Tour operator Thomas Cook Group Plc (TCG.L,TCKGY.PK) on Thursday reported a wider pre-tax loss for the first half as challenging economic conditions and political unrest in some markets continued to discourage travelers. The stock is falling over 8 percent in early trade.
However, the troubled company has seen progress in its UK turnaround plan and said it now expects to deliver better-than-estimated improvement in profitability over three years.
The first half of the year was tough for the 171-year-old travel firm with liquidity problems threatening its continuation in business. In this eventful and unenviable period, Thomas Cook secured 1.4 billion pounds ($2.17 billion) in longer term flexible funding that has no fixed repayments until May 31, 2015.
Further, shareholders approved the disposal of HCV hotels and aircraft sale and leaseback, expected to add another 239 million pounds of liquidity. Additionally, the tour operator agreed this month to sell its Indian business Thomas Cook India for around 94 million pounds to reduce debt.
It also made some changes to the management. Harriet Green was named as Group CEO with effect from July 30 and Michael Healy was named Group CFO, effective July 1.
Thomas Cook's pre-tax loss for the first-half widened to 712.9 million pounds from 269.4 million pounds. The latest results included 300 million pounds of non-cash goodwill impairments.
The company noted that the results reflect the difficult trading conditions in most of the Group's markets and particularly the impact of MENA on France and the poor trading in the Canadian mainstream business partly a result of overcapacity in that market.
On an underlying basis, pre-tax loss was 328.3 million pounds compared to 232.9 million pounds in the prior year.
Revenue increased to 3.52 billion pounds from 3.43 billion pounds in the prior year due to acquisitions, specifically the Russian and Co-op joint ventures which added 111 million pounds, and additional capacity in Airlines Germany and in Northern Europe.
This growth was offset by capacity reductions in other segments and weaker trading in North America and France.
Revenue from the UK slipped nearly 3 percent while West Europe showed a 11.5 percent decline. Central Europe revenues grew 14 percent.
Thomas Cook said its UK turnaround plan is well underway. The firm now expects over three years to deliver a fully annualized improvement in profitability of 140 million pounds, compared to the previous expectation of 110 million pounds. The total estimated cost now is around 70 million pounds compared to the previous projection of 60 million pounds.
Against uncertain economic environment, the firm is "pleased with the recent booking patterns." UK bookings are only slightly lower than prior year. Bookings are up 4 percent in Airlines Germany and up 1 percent in Central Europe. In Northern Europe, bookings are down 6 percent after a slow start to the year.
Yet, the firm continues to expect this year to be challenging due to the economic backdrop, difficult trading environment with particularly poor performances in the North American and French businesses.
"Whilst our booking position for the second half has improved trading will be dependent on how well the Group performs during the important lates market," it added.
The stock is currently falling 8.6 percent on the LSE at 18.50 pence.
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by RTT Staff Writer
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