Thomas Cook boosted by recovery of Condor airline but feels the heat on UK margins amid tough competition for Spanish holidays

 
Rebecca Smith
Thomas Cook was boosted by Condor's recovery
Thomas Cook was boosted by Condor's recovery (Source: Thomas Cook)

Thomas Cook said a "strong recovery" at its German airline Condor helped the travel firm secure rising profits for the year.

But UK margins were buffeted though, as the company suffered from tough competition in the Spanish holiday market. Its full-year gross margin edged down to 22.1 per cent from 23.4 per cent last year.

Shares slumped more than 12 per cent in early morning trading.

Read more: Here's what the City will be looking at in Thomas Cook's results

The figures

Group revenue rose nine per cent on a like-for-like basis to £9bn, with underlying earnings before interest and tax rising £24m to £330m.

Thomas Cook proposed a recommended dividend of 0.6p per share.

It said UK margins had come in lower after four consecutive years of profit growth amid "challenging" conditions, but group airline underlying earnings before interest and tax rose by 42 per cent to £115m, predominantly due to the turnaround of airline Condor, which improved profits by £24m during the year.

Based on current trading, Thomas Cook said it is well-positioned to achieve a full-year operating result in line with market expectations. Winter trading is in line with expectations, with total bookings up five per cent, boosted by a strong recovery in demand for Egypt.

It noted good growth to both Turkey and Egypt in the UK, after demand had been buffeted over political instability and terrorism concerns.

Why it's interesting

Looking forward the company is planning to branch out as it explores more opportunities to grow profitably, which includes bolstering its own-brand hotel portfolio, with its LMEY partnership.

Thomas Cook unveiled the tie-up with Swiss-based hotel property development firm LMEY Investments in September. The companies have struck an agreement to create a joint hotel investment platform, contributing five owned and directly-managed hotel properties between them.

Meanwhile, last month the travel firm, which operates airlines in the UK, Germany and Scandinavia, announced it had launched a new airline in Majorca. Thomas Cook said the new carrier will supplement its existing operations, starting with at least three Airbus A320 aircraft that previously operated for its Belgium airline.

What the company said

Chief executive, Peter Fankhauser, said:

2017 was a milestone year in the strategic development of Thomas Cook. By delivering what we promised on strategy, we’ve inspired more customers to choose our holidays for their hard-earned weeks in the sun, while at the same time transforming the scale of the opportunity ahead for the group.

He added that the "strong performance" of Thomas Cook's group airline "in what has been a difficult year for European aviation is a particularly encouraging sign of our progress".

"After four consecutive years of profit growth, margins in our UK business declined due to a more competitive market environment, especially for holidays to Spain," Fankhauser said.

Read more: Thomas Cook has just launched a new airline

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