London - British holiday operator Thomas Cook on Tuesday highlighted a slowdown in bookings in its German market but also provided guidance on full-year earnings that put the company broadly on course to meet analyst expectations.
Thomas Cook said it expected earnings before interest and tax (EBIT) of between 315 million pounds (R5.6 billion) and 335 million pounds in the 12 months to the end of September.
That compared with analyst expectations of 327 million pounds ($530.2 million), according to a Thomson Reuters consensus forecast.
But Thomas Cook said bookings by German customers had slowed from late July as consumer confidence there dipped, reflecting worries around the impact of further European Union sanctions against Russia and their knock-on effect on Germany's economy.
This had hit margins in the German business in the fourth quarter.
“The Germany market place is very sensitive,” chief executive Harriet Green told reporters.
“We're very clear on our fourth quarter which is why we've given the (EBIT) range that we have. We're encouraged to see Germans buying vacations for the winter.”
Shares in the company lost as much as 6 percent of their value to stand at 122.25 pence in early trading on Tuesday.
Analysts cited the weakness in Germany, a market which accounts for about a third of group revenues, as the reason for the fall.
“Thomas Cook's update is disappointing given that we will have to downgrade our forecasts, however, the turnaround strategy continues despite the impact of recent weak trading in Germany and Airlines Germany,” Shore Capital analyst Martin Brown said.
He had expected the company to post EBIT of 346 million pounds, above the market average.
Despite the slowdown in Germany, the company said its operational performance in the 12 months to the end of September would show material improvement on last year and that a long term turnaround plan based on cost cutting was going well.
For its summer season, Thomas Cook, whose other larger markets are in Britain and the Nordic region, said that weaker prices, driven by higher capacity particularly in the airline market, continued, but it had offset that impact by speeding up cost cuts.
The group had first warned about price weakness in May.
Green said that the company was on track to raise its targets for cost-cutting when it reports its full-year results in November.
Its current plan is for two waves of cost cuts.
The first is to save 460 million pounds by 2015 and the second for more than 400 million pounds of savings by 2018.
Shares in Thomas Cook had lost about 3 percent of their value on Monday after the company's larger rival TUI Travel agreed a merger with its majority owner TUI AG.
This will create a larger rival and potentially the world's largest leisure and tourism group with a combined value of 6.5 billion euros. - Reuters