Thomas Cook warns of long road to recovery

Thomas Cook chairman Frank Meysman told shareholders at its annual general meeting yesterday that it will take several years for the company to rebuild shareholder value and he confirmed there would be no further dividend payments until it has strengthened its balance sheet.

At the same time, he promised to respond to criticism from shareholders concerning directors’ pay by installing a "proper pay for performance approach". The Board has agreed to introduce deferral and clawback in respect of future senior executives’ bonuses, and to reduce the level of matching awards due under the co-investment plan.

"My objective here is to ensure that we avoid inappropriate windfall gains and excessive dilution on the one hand, yet provide incentives that will be meaningful, in terms of motivation and retention, to the key executives whom we rely on to deliver the recovery," he said.

"The Board believes that the proposed approach aligns the interests of our executives with those of our shareholders and is fair to all parties in the current circumstances."

Thomas Cook was roundly condemned at last year’s AGM by shareholders for bonuses paid to directors, in particular those received by former chief executive Manny Fontenla-Novoa who presided over the company at a time when its share price plunged due to mounting losses.

Peter Middleton, chairman of Cook’s remuneration committee, today stood down to be replaced by the Group’s senior independent non-executive director Roger Burnell.

Burnell, a former chief operating officer of Thomson who joined Thomas Cook as a non-executive director in 2007, will lead the remuneration until his retirement next year. Meysman said he was seeking a number of new non-executive directors to strengthen the Board.

He is also continuing to search for a permanent chief executive to replace Sam Weihagen, who agreed to head the business temporarily following the sudden departure of Fontenla-Novoa last August.

Meysman praised Weihagen, describing him as "a first-class CEO". "Sam really was the right person at the right time and he stepped up to the challenge. And together with Paul Hollingworth and his financial team, they have grasped a very difficult situation and led us successfully through some really stormy weather where others would probably have failed," he said.

"Having Sam in place has bought me sufficient time to run a thorough search for a future CEO."

He revealed he had conducted a first round of interviews but gave no indication of when the Board would appoint a replacement chief executive.

Meysman said the Group had extremely strong brands, including Thomas Cook, Ving in Scandinavia and Neckermann in Germany and Belgium, but he acknowledged it had been a tough year for its employees.

"On behalf of the Board I would like to thank them for their dedication and high standards," he said.

"Over the past few months I have visited different core units of our business and I have been convinced of that commitment of the strength. I’ve also been convinced of the need to do a better job in sharing best practices, in having a culture where people accept that somebody else has a better idea. But that is an opportunity because this is not just a UK company; everybody in the industry envies, and rightly so, our position in Germany and Scandinavia."

In other changes announced today, Peter Marks, group chief executive of the Co-operative Group will chair the health, safety and environmental committee, a role previously held by Burnell, while Cook chairman Frank Meysman will continue to chair the nominations committee.

Martine Verluyten, cahir of the audit committee of the Flemish Region of Belgium, will chair Cook’s audit committee.