Luxury overseas holidays boost Thomson profit

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Strong demand for luxury, all-inclusive package holidays helped Thomson and First Choice owner Tui Travel beat profit forecasts.

The world’s biggest tour operator reported a sharp rise in sales of more expensive holidays in the UK and Germany and said it would hit ambitious 2014 targets as people spend more on foreign holidays.

The group reported a 13 per cent rise in underlying operating profits in the year to September 30, thanks to the growing popularity of higher-margin holidays, such as all-inclusive deals where people know they won’t be charged more for food and drink.

Packages to more exotic, long haul destinations have also proved popular.

Analysts said the result was all the more impressive as the UK heatwave persuaded many people to holiday at home rather than look for last minute getaways.

The company said it is confident it can meet its target for underlying profit growth of seven to 10 per cent next year and for the following four years, given the encouraging winter trading and early summer holiday sales.

Tui’s chief executive Peter Long said the group has seen an improvement in sales of holidays to Egypt after the foreign office relaxed its travel advice following political unrest earlier this year.

Underlying pre-tax profits rose 21 per cent to a higher-than-expected £473m in the year to September 30.

Package holiday sales rose five per cent in the UK, driven by the focus on more profitable, unique holidays targeted at couples and those looking for luxury resorts, such as Sensatori and SplashWorld, which now account for 83 per cent of all departures.

Mr 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 per cent to £181m as it was hit by write-downs in its specialist and activity division and its embattled French tour operator, which reported annual losses of £60m.

Profits in France were 28 per cent lower, in sharp contrast to the UK business, where profits rose 27 per cent, and Germany, which reported profit growth of 30 per cent. The French business is being restructured.

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