Thomas Cook shares leap 9%

Shares in Thomas Cook rose as much as 9% after it said it would grow in 2017, buoyed by future bookings and a turnaround plan for its German airline, and after it stuck to its pledge to pay its first dividend in five years.
Thomas Cook shares leap 9%

The British travel group remained profitable in 2016 despite disruption in Turkey, and said confidence in its future performance meant the board was recommending a dividend of 0.5 pence per share for the full-year 2016, keeping to guidance it gave last year.

Its shares hit a six-month high, which analysts said was due to reassurance given by the company that it was on track to meet profit forecasts for the 12 months to the end of September in 2017.

Profit is expected to grow 6% to £326m (€382m) for the 2017 financial year.

That reassurance came after a series of bombings and a failed coup in Turkey this year forced Thomas Cook to make downgrades in 2016 as it was forced to switch its holiday programme into Spain, Portugal and Croatia instead.

Despite those difficulties, Thomas Cook posted underlying operating profit of £308m in its 2016 year, broadly flat on the £310m it made last year.

The drop in demand for Turkish holidays in 2016 impacted Thomas Cook much more than its larger rival TUI Group as Thomas Cook was the market leader, taking many more customers there, particularly through its German airline Condor.

Exposure to Turkey as well as overcapacity in the German airline market, meant Condor dragged on Thomas Cook’s profitability, and as such the company said it was implementing a turnaround plan to try to improve profits by focusing the airline away from short-haul flights to longer-haul flights. For next year, Thomas Cook said bookings for the summer, when it makes all its profit, were ahead across all its markets.

Thomas Cook, whose shares have slid 35% since the start of the year, looked like a buying opportunity following the results said some analysts.

“Given the opportunity to improve the underlying performance (including Condor) and lower finance charges as expensive debt matures we see this rating as attractive, despite the obvious geo-political risk,” Shore Capital analyst Greg Johnson said.

Of the risks it faces, the company said that to date it has not been affected by Britain’s vote to leave the EU, but militant attacks in parts of Europe, and ongoing security issues in Turkey, Tunisia and Egypt have all affected demand for holidays over the last year.

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