Thomas Cook reported full-year operating profit at the bottom end of forecasts and said it would close 200 underperforming shops, as it looks to cut debt and restore investor confidence.
Europe’s second biggest travel firm by sales, which secured a rescue package from its lenders last month, said the move was part of a turnaround plan that would enable it to deliver an annual profit improvement of £110-million ($170-million U.S.).
Thomas Cook said Wednesday trading had picked up since that agreement was announced with summer bookings in Britain up 8 per cent. Its shares were up 2.9 per cent in early trading.
The group’s future has been in question since it asked lenders to come to its rescue twice in five weeks, sending its shares into freefall after it warned of a possible debt default.
“We have instigated significant management changes and implemented a turnaround plan in the U.K. to address our areas of underperformance,” acting chief executive officer Sam Weihagen said.
Aside from closing 200 of its 1,300 shops in Britain, the company plans to reduce its airline fleet to 35 from 41, cut 500 underperforming hotels from its portfolio, and invest more in its online business.
Thomas Cook said operating profit fell 16 per cent to £304-million in the year to September. Forecasts were in a £306-£321-million range, with the average at £317-million, according to a Thomson Reuters I/B/E/S poll.
It had issued a strong of profit warnings this year leading to the departure in August of chief executive Manny Fontenla-Novoa.
In contrast, TUI Travel, the world’s biggest tour operator, reported a better-than-expected full-year profit last week, boosted by strong online sales and demand for exclusive resorts.
Thomas Cook has been hit hard by tough trading conditions, especially in Britain, where its core customer base of families with young children has been particularly affected by tough economic conditions. It has also been impacted by unrest in popular destinations such as Egypt, Morocco and Tunisia.
It said the first quarter of its fiscal year had got off to a slow start with bookings hit by publicity surrounding the announcement it needed to borrow more money from its banks, before picking up since the deal with lenders was agreed.
The company’s banks, led by Barclays, HSBC, RBS and UniCredit, agreed last month to provide a new 200 million pounds credit facility.
The 170-year-old company, the world’s oldest travel firm, said Tuesday it was examining further ways to cut net debt which stood at £891-million at the end of September, up from £804-million a year earlier.