Thomas Cook’s failure to announce a new group chief executive caused concern among City analysts yesterday, despite the company reporting trading in line with expectations.
At the same time, analysts made differing assessments of Thomas Cook’s health in light of the trading update. Acting chief executive Sam Weihagen reported trading as “stable”.
Investec Securities analyst James Collins noted: “Thomas Cook is facing continued difficult trading conditions and needs to rigorously address its cost base particularly in the UK. This is made more difficult without a permanent CEO and we are disappointed an appointment has not been announced.”
Thomas Cook had previously suggested a new chief executive would be announced by the end of this month.
However, Investec was relatively upbeat, describing Thomas Cook as a “turnaround opportunity” and switched its recommendation to investors from “hold” to “buy”. It noted: “We take encouragement from the outlook and likelihood of disposal proceeds.
“Thomas Cook has the ability to generate sufficient cash from operational free cash flow and asset sales to manage and pay down its debt.”
Investec added: “The markets are pricing in a tortuous outlook … but we project the combination of operational improvements and asset disposals will enable Thomas Cook to manage its debt management and repayment programme.”
Rival investment analyst Langton Capital observed “consumers seem to be sticking with the company”. However, it suggested: “Overall, Thomas Cook Group remains a risky investment.”
Citi noted “risks remain” and suggested the group would again “be close to [its] debt covenants during the winter season”.
Thomas Cook reported mainstream bookings for this summer 10% down year on year, but specialist and independent bookings up 14%, leaving it 2% down overall on a year ago.
The group revealed it had cut mainstream capacity yet again for the summer, taking the total reduction on last year to 12%, increased from 11% at the start of February.