Thomas Cook admits its brand was hurt

Thomas Cook has admitted its brand was damaged by publicity surroundings its financial problems earlier this year.

It said its sales were hit by a difficult trading environment and the "weakening in brand sentiment", but claimed it was now taking the right actions to stabilise its business.

Unveiling its interim results for the six months ending March 31, Thomas Cook said it now expects over three years to deliver a  £140m improvement in profitability, up from £110m as previously announced.

But this will come at as estimated cost of around £70m, up from £60m previously thought.

It said the turnaround would be achieved by "optimising yield, reducing retail and tour operator discounts, improving the operational efficiency of the organisation and facilitating faster, more focused decision making".

Thomas Cook said it would change its discounting approach to ensure that distribution channels are not competing against each other.

"Our revised discount policy has led to a substantial reduction in discount levels with retail shops now averaging around 3% compared to 5% previously. There remain opportunities to align our product portfolio so that they complement rather than compete against each other," it said.

The operator has removed over 500 under-performing hotels from the summer 2012 programme, which represents around 22% of properties. It has introduced around 150 new properties focused on differentiation and exclusivity.

For summer, differentiated product sales are up 9%, making up 31% of overall passengers for the season to date.

New properties are being added for summer 2013.

As part of the merger with the Co-operative, nearly 100 stores have closed since October with a further 15 to be closed or sold during the rest of the financial year. This will mean around 850 job losses and savings of £30m, as previously announced.

Costs are also being reduced by the introduction of paperless ticketing and a 20% cut in the number of brochures.

Total Group revenue for the six months was £3,517m, up 3% on 2011 on a constant currency basis.

Seasonal underlying loss from operations was £263m, an increase of £97m on the year before.

"This reflects the inclusion of losses from our acquired businesses in Russia (£10m seasonal loss) and the Co-op in the UK (£15m seasonal loss)," said the statement.

"The difficult trading environment increased losses, in particular the impact of MENA on the French result (£17m increased loss) and the poor trading in the North American business (£25m worse than prior year).

"Seasonal losses in the UK business are flat year on year excluding the acquired Co-op seasonal losses, whilst within Central Europe, our German business performed well with a 58% reduction in the seasonal operating loss at constant currency."

Interim chief executive Sam Weihagen said the company was moving ahead with efforts to "re-energise our business and begin to rebuild profitability, reduce debt, and continue to provide a fantastic holiday experience for our customers".

New chief executive Harriet Green, an industry outsider, will take over in July.

by Bev Fearis