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Latest Content

Weak bookings ahead of the key summer 16 season

  • 27 May 16

TCG is feeling the pain of the terrorist activity Thomas Cook last week reported its H1-16 results which were short of the the consensus and our expectations. The FY16 guidance has been revised down to the bottom end of expectations. As a result of the terrorist attacks in Turkey, Tunisia and Brussels, TCG warned that Summer 16 bookings (63% sold, -2% yoy) had fallen by 5% (up to 10% for Continental Europe, -6% in Germany). Demand for Turkey, Tunisia and Egypt has collapsed. Overall, the pricing pattern is negative yoy (except for differentiated holidays, in the UK notably) while the collapse in demand for Turkey has resulted in later bookings for the destination. Summer bookings on average have been made almost two weeks later than last year. Since TCG has been prioritising margins over volumes, the Group cut capacity by 4% at Group level. Strong Mediterranean destinations have not yet fully offset weak demand for Turkey Excluding these problematic destinations, demand for Spain (summer 16 bookings were up 14% yoy in the Balearics) and the Canaries (+23%) but also the US (+29%) and the Caribbean (Cuba and Mexico) soared while, excluding Turkey, bookings were up 6% yoy and 13% excluding Turkey, Egypt and Tunisia. The long-haul programme (bookings up 19% in the UK) has also been helpful in mitigaging the impact of North Africa along with the seat-only offering, although the latter has lower average selling prices than package holidays.

Resilient underlying performances despite terrorist activities

  • 02 Mar 16

+Underlying demand in most source markets remained strong+ In Q1 16, revenues were up by 1% to £1.4bn (but -7.2% reported), largely driven by differentiated products (own-brands hotels up 24%) and the UK and Northern Europe while Continental Europe and Airlines Germany proved challenging. While TCH has been pushing for higher-quality packages, the gross margin improved by 20bp lfl in Q1 16. And the operating loss was cut by 11% to £16m, largely driven by the UK (-21% seasonal loss yoy). Management reiterated its confidence in repeating its FY15 profit guidance in 2016. +Popular winter sun business and upmarket package holidays+ The winter season (82% sold to date) experienced a 2% drop in volumes but margins went up, backed by higher prices (+4%). The UK benefited strongly from a successful winter sun strategy, particularly to long-haul destinations, with both charter risk and seat-only pricing up by 10%. In Continental Europe, seasonal loss expanded by £6m (reflecting a 90bp drop in the gross margin), resulting from overcapacity and weakening consumer confidence, impacting particularly Germany and Condor, TCG’s German airline (tough comps, -£7m drop in EBIT yoy). The latter was weakened by competitive pressure and weak demand in short- and medium-haul markets, despite the strong growth seen in long-haul destinations. However, France and Russia proved resilient despite economic downturns. + Geopolitical incidents disrupted the strong start to summer 2016, resulting in a 3% capacity cut for the season+ For the summer 2016 season, margins are up yoy and 29% of the programme is sold (2% lower than Q1 15). The recent geopolitical shocks (Tunisia, Paris, Egypt and Turkey) have disrupted the strong start of the season, impacting customer confidence and leading to a later booking pattern, with holidaymakers postponing their holidays. The group has been giving priority to margins rather than volumes. Pricing remains positive for package holidays in Northern Europe (+6%) and the UK (+4%, UK online sales up by 7% ytd). This was attenuated by a tough Continental Europe and Airlines Germany. The latter is highly competitive and has been affected by structural market and customer confidence issues. At the group level, summer 2016 bookings slipped by 5%, mainly attributable to the 3% capacity reduction. But despite the late booking market, TCG has been counting on a recovery in demand to maintain a good price level. Recent weeks of trading have pointed to a recovery in consumer confidence across almost all source markets.

Poor outlook in Germany impacts performance

  • 22 Sep 15

Q3 15 group revenues grew by 0.2% LFL (-12% reported), hit by FX moves and a later booking profile (in Germany in particular) and weaker demand, as already highlighted in H1 15. Summer 2015 trends were impacted by terrorist events in Tunisia and macro issues in Greece and came below our expectations with a respective 1% and 3% slip in bookings in the UK and Continental Europe, while pricing power remained low in these regions (-1% in rates in the UK, flat in CE). Northern Europe was better (flat volumes, +2% in rates), as was Airlines Germany (+8% in bookings) which benefited from increased capacity (+7%) but prices remained weak (+1%) in the light of lower fuel prices. The group was well hedged and has passed this on to customers. For information, fuel-related costs were £820m in 2014 while TCG expects to be more than £200m less in FY16. Underlying EBIT improved by £5m LFL to £30m resulting from improved operating performances in every market (EBIT +7% LFL in the UK), except for Airlines Germany (tough comps) and also from cost efficiencies (-2% LFL). The underlying EBIT margin remained flat in Q3 to 1.5% yoy but rose from 3.4% to 4.1% over the last 12 months. Reported EBIT turned from a £42m loss last year to a £3m profit in Q3. We anticipate that in Q4 15, efforts that are currently being made by TCG on the operating front should help the group to attenuate the impact of the poor summer 2015 demand after recent terrorist attacks in Tunisia (15,000 holidaymakers were repatriated on c.60 flights) and the political and economic issues in Greece. The latter will impact FY15 EBIT by around £25m (o/w £20m due to Tunisia, £5m due to Greece). The group warned that if Foreign Office advice remains negative and if demand does not return to a normal level, then FY16 figures were likely to be impacted, without indicating the magnitude of the loss on profits. Sales to Tunisian holidays have been suspended until February 2016 (TCG counts c.14 branded hotels in Tunisia). Also, TCG said that unfavourable FX movements (the appreciation of sterling against the euro and the Swedish krona) should cut FY15 EBIT by £39m (vs £25m assumed in H1 15).


Research, Charts & Company Announcements

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Date Source Announcement
17/10/2016 16:13:54 London Stock Exchange Holding(s) in Company
07/10/2016 14:39:44 London Stock Exchange Holding(s) in Company
03/10/2016 17:18:47 London Stock Exchange Holding(s) in Company
30/09/2016 16:06:29 London Stock Exchange Director/PDMR Shareholding
27/09/2016 07:00:07 London Stock Exchange Thomas Cook Pre-close Trading Update
12/09/2016 17:37:14 London Stock Exchange Holding(s) in Company
07/09/2016 16:53:13 London Stock Exchange Holding(s) in Company
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