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Thomas Cook’s pre-tax loss narrows as bookings grow ahead of busy season

The FTSE 250-travel and leisure group reported that pre-tax losses for the first 6 months of the year stood at £303mln, up 16% from the same period a year ago
Thomas Cook aircraft
Revenue for the group during the period was around £3.2bn, up from £2.9bn a year ago

Thomas Cook PLC (LON:TCG) saw its pre-tax losses decline in the first 6 months of its financial year as it reported a growth in bookings ahead of the busy summer period.

The FTSE 250-travel and leisure group reported that pre-tax losses for the first 6 months of the year stood at £303mln, up 16% on a like-for-like basis from the same period a year ago, helped by an £8mln reduction in net finance charges.

READ: Credit Suisse upgrades Thomas Cook as recovery gathers pace

Revenue for the group during the period was around £3.2bn, up from £2.9bn a year ago, while underlying gross margins had reduced to 20.8% from 21.1% the same time last year.

Heading into the Summer trading period for 2018, the firm said its programme was already 59% sold, with bookings up 13% compared to the same time last year, with particularly strong demand for Turkey, Greece and Egypt.

Thomas Cook also said its UK tour operators had seen a 4% rise in bookings, with pricing up 6%, although it was continuing to experience margin pressure because of currency impacts and hotel bed cost inflation in a competitive market environment, however growth in higher-margin destinations in the eastern Mediterranean was helping to mitigate this.

In its results for the six months, the UK tour operating business reported underlying earnings before interest and tax (EBIT) were at a £77mln loss.

In its outlook, the group said trading was continuing in-line with expectations and that it expected an improved performance from its group tour operator business in the summer, driven by continental Europe and northern Europe, which would offset continued UK margin pressure in holidays to Spain.

READ: Thomas Cook reports quarterly revenue growth but warns over competitive market

They added that strategic initiatives were leading to increased demand for its holidays, which when combined with operational efficiency drives, was improving profitability. As a result, the group expected further profitable growth in its 2018 financial year on a constant currency basis, consistent with underlying expectations.

Thomas Cook chief executive, Peter Fankhauser, said: "Customer demand for this summer is good in all our markets, particularly in our Nordic region. We continue to experience margin pressure in the UK tour operator due to a combination of hotel cost inflation in Spain, currency impact and capacity increases in the market. We have taken action to help mitigate this pressure, including taking out holiday capacity from Spain and moving it to the Eastern Mediterranean.

He added: "Our Group Airline performed particularly well in the first half. Condor delivered a strong turnaround, and has benefitted from our ability to provide a reliable and high-quality service during a period of disruption and consolidation in the German aviation sector. Our booking position for the summer is strong, and bookings are well in line with our capacity growth of 10 per cent to an expanded range of destinations, including 70 new routes across the group.

The growth in bookings for the upcoming summer period may be taken as a good sign by some investors, particularly following a cautious outlook from the group in its quarterly results in February when Fankhauser said the market remained “highly competitive – and at times, unpredictable”.

In early afternoon trading Thursday, Thomas Cook shares were down 2.7% at 142.1p.

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