Thomas Cook has admitted that adverse publicity over its finances in the UK resulted in the group suffering “a weakening in brand sentiment”.
However, providing interim results, the group said implementation of the UK turnaround plan is well underway.
This is expected to result in annual improvements in profitability of £140 million, up from £110 million previously estimated. This will come at an increased cost of £70 million.
“Although in the current financial year we expect to deliver benefits of £60 million, these will help to mitigate the difficult trading environment and the weaker consumer sentiment towards the group which we experienced earlier in the year,” Cook said.
“As a result of adverse publicity the group received in the UK, we suffered a weakening in brand sentiment.
“However, looking forward, we believe we are taking the right actions to stabilise the business and provide a more competitive cost base, which with a steady improvement in brand sentiment will better position the business for future growth.”
The initial focus of the UK turnaround plan has been on optimising yield, reducing retail and tour operator discounts, improving the operational efficiency of the organisation and facilitating faster, more focused decision making.
Cook saved £10 million by taking six aircraft out of its winter flying porgramme. It also cut 300 staff.
The closure of 100 agency branches since October and a further 15 to be shut in the current financial year following the merger with the Co-operative will result in a previously announced 850 job losses and £30 million in savings.
A further £15 million in savings has come from a refocus in mainstream holidays with the removal of 500 under-performing hotels from the summer programme, representing 22% of capacity.
Around 150 hotels were introduced with a focus on differentiation and exclusivity.
Holidaymakers choosing differentiated holidays are up by 9% this summer, making up 31% of overall passengers for the season to date.
Further new properties are being added for Summer 2013.
Improved yield manage has resulted in a £40 million in savings by creating a single commercial trading approach across the mainstream business.
This involves a co-ordinated discounting approach to ensure that distribution channels are not competing against each other.
“Our revised discount policy has led to a substantial reduction in discount levels with retail shops now averaging around 3% compared to 5% previously,” Cook said. “There remain opportunities to align our product portfolio so that they complement rather than compete against each other.”
Further savings of £45 million are expected through reducing and eliminating operational inefficiencies.
Paperless ticketing has been launched during summer 2012 and the number of brochures issues has been cut by 20%.
“We have also announced that we are working with software provider Anite to implement a new reservation platform in the UK to drive improved processes and increase the functionality for our online customers.
“The first phase of this is expected to be implemented in the first half of FY13 for departures in FY14.”
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