TUI Group confident on earnings as it sidesteps tourism sector's woes

* FY earnings up 10.9 pct to 1.147 billion euros

* Sees (Shanghai: 600481.SS - news) 2018-19 earnings growing at least 10 pct

* Shares (Berlin: DI6.BE - news) up 5.9 pct (Adds CEO comment, share price)

By Sarah Young

LONDON, Dec (Shanghai: 600875.SS - news) 13 (Reuters) - European travel and tourism group TUI Group posted an 11 percent rise in annual earnings, and said next year would generate similar growth, as its higher-margin hotel and cruise businesses help it eclipse smaller rival Thomas Cook (Frankfurt: A0MR3W - news) .

Thomas Cook last month posted an almost 20 percent fall in annual earnings and suspended its dividend, blaming a heatwave in summer in northern Europe which it said had hit demand in the most profitable part of its season.

TUI (LSE: 0NLA.L - news) was much less affected thanks to the set-up of its hotel and cruise business and said it was confident of delivering future growth despite what it described as a "challenging" market environment.

"Uncertainties are increasing, look at Brexit developments, look at the weather. The nice thing, our business model and transformation, seems to be not affected," CEO Fritz Joussen told reporters on a call on Thursday.

The company owns many more of its hotels than Thomas Cook and also owns a large cruise ship business, boosting its margins compared to its rival, which buys hotel space in advance, and meaning TUI profits are less exposed to unpredictable trading.

Last year it derived 70 percent of its earnings from the cruise, hotel and related businesses.

Like Thomas Cook, however, TUI's markets and airlines division was hurt by airline disruption, hot summer weather and a weaker pound, dragging down earnings by about 15 percent in that unit.

CONFIDENT ON FUTURE

But on a group basis, TUI's earnings were barely dented by those difficulties.

For the 12 months ended Sept. 30, TUI reported core earnings (EBITA) of 1.147 billion euros at constant currency, beating a consensus forecast of 1.145 billion euros, and up 10.9 percent compared to its forecast for growth of at least 10 percent.

For the current 2018-19 year, TUI said it would deliver underlying earnings of at least 10 percent at constant currency, despite it flagging that winter trading was just below last year's level, with bookings trailing by 1 percent.

Shares in TUI, which have lost about 34 percent of their value over the last six months partly due to investor negativity towards the sector, were up 5.9 percent to 1,207 pence at 0936 GMT.

Looking at uncertainties next year, when Britain, one of its biggest markets, will leave the European Union in March, possibly without a deal, Joussen said that TUI's business model was robust and he expected the UK market to "stay intact".

TUI proposed lifting its annual dividend to 0.72 euros per share from last year's payout of 0.65 euros. (Reporting by Sarah Young, editing by James Davey and Adrian Croft)