TUI AG :TUIFY-US: Earnings Analysis: Q3, 2017 By the Numbers : August 21, 2017

TUI AG reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of TUI AG – Royal Caribbean Cruises Ltd. and Carnival plc Sponsored ADR (RCL-US and CUK-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 5,338.90 million, Net Earnings of USD 152.50 million.
  • Gross margins widened from 8.82% to 9.13% compared to the same period last year, operating (EBITDA) margins now 4.97% from 5.02%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 5338.9 3316.2 3517.82 6481.84 5164.04
Revenue Growth (%YOY) 3.39 -8.63 -12.59 -27.17 -8.47
Earnings (mil) 152.5 -204.34 -116.69 802.93 79.41
Earnings Growth (%YOY) 92.04 28.18 40.37 28.38 136.81
Net Margin (%) 2.86 -6.16 -3.32 12.39 1.54
EPS 0.04 -0.22 -0.11 0.69 0.08
Return on Equity (%) 5.26 -6.14 -3.21 26.7 3.63
Return on Assets (%) 3.78 -5.47 -2.98 18.8 1.9

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Market Share Versus Profits

Revenues History
Earnings History

TUIFY-US‘s change in revenue this period compared to the same period last year of 3.39% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TUIFY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 60.99% and earnings by 174.63% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 8.82% to 9.13%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

TUIFY-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently -57.55, compared to last year’s level of -62.23 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 2.73% to 2.84% and (2) one-time items. The company’s pretax margins are now 3.12% compared to 1.71% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

TUI AG engages in the provision of tour, hotel and resort, and cruise services. It operates through the following segments: Northern Region, Central Region, Western Region, Hotels and Resorts, Cruises, and Other Tourism. The Northern Region segment includes tour operators, airlines and cruise business in the UK, Ireland and the Nordics. The Central Region segment comprises of the tour operators and airlines in Germany and the tour operators in Austria, Switzerland and Poland. The Western Region segment encompasses tour operators and airlines in Belgium and the Netherlands and the tour operators in France. The Hotels and Resorts segment covers all group-owned hotels and hotel companies of the TUI Group. The Cruises segment consists of Hapag-Lloyd Cruises and the joint venture TUI Cruises. The Other Tourism segment represents the French airline Corsair and, in particular, central Tourism functions such as the TUI Group’s flight control and information technology departments. The company was founded in 1923 and is headquartered in Hannover, Germany.

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