TUI Group has released full year results that highlight how the COVID-19 pandemic has devastated the travel industry this year. After beginning the year with record bookings, a strong outlook and increased capacity planned for the summer, TUI has been forced to slash holiday itineraries and rely on emergency financial rescue packages.
TUI Group (TUI) reported a £2.7 billion loss for the year ended September 30, 2020, with a drop in revenue of 58% from the previous year. Customer volumes were down 62% and the company dividend was suspended as a requirement of the German Support Package.
TUI announced in May that it would be cutting 8,000 jobs and closing 166 travel agency branches in the UK and Ireland, with the intention of permanently reducing costs by 30%. They have received multiple financial support packages since the pandemic hit as their net debt deteriorated from €910 million for FY19 to €4.5 billion for FY20.
The company expects 2021 to be a “transition” year as capacity for Winter 20/21 has been adjusted to 20%. They expect to operate at 80% adjusted capacity by Summer next year.
Brexit is another concern for TUI as without a free trade agreement between the UK and the EU, they remain uncertain as to whether they will have full access to EU airspace once the transition period ends. (See TUI stock analysis on TipRanks)
Consensus among analysts is a Strong Sell, with 0 Buy recommendations, 1 Hold and 5 Sells. The average price target is 206.57p, which implies a possible decrease of 52% over the next 12 months.
James Wheatcroft of Jefferies reiterated his Sell recommendation three days ago and lowered his price target to 90.27p. This would suggest an 80% fall in price from current levels over the next 12 months.
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