SHARES in travel business Thomas Cook recovered some of the ground they lost in early morning trading yesterday after being hit when the firm announced tighter margins on the back of rising costs in the Spanish market.

Having opened 12 per cent down at 106.7p, the firm’s shares rose during the day to close at 112p.

The initial fall came in spite of firm-wide revenues for the year to the end of September rising by 15 per cent to £9 billion (nine per cent when currency fluctuations are stripped out) and pre-tax profits increasing by 35 per cent to £46 million.

Underlying profit margins were down, however, from 23.4 per cent to 22.1 per cent, as a result of underlying gross profits rising less steeply at 11 per cent.

Chief executive Peter Fankhauser said this was because “our UK business declined due to a more competitive market environment, especially for holidays to Spain”, where the firm had been impacted by “bed-cost inflation”.

While this inflation had been caused by holidaymakers turning away from destinations like Turkey and Egypt towards Spain, Mr Fankhauser said indications are that demand for Spain is beginning to ease.

“Although it is still early in our group tour operator sales cycle for summer 2018, we have seen a good start to trading, with overall holiday bookings and pricing ahead of last year,” Mr Fankhauser said.

“Demand for our holidays to Turkey and Egypt is very strong, which we expect will start to alleviate the margin pressures caused by the high concentration of holidays to Spain in 2016 and 2017. Bookings to Greece and Cyprus are also up significantly.”