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Thomas Cook has more problems than just this summer's scorcher

Published: 11:30 01 Oct 2018 BST

View of Southend pier
Why go to the Costa Lager when you can relax on the beach at Thorpe Bay?

Berenberg estimates that the hot weather has cost package tours operator Thomas Cook Group PLC (LON:TCG) this year.

The holiday firm said last week that the late bookings market had been soft because of the splendid weather at home; the shares plummeted from 77.85p to 56p on the profit warning.

READ: Thomas Cook plunges as 2018 profit outlook chopped on more discounting

Berenberg said that despite the share price fall, it still cannot bring itself to recommend buying the shares, although it has upgraded it to ‘hold’ from ‘sell’, and slashed its target price to 60p from 100p.

The hot weather has obviously taken its toll, the broker said, but it also believes competition intensified in 2018. The internet has made it a lot easier for travellers to “build their own holidays” and that is likely to constrain growth opportunities for the traditional package tour operators.

The broker also raised a red flag over the company’s credit rating.

“We do not see any short-term pressure on the basis that, as indicated by the company, TCG is not under any covenant pressure; however, if there is any further weakening in performance in 2019, the company will face a rating downgrade and with the revolving credit facility and the €750m bond maturing in 2022, we expect this to become a focus,” Berenberg said.

Shares in Thomas Cook were up 3.4% at 59.85p.

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