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Despite broadly flat like-for-like revenues and gross margins in the first half, Thomas Cook now expects underlying EBIT for the full year to be £310m-£335m, at the bottom end of analyst expectations. Underlying losses from operations improved slightly in H1, from £173m to £153m.
Overall bookings fell 5% in the first half as turmoil in Turkey, Thomas Cook's second largest market in 2015, impacted bookings. Excluding Turkey, bookings rose 6% as alternative markets, including Long Haul destinations, delivered strong performances. Average sale prices were flat.
Thomas Cooks' shares reacted with a 16% fall in morning trading. This is against the background of the disappearance of an EgyptAir flight between Paris and Cairo which has knocked the sector by 2-4%.
Summer 2016 is 63% sold for the group as a whole, 2% lower than this time last year, despite the group rebalancing away from Turkey, Tunisia and Egypt. The group has seen a strong performance from alternative destinations, including Spain, the USA, Cuba and Mexico. Bookings are down 3% in the UK, 2% in Northern Europe, 10% in Continental Europe and 4% at Airlines Germany.
Winter 2016/17 is 10% booked, up 16% on last year with average selling prices up 2%.
Balance Sheet:
Underlying net debt increased by £50m to £825m, up 18% on a year previously.
The company is embarking on a program to reduce its fixed term debt, £100m in outstanding bonds are expected to be purchased shortly, with the objective of reducing interest costs, which cost the group £42m in the first half. Moody's have increased the company's credit rating by a single notch to B1.
Thomas Cook continues to expect to begin paying a dividend out of FY16 profits, targeting a payout ratio of 20%-30% of reported net profit.
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