TUI Travel hails profits record

Thomson and First Choice owner TUI Travel reported another year of record results today as its new line of luxury all-inclusive deals kept up demand for package holidays.

Europe’s biggest travel company shrugged off the impact of this summer’s heatwave to post its highest ever earnings across the business and in its UK arm, with overall underlying pre-tax profits surging 21% to a higher-than-expected £473 million in the year to September 30.

Package holiday sales rose 5% in the UK, helped by its focus on more profitable unique holidays targeted at groups including couples and those looking for luxury resorts, such as Sensatori and SplashWorld, which now account for 83% of all departures.

UK underlying earnings rose by more than a quarter – 27% – to £251 million.

But despite profits hitting yet another all-time high, TUI revealed it paid just £14 million of UK corporation tax as it continues to offset losses incurred following a restructuring launched six years ago.

It courted controversy last year when it admitted paying zero UK corporation tax.

But the group said it paid another £96 million of corporation tax in other countries and expects to pay tax of around 20% of underlying pre-tax profits as its tax bill begins to normalise.

Chief executive Peter Long said: “The year has been outstanding and highlights that our strategy of delivering unique holidays sold directly to our customers is the right one.”

On a bottom line basis, pre-tax profits fell 10% to £181 million as it was hit by write-downs in its specialist and activity division and embattled French tour operator, which saw annual losses widen to £60 million.

TUI said current trading was “robust” with 60% of its 2013/14 winter holidays already sold, while it added it was pleased with demand for next summer despite strong comparatives.

It has sought to minimise the impact from travel restrictions amid the political unrest in Egypt – traditionally a popular winter destination – by cutting its service to the country, which now accounts for less than 5% of its programme.

Its markets now have Egypt programmes back on sale, but it said customer demand remained lower than a year earlier.

Excluding Egypt, UK winter holiday bookings are 1% higher, while it has seen a 6% rise in average selling prices.