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European travel giant deals blow to London stock market

Tui is one of the world’s largest tourism businesses, spanning more than 400 hotels, 16 cruise ships, 1,200 travel agencies and five airlines - Lindsey Wasson/Reuters

Travel giant Tui is considering plans to scrap its listing on the London Stock Exchange, dealing a fresh blow to the City as ministers battle to revive its reputation as a financial hub.

Europe’s biggest travel operator said it was exploring the move after shareholders raised questions over whether its dual listing structure across London and the Frankfurt Stock Exchange was “optimal and advantageous”.

Increased scrutiny from investors has led to Tui proposing a vote at its annual general meeting in February, which will determine whether the business should switch to a sole listing to Germany.

Tui has been listed on both stock exchanges since 2014 when UK-based Tui Travel, known for its Thomson and First Choice travel agencies, merged with its largest shareholder, German-based Tui AG.

The tie-up created one of the world’s largest tourism businesses, spanning more than 400 hotels, 16 cruise ships, 1,200 travel agencies and five airlines.

The company’s potential departure from the Square Mile will spark fresh concerns over its ability to retain and attract companies, particularly after a string of high-profile exits.

That includes building materials company CRH and plumbing equipment supplier Ferguson, which shifted their listings to New York.

Ministers have been seeking to cut red tape in a bid to make London a more attractive place to list.

However, Tui bosses said they have seen a significant shift in the ownership of shares from the UK to Germany in the past four years.

Tui chief financial officer, Mathias Kiep, said around 75pc of Tui’s shares “are now held in Germany or in the German register”, adding: “There were comments during our roadshow where people asked me, why do you still have this listing structure? Why is the liquidity not pooled in one exchange? That would be better for us as investors and we would also encourage you to think about whether there’s a better index.”

Tui dropped out of the FTSE 100 in early 2020 after the pandemic caused its shares to crash. It is still trading around 80pc lower than it was in late 2019 despite travel demand bouncing back.

On Wednesday, the company said it had swung back to a profit in its latest financial year to the end of September after reporting record revenues.

The group reported pre-tax earnings of €551.2m (£471.9m) for the year to September 30 against losses of €145.9m in 2022.

It is expecting underlying earnings to jump by at least 25pc in the new financial year, with sales also set to rise by another 10pc.

Mr Kiep said there were benefits from being based purely in Europe as it makes operations easier post-Brexit.

However, chief executive Sebastian Ebel stressed that any departure from London was not a political decision: “It’s just that it could make the structure easier.”

He said British tourists still formed “the most important market for us”.

Tui’s brand has been a cornerstone of many British high streets for years, particularly through Thomson travel agents – which had a history dating back 50 years before the brand was phased out in 2015 as part of a push to unify brands under the Tui umbrella.

Its complex dual listing structure comes from Tui having been formed from a merger of the German Tui AG business and the London-listed Tui Travel business in 2014.

At the time, Tui AG held a majority stake in Tui Travel, having helped create the business through a merger of its travel arm and Britain’s First Choice.

Tui’s management is expected to consider the potential listing change over the next few weeks before a final decision is made in February.

If approved, the listing change could allow Tui to upgrade to a prime standard listing on Frankfurt’s MDax index.

Ivor Jones, an analyst at Peel Hunt, said there could be a benefit to making the switch: “It will probably be more relevant to more investors if it becomes a member of the MDax index.”

However, he said it came at a time when concerns were mounting over the health of Britain’s stock market, where the number of listed companies was shrinking.

In a research note on Wednesday, Peel Hunt highlighted a series of issues holding back the City.

Charles Hall, head of research at the broker, said Britain did not have enough investment reserves to help listed companies grow.

He said this was because UK pension and insurance funds have been steadily withdrawing from British shares.

In 1992, UK pension funds held 32.4pc of British shares, according to the Office for National Statistics. In 2022, this proportion hit a record low of just 1.6pc.

Mr Hall said: “The drain of investment over the past few years means that there is a scarcity of funds available to support IPOs (there has only been one of note so far this year) and to support growth companies that are already listed.”

The result is lower company valuations, he said, which means British companies are increasingly likely to be bought out: “This has made the UK a happy hunting ground for both corporate and financial buyers.”