UPDATE: Thomas Cook Group To Miss 2010 Target On Weak Market
13 Agosto 2009 - 11:07AM
Dow Jones News
U.K.-based travel company Thomas Cook Group PLC (TCG.LN)
Thursday warned that it will miss its target for profits next year
due to the downturn in the industry, after posting a widened loss
in the last nine months.
The company said it will still meet this fiscal year's targets
despite the widened loss, but it won't make the GBP480 million in
earnings before interest and tax, or EBIT, it had targeted for next
year.
Chief Executive,Manny Fontenla-Novoa told reporters the company
can still meet consensus EBIT views of GBP400 million for this
financial year and GBP430 million next year.
The warning hit the company's shares and at 0757 GMT, the stock
was down 13 pence, or 5.8%, at 216 pence, the biggest decline on
the FTSE 100.
The company posted a pretax loss of GBP286.4 million for the
nine months to June 30, wider than the loss of GBP236.7 million a
year earlier, mainly due to GBP107.3 million costs related to the
2007 merger of MyTravel and Thomas Cook, as well as costs for other
acquisitions and restructuring costs. Cancellations and
repatriations due to swine flu cost it GBP12.6 million.
Its net loss only widened slightly, to GBP175.6 million, from
GBP174 million, as it booked a tax gain of GBP110.8 million
compared with a gain of GBP62.7 million a year earlier. The company
is able to claim back tax because of recent losses in the U.K. and
Germany.
The company has been taking out capacity to match lower demand
during the downturn and also cutting costs, so margins have risen
and EBIT improved.However it doesn't see market conditions
improving sufficiently to meet 2010 operating profit forecasts
originally targeted.
Thomas Cook's comments echoed those from larger rival TUI Travel
PLC (TT.LN), which Wednesday warned that it faces a tough winter
because consumers are foregoing second holidays during the economic
downturn.
Fontenla-Novoa said rising unemployment across all markets in
which it operates would mean it faces a tougher year next year.
However, while he acknowledged winter holidays were more
discretionary compared to main summer holidays, he was confident
people would still book trips and planned capacity reductions would
match lower demand.
Over the past four weeks bookings for winter holidays are down
8% on the year in the U.K. and flat across Northern Europe.
He said it would only "trim" capacity further if it was needed.
It is planning to cut capacity for the upcoming winter season by 6%
in the U.K. and 7% in Northern Europe, much less than the 15% cut
in capacity that TUI Travel is planning for the winter.
Fontenla-Novoa said Thomas Cook had already cut more capacity
than TUI Travel, having taken out 25% of available holidays over
the past two years.
The collapse of the U.K.'s XL Leisure in 2008 helped both Thomas
Cook and TUI Travel keep up prices as it meant a reduction of about
two to three million holidays - about 7% of total market
capacity.
Thomas Cook's revenue increased 10.7% to GBP5.84 billion for the
nine months period as it increased the price of holidays and
revenues from outside the U.K. were boosted by sterling's weakness.
It makes about a third of its revenues in the U.K.
Average selling prices in the U.K. for the summer 2009 have
increased 8%. Prices in general have to rise between 3% and 4% to
offset fuel and currency movements, Manny Fontenla-Novoa said.
Its results were also boosted by the timing of Easter - which
fell in the third quarter this year and the second quarter last
year - and because the company has also persuaded suppliers like
hoteliers to lower costs to encourage travellers back. It's been
particularly successful in getting suppliers to reduce cost in the
euro zone, where there's weak demand due to the strength of the
euro against the pound.
Thomas Cook's shares have fallen some 6% over the past 12
months, weighed down by the uncertainty surrounding the 52.8% stake
owned by insolvent German retailer, Arcandor AG (ACAGF).
Royal Bank of Scotland Group PLC (RBS.LN), Commerzbank and
BayernLB have said they are considering their options on a 43.9%
Thomas Cook stake, which was put up as collateral against
borrowings by Arcandor. The stock will most likely be sold on the
markets, privately, or by a combination of both.
Fontenla-Novoa stressed Arcandor's woes doesn't affect Thomas
Cook financially.
-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299;
kaveri.niththyananthan@dowjones.com
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