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Tui usually transports customers to sunnier destinations. But the dual-listed German tour operator is thinking of packing its own bags. It is considering ditching London to make Frankfurt its primary listing. Its possible departure would be another blow to UK capital markets. But it would make sense as Tui gets back on its feet.
Tui chief executive Sebastian Ebel is likely to put the proposal forward at next year’s annual meeting. The UK still accounts for almost two-fifths of group revenues. But three-quarters of shareholders and share-trading volumes are in continental Europe.
The London listing is a quirk of past consolidation. Tui’s tour operating business subsumed the UK’s First Choice Holidays in 2007 to create London-listed Tui Travel. The German and British businesses were joined together in 2014.
An obvious benefit would be lower capital markets costs. Tui would drop out of the FTSE 250 index and unite Germany’s second index, the MDAX. A central and larger pool of trading liquidity should improve the attractiveness of its shares to institutional investors.
Low liquidity is put forward as one of the reasons for the UK market’s persistent valuation gap. Median average daily volumes for the FTSE All Share are just 0.15 per cent of the market value, notes Simon French of Panmure Gordon. That compares with 0.2 per cent for the Stoxx 600 ex-UK and 0.7 per cent for the S&P 500.
Research from the University of Bath suggests changes from the EU Mifid II research unbundling have contributed to the UK’s liquidity crunch. Analyst coverage fell by about 12 per cent for LSE main list companies between 2015 and 2020. In the junior Aim market, where dedicated brokers must be maintained, analyst coverage and liquidity have improved.
Tui hinted at its possible travel plans alongside annual results. Lockdowns, state bailouts and recapitalisations have caused turbulence in recent years. But its first full year of profits since 2019 should mark the first leg of the long journey back to shareholder payouts.
There are few compelling reasons for Tui not to leave London. A greater focus on liquidity by UK regulators might stop others from also taking flight.
