Thomas Cook resurgence putting pressure on TUI

PRESSURE is mounting on TUI Travel chief executive Peter Long to match the performance of Harriet Green, boss at resurgent arch rival Thomas Cook.

Green last month unveiled Thomas Cook's first full-year operating profit since 2010. Picture: Contributed

Green last month unveiled Thomas Cook’s first full-year operating profit since 2010 as her turnaround plan begins to revive the firm’s fortunes following its near-collapse.

Long will use Google’s head office in London to unveil TUI’s full-year result as he emphasises his firm’s “technological innovations” and the benefits of its own roadmap for growth.

Greg Johnson, an analyst at Shore Capital, pointed out: “Given the location of the presentation at Google’s HQ, we would expect management to use the results presentation to demonstrate the progress being made in this area. Apart from reducing distribution costs we see online development as an opportunity for both yield management and customer acquisition.”

Johnson said Thomas Cook’s resurgence had “raised the bar” on profit margins.

“If Thomas Cook delivers on both ‘wave one’ and ‘wave two’ profit-improvement targets, assuming limited slippage in trading it would imply around 8 per cent operating margins – El Dorado to a tour operator historically,” he said.

“TUI Travel’s margins were 3.4 per cent in 2012 and we forecast increasing towards 5 per cent by the end of the five-year roadmap.”

Wyn Ellis, an analyst at Numis Securities, added: “Thomas Cook, as it has recovered from its financial crisis, has been the stellar performer in the tour operator segment.

“TUI Travel, in the meantime, has continued to make encouraging strategic progress and we believe that its superior business model leaves it well placed for further strong progress.”

Ellis is forecasting an 18 per cent rise in underlying profits to £580 million, while other analysts are expecting underlying pre-tax profits to climb by 16 per cent to £452m.

Thomas Cook last month highlighted the effect of travel restrictions amid the political unrest in Egypt – a popular winter destination – which it said cost it around £10m in profit.

The unrest could hit TUI’s current-quarter trading, according to Numis.