Exposure to terrorist-hit locations, most notably Turkey, dealt a major blow to Thomas Cook (TCG) shares, which were sent down nearly a fifth on publication of its half-year results. Exclude Turkey and comparable summer bookings are up 6 per cent, but that moves into negative territory once the nation is factored in to the equation.
The group's German business, Condor, is the market leader for flights to Turkey and the Eurasian destination is also regularly served by its UK division, meaning that Thomas Cook has been disproportionately affected compared with peers. Chief executive Peter Fankhauser said he was impressed with how the group pivoted to try to offset the impact. Management shifted roughly 1.2m seats destined for Turkey, Tunisia and Egypt to other destinations now the subject of holidaymaker clamour, notably the Balearic and Canary Islands, as well as long-haul destinations.
The pain was exacerbated by its Belgian business (roughly 5 per cent of turnover), which is "almost at a standstill" due to the March bombing at Brussels airport. According to management, this means that adjusted operating profits are now expected to be at the lower end of the £310m-£350m consensus range.
The 'new operating model' strategy has delivered £9m-worth of operating benefits this half, which leaves the group on track to deliver £100m-£120m of cumulative annualised benefits by 2018. The group is also going further than the suggestions laid out in the independent King review of the business by auditing 3,600 hotels by next season and doubling its spend on health and safety by next summer.
Analysts at Numis expects pre-tax profits of £186m in the year to September, leading to EPS of 9.9p, compared with £177m and 8.9p in FY2015.
| THOMAS COOK (TCG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 73.55p | MARKET VALUE: | £1.13bn | |
| TOUCH: | 73.4-73.6p | 12-MONTH HIGH: | 161p | LOW: 72p |
| DIVIDEND YIELD: | nil | PE RATIO: | 15 | |
| NET ASSET VALUE: | 3.2p* | NET DEBT: | £825m | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 2.74 | -303 | -20.8 | nil |
| 2016 | 2.67 | -288 | -17.6 | nil |
| % change | -3 | - | - | - |
*Includes intangible assets of £2.9bn, or 190p a share | ||||
