Nov 22, 2017

Thomas Cook shares dive as UK earnings suffer

Thomas Cook shares fell 13 per cent on Wednesday morning after the package tour operator revealed that UK profits had been hit by rising costs. The group's gross margin fell 1.3 percentage points to 22 per cent, with much of the decline coming from Thomas Cook's UK business - a problem it attributed to the market environment in Spain, as well as the weakness of sterling against the euro. It marked the first fall after four consecutive years of profit growth in the UK. Thomas Cook said underlying earnings for the UK division fell 40 per cent to £52m, down from £86m in 2016. Mr Fankhauser said that while 42 per cent of Thomas Cook's revenues came from Spain this summer, that was set to fall to a more usual 30 per cent next year as demand for destinations such as Turkey returned. "Nicholas Hyett, an analyst at Hargreaves Lansdown, said:"There are promising signs in Thomas Cook's northern European and continental businesses, but those are being outweighed by headwinds in the UK. "With destinations in the eastern Mediterranean out of favour following political unrest, holiday providers are dashing headlong into Spanish resorts. The increased competition is a double whammy for Thomas Cook, pushing up the cost of beds while piling the pressure on pricing as well."

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