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24 Sep 2018

BY Jennifer Morris

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Thomas Cook Group issues profit warning following hot summer

Thomas Cook Group has revised its full-year profit forecast from £323 million down to £280 million following the summer heatwave.

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Cook said its ability to drive margins in the lates market had been "further restricted by excess summer capacity"

The company said today (Monday, September 24) that trading since the last update in July has been “tough”, particularly in the tour operator, where its ability to drive margins in the lates market “has been further restricted by excess summer capacity”.

 

“In addition, we have reflected the more difficult trading environment for some of our suppliers in our approach to historic hotel recoveries, a non-cash item,” added Cook.

 

“Accordingly, we now expect to deliver full-year underlying operating profit of around £280 million, of which the greater element of the downgrade is related to the weak trading.”

 

Cook added that the impact of the hot summer was continuing to be felt into winter trading.

 

However, the group said it continued to make “good strategic progress which positions us well to return to profitable growth”.

 

Cook will provide detailed guidance for full-year 2019 in November.

 

Peter Fankhauser, chief executive of Thomas Cook, said: “Summer 2018 has seen a return to popularity of destinations such as Turkey and Tunisia.

 

“However, it has also been marked by a prolonged period of hot weather across Europe. This meant many customers spent June and July enjoying the sunshine at home and put off booking their holidays abroad, leading to even tougher competition and higher than usual levels of discounting in the lates market of August and September.

 

“Our recent trading performance is clearly disappointing. However, despite the recent challenges, we continue to make good strategic progress which positions us well to drive further performance improvement; this includes the launch of our Expedia alliance in the UK and Scandinavia, signing our first own-brand hotel in China and lining up a pipeline of 10 new Cook’s Clubs in some of our key destinations for Summer 2019.”

 

Cook revealed its summer 2018 programme was 90% sold, in line with last year. Total group bookings were up 12% compared to this time last year driven by the return in popularity of holidays to Turkey, Egypt, Tunisia and Greece.

 

Pricing across all segments remained higher than last year but, with a higher mix of short/medium-haul airline bookings, overall average selling prices were 5% lower.

 

Overall group tour operator bookings were up 1%, while pricing was up 3%.

 

UK tour operator bookings were in line with last year, while average selling prices were up 7%.

 

“The slowdown in customer bookings during June and July extended into August, leading to higher than normal levels of promotional activity,” said Cook. “This has exacerbated pressure on margins, on top of an already competitive market for Spanish holidays, as previously highlighted.”

 

The group’s tour operator programme was 43% sold for winter 2018/19, with bookings 2% behind last year and average selling prices up 1%.

 

For the UK demand was ahead of last year, but this has been offset by a slow start in the Nordics and Continental Europe. Cook has therefore trimmed capacity in the Nordics by 5%.

 

Elsewhere, Thomas Cook Group has announced group chief financial officer Bill Scott has decided to step down.

 

He will leave the company and the board on November 30 following the full-year results announcement.

 

Sten Daugaard has been named group chief financial officer on an interim basis from October 1.

 

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