Thomas Cook Sees Profit Slump in UK Division

Thomas Cook’s UK business has reported a fall in profit of 40 percent after a mixture of hotel price increases and a weak pound took their toll.

An improved performance in other markets meant that overall the companies full-year pre-tax profit rose by 35 percent to $61 million (£46 million).

The company's share price fell by 8.4 percent in the aftermath of the announcement.

The pan-European tour operator said the problem in the UK was down to a number of issues. A more competitive market in Spain put pressure on costs and selling prices and the continuing struggles of the pound following last year’s Brexit referendum gave rise to increased costs. The company also blamed the disruption caused by Hurricane Irma.

Underlying earnings before interest and taxes slumped from $115 million (£87 million) to $69 million (£52 million) in the unit.

Thomas Cook had previously guided that increased demand to Spain was likely to push prices up.

“After four consecutive years of profit growth, margins in our UK business declined due to a more competitive market environment, especially for holidays to Spain,” said Chief Executive Peter Fankhauser.

There was better news for Thomas Cook in its airline division and in its other European markets. German airline Condor, which had been struggling in recent years, moved into the black and underlying profits were also up in Continental Europe and the Nordic region.

Fankhauser said: “Looking to the year ahead, we can see real momentum in our Group Airline, and expect our Continental Europe and Northern Europe tour operator businesses to continue their good performance. While conditions are challenging in the UK, we have implemented a set of actions to improve performance.  Overall, based on current trading, I believe that we are well-positioned to achieve a full year operating result in line with market expectations."

Destination Remix

There was more encouraging news for Thomas Cook on the destination front. Interest in holidays to Turkey and Egypt – two destinations hit by terrorism in recent years – is returning. This should help Thomas Cook recover some of the ground it has lost in the UK, as both a considerably cheaper than Spain.

"Customer demand for non-Euro destinations such as Turkey and Egypt, where we have long been market leader, is picking up well, helping us to mitigate the margin pressure we've experienced this year in Spain," the company said.