Thomas Cook shares tumble another 40pc after City analysts brand them worthless
Thomas Cook shares tumbled another 40 per cent yesterday after City analysts branded them worthless.
The travel operator, which served 22m customers last year, is struggling under the weight of a £1.25 billion debt pile.
The assessment by analysts at investment bank Citigroup sent the stock down 7.8p to just 11.8p, valuing Thomas Cook at about £180m.
Hitting turbulence: Thomas Cook is struggling under the weight of a £1.25 billion debt pile
A year ago its shares were changing hands at close to 150p, valuing the company at more than £2.2 billion. But the report by Citi – which came a day after Thomas Cook reported a record half-year loss of £1.5 billion – said they should be priced at zero.
Warning of a bleak outlook for the business, Citi analyst James Ainley said its troubles were likely to ‘unsettle consumers and drive further weakness in bookings’.
Michael Hewson, chief market analyst at trading firm CMC Markets, said: ‘Thomas Cook’s woes have gone from bad to worse after Citigroup downgraded the shares to sell with a 0p price target. Investors appear to be losing confidence in the ability of management to turn the ailing business around.’
The travel firm dates back to 1841, when 32-year-old Thomas Cook sold a one-day rail excursion for one shilling per head from Leicester to Loughborough.
The first trip, inspired by Cook’s belief that the working-class’s lives could be improved by travel and education, carried 500 people.
The company now sells package holidays, operates airlines in several European countries, owns hotels in 47 countries and has a travel money and insurance branch.
But it has struggled to keep up with customers’ changing travel habits as holidaymakers turn their backs on package deals and traditional resorts.
The company is closing 21 of its 583 High Street branches and has put its airline up for sale to raise much-needed cash, with Virgin Airways, Germany’s Lufthansa and investment firm Indigo Partners among those said to be interested.
In its half-year results this week, the company’s auditors Ernst & Young said that there was ‘material uncertainty’ around the proposed sale of the airline division, which cast doubt over the health of the entire company.
But the auditor concluded that after considering all uncertainties, Thomas Cook should be able to keep its head above water.
However, while the prospect of the business failing will be a worry for many of its customers, Thomas Cook said all of its holidays are Atol protected, meaning travellers will get a refund or a replacement holiday if it collapses.