Summer's a wash-out as Thomas Cook issues third profits warning this year

No sign of things looking up for the travel firm: this time it's blaming the Arab Spring, although that's not exactly the first excuse it's made....

by Emma Haslett
Last Updated: 09 Aug 2011
Remarkably, not even the sight of Jamie and Louise Redknapp twitting about on a beach has been enough to revive Thomas Cook’s fortunes: the company has seen its shares fall by more of a quarter this morning after issuing its third profits warning this year. According to results published this morning, the firm’s underlying profits for the three months to June fell to £20m, £5m lower than the same period a year ago. As a consequence, it expects annual profits of £320m, £60m less than expected. The company blames various external factors for its disappointing performance – but is it running out of excuses?

Political unrest in the Middle East and North Africa was the primary reason given by TC for its disappointing results. Apparently, a drop in bookings from French customers to destinations popular with the Gallic contingent – like Tunisia, Egypt and Morocco – hit it harder than it had expected. But that wasn’t the only disappointment: apparently, we Brits’ hitherto-unshakable desire for summer sun in the exotic climes of Benidorm, the Costa Del Sol etc has taken an unexpected hit, too – again, more so than it expected. Which rather begs the question: is the fundamental problem that Thomas Cook is being buffeted by external factors beyond its control, or that its financial types are failing miserably to plan ahead?

TC management may well have had the same thought. This is not, as we mentioned before, the first time the company has issued a profits warning this year. The first time, the problem was UK spending; then it was an issue with planes that were driving up costs. But those at the top seem to have realised there’s something wrong: they’ve asked its UK arm to embark on a ‘fundamental strategic and operational review’.

The good news is, a spokeswoman has already assured staff that they don’t need to worry about their jobs: apparently, the review will instead look at a ‘wide range of operational issues’, including whether Thomas Cook offers the right holidays. Which, given the circumstances, could well mean fewer exotic boutique hotels in Morocco, and more cut-price self catering apartments in Los Christianos. Bad times. 

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