The tour operator has endured a terrible year amid profit warnings and inflated borrowing levels
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Travel agent Thomas Cook (TCG) has a long and proud history but this famous British brand, once a regular constituent of the FTSE 100, appears to be facing a much bleaker future.
On 27 November the company delivered its second profit warning in a matter of months. A toxic mix of weak trading and one-off items has led to full year operating profit coming in some £30m below expectations at £250m.
The company had already lowered guidance from £323m to £280m in early September after a summer heatwave led people to sun themselves at home rather than jetting off abroad.
Its experience shows the dangers of standing still in a highly competitive market. The Thomas Cook name probably still has value but holidaymakers are increasingly less likely to use traditional platforms and instead will look to build their own tailor-made trips online.
BORROWINGS MOUNT UP
Higher than expected borrowings also prompted the company to suspend its dividend. Analysts had forecast Thomas Cook would move to a net cash position by 2020 but this goal now seems a bit of a stretch.
In 2012 the company bottomed out at just 13p having traded above 300p before the financial crisis hit. It then staged a recovery to 190p in 2014 as it successfully deleveraged its balance sheet. Today it has fallen from grace once more, now trading at 38p.
The company now faces on uncertain backdrop, with Brexit not only a threat to spending on holidays but also potentially disruptive in terms of UK nationals visiting EU destinations, particularly in a no-deal scenario.
Its recovery plan involves a marketing push for its higher margin own-brand hotels and an aim to boost exposure to niche holidays. Arguably rivals such as TUI (TUI) have already stolen a march on Thomas Cook in these areas.
2018 NET DEBT WAS FORECAST TO BE £267m 2018 NET DEBT IS ACTUALLY £389m
By Tom Sieber Deputy Editor