Thomas Cook shares plunged by 20 per cent today as the holiday firm partly blamed Brexit for an eye-watering £1.5billion loss, with swathes of Brits delaying summer trips abroad.
Looking ahead to this year’s peak summer season, the stricken travel group said: ‘There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer.’
The dismal half-year results, which are the worst in the group’s history since it was founded in 1841, have sent Thomas Cook’s share price plummeting by a fifth to 18.43p this morning.
Thomas Cook booked a £1.1billion goodwill impairment relating to its merger with MyTravel over a decade ago in 2007.
Loss: Thomas Cook sank to a £1.5billion loss in the six months to 31 March
On Brexit, Thomas Cook said: ‘In the UK, the political uncertainty related to Brexit over recent months has led to softer demand for summer holidays across the industry.
‘While our booking position remains ahead of the capacity reductions in the tour operator, the trading backdrop remains highly competitive, leading to increased levels of promotional activity.
‘We have seen no tangible change to booking patterns in recent weeks since the announcement of a delay to Brexit, although we will shortly start to lap a weaker comparative period.’
The group’s customer base fell by 295,000 to 2.9million over the period, the results show. The firm’s net debts have risen to £1.25billion.
Thomas Cook warned ‘challenging’ trading over this year’s peak summer season looked set to put its full-year results under further pressure.
It now expects underlying earnings to fall over the second half as holiday firms cut prices to boost Brexit-hit demand and costs of fuel and hotels continue to rise.
The London-based travel group is looking to implement further cost cutting measures in the second half in a bid to offset sluggish sales and swelling costs. The group closed 21 stores over the period.
Thomas Cook also revealed today that ‘multiple’ bids had been made for all or part of its airline arm, which was put up for sale back in February.
The group said it was in the process of assessing all the bids that had come through so far.
Up for sale: Thomas Cook also revealed today that ‘multiple’ bids had been made for all or part of its airline arm, which was put up for sale back in February
Deal: The group confirmed it had secured a a further £300million financing deal with its lenders to help boost its balance sheet
Peter Fankhauser, chief executive of Thomas Cook, said: ‘The prolonged heatwave last summer and high prices in the Canaries reduced customer demand for winter sun, particularly in the Nordic region, while there is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer.’
He added: ‘As we look ahead to the remainder of the year, it’s clear that, notwithstanding our early decision to mitigate our exposure in the ‘lates’ market by reducing capacity, the continued competitive pressure resulting from consumer uncertainty is putting further pressure on margins.
‘This, combined with higher fuel and hotel costs, is creating further headwinds to our progress over the remainder of the year.’
Tough times: Peter Fankhauser, chief executive of Thomas Cook
The group confirmed it had secured a a further £300million financing deal with its lenders to help boost its balance sheet.
The debt-laden company has struggled recently, as a fall in demand for package holidays and intense online competition has resulted in the firm issuing a string of profit warnings.
Mr Fankhauser said customers are ‘having a great deal this summer’ as a price war rages in the sector.
It confirmed its steep interim losses came after it wrote down the value of its MyTravel business, which merged with the group in 2007, though it usually makes a seasonal loss in the half-year.
The group’s latest results also reveal a slump in customer numbers during the first half of the year, down 295,000 to 2.9 million.
Neil Wilson, chief market analyst at Markets.com, said: ‘A whopper of a loss and a profits warning – it’s tough times for Thomas Cook.
‘Just as well it’s got many suitors for its airline business and has secured an extra £300m in funding to help cover the 2019/20 winter season.
‘Net debt has risen to £1.25bn – this is the biggest worry. The loan buys it time to flog the airline without it becoming a distressed purchase. But selling Condor is no silver bullet.
‘For sure Thomas Cook needs to see a good summer season to try and offset a miserable winter, but struggling under substantial debts and with structural headwinds combining with cyclical weaknesses in some markets, it’s still a very bumpy journey ahead.
Soaring debts: Thomas Cook’s net debts have risen to £1.25billion
‘The question now is whether c17 per cent shareholder Fosun simply decides to come in and take it over – once the airline is sold a major obstacle to the Chinese group making a bid will have been removed. An approach may well be in the offing. Shares are on the floor and dropped 17 per cent on the open to trade below 20p.
‘First half losses jumped to almost £1.5bn – its biggest ever – as it took a £1.1bn write-down on My Travel. Underlying EBIT losses increased by £65 million to £245 million, which was down mainly to margin pressure in package holidays.’
He added: ‘Britain is tough – UK consumers remain on edge because of Brexit and are unwilling to plan their summer holidays on the continent. Thomas Cook says the political uncertainty related to Brexit over recent months has led to softer demand for summer holidays.’