Traveltek

Published on Thursday, November 29, 2018

Thomas Cook reveals huge net loss






 


Thomas Cook has announced a £163 million loss after tax for the 12 months to the end of September, which chief executive Peter Fankhauser described as 'a disappointing year'.

The announcement to the London Stock Exchange this morning came two days after the company issued its second profit warning in two months, blaming this summer's heat wave for its worsened performance.

As a result of the loss, the Group's net debt has rocketed from £40 million last year to £389 million.

The group's earnings for 2018 were £250 million, down 76% on last year. Operating profit from the tour operating side of the business was down £88 million, which Thomas Cook blamed on discounting in the lates market. The UK was particularly disappointing it said, adding that it needed to 'address performance' in its UK tour operating business.

However, its airline saw a strong profit growth of £35 million, despite suffering more disrupted flights.

The Group's pre-tax earnings were £97 million, down 130% year-on-year. It announced on Tuesday that it had suspended its dividend for 2018, reflecting the overall net loss after tax.

Going forward, the Group said it is developing new opportunities for growth and efficiencies, including sales of holidays to its own-brand hotels, which are up 15% and it is planning to add at least 20 new ones next year. Also, it said innovative ancillary services are driving growth of 4%.

Priorities for 2019 include better capacity management and improved operational flexibility, increased focus on cash and cost discipline across the group, and improved selling of higher-margin own-brand hotels and differentiated holidays.

Fankhasuer added: "2018 was a disappointing year for Thomas Cook, despite achieving some important milestones in our strategy for transforming the business.

"After a good start to the year, we experienced a larger-than-anticipated decline in gross margin following the prolonged period of hot weather in our key summer trading period.

"Profit in our tour operating business fell £88 million as the sustained heatwave restricted our ability to achieve the planned margins in the last quarter. The UK was particularly hard hit with very high levels of promotional activity coming on top of an already competitive market for holidays to Spain.

"Despite the impact of the hot summer, our Northern European tour operator achieved a near record performance, albeit lower than that expected at the end of May.

"Meanwhile, our Group airline delivered strong growth in customers and profit, up £35 million, benefitting from increasing capacity in a turbulent European aviation sector.

"We remain committed to our strategy for profitable growth and we've made some good progress during the year. Within our own-brand hotels business we have established our hotel investment fund, opening 11 new hotels last summer, including an innovative new concept in Cook's Club. This positions us well for 2019 as we build on our position as one of the top five sun & beach hotel companies in Europe with at least 20 new hotel openings planned.

"Meanwhile, the launch of our alliance with Expedia, now in five of our markets, offers customers a much wider choice of city and domestic hotels at lower cost to the business. Taken together, these developments are transforming our opportunities for growth.

"Looking ahead, we must learn the lessons from 2018 and go into the new year focused on where we can make a difference to customers in our core holiday offering. We will put particular attention on addressing the performance in our UK tour operator where the challenges of transformation in a competitive environment remain significant.

"Across the Group, we will continue to streamline our cost base and manage our capacity to give us greater operational flexibility and financial discipline, while focusing the team on delivering performance improvements and giving customers more reasons to holiday with Thomas Cook."

The Group intends to announce a first quarter trading update on 7 February 2019.

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