Thomas Cook share price falls five per cent on first quarter results

 
Emma Haslett
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Shares in Thomas Cook fell more than 5.5 per cent this morning (Source: Getty)

The figures

Having risen yesterday, Thomas Cook shares promptly shed those gains this morning, losing more than 5.5 per cent in early trading, after it posted figures showing first-quarter profits had dipped to £327m in the three months to the end of December, down from £365m during the same period the year before.

Like for like revenues edged up 1.6 per cent to £1.5bn, although its underlying loss from operations fell slightly, from £56m in 2013 to £53m this time. Underlying gross margin was 21.6 per cent, three percentage points lower than during the same period last year.

Why it's interesting

Thomas Cook became the subject of intrigue in November when its chief executive Harriet Green left unexpectedly, only days after telling a conference the company's fairytale turnaround was "absolutely not done [yet]". Indeed, when Green joined in 2012, shares had been languishing at 15p. When she departed in November, they were trading at 137p.

The reasoning behind Green's departure is still largely unclear, but in recent weeks shares have shown a cautious recovery: yesterday, they closed at 133p.

That's partly because the company, which is also an airline operator, is benefiting from a fall in fuel prices, a knock-on effect of the plummeting oil prices. Today it reported a "strong end to the summer season it airlines", with increased passenger volumes.

But trouble in the Eurozone is also having an impact: Thomas Cook admitted trading conditions in the region were tough during the three-month period, with early summer bookings in the region down six per cent compared with last year. For investors, that will hardly inspire confidence.

What Thomas Cook said

Peter Fankhauser, the travel operator's new chief executive, said it had made "strong progress".

The trading environment in many of our markets continues to be tough, but we believe the measures we are taking to improve our businesses will continue to strengthen our competitive position. Our strategy remains to generate sustainable profitable growth by providing differentiated and exclusive holidays while driving efficiencies in production and distribution, underpinned by digital excellence. I am confident that our focus on rigorous implementation will continue to drive significant improvements in the group's performance.

In short

With headwinds coming from Europe, not to mention a dip in shares after the exit of Green, Thomas Cook has challenges to overcome. But with falling oil prices and some well-thought-out hedging, it should be able to weather the storm.

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