‘Milestone’ year for Thomas Cook sees earnings rise but UK margins fall

‘Milestone’ year for Thomas Cook sees earnings rise but UK margins fall

Thomas Cook has declared 2017 a milestone year for delivering on its customer first strategy but reported UK margins were down due to a competitive market for holidays to Spain.

In its year-end results, released to the City this morning, the big three tour operator reported revenues were up 9% to just over £9,000 million. Profit after tax stood at £12 million.

Profitability as measured by EBIT, or earnings before tax, was up £34 million to £300 million and the group said this has been boosted by a strong recovery by its German airline Condor.

However, UK margins declined after four successive years of growth due to a challenging market. Cook chief executive Peter Fankhauser said actions had been taken to improve performance.

He said: “2017 was a milestone year in the strategic development of Thomas Cook.

“By delivering what we promised on strategy, we’ve inspired more customers to choose our holidays for their hard-earned weeks in the sun, while at the same time transforming the scale of the opportunity ahead for the Group.

“We now see that the deliberate decision we made to put the customer back at the heart of our business is bearing fruit.

“Customers’ satisfaction with our holidays has increased strongly for a second consecutive year, growing in all of our main markets.

“I’m particularly pleased by the number of new customers we’ve won this year, showing us that we’re getting more people to look again at what we offer – and that more of our existing customers are recommending our holidays to family and friends.

“Increased customer demand delivered a 9% growth in revenues in the year. Combined with the successful turnaround of our German airline division, Condor, this led to an underlying operating profit of £330 million, an 8% increase year on year.

“The strong performance of our Group Airline in what has been a difficult year for European aviation is a particularly encouraging sign of our progress. In our tour operating business, Continental Europe grew strongly while our Nordic division enjoyed another excellent year.

“After four consecutive years of profit growth, margins in our UK business declined due to a more competitive market environment, especially for holidays to Spain.”

Cook said its customer focus has seen its Net Promoter Score, a measure of people’s propensity to recommend the brand had increased by four points year-on-year and nine since 2015.

It also said it has seen a growth in repeat bookings since 2015 of 51% to own-brand hotels and 15% to differentiated hotels.

Future growth is expected in own-brand hotels due to a partnership with LMEY and it is also expecting greater product range and less complexity thanks to a new partnership with Expedia.

A new set of financial services is expected to reinvigorate Thomas Cook Money and a new digital proposition is expected to build on the back of an 18% rise in web bookings.

Cook also expects to see a ten-fold increase in customer numbers in China in 2018.

The firm also reported a further strengthening of its financial position with net debt reduced by £122 million to £40 million, reflecting higher free cash flow generation

New financing arrangements to 2022 will “provide greater liquidity and flexibility to invest in growth”, it said.

Fankhauser added: “The actions we have taken in the last 12 months take us significantly further forward in our strategy for profitable growth.

“The strategic alliance we signed with Expedia will transform the way we work, enabling us to offer a much greater choice of hotels to Thomas Cook customers at lower cost and complexity to us.

“Meanwhile, the partnership with LMEY strengthens our own-brand hotel portfolio and reinforces our focus on a more streamlined portfolio of hotels where we can give customers the very best experience.

“I am also excited by the growth opportunities we have in our fledgling business in China, as well as in financial services with the launch of Thomas Cook Money.

“In a very short space of time, Anth Mooney and his team have developed a really innovative set of financial products that I believe will make customers think again about what we can offer – and help us reclaim our position as number 1 for holiday money.

“Looking to the year ahead, we can see real momentum in our Group Airline, and expect our Continental Europe and Northern Europe tour operator businesses to continue their good performance.

“While conditions are challenging in the UK, we have implemented a set of actions to improve performance.

“Overall, based on current trading, I believe that we are well-positioned to achieve a full year operating result in line with market expectations.”

Comments

This is a community-moderated forum.
All post are the individual views of the respective commenter and are not the expressed views of Travel Weekly.
By posting your comments you agree to accept our Terms & Conditions.

More in air