Thomas Cook reports cost savings

Dino D'Amore
By Dino D'Amore May 15, 2014 13:53

Thomas Cook reports cost savings

Harriet Green, Group Chief Executive of British holiday operator Thomas Cook, has stated that she is confident of hitting 2015 targets thanks to cost-savings that helped it weather a slump in bookings for Egypt and lower holiday prices in Britain.

“Firstly, I’m delighted to report that we have delivered 39% underlying EBIT growth to £274 million and a 120 basis point improvement in underlying gross margin to 22.5% on a last 12 months like for like basis, despite around a quarter of a million fewer customers travelling to Egypt which reduced revenues and profits by £131 million and £14 million respectively.  Secondly, concept hotel summer bookings are up 44% and UK 2014/15 winter bookings 11% higher, reflecting strong customer demand for our new products.  Thirdly, 2014 Wave 1 cost out and profit improvements are £20 million ahead of plan, resulting in yet another increase in our 2015 Wave 1 target, from £440 million to more than £460 million.  Finally, Standard & Poor’s recently recognised our transformation progress by raising their outlook to ‘positive’ from ‘stable’.

In respect of our 2018 Wave 2 target of over £400 million, we have so far identified an initial proportion of benefits, which we have fully risk weighted, of £150 million, with substantially more to come.   We believe that these, in addition to over £1.2 billion in targeted incremental new product revenue in 2017, will transform our profitability and generate superior returns for our shareholders.”

Thomas Cook reported a 39% rise in underlying EBIT to £274 million on a last 12 months like for like basis. For the six months ended 31 March 2014 underlying EBIT improved by £30 million to £(187) million on a like for like basis. Wave 1 FY15 cost out and profit improvement target up £20 million to £460 million.  Wave 2 FY18 target of over £400 million; initial risk weighted benefits identified so far of £150 million.

The holiday group reported that online bookings increased to almost 39% over the last six months, with annual web booked revenues representing approximately £3 billion; mobile and tablet bookings almost £0.5 billion.

Strong new product demand was reported with summer concept hotel bookings up 44%, UK Winter 14/15 bookings up 11%.  Around a third of Group revenue is from more flexible rather than traditionally packaged products. Summer 2014 booking performance is developing well with solid volumes in its main markets, the company stated.

Thomas Cook shares lost 5 percent of their value in morning trading due to, analysts say, investor disappointment with the 2015-18 cost saving plan and average holiday prices in Britain which for this summer were 3% lower than last year.

Dino D'Amore
By Dino D'Amore May 15, 2014 13:53
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