Troubled holiday giant takes axe to costs

TROUBLED holiday company Thomas Cook is taking an axe to costs, closing 200 under performing shops, as it looks to cut debt and restore investor confidence.

More than 600 jobs will be lost at the travel agency business – which since its merger with the Co-operative Group’s travel arm this year – has 1,400 shops.

After exceptional charges of £573m, which included write-downs in the value of its UK and Canadian business, Thomas Cook posted a pre-tax loss of nearly £400m.

The group said the cuts were part of a turnaround plan that would enable it to deliver an annual profit improvement of £110m.

Thomas Cook said trading had picked up since an agreement with its lenders last month to give it more headroom. Booking for next summer are up 8%.

The group’s future has been in question since it asked lenders to come to its rescue twice in five weeks, sending its shares into freefall after it warned of a possible debt default.

Acting chief executive Sam Weihagen said: “”We have instigated significant management changes and implemented a turnaround plan in the UK to address our areas of under-performance.”

Aside from closing shops, the company plans to reduce its airline fleet to 35 from 41, cut 500 under performing hotels from its portfolio, and invest more in its online business.

Operating profit fell 16% to £304m in the year to September. It had issued a strong of profit warnings this year leading to the departure in August of chief executive Manny Fontenla-Novoa.

Thomas Cook has been hit hard by tough trading conditions, especially in this country, where its core customer base of families with young children has been particularly affected by tough economic conditions.

It has also been impacted by unrest in popular destinations such as Egypt, Morocco and Tunisia.

It said the first quarter of its fiscal year had got off to a slow start with bookings hit by publicity surrounding the announcement it needed to borrow more money from its banks, before picking up since the deal with lenders was agreed.

The company’s banks, led by Barclays, HSBC, RBS and UniCredit, agreed last month to provide a new £200m credit facility.

The 170-year-old company, the world’s oldest travel firm, said it was examining further ways to cut net debt which stood at £891m at the end of September, up from £804m a year earlier.

Thomas Cook shares have lost more than 90% of their value since March. The group now has a market value of £135m.