28th Nov 2013 09:54
LONDON (Alliance News) - Travel operator Thomas Cook Group PLC Thursday provided an upbeat earnings report for the year ended September 30, as the company made progress on its turnaround plan, strengthened its balance sheet, reduced losses, and increased growth and profit targets for the next few years.
Thomas Cook said it now has completed phase one of its turnaround plan, which included exiting low-value businesses by means of a string of asset sales. Under new Chief Executive Officer Harriet Green, the group has been trying to shrink the debt that it piled on during the recent economic downturn and focus on its core assets.
In recent weeks, the group has sold its UK corporate foreign exchange business, its business in Egypt and Lebanon, and its specialists activity tour operator Neilson Active Holiday, while outsourcomg its UK escorted tours business and selling most of its shareholding in UK air-traffic controller NATS Holdings Ltd.
Thomas Cook reported an operating profit for the first time since 2010, of GBP13 million.
It more than halved its losses for the year, reporting a pretax loss of GBP207 million for the 12 month period, down from GBP590 million a year earlier, as the group ripped out operational costs and reduced capacity.
Thomas Cook said it reduced its debt pile to GBP421 million, down significantly from GBP788 million in net debt a year earlier, due to the disposals and improved operational cash flow.
Thomas Cook said that it has gained a total of GBP61 million in gross proceeds from disposals, but there is still more to come, as it stays on track to reach its target of between GBP100 million and GBP150 million in disposal proceeds by the fiscal year 2015.
"Wave one was a low-hanging-fruit cost out programme, but phase two is all about profit improvement, yield management and lower distribution costs, as we try to enhance margins and operate in a leaner way," Green told journalists in a call after the results were released. "The challenge is the scale of the business and bringing it all together."
Green emphasised a confident outlook for the business going forward by raising a number of the company's growth, profit and cash targets for the group for 2015.
"We are implementing these changes faster than we thought, and have taken out costs faster than planned," Green said.
Thomas Cook raised its new product revenue growth target to more than GBP700 million in 2015, up from a previous target of GBP500 million, boosted by the growing contribution from exclusive hotels, including concept and partnership hotels.
It also increased its cost out and profit improvement target to GBP440 million, due to a further GBP40 million of deliverable benefits, and upped its cash-conversion target to more than 70% for the fiscal year 2015.
The group reported a slight increase in revenue for the year, up to GBP9.3 billion, from GBP9.2 billion a year earlier, boosted by strong sales in Northern Europe, and an improving UK market. It also said that its ailing French business is still reducing its losses, and moving closer to its breakeven target by 2015.
The travel operator said that it increased its web penetration across the business during the year, with 36% of holidays having been booked online, up from 34% last year. It said that it is on target to increase that figure to more than 50% by 2015. Web penetration increased strongly in Scandinavia, up more than 70%.
Thomas Cook has reduced its brands and labels to 30 from 85, and are now all unified under its new "sunny heart" logo. During the year the group also reduced its UK retail stores by 21%.
Commenting on current trading, Thomas Cook said tmargins for winter 2013/2014 are ahead of last year, with UK bookings up 1% on a like-for-like basis, and a strong level of price increases across the business. It said that the strength of its Nordic business continues, delivering growth at stable prices and improved margins.
The group said that continental Europe sales were affected by the political turmoil in Egypt, although confidence has begun to return, and its summer 2014 performance is in line with expectations.
Thomas Cook shares continue to underperform against its bigger travel rival, TUI Travel PLC, but the market has noted the strong report Thursday, with shares up 12% at 171.71 pence. TUI Travel is quoted 369.35p, up 1.8%.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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