Thomas Cook Group continue to make good strategic progress

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Thomas Cook Group (LON:TCG) today announced pre closing trading update.

· Good strategic progress through the year to date

· Challenging period of ‘lates’ trading following unprecedented months of hot weather

· Full year underlying EBIT now expected to be around £280 million, based on recent trading

Peter Fankhauser, Chief Executive of Thomas Cook, 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.

“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; this includes the launch of our Expedia alliance in the UK and Scandinavia, signing our first own-brand hotel in China and lining up a pipeline of 10 new Cook’s Clubs in some of our key destinations for Summer 2019.”

Current trading

Summer 2018

Our Summer 2018 programme is now 90% sold, in line with last year. Total Group bookings are up 12% compared to this time last year driven by the return in popularity of holidays to Turkey, Egypt, Tunisia and Greece. Pricing across all segments remains higher than last year but, with a higher mix of short/medium-haul airline bookings, overall average selling prices are 5% lower.


Summer 2018	Year-on-Year Variation %

	Bookings⁽ⁱ⁾	ASP⁽ⁱ⁾	% Sold⁽ⁱⁱ⁾

UK	Flat	+7%	94%
Continental Europe⁽ⁱⁱⁱ⁾	Flat	+2%	87%
Northern Europe	+4%	+2%	98%
Group Tour Operator	+1%	+3%	92%

Short & Medium Haul	+18%	+6%	89%
Long Haul	-1%	+2%	90%
Group Airline^(iv)	+15%	+1%	89%

Total Group	+12%	-5%	90%

Based on cumulative bookings to 15 September 2018

Notes

(i)

Risk and non-risk customers

(ii)

Risk customers only

(iii)

Continental Europe excluding legacy city and domestic hotel-only business bookings up 3% with ASP flat

(iv)

Group Airline figures include intercompany sales to the Group Tour Operator

Our Group Tour Operator has experienced a highly competitive trading environment in the ‘lates’ market, as a consequence of the sustained period of hot weather across Europe this summer. Overall Group Tour Operator bookings are up 1%, while pricing is up 3%.

UK Tour Operator bookings are in line with last year, while average selling prices are up 7%. The slowdown in customer bookings during June and July extended into August, leading to higher than normal levels of promotional activity. This has exacerbated pressure on margins, on top of an already competitive market for Spanish holidays, as previously highlighted.

Northern Europe bookings are up 4%. However, growth in bookings has been at the expense of price, with average selling prices now up 2%, a fall of two percentage points since the last update. We have experienced a similar pattern in Continental Europe, with bookings up in recent weeks driven by lower pricing. Average selling prices are up 2%, a fall of one percentage point since the last update.

Our Group Airline performance is broadly in line with our last update despite headwinds of continued disruption in the sector: overall bookings are up 15%, in line with capacity increases, reflecting growth in short and medium haul. Group Airline pricing is up 1% due to the shift in mix away from long haul towards short and medium haul. While long haul yields are unchanged since the last update, short and medium haul yields have fallen by two percentage points, reflecting a more competitive market.

Winter 2018/19

Our Group Tour Operator programme is 43% sold for Winter 2018/19, with bookings 2% behind last year and average selling prices up 1%. The UK has made a good start with demand ahead of last year, but this has been offset by a slow start in the Nordics and Continental Europe which are experiencing some knock-on impact from the hot summer weather. This has led us to proactively trim capacity in the Nordics by 5%.

The positive booking trends for the Group Airline have continued into winter, with double-digit growth in bookings to short and medium-haul destinations, and good growth in long haul.

Outlook

Trading since the last update has been tough, particularly in the Tour Operator, where our ability to drive margins in the ‘lates’ market has been further restricted by excess summer capacity. In addition, we have reflected the more difficult trading environment for some of our suppliers in our approach to historic hotel recoveries, a non-cash item.

Accordingly, Thomas Cook now expect to deliver full year underlying operating profit of around £280 million, of which the greater element of the downgrade is related to the weak trading.

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.

Analyst and Investor Call

A conference call and webcast for investors and analysts will be held today at 08.00 (BST):

– Standard International Access: +44 (0) 20 3003 2666

– Password: Thomas Cook