HOLIDAY operator Thomas Cook yesterday said it would slash costs by up to £50m after a “demanding” year that saw profits come in at the lower end of expectations.
Profit before tax fell six per cent compared to 2009 to £277m, while revenues were down four per cent to £8.89bn. The UK and US markets were particularly tough, with UK underlying profit falling by a third on the previous year. This was due to “significant foreign exchange headwinds” from sterling’s weakness against the dollar and euro, as well as lower demand for holidays. The five-day closure of EU airspace in April due to volcanic ash also cost it about £100m in revenues, the company said.
Thomas Cook is now reducing its UK cost base and aims to generate £40m to £50m in cost savings.
It expects the changes to cost £20m to implement, incurred in the 2010-11 financial year, but believes they will mitigate any further deterioration in the market.
It has already cut 500 managerial and support jobs since October.
“We recognised at the outset that 2009 to 10 would be demanding,” said chief executive Manny Fontenla-Novoa. “While we made good progress in many of our operating segments and delivered a strong improvement in operating cash flow, trading in the UK was even tougher than anticipated.”
The results meant an overall loss per share of 0.3p, down from 2009 eps of 0.8p per share. The company will pay a final dividend of 10.75p, unchanged from 2009’s level.
Analysts remained upbeat about the fundamentals and said the results were as expected, though Wyn Ellis of Numis warned of a tough year ahead. “We find it difficult to identify a near term catalyst; while shares look cheap they may continue to drift,” he said.