Thomas Cook Group has suspended dividend payments after October as it battles to rebuild its balance sheet on the back of three profits warnings since August 2010.
A previously declared dividend of 3.75p will be paid on October 7 but the board has decided not pay any further following a dramatic slump in its share price. Cook said today that it is focused on improving its financial flexibility, particularly around the seasonal cash low point at the end of December.
“Therefore we are working closely and constructively with our banking group to achieve this,” the company said in a trading update, adding that the board is “confident” that agreement will be reached shortly.
“The group delivered steady results in July and August in line with our expectations but September has been a more challenging month, particularly for our French business. However, we still expect to deliver a result broadly in line with market expectations,” Cook said.
There has been a £78 million improvement in cash flow for the 11 months to August 31, resulting in £830 million in available cash and committed bank facilities.
The operator said “good progress” was being made in a programme of disposals designed to raise £200 million, with two sales completed and a further two in the pipeline due to bring in £40 million by the end of the calendar year.
It outlined action being taken to improve performance of it UK business which has hit the overall group performance together with political upheaval in the Middle East and North Africa.
Cook has started consultations having announced plans to withdraw six aircraft from its 41-strong UK fleet and closing 24 loss-making travel agency branches at the end of their lease periods.
It is also stripping 500 hotels out of its summer 2012 programme, adding around 100 mainly “differentiated” properties
Call centre rostering is being reviewed to improve efficiency and align staffing with demand and the UK organisational structure is being simplified to help with faster decision making.
Full details of the review of the UK business are due to be unveiled at the company’s year end results on November 24 and no mention of job losses was made today.
The actions come after Cook replaced former chief executive Manny Fontenla-Novoa in August as it sought to relieve pressure on its balance sheet and stabilise its poorly-performing UK business.
Fontenla-Novoa was succeeded by 61-year-old Sam Weihagen, who ran Cook’s Scandinavian business for nine years. He agreed to postpone his retirement and stay on in a caretaker role until a new chief executive is found.
The company announced last week that Belgian Frank Meysman is taking over as chairman when current chairman Michael Beckett retires in December.
The trading statement showed that underlying profit is expected to be “broadly in line” with market expectations with action being taken to “increase UK cost base flexibility”.
Winter bookings in the UK are slightly behind a 5% cut in capacity.
Co-operative Group chief executive Peter Marks is joining as a non-executive director on October 1, the date of the completion of the UK retail joint venture between Cook and the Co-operative.
Commenting on the appointment of Marks, Cook chairman Michael Beckett said: “This appointment further strengthens and complements the composition of our board. I would like to welcome Peter to our board and I am confident he will bring current and wide-ranging experience to our deliberations.”