Less Ads, More Data, More Tools Register for FREE

Moody's Downgrades Thomas Cook's B1 Corporate Rating, Outlook Negative

Wed, 05th Dec 2018 07:00

LONDON (Alliance News) - Moody's Investors Service late Tuesday downgraded the corporate family rating of Thomas Cook Group PLC to B2 from B1 and changed the outlook to negative from stable.

"Our rating action reflects the deterioration of credit metrics after unfavourable earnings development in the financial 2018 and the group's weakened liquidity," said Assistant Vice President-Analyst Vitali Morgovski.

"Furthermore, the negative outlook reflects Moody's concerns regarding the company's ability to recover its profitability and cash generation in the coming fiscal year as the macroeconomic tailwind becomes less supportive whereas the outcome of Brexit negotiations and their potential impact on customer behaviour that may include a shift to late bookings exacerbates the uncertainty," added Morgovski.

On Thursday last week, the travel agency reported a swing to a loss in its recently ended financial year, hurt by a number of one-off charges and by weakness in its tour operating business.

Thomas Cook said it suffered from a prolonged period of unusually hot weather this summer, with customers delaying their holiday decisions, putting profit margins under pressure.

Moody's noted that initially the mid-cap constituent guided broadly stable earnings before interest and taxes, but on Tuesday last week, the company warned that its underlying Ebit dropped by 23% to GBP250 million year-on-year.

Thomas Cook said it is currently in the process of executing its strategy, focusing on a differentiated holiday offering to transform its business model. However, Moody's highlighted that this transformational programme resulted in a significant increase of exceptional items, totalling GBP153 million compared to GBP54 million prior year.

"High and growing amount of transformational expenses contrasts sharply with Moody's expectation of their gradual decline," the ratings agency said.

Moody's said that Thomas Cook's decision to suspend its dividend payment will not have any meaningful impact on its credit metrics. In financial 2018, Thomas Cook distributed GBP9 million to shareholders.

Looking ahead, the ratings agency said it will consider an upgrade if Thomas Cook is able to demonstrate the resilience of its business model to external shocks, including Brexit-related uncertainty.

Related Shares

More News
30 Sep 2019 09:43

Some Thomas Cook customers will wait 60 days for refunds - CAA

(Sharecast News) - Some Thomas Cook customers may have to wait for at least two months to receive a refund after the travel firm collapsed last week, ...

24 Sep 2019 20:07

Germany to offer 380 mln euro bridging loan to Condor

BERLIN, Sept 24 (Reuters) - Germany has decided to guarantee a bridging loan of 380 million euros to Condor, the German airline owned by insolvent B...

24 Sep 2019 18:38

RPT-German govt, Hesse line up bridge loan of nearly 400 mln euros for Condor - sources

BERLIN, Sept 24 (Reuters) - The German government and state of Hesse want to jointly support Condor, the German airline owned by insolvent British t...

24 Sep 2019 14:27

Thomas Cook collapse affects 53,000 British nationals in Spain - tourism minister

MADRID, Sept 24 (Reuters) - The collapse of British travel firm Thomas Cook has affected 53,000 Britons in Spain, Spanish Acting Tourism Minister Re...

24 Sep 2019 12:18

UK accounting regulator mulls examining Thomas Cook failure

LONDON, Sept 24 (Reuters) - Britain's Financial Reporting Council said on Tuesday it was considering investigating the collapse of travel company Th...

Login to your account

Don't have an account? Click here to register.

Quickpicks are a member only feature

Login to your account

Don't have an account? Click here to register.