TUI: revenue rebound, need to see profits, cash flow growth


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In a previous article in April, I made the argument that TUI AG (OTCPK: TUIFF) could see short to medium term challenges due to rising fuel prices and flight disruptions due to staff shortages.

Since then, the stock has fallen by almost 40%:

TUI AG stock chart

While the macroeconomic environment has been challenging, I want to assess whether TUI has significant rebound potential going forward – due to a potentially growing disconnect between price and financial performance.


Looking at the revenue performance over the last quarter, we can see that Markets & Airlines has by far generated the largest portion of revenue.

Half-year financial report of the TUI group October 1, 2021 - March 31, 2022

Half-year financial report of the TUI group October 1, 2021 – March 31, 2022

However, comparing performance to 2019 levels, we can see that Markets & Airlines revenues have rebounded strongly to levels close to those seen that year.

In particular, the Spanish market (including the Canary Islands) accounted for more than a third of total turnover.

External revenue broken down by destination: October 2021 to March 2022

TUI Group Finances

Half-year financial report of the TUI group October 1, 2021 – March 31, 2022

External revenue broken down by destination: October 2020 to March 2021

TUI Group External revenues broken down by destination: October 2020 to March 2021

Half-year financial report of the TUI group October 1, 2020 – March 31, 2021

From a balance sheet perspective, we can see that the company’s quick ratio – or a measure of the company’s ability to pay current liabilities without needing to sell inventory – rose from 0.61 in September 2019 to 0.46 in March 2022.

Period March 2022 September 2021 March 2021 September 2020 March 2020 September 2019
Current assets 3549.9 2933.3 2621.4 2693.4 4389.2 4313.5
Inventories 50.1 42.8 71.5 73.2 108.5 114.7
Current liabilities 7680.7 6240.3 4797 5873.2 7777.8 6857.4
Quick report 0.46 0.46 0.53 0.45 0.55 0.61

Source: Figures taken from TUI historical half-yearly financial reports (2019 – present). Quick ratio calculated by the author.

In this regard, we can see that although revenue has rebounded strongly, it has affected the company’s liquidity to some extent. While investors are likely to be willing to temporarily tolerate lower levels of cash as long as revenue rebounds, there will come a time when investors want to make sure the company is generating enough cash relative to expenses. Cash and cash equivalents themselves increased from just over €1 billion in March 2020 to over €1.5 billion in March 2022 (with cash levels in 2019 slightly above €1.7 billion).

Additionally, looking at TUI’s historical earnings per share, we can see that earnings per share have been negative for the past five years when we look at the half-year results:

Period H1 2018 H1 2019 H1 2020 H1 2021 H1 2022
Earnings per share -0.48 -0.58 -1.51 -1.83 -0.47

Source: Figures taken from TUI historical half-yearly financial reports (2019 – present).

Looking forward

From the above, we can see that while TUI managed to pull off a strong revenue rebound, negative earnings growth was an issue even before the pandemic.

From this point of view, we see that the share price has generally been on a downward trajectory since 2015:

TUI AG share price

As I mentioned in my previous article, rising fuel prices could significantly increase the cost of sales in the years to come. While TUI may be able to return to pre-pandemic sales levels, it will cost the company more to make those sales. The fact that the quick ratio has yet to recover to 2019 levels is disheartening.

TUI has also been under pressure due to staff shortages, leading to last-minute cancellations of many flights. Since Markets & Airlines represents the bulk of the company’s revenue, costs related to flight cancellations are likely to affect the company to a greater extent than travel agencies which are less exposed to this segment of the business. ‘industry.

Therefore, despite encouraging growth in segments such as hotels and resorts thanks to rising average daily rates and resilient occupancy levels, such growth is unlikely to offset the pressure on the markets and the airlines.

The main challenge for TUI going forward will be to strengthen Markets & Airlines revenues sufficiently to increase overall profits. The rebound we have seen so far is encouraging. However, the company faces a challenging environment going forward as rising costs are expected to impact earnings. Although the company has seen a strong rebound in cash growth since 2020, investors will also want to see evidence that this growth remains sufficient to cover short-term liabilities.


To conclude, I consider TUI as a detention for the moment. In my view, the stock’s strong rebound in Markets & Airlines earnings does not make the stock a sell at this time.

However, I would watch for strong growth in both earnings per share and quick ratio over the next year as evidence that the company can translate revenue growth into bottom line.

If we see evidence of this, there could be potential for the stock to rebound from here. That said, if sales growth in the next quarter were to fall short of expectations, then the stock could face a further decline.


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