Thomas Cook confirms sale of major brands to cut debt

Thomas Cook today confirmed it is selling some of its brands as reports claimed that group chief executive Harriet Green was also preparing to turn to shareholders to raise more than £400 million as part of a rescue plan for the business.

Sky News claimed sources within the operator had told it Green was planning a share placing to reduce the tour operator’s debt mountain, further details of which will be released in coming weeks, it said.

Revealing long-awaited details of her turnaround strategy for the business, Green gave no hint of any plan to tap shareholders for cash, saying only that the company planned to raise a further £100 million to £150 million by off-loading several of its non-core brands, the disposal of which is underway.

The brands put up for sale were not named, but they are expected to include ski operator Neilson, luxury brand Elegant Resorts and Gold Medal.

In a brief trading update ahead of the half year results to be announced in May, Green said the business transformation plans were "well ahead of schedule". She announced a further £50 million of cost-cutting had been identified, bringing the total improvement so far to £350 million.

By 2015, the company hopes new product will be bringing in an additional £500 million of revenue, half it holidays will be sold on the web (see story) and profits will have improved by £350 million.

The company, which announced last week that a further 2,500 jobs will be axed and 195 more of its high street shops will close along with its Accrington office, said its UK turnaround was on track, with a target to achieve a UK EBIT margin in excess of 5% by 2015.

"Our Business Transformation plans are ahead of schedule and already delivering substantially improved performance, which resulted in our recent return to the FTSE 250," said Green.

" We have exceeded our initial commitments and today announced a further £50m of cost out actions, bringing the total profit improvement actions identified already to £350m, £290m of which is still to come.

"Stabilising the business has been our priority through addressing our cost and cash challenges, and strengthening the leadership team to create a more effective, aligned organisation focused on rigorous execution. "

Announcing long-awaited details of her turnaround strategy for the business, Green said this would be based on four cornerstone principles; delighting customers with trusted, personalised holiday experiences through a high tech, high touch approach.

"Based on comprehensive consumer research we aspire to occupy a unique position in the market through our new strategy, deliver industry leading margins and customer loyalty, whilst maintaining consistent quality that can be trusted.

"We will expand our already successful hotel concepts; and build a new portfolio of flexible, trusted products and services; creating a single gateway for customers to access personalised recommendations, specifically tailored to meet their needs.

"The operational credibility of this strategy rests on the success of our self -help measures to date, our trusted brand and the clear targets and KPI’s against which we are ready to be judged. We have real options now, with the prospect of delivering improved revenues, strengthened gross margin, better cash flow and disposal opportunities, to build a strong and exciting future for the Thomas Cook Group, worthy of our customers and our heritage."