Management at Thomas Cook (TCG) highlighted last summer’s heatwave, reduced demand for winter getaways and Brexit uncertainty as contributory factors to an underwhelming performance at the half-year, but with the shares down 15 per cent on results day, analysts will be less interested in sector-wide issues than they will be in the areas management can influence – a one percentage point drop in the gross margin is unlikely to inspire confidence.
TCG impaired £1.1bn of goodwill and brand-name intangibles relating to its merger with MyTravel in 2007 “as a result of the weak current trading environment”, pushing its loss from operations in the half-year to a staggering £1.4bn and leaving it in a net liability position.
Trading remains competitive in the tour operator business, leading the group to cut capacity in a bid to reduce operational risk. Lower margins here had a knock-on effect on the broader business, cutting the gross margin by 180 basis points to 19.8 per cent and helping widen underlying operating losses to £245m. Increased losses, combined with lower bookings and increased cash exceptionals led to a 41 per cent rise in net debt.
With higher fuel and hotel costs, the group expects underlying operating profit to be below last year’s £250m; broker Numis said this suggests profits 40 per cent below current consensus, or a range of £150m-£160m.
| THOMAS COOK (TCG) | ||||
| ORD PRICE: | 12.49p | MARKET VALUE: | £192m | |
| TOUCH: | 12.37-12.5p | 12-MONTH HIGH: | 150p | LOW: 12.49p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | * | NET DEBT: | £1.25bn | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 3.23 | -0.30 | -16.6 | nil |
| 2019 | 3.02 | -1.46 | -96.1 | nil |
| % change | -6 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Negative shareholders' funds | ||||
