All good things must come to an end, and after several years benefiting from mega-merger cost savings and the collapse of competitors, Thomas Cook had a torrid 12 months to the end of September. A decision to cut capacity in response to weak demand hit revenue, but the group also suffered due to worse than usual UK summer-holiday bookings.
While the group says it is encouraged by the trading environment in its Continental and Scandinavian markets, the outlook for the UK remains uncertain. Operating profits from the UK operation fell 24 per cent from £162m to £124m in the 12-month period, but even after this decline the business still accounts for 35 per cent of group revenue and 29 per cent of adjusted underlying profits. The volcanic ash cloud accounted for £16.4m of the £36m slide in UK profits. Management hopes to mitigate any ongoing weakness in the UK by reviewing the cost base, which it hopes produce savings of £40m to £50m. This is on top of the £45m savings it plans to make by merging its high street presence with that of the Co-op, a deal which is still to be cleared.
The relentless presence of large exceptional costs in the results is a bear bug for the City (£185m in these results, £53m of which related to the ash cloud), and management says it is now focused on reducing these. However, even after stripping out one-off items, underlying pre-tax profits still fell 6 per cent to £277m and adjusted EPS declined almost 9 per cent to 22.8p. On the same basis, analysts at broker Numis Securities cut their pre-tax profits forecasts for the current financial year from £326m to £296m and predicts underlying EPS of 24.8p.
| Thomas Cook Group (TCG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 180p | MARKET VALUE: | £1.5bn | |
| TOUCH: | 179-180p | 12-MONTH HIGH: | 272p | LOW: 172p |
| DIVIDEND YIELD: | 6.0% | PE RATIO: | NA | |
| NET ASSET VALUE: | 200p* | NET DEBT: | 46% | |
| Year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007** | 7.88 | 100 | 17.1 | 5.00 |
| 2008 | 8.75 | 23.7 | 4.60 | 9.75 |
| 2009 | 9.27 | 45.1 | 0.80 | 10.75 |
| 2010 | 8.89 | 41.7 | -0.30 | 10.75 |
| % change | -4 | -8 | - | - |
Ex-div: 16 Mar Payment: 7 Apr *Includes intangibles of £3.8bn, or 446p per share **Pro-forma figures following change of year end | ||||
