THOMAS Cook has seen its recovery plan shift into gear with a robust finish to its final quarter helping to counter a year of financial pain.
Britain’s second-biggest travel operator has been hit hard by the economic downturn, soaring fuel costs and social unrest in popular destinations. It has had to renegotiate bank loans, cut its aircraft fleet and sell off other assets to reduce debt.
Annual results released today showed that underlying operating profits had almost halved to £156 million – roughly in line with City expectations.
Hefty restructuring costs meant that pre-tax losses widened 22 per cent to £485m, with the 171-year-old group seeing profit fall in all its regions.
No dividend will be paid to shareholders for the year ended 30 September.
However, the firm provided some reassurances for bruised investors, noting that winter bookings were ahead of committed capacity in all markets at improved prices.
Chief executive Harriet Green, who arrived in July to try to revive the group’s fortunes, said the firm had turned a corner.
“Thomas Cook, in my opinion, is not broken,” she stressed. “It is viable and working, and we have turned the corner.
“These results reflect the major issues that Thomas Cook faced last year. They mask the material improvement that we made in the fourth quarter.”
Analysts at Investec Securities issued an upbeat note, reiterating their “buy” recommendation on the shares.
“This is an encouraging statement of intent and represents a suitably aggressive start to life under chief executive Harriet Green,” said Investec.
The broker added: “With net debt down to more manageable levels and a supportive banking syndicate, we think Thomas Cook now has the platform and management to deliver the required cost and business changes to thrive.”
Peel Hunt analyst Nick Batram said: “Net debt was lower than we had expected, and this should give some confidence that the new management team can deliver. Nevertheless, while the upside from getting it right is significant, the task remains substantial.”
Over the year, net debt fell by £103m to £788m, compared with a forecast for little change. The group said it would be trimmed by at least a further £50m in its 2012-13 financial year.
Green, who is putting technology at the heart of the revival plans with the firm’s online business set to be the key distribution channel, is due to unveil a full turnaround strategy in the spring.
Today, she said £100m of annualised savings had already been identified, in addition to £140m of UK-focused cost cuts already announced.
In its central Europe business, the group said it had achieved higher volumes and average selling prices in the competitive German market.
But the Eastern markets experienced difficult conditions with general economic uncertainty.
Overall group revenues fell by about 3 per cent to just under £9.5 billion.