Wednesday, February 8, 2012

Thomas Cook - still a mess

TCG.L (Thomas Cook) shares rose 3.9% today in early morning trading on the back of their IMS, as they reported results for 3 m/e Dec 2011.

Revenues were up 3%, helped in part by the Co-op and Russian joint ventures. Losses from operation were £91m, compared with prior year of £37m. The company cites tougher trading conditions, rising fuel costs, and disruptions in MENA (Middle East and North Africa). As ever, with Thomas Cook, there's always something. Chief Executive Sam Weihagen said "I have been encouraged by how out booking have developed". It still seems that the directors are viewing the world through rose-tinted spectacles.

The group incurred £24.9m of exceptionals, against comparative period of £16.9m. Exceptionals are not to exceptional at TCG. I totted up the basic EPS of TCG since its flotation in the previous decade. It comes to -27.05p (a loss). Compare that with its adjusted EPS total: 119.47p.

Free cash outflow for the quarter was £740m, against comparatives of £639m. TCG intends to sell off its Indian business to help reduce debt. It will also explore other opportunities.

Four directors will retire at the conclusion of the company's AGM today. Good riddance. A replacement is also sought for group CEO, Same Weihagen, who took up the position in August 2011, and will stay until an appropriate candidate is found.

Unfortunately, the IMS didn't mention the net debt position. I assume it is worse.

Although the market has reacted well to the IMS, I don't see much to cheer about. There just seems no end of the problems in sight. Based on the finals, rather than the latest IMS, TCG is on a PER of 1 (!), and a PBV of 0.1, so Mr Market is clearly having a lot of reservations on this one. Market cap is £113m, and net debt is £891m - clearly something is wrong with this picture. The latest free cash flow for the full year was £18m (190m net cash flow less 172m capex). This puts is on an EV to free cashflow of 56 ( (113+891)/18) - not cheap at all. It looks like it is going to take some kind of minor miracle to turn this tanker around.

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