BIG NEWS

The tour op­er­a­tor has en­dured a ter­ri­ble year amid profit warn­ings and in­flated bor­row­ing lev­els

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Big de­cline in Thomas Cook share price / Is the UK ad­dicted to pay­ing on plas­tic? / Faroe re­jects takeover bid / Sun shines on UK so­lar funds / In­di­v­ior, Cen­trica, Greggs and more big news

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

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