Published on 22 Nov 2011 Sections

Thomas Cook shares hit as firm seeks financial help

Shares in Thomas Cook plunge after the holiday firm is forced to ask lenders for more money, but bosses insist it is “business as usual”.

Shares in holidays giant Thomas Cook took a nosedive after the company admitted dire trading had forced it back to the banks for more financial help.

Europe’s second biggest tour operator insisted it was in robust shape, but the surprise update spooked investors, causing shares in the company to slump 70 per cent at one stage.

The group said plummeting consumer confidence and the unresolved turmoil in north Africa had hit the business harder than expected.

Just four weeks after it agreed an additional £100m loan to help it cope with the quietest point of its trading year, the tour operator has gone back to its banks to ask for a similar top up.

The group – which postponed Thursday’s publication of its full-year results until after talks with its lenders – said the move was prudent ahead of the traditionally slow period of December and January.

Thomas Cook is expected to report a 31 per cent slide in underlying profits to £191.1m following a year which saw numerous profits warnings and the exit of its chief executive, Manny Fontenla-Novoa.

‘Business as usual’

It now has a market value of just £120m and a series of profit warnings left shares 93 per cent lower on the start of the year.

Sam Weihagen, Thomas Cook interim chief executive, said: “We’re operating business as usual,” he said. “Flights are leaving on schedule, shops are open and we’re taking bookings.”

But the City was less convinced as shares plunged and some analysts urged investors to sell their holdings.

Wyn Ellis, analyst at Numis Securities, said turning the business around would be tough as holiday suppliers are likely to be more wary of committing their products to the company.

He said: “The announcement will be of concern to shareholders, customers and suppliers. Thomas Cook faces a difficult near-term future which could lead to significant loss of market share.”

Thomas Cook said its French and Belgian markets have seen bookings fall by up to 20 per cent in recent trading, while its recent move into the Russian market had “got off to an extremely slow start”.

The group has suffered from the impact of the Arab spring, which has hit bookings to Tunisia and Egypt, destinations popular with France and Russia respectively, as well as UK holidaymakers.

Russian bookings to Thailand have also been knocked by recent severe flooding in the capital Bangkok.

Act of ‘prudence’

But the group insisted it had not fallen behind with any of its payments and Mr Weihagen said talks with its lenders were an act of “prudence” ahead of the seasonal low point.

Thomas Cook is understood to be considering the closure of 200 of its outlets following its recent merger with the Co-op’s UK high street travel businesses.

The deal created the UK’s largest high street travel agent and second largest foreign exchange group with more than 1,200 shops.

In other moves to turn around the UK business, the group has announced plans to reduce its current fleet of 41 aircraft by six to better meet capacity. It is also reviewing call centre rostering to improve efficiency.

In addition, the company is looking to raise £200m from the sale of assets such as hotels and its stake in Britain’s air traffic control service.

The announcement hit sentiment towards the wider sector with industry leader and Thomson Holidays owner TUI Travel falling nearly 10 per cent.