Thomas Cook reports first post-tax profit in five years

After a five-year holiday, Thomas Cook reported its first annual profit after tax since 2010 and said it had got off to a positive start to the next year as well.

The travel and leisure business saw a marginal 1% lift in group revenue over the previous year, to £7.83bn, with underlying EBIT up 11% to £310m.

Profit after tax was where the real news lay, with a £177m increase to sit at £19m for the year.

The firm put the improvement down to a positive response to its “differentiated holiday offering”, with underlying EBIT in its UK business specifically up 42%.

“Despite turbulence in some of our destinations, the underlying business performed in line with our plans at the start of the year, demonstrating its greater resilience”, said chief executive Peter Fankhauser.

“Looking across the group, northern Europe and our German airlines business also performed well with underlying operating profits up 23% and 19% respectively.

“As previously highlighted, Continental Europe, particularly Germany and France, were weaker due to more competitive trading conditions”, Fankhauser added.

The group also touched on the deaths of Bobbi and Christi Shepherd in Corfu nine years ago, as it was forced to confront the issue again this year at an inquest into the tragedy.

“Last week, we launched the Safer Tourism Foundation together with (Bobbi and Christi’s) mother, Sharon Wood”, said Fankhauser.

Thomas Cook pointed to a positive start to the next year as well, reporting strong winter trading in the UK and Northern Europe.

Shore Capital's Greg Johnson was pleasantly surprised by the results, saying the group's profit before tax was £20m ahead of their expectations.

"The new operating model is expected to deliver between £100m and £120m EBIT improvement between 2016 and 2018", he said.

"We are upgrading our recommendation on the stock from Hold to BUY noting the potential to deliver greater cash flow and margin improvement over the longer-term.

"Although trading is likely to be volatile we see the current valuation as highly attractive", Johnson added.

In light of the improved performance, Thomas Cook now expects to pay a dividend in early 2017 off next year’s earnings.