Nearly a fifth of Thomas Cook’s (TCG) market value has been wiped off as it cuts earnings expectations following the summer heatwave.
Shares in Thomas Cook plummeted 19.5% to 62.6p after the travel operator slashed its earnings before interest and tax guidance by between £40m and £50m to £280m.
Chief financial officer Bill Scot has resigned and will be replaced by Sten Daugaard on an interim basis.
HOT WEATHER DETERS POTENTIAL HOLIDAYMAKERS
People enjoyed the recent spell of hot weather at home instead of jetting off to get the perfect tan.
With destinations including Turkey, Egypt, Tunisia and Greece becoming popular, overall bookings rose 12%, but average selling prices declined 5% thanks to strong competition.
The hot weather also deterred people from taking holidays later in the year with Thomas Cook warning of tougher competition and higher levels of discounting in August and September.
Looking ahead to winter bookings, sales are 2% lower than last year with prices up only 1%.
EXPERT VIEWS
Shore Capital analyst Greg Johnson has lowered his recommendation from ‘buy’ to ‘hold’ on the weaker performance and lack of clarity over trading for summer 2019.
He has cut his pre-tax profit forecasts by £45m to £150m, although he believes strategic initiatives can drive material profit improvement over the medium term.
Johnson warns further profit downgrades for 2019 could be on the cards (also to the tune of £45m) leaving pre-tax profit estimates at £200m.
AJ Bell investment director Russ Mould says: 'Investors might legitimately ask why the firm wasn't more conservative when it updated on trading at the end of July - surely it could have seen this coming.
'Worryingly the impact is continuing to be felt into Winter trading and all eyes now are likely to be on the guidance given for 2019 when the company reports its results for the 12 months to 30 September on 29 November.'
