Thomas Cook to fly in £400m of shareholders' cash

The struggling tour operator is expected to ask its shareholders to stump up £400m to help it pay off some debts.

by Michael Northcott
Last Updated: 01 Oct 2013

You know you’ve picked crap shares when instead of earning you money, the company is asking you to put more of your hard-earned into the pot. But, in classic ‘sunk money paradox’ form, the price of shares in Thomas Cook rose as much as 13% on the news that the operator wants shareholders to make a one-off contribution to paying off some debt. It currently has about £1.5bn outstanding, and wants to clear about £400m of it with an investors’ shot in the arm.

The plan comes as part of a turnaround plan from new chief executive Harriet Green, who came aboard in July last year. In March this year she also announced plans to trim total headcount by 2,500 people. That’s because in the financial year to September 2012, the company posted pre-tax losses of £485.3m, which it blamed on a ‘difficult trading environment.’ The political unrest in North Africa has hit it hard in the last couple of years as Egypt and Tunisia were two of its most popular destinations.

The firm has also managed to agree £691m of new banking facilities (and this isn’t the first such renegotiation in recent years) to help stabilise its cash flow issues. Those issues have seen the firm close 200 high street retail outlets and sell off planes, but the new chief exec seems confident that profits can grow by more than $500m in the next three years. She said: ‘[These measures] will reduce the very significant debt we inherited, lengthen its repayment profile, and consequently help us deliver the full benefits of the strategic plan we set out in March.’

So things may be looking up for Britain’s biggest and the world’s oldest tour operator. It’s worth noting that there has been an uptick in sales for the package holidays market since customers began to realise that the insurance covering you if your airline goes bust while you’re abroad is actually worth something. Booking all of the components of your holiday separately leaves you pretty exposed.

It seems a return to profitability could be in the offing for Thomas Cook, and investors certainly seem enthusiastic. Now the challenge is to grow that online business whilst the high street continues to die a death…

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