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Thomas Cook Suffers As Heatwave Keeps Customers At Home

Published on Oct 1 2018 9:30 AM in General Industry tagged: Trending Posts / thomas cook

Thomas Cook Suffers As Heatwave Keeps Customers At Home

British holiday company Thomas Cook cut its 2018 profit forecast, blaming a heatwave in northern Europe for hitting demand in the most profitable part of the summer season and hurting winter trading, sending its shares plunging.

In a separate statement, Thomas Cook also said it would replace its chief financial officer after less than a year in the job. The change was described by Morgan Stanley analysts as a surprise.

Thomas Cook makes all its profit in the summer when its customers in northern Europe, including Britain, Germany and Scandinavia go on holiday, mainly to warmer destinations in southern Europe such as Spain, Turkey and Greece.

The company, which had warned in July that profit would be at the lower end of its forecast range, said that "unprecedented months of hot weather" reduced demand for late bookings, leading to more discounting and tougher competition.

As a result, Chief Executive Peter Fankhauser told investors on a call that Thomas Cook had been unable to achieve the margins it needed, and the impact was still being felt.

"We've seen a spillover of the hot weather as well into 2019 in the winter so we have some weakness in winter trading," he said.

"A downgrade of this size in 2018 is going to have some impact on 2019."

Thomas Cook said it would provide further details on 2019 guidance in November.

In August, Thomas Cook's bigger rival TUI Group stuck to its forecasts but said that the heatwave would prevent it from beating them.

Profit Estimate

For the 12 months to September 30, 2018, Thomas Cook estimated that underlying operating profit (EBIT) would come in at around £280 million, below a previous £323 million to £355 million range.

Thomas Cook's share price has lost about half its value since the beginning of the year, underperforming Britain's midcap index which is down 0.5% in the period. The company is now worth about £980 million.

"The shares are undoubtedly cheap...although we lower our recommendation from 'buy' to 'hold' until we get greater clarity over trading for summer 2019," Shore Capital analyst Greg Johnson said.

In a separate statement, Thomas Cook said its chief financial officer Bill Scott would leave the company on November 30, and be replaced on an interim basis by Sten Daugaard, a board member of Thomas Cook's German business.

A search for a permanent successor would be started immediately, the company added.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition. 

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