THOMAS Cook, Europe's second-biggest travel firm, saw nearly £300 million wiped off its stock market value yesterday.
The drop came after it warned the City full-year profits would be lower than forecast as tough economic conditions in Britain and unrest in the Middle East and North Africa damaged trading,
The 170-year-old travel company said it expected full-year EBIT – earnings before interest and taxation – of £320m compared with a market consensus for around £380m. The comparable profit for the previous year was £362m.
Analysts at City brokers Panmure Gordon said the announcement constituted a “major profit warning”.
They added: “While some of its problems are clearly generic to all tour operators, we do believe there are some company specific issues, particularly in the UK business.”
Commenting on the financial health of the Scottish travel industry, Bill Munro, director of Barrhead Travel in Glasgow, told The Herald trading was “slightly difficult” but his company had picked up business from some smaller firms that had struggled to stay afloat or had gone bust.
“There are many fewer players out there,” he stated. “The ones that are left are doing okay.”
Mr Munro said 40% of his company’s sales now came from internet transactions and Barrhead was attracting business from England.
Shares in Thomas Cook, which have lost nearly 60% of their value since January, shed nearly 30% of their value in early trading. They later closed 34.85p easier at 87.85p – a loss on the day of 28.4%.
Thomas Cook said it was struggling to pass on cost increases to budget-conscious UK travellers, hit by higher taxes, rising inflation and frozen wages. The company also said French holidaymakers were not taking their usual summer journeys to Egypt, Tunisia and Morocco because of recent political unrest in the Middle East and North Africa.
“Our French business in particular [is] seeing further reduced demand and lower margins during peak season for its key destinations,” the company said.
Thomas Cook is conducting a restructuring and cost-saving programme in the UK, which it expects to deliver annualised savings of £40m to £50m from fiscal 2012, with an estimated one-off cost of £20m.
On a positive note, the company said its central Europe and northern Europe businesses continued to “perform well”.
The number of holidays Thomas Cook has left to sell is 5% lower than a year ago, but this is partly because it has reduced the number of packages to UK consumers by 1%.
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