It’s been a challenging year for travel operators and airlines, buffeted by the 'beast from the east' at the beginning of the year, and then by industrial action in Europe, as well as rising oil prices through the summer.

In September, Thomas Cook followed on a profits warning in July with another warning that its profits for the year would be hit by the summer heatwave, as people opted to stay at home rather than brave the airport chaos. As a result, the company had to shave margins to entice people to book and having guided profits down to £280m, from a previous £323m, this morning’s news that profits have fallen short of the revised guidance to an even lower £250m hasn’t been received well. The timing is particularly curious given that the company is due to announce its full-year numbers later this week.

CEO Peter Fankhauser blamed a number of “legacy and non-recurring charges” of £28m for the downgrade to profits, which hopefully Thursday’s results will give further clarity on.

The statement went on to warn about the outlook, despite saying that the company was ahead on UK bookings for next year, while revenue on a like-for-like basis rose 6%. Other silver linings were sales of holidays to own brand hotels, which were up 15%, with at least another 20 new hotels in the pipeline for 2019.

Nonetheless the woe continues for shareholders, in what has been an awful year for Thomas Cook. Before this morning’s announcement, the share price had already fallen 60% year to date and this announcement, along with the news that the company was suspending the dividend, has seen the shares plunge another 30%.

The decision to cut the dividend can’t have been taken lightly, however the lack of a dividend is likely to be the least of shareholders' problems given how badly the shares have performed this year.
 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.