Thomas Cook PLC (LON:TCG) saw its shares plunge by over a fifth on Monday after the travel firm cut its 2018 profit outlook, blaming a heatwave in northern Europe over the summer which meant there was more discounting and tougher competition in the later part of the holiday season.
In a pre-close season update, the FTSE 250-listed firm said that, based on recent trading, its core underlying earnings (EBIT) would come in at around £280mln for the 12 months to September 30, below a previous £323mln-£355mln range.
READ: Thomas Cook issues profit warning as competitive Spanish holiday market hurts margins
The group said trading since its last update has been tough, particularly in its tour operator business, where its ability to drive margins in the 'lates' market has been further restricted by excess summer capacity.
It added: “The impact of the hot summer is continuing to be felt into Winter trading. As usual, we will provide detailed guidance for full-year 2019 in November. However, despite recent challenges, we continue to make good strategic progress which positions us well to return to profitable growth.”
Thomas Cook said its Summer 2018 programme is now 90% sold, in line with last year, with total group bookings up 12% compared to this time last year but overall average selling prices 5% lower.
Meanwhile, it added, its Winter 2018/19 group tour operator programme is 43% sold, with bookings 2% behind last year but average selling prices up 1%.
Recent trading performance “clearly disappointing”
Peter Fankhauser, Thomas Cook’s chief executive commented: "Summer 2018 has seen a return to popularity of destinations such as Turkey and Tunisia. However, it has also been marked by a prolonged period of hot weather across Europe.
“This meant many customers spent June and July enjoying the sunshine at home and put off booking their holidays abroad, leading to even tougher competition and higher than usual levels of discounting in the 'lates' market of August and September.”
He added: "Our recent trading performance is clearly disappointing. However, despite the recent challenges, we continue to make good strategic progress which positions us well to drive further performance improvement”.
In early morning trading on Monday, Thomass Cook shares dropped 22.6% to 60.25p.
Neil Wilson, chief market analyst at Markets.com commented: “The manner of these large share price moves whenever a company misses its numbers appears increasingly excessive, although we must note that profit warnings rarely come alone."
He added: “We really need to wait to see how summer 2019 looks now to get a clear idea of where the company stands. Further improvements in Egypt and Turkey should help with the Spanish market tough.”
New finance boss
In a separate statement, Thomas Cook also announced that its group chief financial officer, Bill Scott has decided to step down and will leave the company following the full-year results on 30 November 2018.
The group said Sten Daugaard, currently a board member of Thomas Cook GmbH, Germany will take over as group chief financial officer on an interim basis on 1 December 2018.
The company said its board will commence a search for a long-term group chief financial officer with immediate effect.
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