UK HOLIDAY operator Thomas Cook reported full year results at the lower end of analysts’ expectations after a “demanding” year today.
Profit before tax fell six per cent to £277m from £295m in 2009, while revenues were down four per cent to £8.89bn from £9.27bn the previous year.
The firm will pay a final dividend of 10.75p, unchanged from 2009’s results, and has announced it will restructure its UK operations to generate £40m to £50m in cost savings.
“We recognised at the outset that 2009/10 would be demanding given the uncertain economic outlook and, accordingly, we took early action to deal with the challenges,” 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.”
Revenues were hit by the closure of EU airspace for five days in April due to the volcanic ash cloud from Iceland, which “severely disrupted” trading, as well as capacity reductions in its winter travel offerings.
The ash cloud caused it an estimated £52.9m of direct losses from managing stranded customers as well as £29.2m in lost margins from its inability to operate, it said.
Thomas Cook, Europe’s second-biggest travel firm, said much-improved performances in its central European and German businesses were not enough to offset the decline in the UK. Its northern and western European operations also recorded profits.
The UK was affected by “significant foreign exchange headwinds and softer demand over the summer,” the results statement said.
To reduce its UK cost base, Thomas Cook has cut of 500 managerial and support jobs and will also renegotiate supplier costs, reduce its buying requirements and upgrade its IT infrastructure.
It expects the changes to cost £20m to implement, incurred in the 2010/11 financial year, but believes they will mitigate any further UK deterioration.
It described the outlook as “encouraging,” but Numis analyst Wyn Ellis remained unconvinced.
“We believe that another tough year is in prospect with debt concerns within the Eurozone adding to the uncertainty,” he said.
“In such circumstances we find it difficult to identify a near term catalyst and whilst the shares look cheap they may continue to drift."