After a long holiday away, will investors return to Thomas Cook following Tuesday’s pre-close trading update?
There was a very brief moment where it looked like it was going to be a decent year for the FTSE 250 firm. Opening at £1.23, it spent the first 4 months of 2018 trickling lower, dipping under £1.20 in April. Yet the first half of May saw a sharp rise from the stock, resulting in a 3 year intraday peak of £1.50 by the middle of the month.
That high is now a distant memory. Since hitting that level the company has entered a serious spiral, its half year figures sparking a decline that still hasn’t shown any signs of really slowing down. Having touched a 22 month low of 74p in mid-September, Thomas Cook Group PLC now sits at a current trading price of 76p.
The firm’s most recent release was its third quarter figures at the end of July, an update that briefly lifted the stock before it resumed its decline. Revenue rose 10% to £2.479 billion, with summer 2018 bookings up 11% on the previous year with 79% of the programme sold. The company said strength at its Group Airline helped compensate for European holidaymakers delaying their bookings as they stayed at home to enjoy the continent-wide heatwave, something that impacted the so-called ‘lates’ market.
While revenues were still strong, the heatwave and continued competition in Spain ate into its gross margin, which fell 240 basis points year-on-year, leading Q3 gross profit down 3% to £443 million. This also meant Thomas Cook now sees full year underlying operating profit coming in at the ‘lower end’ of market expectations.
In terms of Tuesday’s statement, investors will ideally see a positive revision to that full year guidance, something that would be reliant on an admittedly hard to produce late flurry of bookings.
Thomas Cook Group PLC (LON:TCG) has a consensus rating of ‘Hold’ alongside an average target price of £1.25.
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