Thomas Cook Lowers Profit Forecast as Attacks Sap Travel Demand

  • Bookings for key summer travel season down 5% on Turkey trips
  • Brexit has added to ‘general sense of uncertainty,’ CEO says

Thomas Cook Group Plc cut its earnings forecast for fiscal 2016 after a string of terror attacks from Turkey to the French Riviera depressed demand from summer vacationers.

For the year ending Sept. 30, underlying earnings before interest and taxes will be about 300 million pounds ($396 million), the company said in a statement Thursday. That compares to a May forecast for operating profit to be in a range of 310 million pounds to 335 million pounds. With the new figure roughly in line with analyst estimates, the shares bounced back from a recent selloff, rising as much as 9.7 percent.

“These are dismal results, however the market was expecting that,” Stuart Gordon, an analyst with Berenberg. “The story is certainly not getting any better.”

Tour operators are struggling to offer clients enough destinations that seem safe for vacation, after attacks last year effectively closed large parts of Egypt and Tunisia, and a string of incidents in Turkey, including the failed coup, sapped demand for one of the industry’s most important destinations. Germany, the company’s biggest market by customers, also saw a string of attacks this month.

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“We are operating in a challenging geopolitical environment, with repeated disruption in some of our key source and destination markets,” Chief Executive Officer Peter Fankhauser said in the statement. “In addition, while Brexit has had no noticeable impact on our bookings so far, it has added to a general sense of uncertainty.”

Booking for the important summer season are down 5 percent, Thomas Cook said, depressed by falling demand from Belgium, which suffered a double attack at its main airport and a subway station in Brussels in March. The group’s summer program is 81 percent sold.

Even amid the woes, the company stands by its goal to pay out between 20 percent and 30 percent of net income as a dividend for fiscal 2016, CEO Fankhauser said on a call with
journalists.

The new guidance also includes benefit of 32 million pounds from currency translations, as sales generated in euros are worth more when translated into pounds. The pound has lost about 12 percent against the euro since the beginning of the year, as the U.K. in June voted to leave the European Union.

Thomas Cook shares, which have tumbled 47 percent this year amid growing travel concerns, climbed to as high as 65.8 pence and were up 7.3 percent at 64.4 pence at 8:50 a.m. in London.

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