Thomas Cook reveals further heavy losses

Thomas Cook lost a further £590m in the year ended September 30, during which time it has sold assets worth a total of £103m.

It made a gross profit of £2.1bn but underlying profit from operations was 49% down to £156m, which it said was in line with expectations but made worse by a £110m higher fuel bill.

The £590m loss included previously disclosed goodwill and other write-downs of £369m and business repositioning costs of £81m.

It revealed it lost £17m on the sale of packages for the Olympic Games, for which it was preferred partner. Even though it sold these at a profit of £9m, it lost money on the deal due to upfront licensing and marketing costs. The head of the operator’s London 2012 partnership, Stephen Vaughan, has since left the business.

However, Cook said current trading was good, with summer 2012 ending strongly and winter off to a good start in major markets, with forward bookings and improvements in pricing.

"Our capacity strategy will reduce operating risk in an uncertain consumer environment as the Group implements its Business Transformation," it said in a statement released to the London Stock Exchange this morning.

The transformation includes changes to the key management team, which is said would "break down historic silos, energise our people and implement cultural change". Already six senior members of staff have announced they are leaving the operator following the appointment of new group chief executive Harriet Green.

Other changes, said Thomas Cook, include driving efficiency through global procurement, centralised hotel purchasing and consolidation to reduce fixed and overhead costs; over £100m of annual cost benefits and £50m of incremental working capital improvements have already been identified.

It said it was also developing "an online centre of excellence" with channels tailored to local makets.

Green said: "In 2012 over 23m customers enjoyed their holidays with us, 50% of whom went on an independent or flexible holiday.  Through building on our core product strengths to further improve our proposition with new and different products, we have a significant opportunity to unlock the full potential of our brands and attract more customers. 

"As we develop our Business Transformation plans we will continue to place our customers and employees at the very centre of our business.  Through leveraging existing best practice and by focusing on efficiency, harnessing the power of technology and delivering on our commitments we are addressing the most immediate challenges facing the Group and creating a platform for future growth.

"These results reflect the major issues that Thomas Cook faced last year, but they mask the material improvement that we made in the fourth quarter.  Our brand has demonstrated its strength by recovering all the ground lost during last year’s difficulties and we have identified significant further efficiency improvements.  The year ahead is the initial stage in this recovery and as we embark upon our first year of Business Transformation, we are optimistic about the future and look forward to updating you on our full plans and additional financial benefits in the spring of 2013."

By Linsey McNeill