Analysis: Cook’s results allay City fears

Analysis: Cook’s results allay City fears

Thomas Cook remains in the media glare following the inquest into the deaths of two children, But analysts seem less concerned. Ian Taylor reports

City analysts appear unfazed by the public and media reaction to Thomas Cook’s handling of the deaths of children Christi and Robert Shepherd nine years ago.

Media reports focused on a fall in the company’s share price and online calls for a boycott of Thomas Cook last week. But analysts greeted chief executive Peter Fankhauser’s apology to the family and presentation of the group’s half-year results positively.

Fankhauser met the parents of Christi and Robert last Thursday to apologise for the company’s failings a day after announcing the results to the City and issuing a public apology.

Mark Brumby, leisure analyst at Langton Capital, said: “You can’t defend the tragedy, but it has not stopped the company from doing what it does. Whether it will impact bookings, I’m not sure.”

Brumby said: “It has been handled cack-handedly, but the management changed three times since 2006. It helps that Peter Fankhauser and [chief financial officer] Michael Healy were not running the business at the time. The current management has done as much as it could.” He added: “The half‑year figures were fine. They ticked all the right boxes.”

Cook reported a reduction in winter losses, a fall in debt and reduced interest payments, and promised a resumption of dividend payments to shareholders “in respect of 2016 earnings”. Thomas Cook last paid a dividend in 2011.

The company said public outcry over the Corfu deaths had not damaged bookings up to last week.

The group’s share price did fall last week, but it remained 8% up on six months ago and close to the level it has been at since early March.

Fankhauser began the results presentation by saying: “I’m deeply sorry, as a father myself, about the tragic deaths of Bobby and Christi Shepherd. There are things we, as a company, could have done better during the last nine years – in particular, how we have conducted our relations with the family.”

He added: “I am not going to repeat the mistakes of the past by talking about the family in public. My intention is to see how we can help them move on with their lives.”

Anne Grube, equity research analyst at Morgan Stanley, said Fankhauser’s apology had been “very positively received”. She added: “It is too early to see if there is any effect on bookings.”

However, the Financial Times reported the furore had “damaged an already ailing company”. The newspaper suggested: “The company’s weakness is that it remains a high street business.” It quoted an unnamed “investment banker” saying: “They have a huge legacy of shops and that is dragging them down.”

The Financial Times also reported Cook “may have to buy hundreds more stores from the Co‑operative Group” under the terms of the pair’s joint venture. This terminates in September 2016 when the Co-op could require Cook to buy the stores for about £82 million.

Brumby dismissed such concerns, saying: “It’s not a new issue. The £82 million in question is already provided for. Thomas Cook may be called upon to make the payment, which they would probably rather not do, but it has been known about for a few years.”

Referring to the media storm, Brumby said: “It’s cheap copy and papers can regurgitate it with very small additions.”

Grube insisted Morgan Stanley’s appraisal of the group had been unaffected by the furore, saying: “We downgraded our forecast [for Thomas Cook] but that was based on the foreign exchange [outlook].”

A Cook spokesman said: “We reject the suggestion we have a huge legacy of shops. The high street is a huge part of Thomas Cook’s strategy. It’s important we’re there for customers however and wherever they look for us.”

Of the joint venture with The Co-operative Travel, he said: “We are looking at the JV and considering what comes next, but I don’t think a decision has been made.”


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