16 May, 2019

Brexit named as a cause of Thomas Cook's woes.

One of the most well known UK travel firms, Thomas Cook has reported losses of £1.5 billion in the first half of the year and the news sent its share price tumbling on Thursday 16th May.

The firm firmly put the blame partly on Brexit,  it says there was "now little doubt" that uncertainty over the British exit from the European Union had caused customers to delay their summer holiday plans. However, much for the loss (£1.1 billion)  was attributed to the firm's decision to write-down the value of My Travel, a business it took over in 2007. It also blames the good weather in the UK and higher prices in the Canary Islands. 

Thomas Cook says it has received multiple bids for its airline businesses, including the German holiday airline, Condor. The Group Airline will operate 105 aircraft this summer, excluding wet leases, as it consolidates its growth of 2018 and strengthens its position as one of the leading leisure airlines in Europe.  The UK airline now operates an all-Airbus fleet, Condor, the German airline has driven particularly strong growth in third-party sales in short/medium-haul of 27% in the first half Meanwhile, the ongoing efficiency programme is on track to deliver further cost reduction across the Group Airline. Thomas Cook Airlines Scandinavia was awarded the TripAdvisor Travellers’ Choice award in April 2019, yet hasn't made a significant profit.

H1 performance against strong prior-year period

Revenue of £3,019 million, in line with last year

Underlying EBIT loss increased by £65 million to £245 million reflecting margin pressure in Tour Operator
Goodwill impairment of £1,104 million in UK business, relating to 2007 merger with MyTravel
Loss before tax of £1,456 million after goodwill impairment
Net debt of £1,247 million; increase due to a lower working capital position and higher non-cash items
 Good progress on executing strategy of differentiation

Group NPS improvement led by Hotels (+6 points), Tour Operator (+2 points) and Airlines (+2 points)

Opened 12 own-brand hotels, including four Cook’s Clubs and one Casa Cook
Expanded presence outside Europe: agreed joint venture in Russia and pipeline of new hotels in China
Strategic review of airline progressing; agreed term sheet for new facility

Multiple bids received for all and part of Group Airline

£300 million bank facility to provide additional liquidity for Winter 2019/20 season
Challenging trading for Summer 2019

Recent economic and political uncertainty has led to high levels of promotional activity

This activity, along with higher fuel and hotel costs, will impact progress on FY19 EBIT
The holiday firm has already closed 21 of its holiday retail stores, with more on the way, while its Thomas Cook Money currency exchange business is understood to in danger of being axed following a review. The group also states there are more "cost efficiencies" planned for the future.

Peter Fankhauser, Chief Executive of Thomas Cook, commented:  "The first six months of this year have been characterised by an uncertain consumer environment across all our markets. The prolonged heatwave last summer and high prices in the Canaries reduced customer demand for winter sun, particularly in the Nordic region, while there is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer."

"Our loss from operations for the period was £1.4 billion, which reflects a non-cash impairment of historic goodwill, largely related to the merger with MyTravel in 2007 which we have re-valued in light of the weak trading environment. Our current trading position reflects a slower pace of bookings, against a strong first half in 2018, and our decision to reduce capacity in order to mitigate risk in the tour operator and allow our airline to consolidate the strong growth it achieved last year."

"Despite this more challenging environment, we have made good progress on our strategy of differentiation. Following the announcement of the strategic review of our Group Airline in February, we have received multiple bids, including for the whole, or parts, of the airline business. As we assess these bids, we will consider all options to enhance value to shareholders and intensify our strategic focus. We are well advanced in our aim to build our position as one of the leading sun and beach hotel companies in Europe. In the last two months alone, we’ve opened 12 new own-brand hotels out of a pipeline of 20 for 2019, reinvigorating key destinations across the Med with four new Cook’s Clubs, and launching our first family Casa Cook in Crete."

"Outside of Europe, we have taken an important next step in the development of our China joint venture with the announcement of two new hotel projects in partnership with Fosun, including our first Casa Cook in Asia. We have also secured a leading position in the Russian market with the development of a new joint venture to buy the number one tour operator Biblio Globus. Taking lessons from 2018, we have put a keen focus on cash and cost discipline across the group in the first half. We have also accelerated the transformation of our UK business, including the closure of 21 UK retail stores and a review of Thomas Cook Money. A range of further cost efficiencies are planned for the second half, allowing further investment in our growth strategy."

"As we look ahead to the remainder of the year, it’s clear that, notwithstanding our early decision to mitigate our exposure in the 'lates' market by reducing capacity, the continued competitive pressure resulting from consumer uncertainty is putting further pressure on margins. This, combined with higher fuel and hotel costs, is creating further headwinds to our progress over the remainder of the year."

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