Thomas Cook Shares Plunge After Profit Warning

Shares in the FTSE 250 travel operator lost 30% after warning on full-year profits and suspending the dividend

Alliance News 27 November, 2018 | 9:42AM
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Thomas Cook

Shares in FTSE 250 firm Thomas Cook (TCG) plunged 30% on Tuesday after it suspended its annual dividend and issued another profit warning ahead of scheduled results on Thursday.

The travel operator said it expects earnings to be hurt by a number of one-off charges and by weakness in its tour operating business, exacerbated by this summer's sustained heatwave in the UK. Thomas Cook also suspended the dividend for the 2018 financial year. The 2017 dividend was 0.6 pence per share. The company’s shares fell 13p to 36p in early trading, a six-year low.

The FTSE 250-listed travel agency and tour operator company said it expects to report underlying earnings before interest and taxes of £250 million for the year that ended in September, down £58 million, or 19%, year-on-year on a like-for-like basis. It will report its full audited financial results on Thursday as planned.

The result includes £28 million in legacy and non-recurring charges, comprising the write-down of historic hotel receivables, flight disruption costs, and company restructuring costs.

Pre-tax profit in the Tour Operator business fell by £88 million, Thomas Cook said, as a result of a worse-than-anticipated decline in gross margin in the final quarter of its financial year.

"The sustained heatwave restricted our ability to achieve the planned margins in the last quarter," said Thomas Cook Chief Executive Peter Fankhauser.

The weakness in the Tour Operator division was partially offset by a good performance in Thomas Cook's Airline division, where profit grew by £35 million from the prior year. The company highlighted that the result was achieved despite air traffic control issues.

"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," said Fankhauser.

"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," he added.


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