Thomas Cook starts strategic review of UK business after profit warning

Thomas Cook has begun a “fundamental strategic and operational review” of its UK business after issuing a profit warning today.

In a trading update, it warned that it had underestimated the impact of the political unrest in Egypt, Tunisia and Morocco and the difficult trading conditions in the UK.

It said underlying operating profit for the three months to 30 June 2011 is likely to be around £20m, £5m lower than the comparable prior year period.

This would leave the operator around £40m behind its cumulative prior year result as it enters the last quarter of our financial year and below the guidance given at the time of the interim results in May.

It now expects full year underlying operating profit to be around £320 million, £42 million below the £362.2 million in 2010.

“As a result, it is now appropriate that we revisit the effectiveness of our UK business model,” said the update.

“The UK’s new management team, which we announced at the time of the interim results, has begun a fundamental strategic and operational review of the business.”

Thomas Cook said its French operations had been particularly badly hit by the unrest in the Middle East and North Africa.

Outlining sales for summer 2011, it said average selling prices are ahead and fewer holidays left to sell in most markets.

But in the UK, the operator said it continues to keep prices competitive and generate improved load factors “although margin is being adversely affected”.

It said it would further update the market on trading when it issues its interim management statement on 11 August.

By Bev Fearis