Thomas Cook cuts profit goal, suspends dividend
LONDON: Thomas Cook lost a third of its value after the holiday operator cut its profit guidance for the second time in two months and suspended its dividend, burned by the effects of a hot British summer and one-off charges.
The oldest travel company in the world, Thomas Cook has been hurt by the heatwave that gripped northern Europe this year, deterring holidaymakers from booking lucrative last minute deals and sending its shares down 70 per cent in 12 months.
On Tuesday it updated the market two days ahead of schedule to cut its underlying operating profit again, this time by 11 per cent. It said it had not breached the terms of its lending agreements and would continue to invest in the business.
Shares in the company fell an initial 33 per cent at the open. They were down 24 per cent to 37 pence, giving it a market value of around 570 million pounds. Shares in rival TUI Group were down 3 per cent.
“I’m not happy with the financial result,” Chief Executive Peter Fankhauser said. “This is not where we wanted to be.”
Thomas Cook makes all its profit in the summer when its customers in northern Europe, including Britain, Germany and Scandinavia seek the sun in southern European destinations such as Spain, Turkey and Greece.
However record temperatures in much of northern Europe this year meant the company was forced to warn in July and September that demand for holidays had been damaged.
It said on Tuesday it had also taken around 30 million pounds of charges to account for costs linked to changes to its business, flight disruptions and unpaid historic hotel bills.
Thomas Cook, which had rebuilt itself from a 2011 collapse when the eurozone debt crisis and political turmoil brought it to its knees, said it would push ahead with its strategy of opening its own hotels, which tend to drive higher returns and customer loyalty.
“Across the group, we will continue to streamline our cost base and manage our capacity to give us greater operational flexibility and financial discipline,” Fankhauser said.
A Thomas Cook aircraft at Manchester Airport in Britain.