Thomas Cook lost a third of its value after the holiday operator cut its profit guidance for the second time in two months and suspended its dividend, burned by the effects of a hot British summer and one-off charges.
The oldest travel company in the world, Thomas Cook has been hurt by the heatwave that gripped northern Europe this year, deterring holidaymakers from booking lucrative last-minute deals and sending its shares down 70% in 12 months.
Yesterday, it updated the market two days ahead of schedule to cut its underlying operating profit again, this time by 11%. It said it had not breached the terms of its lending agreements and would continue to invest in the business.
Shares in the company fell up to 33%, although losses were pared, giving it a market value of around £570m (€643m).
“I’m not happy with the financial result. This is not where we wanted to be,” said Thomas Cook chief executive Peter Fankhauser.
Thomas Cook makes all its profit in the summer when its customers in northern Europe, including the UK, Germany and Scandinavia seek the sun in southern European destinations such as Spain, Turkey and Greece.
However, record temperatures in much of northern Europe this year meant the company was forced to warn in July and September that demand for holidays had been damaged.
It said it had also taken around £30m of charges to account for costs linked to changes to its business, flight disruptions and unpaid historic hotel bills.
Thomas Cook, which had rebuilt itself from a 2011 collapse when the eurozone debt crisis and political turmoil brought it to its knees, said it would push ahead with its strategy of opening its own hotels, which tend to drive higher returns and customer loyalty.
“Across the group, we will continue to streamline our cost base and manage our capacity to give us greater operational flexibility and financial discipline,” said Mr Fankhauser.
The group said for the year to the end of September, its profit had fallen to £250m, down £58m on the previous year and below the £280m it forecast in September.
For 2019 it said it expected to “deliver progress” on underlying operating profit.
Analysts said this implied material downgrades to current consensus of £309m.
Winter bookings are down 3% on last year, with flat pricing. UK bookings are flat, though at lower margins.