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| Thomas Cook profits fall after political turmoil and food poisoning claims | Thomas Cook profits fall after political turmoil and food poisoning claims |
| (about 10 hours later) | |
| Holidaymakers have avoided Turkey, Egypt and Tunisia and flocked to Spain, where tour operator faces fiercer competition | |
| Rob Davies | |
| Wed 22 Nov 2017 15.18 GMT | |
| First published on Wed 22 Nov 2017 11.31 GMT | |
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| Shares in Thomas Cook have fallen sharply after its UK profits were hit by political upheaval in the Mediterranean, food poisoning fraudsters and Hurricane Irma. | Shares in Thomas Cook have fallen sharply after its UK profits were hit by political upheaval in the Mediterranean, food poisoning fraudsters and Hurricane Irma. |
| The string of setbacks meant underlying profit in the tour operator’s UK arm fell by £34m in the year to the end of September despite a 3% increase in revenue. | The string of setbacks meant underlying profit in the tour operator’s UK arm fell by £34m in the year to the end of September despite a 3% increase in revenue. |
| The biggest factor weighing on Thomas Cook was the fallout from disruption to popular tourist spots, which meant Spain’s holiday market was more crowded than ever. | The biggest factor weighing on Thomas Cook was the fallout from disruption to popular tourist spots, which meant Spain’s holiday market was more crowded than ever. |
| Terror attacks in Egypt and Tunisia, as well as political turmoil in Turkey, resulted in tourists steering clear of the eastern Mediterranean in favour of Spain. | Terror attacks in Egypt and Tunisia, as well as political turmoil in Turkey, resulted in tourists steering clear of the eastern Mediterranean in favour of Spain. |
| This allowed hotels to raise prices but fierce competition with rivals such as Tui limited Thomas Cook’s ability to pass the increase in costs through to customers. The company felt the effect on its profit margins, traditionally tight in the travel sector, which fell from 23.4% to 22.1%. | This allowed hotels to raise prices but fierce competition with rivals such as Tui limited Thomas Cook’s ability to pass the increase in costs through to customers. The company felt the effect on its profit margins, traditionally tight in the travel sector, which fell from 23.4% to 22.1%. |
| Despite a relatively strong group-wide performance, investors seized on the difficulties in Thomas Cook’s UK operations as a reason for pessimism despite an otherwise strong full-year profit statement. | Despite a relatively strong group-wide performance, investors seized on the difficulties in Thomas Cook’s UK operations as a reason for pessimism despite an otherwise strong full-year profit statement. |
| Shares in Thomas Cook fell nearly 9% in early trading, making it the biggest faller on the FTSE 250, while Tui’s stock also fell, albeit by a more modest 1.2%, as investors bet that it would report similar pressures in its full-year figures due next month. | Shares in Thomas Cook fell nearly 9% in early trading, making it the biggest faller on the FTSE 250, while Tui’s stock also fell, albeit by a more modest 1.2%, as investors bet that it would report similar pressures in its full-year figures due next month. |
| “With destinations in the eastern Mediterranean out of favour following political unrest, holiday providers are dashing headlong into Spanish resorts,” said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. | “With destinations in the eastern Mediterranean out of favour following political unrest, holiday providers are dashing headlong into Spanish resorts,” said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. |
| “The increased competition is a double whammy for Thomas Cook, pushing up the cost of beds while piling the pressure on pricing as well. The group is making efforts to control costs, and holidaymakers are starting to return to destinations such as Turkey and Egypt that have struggled in recent years. | “The increased competition is a double whammy for Thomas Cook, pushing up the cost of beds while piling the pressure on pricing as well. The group is making efforts to control costs, and holidaymakers are starting to return to destinations such as Turkey and Egypt that have struggled in recent years. |
| “But margins in the travel agent sector have always been tight, and news that they’re being squeezed even further is far from welcome.” | “But margins in the travel agent sector have always been tight, and news that they’re being squeezed even further is far from welcome.” |
| Thomas Cook’s UK business has also been hit by fraudulent illness claims, in which holidaymakers pretend to have suffered food poisoning or other ailments and seek refunds or compensation from the tour operator. | Thomas Cook’s UK business has also been hit by fraudulent illness claims, in which holidaymakers pretend to have suffered food poisoning or other ailments and seek refunds or compensation from the tour operator. |
| The company said the number of claims had fallen recently, after it tightened up its compensation procedures and started taking legal action against fraudsters. | The company said the number of claims had fallen recently, after it tightened up its compensation procedures and started taking legal action against fraudsters. |
| It also suffered increased costs as it tried to meet the needs of 10,000 customers caught up in Hurricane Irma, which devastated parts of the Caribbean earlier this year. | It also suffered increased costs as it tried to meet the needs of 10,000 customers caught up in Hurricane Irma, which devastated parts of the Caribbean earlier this year. |
| The string of problems meant underlying profit in the UK division fell by £34m during the period and Thomas Cook said it would respond by trying to drive passengers towards high-margin destinations such as Turkey and Egypt, as well as cutting costs. | The string of problems meant underlying profit in the UK division fell by £34m during the period and Thomas Cook said it would respond by trying to drive passengers towards high-margin destinations such as Turkey and Egypt, as well as cutting costs. |
| At group level, pre-tax profit was up 8% to £46m in the year, stripping out currency effects, on the back of revenues that were 9% higher at £9bn. | At group level, pre-tax profit was up 8% to £46m in the year, stripping out currency effects, on the back of revenues that were 9% higher at £9bn. |
| Thomas Cook’s chief executive, Peter Fankhauser, cited progress in the group’s continental Europe and Nordic businesses, while its airline enjoyed increased profits in a difficult yearin which European carriers such as Air Berlin, Monarch and Alitalia went bust. | Thomas Cook’s chief executive, Peter Fankhauser, cited progress in the group’s continental Europe and Nordic businesses, while its airline enjoyed increased profits in a difficult yearin which European carriers such as Air Berlin, Monarch and Alitalia went bust. |
| He also pointed to the group’s fledgling business in China and growth in financial services arm Thomas Cook Money. | He also pointed to the group’s fledgling business in China and growth in financial services arm Thomas Cook Money. |
| The tour operator’s prospects could also be boosted by improved sales of its winter holidays, with bookings up 3% and the average selling price also 3% higher. | The tour operator’s prospects could also be boosted by improved sales of its winter holidays, with bookings up 3% and the average selling price also 3% higher. |
| While bookings for next summer are in the early stages, the company said it hoped pressure on the Spanish market would be eased by signs that tourists were returning to Turkey and Egypt, with trips to Greece and Cyprus also showing signs of strong demand. | While bookings for next summer are in the early stages, the company said it hoped pressure on the Spanish market would be eased by signs that tourists were returning to Turkey and Egypt, with trips to Greece and Cyprus also showing signs of strong demand. |
| Those investors who kept some or all of their Thomas Cook shares will be rewarded with an increase in their dividend, which is rising by 20% from 0.5% to 0.6%. | Those investors who kept some or all of their Thomas Cook shares will be rewarded with an increase in their dividend, which is rising by 20% from 0.5% to 0.6%. |
| While the stock market reacted badly to Thomas Cook’s update, its profit statement indicated continued recovery since 2011, when the company had to borrow more money from its lenders as it neared collapse. | While the stock market reacted badly to Thomas Cook’s update, its profit statement indicated continued recovery since 2011, when the company had to borrow more money from its lenders as it neared collapse. |
| The tour operator’s share price has risen almost fivefold since slumping to below 20p during its 2011 crisis. | The tour operator’s share price has risen almost fivefold since slumping to below 20p during its 2011 crisis. |
| •Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. | •Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. |
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