Thomas Cook has reported revenues up by 7% in the first quarter of its financial year as the consumer’s appetite for summer holidays remains undimmed.
The travel giant achieved revenues of £1,749 million in the three months period saying it saw more customers and higher pricing in both its tour operating and airline businesses.
Gross profit for the quarter of £376 million was £16 million higher than last year, while gross margin of 21.5% represented a decline of 50 basis points over the same period last year.
Cook said this was due to higher Spanish hotel bed cost inflation and a lower mix of long haul sales in the quarter.
The Group’s seasonal underlying loss from operations improved by £10 million to £42 million, Cook saying this reflected a good performance by its airline against a weak comparative period for Condor.
However, Cook said Condor’s turnaround has continued in line with expectations, leading to an underlying loss of £13 million for the airline, an improvement of £9 million.
Cook’s airline operations carried 3.5 million customers during the period, an increase of 8% compared to last year.
Seat load factor increased by 80 basis points to 88.0%, driven by higher short and medium haul demand. Cook’s tour Operator’s underlying loss improved by £1 million to £22 million.
Profitability as measured by EBIT increased by £9 million to £27 million, reflecting a shift in the UK market towards digital following a restructuring of its retail operations and closure of 26 stores in the quarter.
Peter Fankhauser, chief executive of Thomas Cook, said: “While it remains early in our sales cycle, we’ve got the year off to a good start.
“A particularly strong performance from our Group Airline, taking advantage of the disruption in the UK and German markets by providing a high quality and reliable service to customers, has helped deliver revenue growth of 7% and a £10 million improvement in the seasonal underlying operating loss for the first quarter.
“From all that we see so far, customers’ appetite for a summer holiday abroad shows no sign of slowing down. We’ve taken early action to meet strong demand for destinations in the Eastern Mediterranean.
“This has enabled us to shift capacity out of the Spanish islands where we have seen a continuation of the margin pressures we experienced last summer, particularly for the UK market.
“We’ve also continued our drive to innovate and invest in ways to help customers get more from their holidays, with the launch last week of our ‘Choose Your Favourite Sunbed’ service, which will be available in at least 30 of our own-brand hotels and resorts for Summer 18.
“This builds on the success of our ‘Choose Your Room’ feature which attracted more than 10,000 bookings during the trial phase in 60 hotels and is set to be rolled out to 300 hotels for the peak Summer 18 holiday season.
“In addition, we’ve made good progress in strengthening our Group Airline. This includes expanding our capacity by 10 per cent for Summer 2018 to meet the increased customer demand we have experienced in recent months, and builds on the strong recovery in our German airline, Condor.
“This remains a highly competitive – and, at times, unpredictable – market, as the disruption in the airlines sector in recent months demonstrates.
“However, based on current trading and the continued progress we are making on implementing our customer-focused strategy for profitable growth, we expect to deliver a performance in line with current expectations for the full year.”
Cook reported net debt at December 31, 2017 of£1,296 million, an increase of £71 million over the last 12 months.
This included non-recurring payments totalling £88 million to The Co-operative Group in connection with exiting our UK retail joint venture.
The firm said on a like-for-like basis, excluding these payments and the effects of currency changes, net debt improved by £65 million.
In December, Cook issued a new €400 million bond with a coupon of 3.875%, maturing on July 15, 2023. This coupon was significantly lower than the 6.75% €400 million June 2021 bond it replaced, helping Cook to achieve lower interest costs, while extending maturities and liquidity.
The firm said winter trading was is in line with our expectations, with 80% of the programme sold, a similar level to last year.
Total bookings are up 8%, supported by continuing demand for the Canaries and a strong recovery in demand for Egypt.
Cook said while pricing across all its segments was higher than last year, average selling prices were 1% lower overall, reflecting a shift in the mix from long haul to short and medium haul destinations.