The results that Thomas Cook have turned in were largely in line with their revised expectations, leaving the city underwhelmed as well as the share price barely responding to the result, even though there was a significant volume of shares that were changing hands.
There were, however, 2 surprises; the first was a write down in balance sheet assets worth £428m, and this accounted for the majority of the pre-tax loss if £398m. It effectively represented that the corporate desk had been cleared, and the largest chunk of this downgrade has stemmed from a reassessment of the value of the UK part of the business.
The slump here was emphasised by the UK accounting for just 10% of the groups underlying profits for the year that ended in September. The second surprise actually tied in with the first; the main reason for the slump is that ¾ of Thomas Cook’s revenue is made up of mainstream sales, yet they made nothing from them.
The independent businesses in the UK actually made money, and they have recorded their best ever year in Germany and Scandinavia, so why is the UK mainstream performing so badly? The mantra from the consumer media can be heard loud and proud at this point; that the package holiday is on its last legs, if not dead already, holidays on the high street are also long gone, and the future of holidays lies with the internet.
The travel sector have of course acted on some of these assertions, as they obviously do contain some elements of truth. This argument kind of falls down however when you see that Thomas Cook’s UK online sales have have declined when you compare the year on year figures, even though the numbers of their web bookings rose. Sam Weihagen, the acting CE, pointed out that the online growth rate was now sharper than a few years ago.