- Video report by ITV News Business Editor Joel Hills
Thomas Cook’s share price is back to levels last seen in 2012 when the consensus was that the company was not long for this world.
This morning, Thomas Cook reported the worst half-year loss in its history and issued its third profits warning in the last eight months. Shares are now changing hands for just 19 pence.
“People can book with confidence because we have a plan and we have the support of our banks”, Thomas Cook’s chief executive, Peter Fankhauser, told ITV News.
The headline loss of £1.5 billion is eye-watering but much of it is down to a “goodwill” write-down of £1.1 billion.
Thomas Cook has decided, with hindsight, that its merger with My Travel in 2007 created no value at all. Yet another ill-judged adventure by the company’s previous management team.
The merger with Coop Travel in 2011 has proved no less foolish, saddling Thomas Cook with a nationwide chain of 1200 travel agents - Nottingham alone has ten - at precisely the time that money started moving online. “The more customers move online, the more we will be closing our shops” Peter Fankhauser explained.
21 shops closed in the UK in the last six months, 580 remain. Fankhauser wouldn’t say how many of them he needs.
In Scandinavia, Thomas Cook rubs along without any shops, the business is entirely online.
“That’s not going to happen in the UK, Thomas Cook is such a strong high street brand,” Fankhauser insisted.
Package holidays remain popular but only one in five is now booked in store. Competition is ferocious, prices are under pressure. Great news if you want to buy a package holiday, not if you’re trying to sell one.
Thomas Cook was the UK’s second largest package holiday operator, behind TUI. But it has now been overtaken by Jet2.
Thomas Cook’s most pressing problem is it’s carrying too much debt - group net debt stands at £1.2 billion.
The hope is that flogging that company’s airline will raise enough money to reduce that burden and enable Thomas Cook to invest in more of it “own-brand” hotels, where the profit margins are fatter.
The company has more than 3000 hotels and resorts in its brochure but only 200 are exclusive to Thomas Cook and most of these are franchised.
The plan is to own and manage as many as possible going forward.
Thomas Cook looks troubled but it also announced a new £300m lending facility this morning.
The new funding depends on “executing the strategic review of the airline”. Translation: no sale, no money.
Thomas Cook says it has had “multiple offers” for the airline. The question is what happens if none completes.
Six years ago Thomas Cook was rescued by its shareholders. In extremis, would they dip into their pockets again? “A rights issue is not what we are discussing right now,” insists Fankhauser.
A rights issue may not be Plan A. But Plan A may not work.