TUI Travel (LSE:TT.), the world’s biggest tour operator, beat forecast profits thanks to strong sales of more expensive holidays in the UK and Germany, and said it would hit ambitious 2014 targets as people spend more on foreign holidays.
The British group, which owns the Thomson and First Choice holiday brands, posted a 13 percent rise in underlying operating profit on Tuesday – higher than its upgraded 11 percent guidance – as a result of the growing popularity of higher-margin holidays, such as all-inclusive deals, and packages to further-away destinations.
The company said it was confident of delivering its target for underlying profit growth of 7 to 10 percent next year and for the following four years, given encouraging winter trading and early summer holiday sales.
Chief Executive Peter Long noted in particular that TUI was benefiting from an improvement in sales of holidays to Egypt after Britain’s foreign office recently relaxed some of its travel advice.
TUI hiked its final divided by 17 percent to 9.75 pence per share, bringing the full-year payout to 13.5 pence per share, 15 percent higher than last year.
“In the UK, given improving consumer confidence, rising house prices, economic growth and increasing employment, we believe that the trading outlook for summer 2014 is increasingly positive,” said Numis analyst Wyn Ellis, who upped his target price for the stock to 425 pence from 400.
Shares in the company were down 0.4 percent at 382.9 pence at 1145 GMT, having earlier reached 396.7 percent.
Investec analyst James Hollins said TUI’s guidance for a flat performance in the first half of the year, excluding Easter which in 2014 falls in its fiscal second half, could put pressure on the company to meet its profit growth targets.
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