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27 Nov 2018

BY Jennifer Morris

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Thomas Cook to 'address performance of UK operator' amid fresh profit warning

Thomas Cook Group has published an update on its full-year results early due to a lower profit figure than expected.

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"It has been a disappointing year for Thomas Cook"

Underlying Ebit (earnings before interest and taxes) for the year ending September 30 was £250 million – £58 million lower than the prior year on a like-for-like basis and £30 million lower than the guidance issued in September.

 

The group will publish its full audited financial results as planned on November 29. It has suspended its dividend for 2018.

 

Group revenue stood at £9,584 million, up 6% on a like-for-like basis.

 

The tour operator was down £88 million, impacted by discounting in the lates market; with the UK delivering “a particularly disappointing” result, the group said.

 

Airline profit grew £35 million, despite higher disruption costs and Cook highlighted that the group result included £28 million of legacy and non-recurring charges to underlying Ebit.

 

The group said priorities for 2019 onwards included addressing the performance of its UK tour operator business; better capacity management and improved operational flexibility; driving increased focus on cash and cost discipline across group; and improving the selling of higher-margin, own-brand hotels and differentiated holidays.

 

The group expects to deliver progress on underlying Ebit and lower separately disclosed items, “leading to substantial progress on reported operating profit”.

 

Chief executive Peter Fankhauser added: “2018 was a disappointing year for Thomas Cook, despite achieving some important milestones in our strategy for transforming the business.

 

“After a good start to the year, we experienced a larger-than- anticipated decline in gross margin following the prolonged period of hot weather in our key summer trading period. Our final result is expected to be around £30 million lower than previously guided, due to a number of legacy and non-recurring charges to underlying Ebit.

 

“Within this, profit in our tour operating business fell £88 million as the sustained heatwave restricted our ability to achieve the planned margins in the last quarter.

 

“The UK was particularly hard hit with very high levels of promotional activity coming on top of an already competitive market for holidays to Spain.

 

“Despite the impact of the hot summer, our Northern European tour operator achieved a near record performance, albeit lower than that expected at the end of May. Meanwhile, our group airline delivered strong growth in customers and profit, benefitting from increasing capacity in a turbulent European aviation sector.

 

“We remain committed to our strategy for profitable growth and we’ve made some good progress during the year.


“Within our own-brand hotels business we have established our hotel investment fund, opening 11 new hotels last summer, including an innovative new concept in Cook’s Club.


“This positions us well for 2019 as we build on our position as one of the top 5 sun & beach hotel companies in Europe with at least 20 new hotel openings planned.


“Meanwhile, the launch of our alliance with Expedia, now in five of our markets, offers customers a much wider choice of city and domestic hotels at lower cost to the business. Taken together, these developments are transforming our opportunities for growth.


“Looking ahead, we must learn the lessons from 2018 and go into the new year focused on where we can make a difference to customers in our core holiday offering.


“We will put particular attention on addressing the performance in our UK tour operator where the challenges of transformation in a competitive environment remain significant.


“Across the group, we will continue to streamline our cost base and manage our capacity to give us greater operational flexibility and financial discipline, while focusing the team on delivering performance improvements and giving customers more reasons to holiday with Thomas Cook.”

 

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