TUI AG returns to dividends as restructuring continues apace

* 2012/13 profit 4.3 mln euros vs forecast 27 mln loss

* Restarts dividend payments earlier than expected

* CEO says restructuring measures taking effect

* CEO says work still to be done on cruises

* Shares rise to five-year high

By Victoria Bryan

HANOVER, Germany, Dec 18 (Reuters) - German travel and tourism group TUI AG (Xetra: TUI1.DE - news) said more work was needed to turn around underperforming cruise and hotels businesses as it targets underlying profit of 1 billion euros ($1.4 billion) in two years' time.

The company, which reported underlying earnings before interest tax and amortisation (EBITA) for the year to end-September up 2 percent, also said it would pay a 0.15 euro per share dividend, the first since 2007, sending its shares to a five-year high.

TUI AG said it was able to pay out a dividend earlier than expected thanks to a reduction in debt, early success from the oneTUI restructuring programme begun by new Chief Executive Friedrich Joussen and positive results at Europe's largest tour operator TUI Travel (LSE: TT.L - news) .

TUI AG owns a 54.48 percent stake in TUI Travel and the London-listed firm, which last week reported a 13 percent rise in profit helped by higher demand in Britain and Germany for more expensive holidays, accounts for 84 percent of its underlying profit.

Joussen, who took over in February, has already sold off the company jet, taken writedowns on the Hapag-Lloyd cruise business and the Castelfalfi resort in Italy and started job cuts at the group headquarters, measures that resulted in one-off costs of 57 million euros in the 2012/13 fiscal year.

His restructuring plan aims to increase underlying group earnings before interest, tax and amortisation (EBITA) to 1 billion euros in the 2014/15 financial year, up from 762 million in the year to end-September 2013.

Shares in the group were up 4.4 percent at 1049 GMT having gained 43 percent this year, outstripping a 20 percent rise for the MDax German index of medium-sized companies.

LUXURY AND ADVENTURES

TUI AG also builds and operates its own hotels and resorts and runs a cruises unit comprising TUI Cruises and Hapag-Lloyd. That division made a loss of 14 million euros for the year, hit by losses at Hapag-Lloyd, which is shifting towards luxury and adventure cruises.

Hapag-Lloyd Cruises saw the average daily rate per passenger increase 5 percent year-on-year but an excess of berths meant occupancy fell 7 percent and rates for its new Europa 2 ship were not as high as expected, Joussen said.

"Luxury has to be in short supply, after all," he said, adding that the group will restrict capacity form next year. Hapag-Lloyd Cruises should be profitable in 2014/15, he added.

In the hotels division, Joussen said that the group would focus investment on its two biggest brands, Spanish hotel chain Riu and club holiday specialist Robinson (LSE: RBN.L - news) , while it had not yet decided if other brands such as Grecotel and Iberotel would remain a part of the group.

Joussen said the Riu currently offered a return on capital of 12 percent, including goodwill, while Robinson was at 6 percent. "It's not great, operationally it's not there yet, but we will improve it," he said.

TUI AG called off merger talks with TUI Travel in early 2013, though a move by shareholder John Fredriksen to up his stake in TUI AG last month has led to speculation a transaction could be revived.

Joussen said there were no plans to restart merger talks.

TUI AG reported net profit after minorities of 4.3 million euros ($5.9 million) for the year to end-September 2013, against expectations for a loss of 27.4 million euros in a Reuters poll.

It said underlying EBITA should increase 6-12 percent in the current business year, while turnover would rise 2-4 percent from the 18.5 billion seen in 2012/13.

Joussen also reiterated plans to achieve a net cash flow of 100 million for the 2014/15 business year, around half of which should be paid out as dividends.