetch €1 billion, according to travel trade press reports.
The shares, off 15p at £10.83, sell on about 12 times’ earnings. I would be nervous over anyone in the travel industry at present, though.
First-quarter turnover €3.72bn
MY ADVICE Avoid for now
WHY The company has bounced back well from the setbacks in various markets, but there is still considerable downside risk
The market’s view of the housebuilders is, frankly, baffling. One can see how Berkeley Group might be vulnerable at the top end of the market to a dearth of rich overseas buyers, but shares in the other housebuilders have been sold on Friday, in Monday’s rout and again yesterday.
Shares in Redrow have lost about 5 per cent of their value in both the latest trading sessions, despite some halfway figures that indicate that everything is going as well as it could be, as it is at the other builders that have reported lately.
Redrow is bang in the middle market, spread around the UK and has little exposure to overheated central London, preferring to focus on the more profitable suburbs, such as a large new site for 3,000 units in Colindale in the north of the capital. The company chose to go for growth a few years ago and buy land, which turned out to be exactly the right thing to do, and interim revenues to December 31 at £603 million are pretty well where they were for the full year then.
The order book at the end of the first half was up by 51 per cent year-on-year and, since the start of the second, reservations are 10 per cent ahead. Redrow raised the number of completions by 18 per cent to 2,178, and there seems no reason why this rate of growth should not continue. Yet the shares fell 18p to 404p.
The dividend is being pushed up from 6p to 10p for the year, though this is not one of the sector’s high-yielders. With the shares on 1.4 times net assets, the share price fall looks overdone.
£603m Revenue 4p Dividend
MY ADVICE Buy long term
WHY Market is taking too pessimistic a view of sector
Shares in Sophos Group are well below their 225p summer flotation price, losing another 30p to 176¼p after a perfectly acceptable third-quarter trading update. This is not entirely the company’s fault; it makes cybersecurity software and is exactly the sort of largely unproven techie that the market has fallen out of love with in these risk-averse times. One analyst estimated that the prices of the peer group, most of them US stocks, used to value the float had fallen by an average of 39 per cent.
Sophos makes more than half its sales in Europe and opted to float in London. Four fifths of these billings are recurring, so are secure enough. It expects to grow billings by about 20 per cent this year, after a 17 per cent rise in the first quarter, ahead of the inevitable damage from the low euro and sterling against the dollar, which reduced the reported figure to almost 11 per cent.
The company has made its first acquisition, another cybersecurity business. In the next financial year both profits and cashflow will grow, unlike some of those peers, though the shares do not trade on any meaningful multiple. Sophos is doing all the right things, but investors are going to have to be patient.
17.4% Rise in third-quarter billings
MY ADVICE Avoid for now
WHY Market has lost trust in unproven tech stocks
And finally ...
Note the shares of RWS Group, up 3.4 per cent even in yesterday’s market. There had been doubts expressed in the autumn over this provider of translation services, which enables companies to protect their intellectual property. In the first three months of the year the company did significantly better than the board’s expectations. The signs are positive for CTi, the specialist in serving the life sciences sector bought in October for $70 million and set to deliver a 43 per cent increase in sales for 2015.
Follow me on Twitter for updates @MartinWaller10
