Thomas Cook First-Half Loss Narrows Boosted by Cost Savings

Thomas Cook Group Plc said summer bookings and prices fell in its U.K. market after Europe’s second-largest tour operator trimmed capacity and customers opt for shorter holidays

Summer bookings by British holidaymakers, who accounted for just over a quarter of sales in the first half, are 1 percent lower than a year earlier, while average selling prices are down 3 percent, Thomas Cook said in a statement today. The season is about 60 percent sold across all markets, it said.

“U.K. summer trading gives us cause for concern,” Investec analyst James Hollins said in a note today. “Bookings and yields are down, which is stated to be strategic, although we see it as placing material pressure on later bookings.”

Under Chief Executive Officer Harriet Green, Thomas Cook is refinancing debt to improve margins, closing underperforming stores, cutting costs and selling peripheral assets. Cost savings are 20 million pounds ahead of plan, prompting the tour operator to boost its 2015 efficiency target to 460 million pounds ($771 million) by fiscal year 2015, Green said today.

Thomas Cook fell as much as 11.7 pence, or 6.6 percent, to 166.9 pence in London, the most in a month. The stock has gained 36 percent in the past twelve months, valuing the company at 2.5 billion pounds.

More Savings

A second, 400 million pound wave of measures set to be achieved by 2018 will “transform our profitability and generate superior returns for our shareholders,” the executive said, adding that unrest in Egypt drove away about 250,000 customers, trimming first-half sales by 131 million pounds.

The tour operator narrowed its first-half loss before interest and taxes to 187 million pounds, compared with a loss of 198 million pounds a year earlier, the London-based company said. Sales retreated 6.6 percent to 3 billion pounds with the U.K. accounting for 783 million pounds in revenue, second only to the 1.25 billion pound contribution of continental Europe.

The tour operator is “seeing a little bit of curtailment of booking activity” out of Russia, the executive said on a conference call. The country’s annexation of the Crimea region is causing some “mild concern, but nothing too dramatic to off set the business performance,” Green said.

Concept Hotels

Early winter bookings for fiscal year 2015 are more than 11 percent higher in the U.K. and average selling prices are up 2 percent, bolstered by more “winter-sun” destinations, Thomas Cook said today.

Summer concept hotel bookings were up 44 percent to 460,211 during the period, with reservations at partnership hotels also gaining, the tour operator said. Thomas Cook has concluded exclusive deals with 166 hotels since the end of September and said it is “well on track” to have 640 hotels in its portfolio by the end of fiscal year 2015.

The tour operator has sought to streamline its Internet presence, reducing 304 websites to about four per segment. Online bookings gained almost 39 percent in the first half, with annual web reservations accounting for about 3 billion pounds in revenue. Mobile and tablet bookings stand at about 500 million pounds a year, Thomas Cook said.

“By September of 2015 we said we want to be half of our business via the web,” she said. “We probably haven’t reached the Thomas Cook tipping where it just zooms.”

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