Thomas cook predicts profit of £20-£30 million

THOMAS Cook is expected to make a profit of £20-£30 million this year but has admitted it will need to reach more “acceptable” levels in future.

At a City briefing, chief executive officer Thomas Cook UK Alan Stewart said £20-£30 million was a “good guess” in terms of annual profit. The turnaround for the year will be more than £75 million.

But Stewart – who described last year’s accounts as a “dog’s breakfast” – said a profit of £30 million was still not acceptable.

He said future growth will come through driving up profits not volumes, while the focus for improved distribution will be call centres and Teletext.

“We will build up a business that in five years’ time will reach acceptable levels of profitability. That would have to be three times what we have now.”

Stewart made a plea to operators not to pile on capacity and stressed the need to manage it carefully.

“Thomas Cook is not going to put on capacity that is not sustainable. The key to credibility is careful capacity management.”

In what could be interpreted as a veiled criticism of Airtours’ announcement to add extra stock this summer, he added: “Putting on capacity might seem to help an individual company but they lose out further down the line. It comes with industry maturity. But if other people put on capacity we have the power to control our own destiny.”

He said Thomas Cook had already planned capacity cuts last year but the September 11 attacks – which came just days before it was due to announce its cost-cutting measures to save £140 million – forced the company to make “deeper” cuts.

Stewart said the transformation of the business over the past four years meant in-house sales were now at levels of 70% compared with a previous 40%. Market share for Thomas Cook was estimated to be 13%.

Stewart said sweeping changes were needed when he took over the job.

“The reality was we had a huge mismatch of brands with some pretty downmarket products. We did have some problems with JMC.

“There was a lack of communication in the business and we had a three-year history of profit underperformance,” added Stewart.