Thomas Cook sees United Kingdom earnings tumble as Spain competition ramps up

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Stripping out items such as foreign exchange movements, pre-tax profit was up 8% to £46m in the year to the end of September, on the back of revenues that were 9% higher at £9bn.

Thomas Cook has sold 58% of its 2017/18 winter programme, in line with previous year, and total bookings are up 5% on the back of demand for the Canaries and a recovery in holidays to Egypt and Turkey.

The company noted successful turnaround of German airline division Condor, while it increased profits in Continental Europe and Northern Europe.

"While conditions are challenging in the United Kingdom, we have implemented a set of actions to improve performance", said chief executive Peter Fankhauser.

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Underlying gross margin, meanwhile, declined to 22.1 percent from 23.4 percent a year ago, reflecting a more competitive market in holidays to Spain.

Regarding summer 2018, the company said it has seen a good start to trading, with overall holiday bookings and pricing ahead of a year ago.

Thomas Cook is also focusing on destinations such as Turkey and Egypt as they begin to regain popularity.

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Profit margins, traditionally tight in the travel sector, were eroded as Spanish hotels hiked their prices in response to an influx of tourists choosing to steer clear of rival Mediterranean destinations.

It noted good growth to both Turkey and Egypt in the United Kingdom, after demand had been buffeted over political instability and terrorism concerns.

"Meanwhile, the partnership with LMEY strengthens our own-brand hotel portfolio and reinforces our focus on a more streamlined portfolio of hotels where we can give customers the very best experience".

That has prompted a price war among tour operators serving Spain, while allowing hotels to increase prices that Thomas Cook must pay, squeezing margins from both sides.

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The actions the company has taken in the past 12 months will take it "significantly further forward" in its strategy for profitable growth, said Fankhauser.

The chief executive, Peter Fankhauser, cited progress in the group's continental Europe and Nordic businesses, while the Thomas Cook airline has enjoyed increased profits in a hard year that has seen European carriers such as Air Berlin, Monarch and Alitalia go bust.

Thomas Cook said it was "well positioned" to achieve current market expectations for 2018.

The board has recommended a final dividend of 0.6p each, up 20% on a year ago.

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