Thomas Cook AG expects first profit in four years

Thomas Cook expects to return to profit in 2005 for the first time in four years.

The German-owned travel group saw winter pre-tax losses cut to 244.2 million euros in the six months to April from 385 million euros a year earlier.

Thomas Cook UK & Ireland expects this year’s profits to exceed last year’s figure of £51 million due to a continued focus on improving profit margins.

UK & Ireland CEO Manny Fontenla-Novoa said: “2005 has seen a healthy market for package holidays, with supply and demand mosre closely balanced than ever across the travel industry.

“As a result there is less excess capacity to be sold off cheaply, leading to a higher average holiday price. Resulting profit margins are therefore stronger and UK businesses are performing well.

“Thomas Cook achived a higher average holiday price for winter 2004 than its main competitors. And while the market overall was down 3% on the previous year, Thomas Cook finished ahead of its winter 2003 performance.

“Indications for summer 2005 are that we are ahead on sales compared with this time last year, both in numbers of passengers and average holiday price.” 

The positive performance by the UK & Ireland business over the last four years was “closely related” to cost-cutting measures.

The company said: “Thomas Cook UK strives to have the lowest cost base of all the major travel companies and has benefited greatly by streamlining its buisness and becoming faster to respond to changes in the travel market. These measures have proved successful in the face of challenges such as war in Iraq and rising fuel costs.”

Across the group 5.2% more people had booked by the beginning of June than the same time a year ago, with the UK showing a 2.5% rise in bookings.

Chief financial officer Ludger Heuberg said: “We anticipate returning to the earnings level achieved in 2000/01 and being able to successfully conclude the two-year restructuring phase we started at the beginning of 2004.”

Average package holiday prices rose by 1.8% in the winter period, with sales up by 0.7% to 2.4 billion euros. The group handled 3.3 million passengers in the period, a 1% drop year-on-year.

But the average holiday cost rose by 1.8% to 570 euros despite the average length of holiday falling 3.5% to 8.2 days.

Heuberg said: “During the winter six months period, which only generates about one quarter of our annual sales, we deliberately concentrated on products offering substantial margins and put sound profitability before growth. This approach has paid off.”

Referring to the first six months of Cook’s second year of restructuring, he said: “Not only is our position significantly better than in the previous year, but we are also making faster progress than originally planned.”

Cost cutting in the half year period saw leisure travel expenses cut by 0.4% despite a strong rise in fuel costs. The gross profit margin was up by 0.3 percentage points to 23.6% as a result.

Report by Phil Davies

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