Thomas Cook trims profit guidance as heatwave takes its toll

THE scorching summer has left Thomas Cook singed after customers shunned late getaways in favour of basking in unusually high temperatures at home.

The travel company has warned soft June and July bookings – the so-called “lates” market – would lead to full-year profits being at the lower end of market expectations. While third-quarter revenues rose 10pc to £2.5bn, Thomas Cook’s margins were squeezed and gross profit fell by £15m to £443m.

Peter Fankhauser, Thomas Cook’s chief executive, said: “All that we can control is paying off.

“What I can’t control is the weather. As a chief executive I can control what is in my hands. This heatwave across the whole of Europe was delaying the decision of customers to book and that is having an impact on the capacity that is left for all the operators.”

He added: “If you have a situation of over-capacity, then you have an increased margin pressure.”

Thomas Cook has been particularly hit by a slump in demand for holidays to Turkey, Egypt and Tunisia in recent years as concerns over terrorism turn customers away from these highermargin destinations. While demand has returned for these countries, Markets.com chief analyst Neil Wilson pointed out that the continued popularity of Spain is problematic for the listed travel company.

“[Spain is] far more competitive and margins are tighter,” said Mr Wilson. “Thomas Cook would prefer it if we were heading back to Turkey and Egypt in greater numbers than we are. Consumers are coming back to those destinations but growth in higher-margin destinations like Turkey and Egypt has not fully offset the hit to margins on Spanish holidays.”

Despite trimming Thomas Cook’s valuation, Jefferies analyst Rebecca Lane remained bullish on its fortunes. “This year’s abnormal weather does not affect our longer-term investment thesis, which remains unchanged,” she said. “Thomas Cook confirms that strategic progress is on track.”

Mr Fankhauser dismissed reports Thomas Cook was preparing to spin off its airline. He said he had received no unsolicited approaches for the carrier. However, he said that it would be willing to play its part in wider European airline consolidation at some point.

Thomas Cook shares closed down 1.0pc at 95.9p. its