It’s one of the longest-established names in travel – an agency credited with having invented the package holiday – and its share price gave investors a roller-coaster ride last week.
The company is Thomas Cook, said to be the world’s best-known name in travel. Founder Thomas Cook (born 1808) set it up with a successful one-day rail excursion from Leicester in the English Midlands to Loughborough on 5 July 1841. The company went on to become one of the world’s biggest travel firms, a major presence in Australia at one stage.
Last week was a wild time in the history of Thomas Cook, and part of the reason, curiously, was fair weather. On Tuesday, the BBC reported shares in the company had fallen nearly 60% in eight days. Bonds also dropped in value and the cost of insuring its debt against defaulting on payments reached a record high.
Concerns over Thomas Cook’s borrowings rose as it issued its second profit warning in two months and said profits would be GBP 30 million lower than expected.
A week earlier, Thomas Cook chief executive Peter Fankhauser admitted it had been a “disappointing year” for the travel firm. The company blamed its profit drop on the prolonged European summer heatwave, which led to a bookings dip. Britons don’t think about getting away for winter holidays when the sun is shining.
Thomas Cook said its bookings for this winter were 3% down on last year and suspended its dividend.
Other factors putting pressure on Thomas Cook: charges related to flight disruptions, writedowns on money owed by some hotels, and transformation costs.
Thomas Cook outlet in the UK
Then, on Wednesday last week, Thomas Cook’s chairman stepped in, snapping up more than GBP 80,000 of shares in a dramatic gesture of confidence.
According to Britain’s Press Association, quoting a regulatory disclosure, chairman Frank Meysman bought 373,000 shares at 21p each, amounting to GBP 80,441.
Non-executive director Lesley Knox was also reported to have bought 208,778 shares at a price of 22p each, totalling GBP 47,163.
Thomas Cook’s shares recovered slightly on Wednesday.
Next thing, share prices in the company broke their six-day losing streak and took off like a rocket, with news agency Bloomberg reporting the biggest gain in Thomas Cook shares in seven years.
It happened, Bloomberg said, after Thomas Cook met with key investors to assure them that it had no immediate plans for a rights issue.
Thomas Cook (22 November 1808 – 18 July 1892) founder of the travel firm
“The shares surged 46% Wednesday, ending a rout that erased hundreds of millions of pounds in market value, while its bonds also turned a corner,” Bloomberg reported.
Bloomberg quoted Stephen Anness, global equities fund manager at Invesco, Cook’s No. 1 shareholder, saying: “The market has taken fright, but from what we see, the fundamentals remain robust. From our conversations with the company, the balance sheet and liquidity is intact.”
The report also quoted a financial analyst saying Thomas Cook could “ease its position further” by selling a stake in its airline arm, which she said might be worth a cool GBP 1.1 billion (AUD 1.94 billion).
Incidentally, Thomas Cook may be the world’s oldest travel agent but it’s not the oldest travel company. That honour belongs to another British company, Cox and Kings, founded in 1758 and said to be the first company ever to focus its business on travel and tourism.
Written by Peter Needham
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