LONDON (Reuters) - Thomas Cook (TCG.L) raised its revenue and cost-cutting targets in the latest stage of a profit-boosting turnaround at the world’s oldest travel firm, sending its shares to a near three-year high.
The tour operator is recovering from a dramatic slump over the past three years, hit by the euro zone debt crisis, high fuel costs and political turmoil in popular holiday destinations such as Greece, Egypt and Tunisia.
Since travel industry outsider Harriet Green took over as Chief Executive 16 months ago, Thomas Cook has achieved a steady improvement in its finances through job cuts, store closures and a series of disposals to reduce debt.
The 172-year-old company on Thursday posted earnings before interest and tax (EBIT) up a forecast-beating 49 percent to 263 million pounds ($429 million) in the year to September 30, helped by strong demand for fixed-price holidays to Spain, the Canary Islands and Turkey.
The consensus estimate from analysts surveyed by Thomas Cook was for EBIT of 251 million pounds.
Green said that the business is now back on a firm trajectory of profitable growth and that she is confident of delivering “significantly more” in the coming years.
Reflecting this confidence, Thomas Cook aims to cut costs by 440 million pounds by 2015 - 10 percent more than previously expected - and to deliver a further 440 million pounds of savings by 2018.
It also raised its target for revenue from new products, such as exclusive hotels and city breaks, by 40 percent to 700 million pounds by 2015 and aims to hit 1.2 billion pounds by the end of 2017.
“The first wave of cost savings was about picking off the low-hanging fruit, and wave two will be about generating savings through better using Thomas Cook’s scale in areas including transportation and purchasing,” Green said.
Shares in Thomas Cook, which have trebled in value since the start of the year, rose more than 10 percent to 168.6 pence by 4:50 a.m. ET. This was their highest since January 2011, giving the company a value of 2.45 billion pounds.
Accendo Research analyst Mike van Dulken said Thomas Cook’s growth forecasts were “music to investors’ ears”, with the shares likely to continue their “meteoric recovery” from as low as 8 pence in late 2011.
In August the company announced its first third-quarter profit since staving off bankruptcy in 2011 and told investors to expect more from a restructuring that has allowed it to pledge a return of dividend payouts by the end of 2015.
Green said the group, which roughly halved its debt to 421 million pounds during the year, is nearing the end of its disposal program after selling ski brand Neilson this week.
Thomas Cook, which unveiled a 1.6 billion pound refinancing plan in May, said its full-year operating margin rose 0.9 percentage points to 2.8 percent. Rival group TUI Travel’s TT.L operating margin was 2.1 percent in 2012, according to Thomson Reuters data.
Green has pledged to boost profits by $500 million in the next three years by moving more operations online.
Thomas Cook said online business accounted for 36 percent of annual sales this year, up two percentage points from last year, after the company reduced its online brands to three in Britain and one in Germany while extending the product range.
It said margins for winter 2013/14 are ahead of last year and bookings for summer 2014 are in line with its expectations.
Editing by Kate Holton and David Goodman