"Milestone year" for Thomas Cook

Thomas Cook sees UK earnings tumble amid ‘challenging’ trading

Thomas Cook sees UK earnings tumble amid ‘challenging’ trading

(TCKGY.PK, TCG.L) were losing around 11 percent in the morning trading in London after the British tour operator reported Wednesday weak United Kingdom margins in its fiscal 2017, despite higher group profit and revenues.

Despite the weak performance at its United Kingdom division, underlying earnings across the Thomas Cook group as a whole rose by £24 million to £330 million, helped by a recovery at its German airline Condor.

"Demand for Turkey and Egypt is good for Thomas Cook as it helps alleviate the margin pressures it's experienced from having to compete harder in the saturated Spanish market - something Monarch bosses would relate to", said Neil Wilson, senior market analyst at ETX Capital. Underlying earnings per share were 9.3 pence, compared to 8.1 pence a year ago.

"With destinations in the eastern Mediterranean out of favour following political unrest, holiday providers are dashing headlong into Spanish resorts", said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"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".

"...margins in the travel agent sector have always been tight, and news that they're being squeezed even further is far from welcome".

United Kingdom margins were buffeted though, as the company suffered from tough competition in the Spanish holiday market.

The company said it planned to take legal action against people who make false illness claims.

This was attributed to travel claim costs from Hurricane Irma, various fraudulent illness claims and a downturn in tourism for previously popular destinations such as Turkey and Egypt.

Thomas Cook said that revenue had risen to £9.0bn from £7.81bn in the previous year but gross profit had only risen to £1.99bn from £1.82bn.

The chief executive, Peter Fankhauser, cited progress in the group's continental Europe and Nordic businesses, while the Thomas Cook airline has enjoyed increased profits in a hard year that has seen European carriers such as Air Berlin, Monarch and Alitalia go bust.

Larger rival Tui (TUIT.L) was down 2 percent, the top FTSE 100 faller.

The group said it was "well positioned" to achieve current market expectations for 2018, given strong early bookings for next summer.

Thomas Cook shares took a hit on Wednesday.

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