Thomas Cook s revival continues

UK-based travel company, Thomas Cook, delivered a relatively upbeat trading statement today (27^th March).

It was just a few years’ back that the rise in online travel agencies, not to mention low-cost airlines, was widely believed to be set to topple existing tour operators –  the likes of Thomas Cook and TUI Travel.

But demand for the services offered by these companies seemingly still exists.

Thomas Cook indicated an improving trading momentum, helped by an increase in bookings for the summer of this year, having already sold some 50% of holidays – a 1% increase over the previous year. Overall bookings are 2% higher than last year.

Meanwhile, despite a decline in average selling prices in some of its markets, Thomas Cook anticipates margins to improve over last year’s. That’s thanks to the company’s current turnaround strategy.

Indeed, the company is currently in the process of transforming itself. 

Knocked by a struggling economy and market disruptions in places such as Egypt, Thomas Cook was plagued with declining sales, notable losses and a plunging share price. The company’s heavy debt burden didn’t help.

So, under the helm of new CEO, Harriet Green, the company embarked on a turnaround, which included cost-cutting, asset disposals and bulking up its online presence.

Now well into its three-year turnaround plan and gradual progress is evident.

Its first quarter results for fiscal 2014, for instance, showed headway in its online efforts (36% of sales versus 34% the year before); narrowing loss (operating loss of £56m compared with £66m the previous year); and some £125m garnered from a series of asset disposals.

The company’s incremental progress has certainly been reflected in its shares – up more than 80% over the last year alone.

That said, Thomas Cook is still unprofitable and, while it has managed to reduce its debt load, the burden still exists – net debt stood at £1.3bn (as at December last year).  That’s aside from fierce competition, which could drive further declines in prices and hurt growth.

It looks to be on the right track, albeit with still a long way to go.