Analyst ‘unenthusiastic’ about investing in Thomas Cook Group

A city analyst has told investors he expects Thomas Cook to give another profits warning on Thursday when it issues its third-quarter interim statement.

Wyn Ellis, analyst at stock broker Numis, said: "Any hopes of a good lates market have evaporated."

In a statement to investors, Numis said: "Multiple issues facing the sector have resulted in material changes in travel patterns, notably a shift in demand (and airline capacity) away from the Eastern Med and North Africa to the Western Med.

"Given the extent of this switch, we have been surprised that there is still ample hotel bed availability in Western Med resorts.

"All hopes of a good lates market have evaporated; there will be no swap into Turkey as Thomas Cook had planned and demand for the Western Med is weaker than expected."

Looking at the airline market, Numis said: "Management warned of a difficult outlook for the summer, but we believe that conditions in the aviation market have subsequently deteriorated more than it expected.

"Condor is a market leader in flights to Turkey and recent events will have a material impact through the summer, in our view."

The analyst added: "We fear that the net result will be that TCG [Thomas Cook Group] discounts committed stock at unattractive prices in the lates market.

"The impact on margins will not be fully apparent until the release of preliminary results, but we believe that there is a significant risk of a further warning re underlying profits in the Q3 IMS, even if TCG has continued to ‘focus on margins rather than volume’."

Thomas Cook said in May that it expected to generate adjusted pre-tax earnings of between £310m and £335m, down from an earlier estimate of up to £359m.