Weak And Uncertain UK Economy Overshadows Thomas Cook Results

The annual results of travel global travel company Thomas Cook have been negatively impacted by the uncertainty and problems in the United Kingdom which is also the biggest market of the operator, even though the company was well on track to achieve the expectations that it had set for itself for the year and the expectations of the market, the company said.

Both revenues and profit from operations were up – nearly at equal rates of growth. Till the month ended September, the company clocked a rise growth of 8 percent in its underlying operating profits which touched £330 million and a growth of 9 percent in its revenues which clocked at £9 billion. there was however a very high jump in underlying operating profits for continental Europe with a growth of 44 percent and reaching £108 million. At the same time. The company reported a £12 million profit for its German Condor airline compared to a loss of £12 million a year earlier.

However, net profits saw a drop of 23 percent in the UK market of the company with values reaching £111 million. The factors that the company identified for the fall there included greater competition among airlines, the falling value of the pound and the increasing hotel prices in the second and third quarters despite strong first-half trading and business.

Another factor that ragged the group’s gross margin from 23.4 percent to 22.1 percent was competition for Spanish holidays as the above mentioned factors had put pressure on the input costs as well as the selling prices for holidays to Spain.

The act of supporting of customers who had been affected by the Hurricane Irma and the rising claims by people faking illness during trips had also negatively impacted the UK business, Thomas Cook said.

There was drop of 12 percent in the shares of Thomas Cook which touched 107p at 08:17 GMT.

58 percent of the winter holidays on offer by the company had already been sold out and therefore it can be said that the market and company expectations about the winter holiday business were in line with the performance of the company so far. There has been a growth of 7 percent in bookings for the winter from northern Europe and 3 percent from continental Europe which resulted in a growth of 3 percent for the group despite just a 1 percent rise in the bookings from its largest market – the U.K.

Peter Fankhauser, Thomas Cook’s chief executive, said: “Looking to the year ahead, we can see real momentum in our group airline, and expect our continental Europe and northern Europe tour operator businesses to continue their good performance.

“While conditions are challenging in the UK, we have implemented a set of actions to improve performance. Overall, based on current trading, I believe that we are well-positioned to achieve a full year operating result in line with market expectations.”

Measures like enhancement in handling and adequate legal action against fraudsters had bene initiated by the company to address the fraudulent illness claims, Thomas Cook said. the destinations of Egypt and Turkey are reviving after a spate of terrorist attacks caused a slump in tourist demands for these places and that is the reason that the company is shifting UK holidays towards those to destinations instead of Spain. Profits are also higher for those two countries, the company said.

(Adapted from Digitallook.com)

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Categories: Economy & Finance, Strategy, Sustainability

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