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Weak Turkish holiday demand hits Thomas Cook

Published: 09:50 19 May 2016 BST

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Thomas Cook added 10 destinations to its airline network including Los Angeles and Cape Town

Shares in Thomas Cook Group plc (LON:TCG) tumbled after the tour operator blamed lower demand for holidays in Turkey for a downbeat profit forecast.

The stock dropped 15.07p, or 16.8%, to 74.44p after Thomas Cook said summer holiday bookings were 5% down on the same time last year.

The company attributed the drop to political unrest in Turkey, saying bookings to other destinations had risen 6% against a year ago.

Summer 2016 bookings to the Balearic islands rose 14%, demand for the Canary islands lifted 23% and bookings to the US increased 29%.

Thomas Cook said strong growth to alternative destinations was not yet fully making up for weak holiday bookings in Turkey.

Chief executive Peter Fankhauser said: "Demand for Turkey - our second largest market last year - remains significantly below last year's levels.

"We've also seen a sharp decline in demand in Belgium following the tragic attack at Brussels airport in March."

The group said, however, that it made improvements including investment in its online business and strengthening its own-brand hotels and airlines.

Web sales grew 10% in UK and 21% in Germany in the second quarter and sales to own-brand hotels increased 21% year-on-year.

The group also added 10 new destinations to its airline network including Los Angeles and Cape Town.

It expects annual underlying pre-tax earnings before interest (EBIT) to be between £310mln and £335mln.

Shore Capital said that compared with £310mln last year and the broker's own estimate of £340mln. The market consensus was £310mln-£359mln.

"Despite the risks we retain a 'buy', highlighting the potential to improve operational performance and materially lower the interest charge," Shore's Greg Johnson said.

Group revenue was slightly up at £2.7bn and the underlying EBIT loss improved by 5% to £163mln due to the positive impact on margins of selling higher quality holidays.

Pre-tax losses narrowed by 5% to £288mln.

It said it continued to expect to pay a dividend in respect of the current year's earnings.

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