Record result leads to acquisition plans

Thomas Cook AG achieved a record result in financial year 2005/2006 with pre-tax profits (EBT) up 47% to €205.8 million and net profits of €170.8 million. Group revenues rose 1.6% to €7.8 billion and customer numbers were up by 2.8% to 13.6 million. The profit increase was essentially driven by cost savings and €184 million worth of income from divestment of non-core businesses such as Aldiana, hotel holdings and TC overseas subsidiaries which more than compensated for a large increase in fuel costs.

The Thomas Cook Group is actively looking at acquisitions to grow its business after unveiling record profits for the 2006/06 business year. Europe’s second-largest travel group has confirmed that in Britain it is considering bidding for First Choice’s package holiday business and has indicated there may also be developments in Germany. At the same time, it has stressed that German airline Condor will remain “an integral element” within the group but will actively seek cooperation partners in a consolidating market.

Continental Europe, covering Germany, Austria, Benelux, France and the small Central European businesses, improved its pre-tax profit to €93 million from €67.5 million on sales up 2% to €4.6 billion. Adjusted customer numbers went up to 8.1 million from 7.9 million. Germany had a very successful year, more than doubling pre-tax profits to €69.7 million, despite flat sales of €2.9 billion and a fractional increase to 4.7 million customers. The UK and Ireland performed even better, improving its already high profit level to €127.5 million despite stagnating sales of €2.5 billion and a fall from 3.1 million to 3 million customers.

“After successful restructuring and strategic realignment, we once again have a very solid foundation”, said CEO Manny Fontenla-Novoa at last week’s financial results press conference. “The corporation has a very good financial standing and the future looks good. Thanks to the pending sale to KarstadtQuelle, we now have a clear perspective in terms of growth and the future.”

For the current business year, Cook aims to improve pre-tax profits by 5-10% but so far has only made a moderate start to the year due to the weak British market and slow sales growth in Germany. Fontenla Novoa said Cook had “slight” increase for winter sales revenues and a “low” minus for the summer on the German market. According to FVW information, however, the revenue decline is more likely to be a high, single-digit figure. This puts the group behind TUI and Rewe Touristik in terms of early sales for summer 2007. But Fontenla-Novoa is confident Cook can catch up and achieve healthy growth for the full business year.

Referring to the group’s future growth prospects, Fontenla-Novoa commented: “The European tourism industry is facing its next consolidation round, and we want to be part of it. Not as the hunted but as the hunter.” He indirectly confirmed for the first time that Cook is considering a bid for First Choice’s package holiday business, saying that Cook is “looking at all options”. Experts believe the successful bidder may have to pay up to GBP 800 million (€1.2 billion) for the First Choice business, which has revenues of GBP 1.3 billion (€1.9 billion) and 2.5 million customers, and also includes the in-house airline (32 jets) and travel agency network (300 outlets).

In response to speculation that Cook might try to downscale or sell off Condor in the future, Fontenla-Novoa stressed that Condor will remain part of the group and participate in the consolidation of the German aviation sector. “Condor will continue to play a decisive and central role in the future,” he declared. “Condor will grow profitably in the future with a healthy mix of flying for the Thomas Cook operators, seat-only and third-party business with other operators.”