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Thomas Cook lands profit

The tour operator appears to have put years of losses behind it and has a clearer plan for the future
November 25, 2015

The pressure on travel stocks in light of recent terrorist attacks has, inevitably, dragged on tour operator Thomas Cook (TCG). But the group stood well ahead in the market's top risers on results day, thanks to a return to profit for the first time in five years. Chief executive Peter Fankhauser, who has been in the top job only a year but at the group since 2001, said the results were underpinned by a "significantly stronger" balance sheet.

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The UK, the company's second largest division by revenue, stood out for its 42 per cent rise in underlying operating profits to £119m, driven by increased take-up of its higher-margin own-brand hotels. Good passenger numbers helped its northern Europe and German airlines divisions deliver underlying operating profits up 23 per cent and 19 per cent, respectively. But continental Europe, the largest division by revenue, experienced a profit fall of 21 per cent, due to competitive pressures and fewer French tourists travelling to North Africa. Mr Fankhauser said actions had been taken to boost competitiveness, including working more closely with third-party travel agents.

There were also several initiatives announced. The group will for the first time create a customer satisfaction index linked to its reward system, which management argued demonstrates a commitment to customers. Mr Fankhauser acknowledged the company's historic mishandling of the fallout from the deaths of Bobby and Christi Shepherd in Corfu nine years ago and said a new independent charity had now been launched in collaboration with the children's mother, Sharon Wood.

Elsewhere, the group will focus on its own brand hotels, which number more than 200 after 72 additions this year. It also launched a new boutique hotel brand for young professionals called Casa Cook, the first of which will open in Rhodes in May 2016. Meanwhile, its cost-improvement programme continued to yield results with another £110m of savings on top of the £400m achieved in the past three years.

Analysts at Credit Suisse expect pre-tax profits of £215m for the 2016 financial year, leading to EPS of 11.5p, compared to £170m and 8.9p for FY2015.

 

THOMAS COOK (TCG)
ORD PRICE:103.5MARKET VALUE:£1.59bn
TOUCH:103.4-103.5p12-MONTH HIGH:162pLOW: 98p
DIVIDEND YIELD:nilPE RATIO:65
NET ASSET VALUE:22p*NET DEBT:38%

Year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20119.81-398-60.73.8
20129.20-337-50.1nil
20139.31-158-16.7nil
20148.59-114-8.2nil
20157.83501.6nil
% change-9---

Ex-div: na

Payment: na

*Includes intangible assets of £2.79bn, or 182p a share