May 15, 2017 / 6:34 AM / in 2 months

UPDATE 2-Tour operator TUI Group says UK sales slow, shares drop

3 Min Read

* UK summer bookings now flat

* Shares drop almost 4 pct

* Confirms guidance for underlying EBITA rise of at least 10 pct (Recasts with comments on UK, shares)

By Victoria Bryan

BERLIN, May 15 (Reuters) - Europe's largest tour operator, TUI Group, said UK sales and bookings for the summer had slowed, hitting its shares on Monday.

The fall in sterling against the euro following Britain's vote to leave the European Union has made it more expensive for Britons to holiday overseas and "staycations" are enjoying renewed interest.

TUI said that summer bookings from British customers were currently flat with revenues up 8 percent, a slowdown from February, when it said UK summer bookings were up 3 percent this year and revenues were 12 percent higher.

"There's no doubt that in the UK, times will be a little more tough in the future than they have been in the past," Chief Executive Fritz Joussen told analysts on Monday, after the group reported first-half results.

He said it was doubtful whether the UK division would maintain its profit margin this year, and the company would look at shifting some capacity.

TUI's shares dropped 3.9 percent, the biggest faller among European travel and leisure stocks. Shares in smaller rival Thomas Cook, which reports results on Thursday, were down 2.6 percent.

Tour operators have also been hit by a shift in demand away from North Africa and Turkey to western Mediterranean destinations due to security concerns.

Joussen said that TUI, which is investing in more of its own hotels, would look to see if the situation in Turkey provided any opportunities for the group to buy up distressed assets.

In Germany, TUI's airline TUIfly is benefiting from problems at rival Air Berlin, which is restructuring amidst record losses, Joussen said.

TUI plans to spin off TUIfly into a leisure airline joint venture with Etihad, but the process has been slower than expected. Joussen said it was a difficult project and the company would rather take its time over the deal to ensure the best result.

Overall, the group reported a second-quarter underlying EBITA loss of 177.7 million euros ($194.2 million) at constant currencies, against a loss of 126 million in the year-earlier period.

Adjusted for the late timing of Easter this year, the loss for the first six months of the financial year improved 6.3 percent to 193.3 million euros, TUI said.

It confirmed a target to increase underlying earnings before interest, tax and amortisation (EBITA) by at least 10 percent this year.

$1 = 0.9150 euros Reporting by Victoria Bryan; Editing by Maria Sheahan and Susan Fenton

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