Thomas Cook confirms return to profit for first time in five years

Thomas Cook confirms return to profit for first time in five years

Thomas Cook today confirmed a return to the black for the first time in five years with a profit after tax of £19 million for the year to September.

This compared to a loss of £115 million in 2013-14 and came despite revenue falling from £8.5 billion to £7.8 million. Like-for-like revenue was up by £86 million.

A strong performance by Cook’s UK business saw underlying earnings [EBIT] from the division rise by 42% to £119 million.

Europe’s second-largest travel group also revealed plans to introduce a 24-hour ‘hotel satisfaction promise‘ as part of a focus on customers.

The group’s winter 2015-16 programme is 58% sold, or 1% ahead of this time last year with prices 3% stronger. UK winter bookings are 8% up with spending 2% ahead.

Summer 2016 booking and pricing trends were described as “encouraging” with the UK business 23% sold - a 5% improvement year-on-year - and prices up 1%.

Looking forward, the company said: “Our business is inevitably impacted from time to time by geopolitical events. In early November we suspended our UK flying programme to Sharm el-Sheikh airport in Egypt following UK Foreign Office advice, and subsequently repatriated approximately 1,700 guests.

“Our programme to Tunisia remains suspended for most markets.

“Despite the fragile geopolitical environment, our business has continued to grow.

“Demand for our differentiated holidays is increasing, we are making continuous improvements to our holiday portfolio, and we are becoming more efficient.

“Our new operating model, together with a renewed focus on our customers, marks a new phase of transformation for Thomas Cook, which we anticipate will deliver long-term, sustainable, profitable growth.

“Accordingly, we remain confident on delivering on our expectations for the current financial year.”

Reviewing the past year, chief executive, Peter Fankhauser, said: "Of course, the past year has also presented considerable challenges for Thomas Cook as we confronted the mistakes that were made following the deaths of Bobby and Christi Shepherd in Corfu nine years ago.

“I am clear that we need to learn from the tragedy and do things differently in the future. Last week, we launched the Safer Tourism Foundation together with the children's mother, Sharon Wood.

"But we also recognise that change needs to come from within Thomas Cook, putting our customers first in everything that we do.

“That is why we have introduced customer satisfaction as a new internal measure of success and why we are rolling out a 24-hour hotel satisfaction promise for key hotels across the group. It is also why we are putting a renewed focus on the quality of our holiday offering and pushing hard to further develop our online and retail channels.

"During the year our staff have shown great dedication in times of crisis, working tirelessly to support our customers. Their response to recent events in both Egypt and, earlier in the year, Tunisia, shows what we can achieve when we pull together. In a time of geopolitical uncertainty, that level of customer care is a key advantage of our packaged holiday offering.

"The new financial year has got off to a good start with encouraging trading overall for winter 2015-16 and summer 2016.

“With our business on a firmer financial footing, we have a clear strategy in place to deliver greater value for customers and sustainable growth for our shareholders."

Leisure analyst Langton Capital, said: “To say that this has been an eventful year for TCG [Thomas Cook Group] is perhaps something of an understatement.

“And, as recent events in Egypt and in Paris fall into full year 2016, the current year looks to be turbulent as well.

“Nonetheless, TCG is able to say that it should deliver on current year estimates.

“In a further move back towards normality, the group will declare a dividend in the current financial year.

“Overall, we believe that leisure travel remains a growth industry and that Thomas Cook’s future is secure. The group and its share price have clearly been buffeted by geopolitical events and this is likely to remain a feature of the industry going forward.

“Nonetheless, the group is continuing to recover.

“[Chinese partner] Fosun could buy more shares at any time and a bid at some point is not out of the question.”

Shore Capital leisure analyst, Greg Johnson, said: “Current trading appears surprisingly robust, given the geopolitical backdrop for both winter and summer in the UK and Northern Europe, although trading continues to be soft in Continental Europe.

“Sharm el-Sheikh is said to be manageable whilst bookings are traditionally quiet this time of year.”

Cook’s ‘new operating model’ is expected to deliver between £100 million and £120 million improvement in earnings [EBIT] between 2016 to 2018.

“Although this is below the prior targets, we understand it is net of expected cost inflation over the period so a cleaner figure than previous,” Johnson said.

“We see the JV with Fosun as key to delivering on these targets. Longer-term we see scope for greater margin improvement through online penetration and more owned content.”

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