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p18 pink dec5 2/12/08 17:48 Page 18
City & finance
Keep up to date with the travel industry’s financial news and results at ttglive.com
The Big Two 2007-08 (£m)
never been in better shape, while cash-rich Tui
AG would appear to underpin the downside.”
Thomas Cook Group Tui Travel KBC added that there were “clearly risks” due
■ Revenue 8,809.8 ■ Revenue 13,932 to uncertainty over consumer confidence, but it
Change on 2006-07 +11.8% Change on 2006-07 +9% said “Tui Travel is a high-quality player”.
Collins Stewart upgraded Cook shares from
■ Operating profit 365.9 ■ Operating profit 398 “hold” to “sell”, while Numis reiterated its “buy”
Change +49.8% Change +53% rating, expressing confidence in the European
tour operating sector as a whole.
■ Profit before tax 309.3 ■ Profit before tax 319.7 One of the less optimistic assessments came
Change +32% Change +43% from Blue Oar Securities, which stuck to its belief
that the consumer downturn would hit travel.
■ Revised savings from ■ Revised savings from It seized on a PricewaterhouseCoopers travel
merger (Thomas Cook and merger (Thomson survey which suggested that spending on the
MyTravel) 210 and First Choice) 175 main annual holiday had slipped down the list of
consumers’ priorities.
The analyst said: “It is almost inconceivable
Mergers fuel surge
that holiday spending will not suffer in the next
18 months and it remains to be seen whether the
two industry majors can reduce supply and cut
costs quickly enough to stay ahead of the wave
that is chasing them.”
Tui recalculated the savings it expects to make
in big two’s profits
following last year’s merger from £150m to
£175m, while Cook’s estimate has risen from
£155m to £210m.
Both said capacity cuts next year (Tui 16% and
Cook 11%) had helped maintain summer prices;
Tui’s are 10% up and Cook’s 8%. Cook said it was
Thomas Cook and Tui Travel’s decisions to prioritise margins over
24% sold for next summer, while Tui has 14% less
market share has led to optimism in the City. Lee Hayhurst reports
stock to sell than at this time last year.
Fontenla-Novoa (pictured, top) said: “While it
is still early in the booking cycle for most of our
F
ull-year results posted by the big two markets, trading is in line with our expectations.
in the past week have had a positive “Recent research and the high load factors we
impact on the markets, although some are experiencing give us confidence that con-
scepticism remains about the outlook for sumers remain intent on taking their holidays. We
2009 and beyond. are targeting further growth in margins in 2009
Thomas Cook and Tui Travel reported higher and 2010, and operating profit of £480m in 2010.”
margins and profits in 2008 (see table), although Tui Travel chief executive Peter Long (bottom)
Cook’s 4.2% margin outshone Tui’s 2.9%. said: “Our customers continue to regard their
A 5% margin, which Cook achieved in 2006, main holiday as an essential, not a luxury, which
claiming a first for a UK vertically integrated they are reluctant to forgo.”
travel company, remains the “holy grail”. Although Tui has said it has put a hold on
With the big two prioritising margins over acquisition activity – it was recently linked to an
market share since last year’s mergers and their aborted bid for Travelzest – Cook said it was still
entry into the FTSE 100, the results found favour looking for opportunities.
with many stockbrokers. Despite “gaps in its portfolio”, Fontenla-Novoa
KBC Peel Hunt said Cook looked well placed to said not to expect big deals in the UK. But Cook is
weather a consumer downturn, although it had looking at expansion in Russia and China.
reservations over its major shareholder, Arcan- “We will continue to invest in the future,” he
dor. It recommended buying Tui and Cook shares, added. “There will be opportunities next year.”
with the former deemed a less risky investment.
It said of Tui: “Structurally, the business has ■ Cook renews Chelsea FC travel deal, p9
18 05.12.2008
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