Thomson holidays-owner TUI (TUI) continues to feel the heat from falling holiday demand in Turkey and parts of North Africa. While breaks remain popular elsewhere around the Mediterranean, Caribbean and for cruises, it is not enough to reassure investors.

Both Turkey and parts of North Africa have experienced terror related attacks during the past year or so.

Shares in Europe's largest tour operator fell 4%, or 49p, to £11.41.

Half year results from TUI show losses before tax running up to €310.8m for the six months to 31 March 2017, albeit, showing a substantial improvement on the €422.9m chalked-up during the first half of last year.

tui graph

AJ Bell investment director Russ Mould believes investors are unconvinced that TUI will be able to boost its underlying earnings by at least 10% this year, which the group announced in February.

Sales are up 3.3% year-on-year to €6.38bn, helped by increased long-haul flights and higher selling prices. Cost inflation in the Eurozone and currency movements also helped. The company also says growth in Thomson Cruises contributed with its first-time operation of cruise ship business TUI Discovery over the winter.

But analysts remains sceptical. Mark Irvine-Fortescue of Panmure Gordon remains convinced that the group will need more cash to boost earnings growth. That implies less money left on the table for shareholder payouts, acting as a ‘catalyst for share price underperformance,’ he says.

The analyst believes the €0.7 dividend in the year to 30 September 2017 will not be covered by free cash flow, which Shares highlighted in March.

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Issue Date: 15 May 2017