Thomas Cook shares jump 10 as guidance raised

Shares in travel firm Thomas Cook jumped more than 105p in early trading on Thursday after the firm reported a 49% increase in full year operating profits, boosting shareholder confidence that turnaround plans are really starting to gain traction by raising forward guidance.

These results are an absolute delight to read for shareholders. Not only have we seen earnings come in at £263mn and above market forecasts of £251mn, but the boost in guidance raises confidence that the company’s turnaround is gaining pace. This is after all their first operating profit in four years.

On a cost and debt basis, there’s more good news. Debt has fallen from £788mn a year ago to £421mn, a fall of 46%. The firm expects to cut an additional £440mn worth of costs by 2015, an increase of 10% on previous guidance, and £440mn worth of savings by 2018.

A key part of this strategy is deleveraging the dependency of sales from in store to online. Thomas Cook expects profits to be boosted by as much as $500mn in the next three years as a result of this change in strategy. To me, this is not necessarily a change in strategy it is more about a 172-year business adjusting to the evolution of customer sales. Nevertheless, it is still a move that has been long overdue and is starting to see benefits hit the bottom line. 36% of all sales this year were made online, which was a 2% increase. I would expect these numbers to grow as we delve further into next year.

Of course, this year there has been less of the operational struggles Thomas Cook has seen within destinations that have become embroiled in both political and economic turmoil. This has allowed the travel firm to focus on becoming more efficient as a business in balancing its costs and driving sales. This lack of distraction has really helped the firm this year.

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