The world's oldest tour operator Thomas Cook (TCG) falls 6.2% today to 121.9p as German holidaymakers wilt in the sun. In a pre-close statement Harriet Green, the UK group's chief executive officer (CEO), attempted to accentuate the positives, but investors are clearly in no mood for looking on the bright side, not today anyway.

In fairness to Green and Thomas Cook, there is underlying progress. The CEO assures the markets that the group's ongoing transformation, now in its second year, remains very much on track, while operational performance should show a material improvement on 2013, when Thomas Cook reports full year results in November. Green expects to report a ninth consecutive quarter of improved profitability.


Underlying earnings before interest and tax (EBIT) are expected to come in between £315 million and £335 million, equivalent to growth of between 39% and 48% and this appears to be driven by the group's success in delivering its transformational strategy.

Online strategy is likely to remain a key battlefield for travel operators worldwide. Here Thomas Cook's new UK website continues to deliver improved online package bookings, which have risen 10% for desktop, 60% for tablet and 216% for mobile since the website was launched at the end of May. Following the UK rollout, the website will be extended to other markets which will begin to reflect the benefits by the end of financial 2015. As a result, management expects that group online penetration will accelerate from the current level of 38% towards the 2015 target of more than 50%.

Concept hotels is another growing demand segment for Thomas Cook and Summer 2014 bookings are up 43% compared to 2013 and as a consequence, management expects to achieve its new product revenue target of more than £300 million this year, and more than £700 million in full year 2015.

Cook's costs and improvement programme continues to deliver ahead of schedule with the result that the group expects its current plan for two waves of cost cuts to remain on track. Wave one is to save £460 million by 2015, the second to slash an extra £400 million or more by 2018.

While average selling prices in Germany, are 3% lower than last year due to an increase in market capacity to short and medium haul Summer destinations, Cook noted bookings in Germany, which had been strong, have recently moderated. This probably reflects a less optimistic consumer climate due to geopolitical events, as well as a more subdued economic outlook as the EU considers adopting further sanctions against Russia. As a consequence, Cook's German business has experienced weaker margins in the fourth quarter of the year due to a combination of reduced demand and excess market capacity.

Issue Date: 16 Sep 2014