Tui shares dive after heatwave hits margins

Shares in Tui have tumbled after the holiday giant cut its earnings forecast as it nurses a hit from last year’s “extraordinary hot weather” and the weak pound.

The group said late on Wednesday that it expects adjusted earnings for the year ended September 30 to come in flat at around 1.17 billion euros (£1 billion).

This compares to previous guidance for at least 10% growth in earnings during the three years to 2020.

Explaining the downgrade, TUI said the out of the ordinary hot weather last summer resulted in later bookings and also hit margins.

Shares crashed on Thursday on the news, diving more than 16% to 986p.

It also cited the “continued weakness of the pound sterling, making it difficult to improve margins on holidays sold to UK customers”.

A shift in demand from the western to the eastern Mediterranean created overcapacity in places such as Spain’s Canary Islands, the firm added.

“Previously, it was anticipated that these headwinds would impact primarily the first half (winter), however we are seeing from current bookings an additional impact on the second half (summer), and have updated our guidance accordingly,” Tui said.

Brexit is also weighing on the industry, with Tui recently saying it remains concerned over flying rights in the event of the UK crashing out of the EU without a deal.

It is in talks with ministers and regulators in the hope of securing a “special agreement” and has begun contingency planning for a hard Brexit.

The group said this includes drawing up “scenarios and mitigating strategies for various outcomes”.