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Thomas Cook UK earnings dive amid Spanish price war

22 November 2017

Based on current trading, Thomas Cook said it is well-positioned to achieve a full-year operating result in line with market expectations.

Travel giant Thomas Cook has reported a 12 per cent increase in pre-tax profits for the 2017 year to September, though underlying earnings in the United Kingdom business fell 34 per cent amid rising hotel prices, the value of pound and intense competition in Spain.

Thomas Cook generated revenues of £9.007bn in the year to 30 September 2017, up from £7.81bn 12 months earlier.

"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", said Thomas Cook chief executive Peter Fankhauser.

Thomas Cook has sold 58% of its 2017/18 winter programme, in line with a year ago, and total bookings are up 5% on the back of demand for the Canaries and a recovery in holidays to Egypt and Turkey. Its full-year gross margin edged down to 22.1 per cent from 23.4 per cent last year.

Group Tour Operator underlying EBIT decreased 2 percent, while Group Airline underlying EBIT increased 42 percent. Group revenue went up 9 percent on a like-for-like basis adjusted for foreign exchange.

One positive element was the performance of the group's airline business, which improved profits by 24 million pounds in the year, helped by a recovery for German carrier Condor.

Average selling prices in the United Kingdom are 6% higher year-on-year for next summer, which Thomas Cook said was mainly down to "input price inflation". Total bookings are up 5 percent, supported by continuing demand for the Canaries and a strong recovery in demand for Egypt.

The tour operator's prospects could also be boosted by improved sales of its winter holidays, with bookings up 3% and the average selling price also 3% higher.

It had already flagged a tough second half and said it was not restricted to challenging trading in its tour operator division amid a price war for Spanish holidays.

Egypt and Tunisia have suffered terror attacks while political turmoil in Turkey has also affected its sizeable tourism industry.

Shares rose initially before falling back 8.49% to 11.04p in morning trading as investors reacted to the company saying that tough competition for holidays to Spain hit United Kingdom margins.

Thomas Cook UK earnings dive amid Spanish price war