Thomas Cook losses widen, omits divi, analysts divided -UPDATE

28th Nov 2012 08:35

Shares of travel firm Thomas Cook nose-dived after it said full year losses widened on higher fuel costs and write-downs.Pre-tax loss widened to a thumping £485.3m in the year ended September 30th 2012 compared to a loss of £398.2m in 2011. Revenue fell to £9.49bn from £9.8bn previously.The heavily indebted travel firm, which has battled against a downturn in global travel and high debt levels and endured three profit warnings last year, said it is recovering lost ground from last year's difficulties. "These results reflect the major issues that Thomas Cook faced last year, but they mask the material improvement that we made in the fourth quarter," said Chief Executive Harriet Green."The year ahead is the initial stage in this recovery and as we embark upon our first year of Business Transformation."Like-for-like revenue fell on reduced capacity actions in the UK and Western Europe and included a £240m contribution from acquisitions in Russia and the Co-op in the UK. Underlying profit from operations, including an £11m contribution from the Indian business, which was disposed during the year, was £156m compared to £304m before.It said significant progress was made under the UK transformation plan however this was offset by increased fuel costs, reduced capacity and adverse publicity about its bank refinancing. UK underlying profit from operations was £19m below last year. Otherwise Thomas Cook reduced its debts to £788m from £891m before after the sale of businesses and an improvement in working capital management. The group was hit with around £100m from capacity reductions.The company said current trading was good with the summer ending well and winter 12/13 trading off to a good start in major markets, with bookings ahead of committed capacity and improvements in pricing. "We are optimistic about the future and look forward to updating on our full plans and additional financial benefits in the spring of 2013," it added.No dividend will be paid for the year ended September 30th 2012.Further opportunities to comeSome analysts called attention to the financial details of the transformation plan provided by the company. The firm said that it had identified over £100m of annual cost benefits and £50m of incremental working capital improvements with "further opportunities to come." Thomas Cook believes it can achieve those targets by driving efficiency in global procurement, centralised hotel purchasing and consolidation.James Hollins at Investec wrote that: "We regard this as a base case level and expect more to be detailed at the time of an update in spring 2013. This is an encouraging statement of intent and represents a suitably aggressive start to life under CEO Harriet Green. We retain our BUY."Simon French and Lindsay Kerrigan over at Panmure Gordon however were of the following view: "On our below consensus forecasts the stock trades on an estimated calendar year 2013 price-to-earnings multiple of 21.6 times which is pricing in too much turnaround when so much remains uncertain. We reiterate our Sell recommendation and 7p target price." The share price was down 4.61 at 23p by 09:00 in London. CJ