Thomas Cook Regulatory News (TCG)

24 September 2015

Pre close trading update

Summer holiday sales in line with expectations

Encouraging start to Winter trading

Highlights

· With our Summer 2015 holiday programme now almost fully sold, trading has progressed well overall

· All markets are performing in line with our expectations, while Northern Europe has enjoyed particularly strong trading in the second half of the year

· Winter 2015/16 trading has started positively, with improved bookings in all major source markets

· Demand has continued to grow for our differentiated holidays, particularly to our own-brand hotels

· Guidance for the full year remains consistent with our expectations at the time of our third quarter results in July

· Our focus is on moving the Group into the next phase of transformation in order to generate growth, through an improved customer experience and more efficient and better integrated operations

Peter Fankhauser, Chief Executive of Thomas Cook, commented:

"Our trading performance for the Summer season has progressed well, despite the impact of external shocks in certain destination markets, as previously announced. With more than a third of the Winter 2015/16 season sold, the bookings profile for next year is also encouraging.

Over the last three years we have made excellent progress transforming our business. We have developed a strong core holiday proposition based around our own-brand hotels, reduced our cost base, and strengthened our capital structure. The next phase of transformation will aim to better integrate our businesses across geographies, with a higher quality and more focused holiday offering delivered through our New Operating Model. With the benefit of our strong brands and through our absolute focus on customer needs, I am confident that this strategy will lead to an even better holiday experience for our customers, further improving our growth and profitability, and increasing returns to shareholders."

Current trading

Summer 2015

The Summer season is approximately 91% sold for the Group as whole, in line with the same time last year. Booking trends in the late Summer season have been in line with our expectations, leading to a similar bookings position for the Group to that reported at our third quarter results on 30 July. In terms of destinations, with Tunisia effectively closed for the time being, we have seen a significant increase in the number of customers travelling to Greece and Egypt, while our strategy to invest in long haul routes is paying off, with particularly strong growth in holidays to the USA and the Caribbean.

In the UK, Summer capacity is 95% sold, 1% ahead of the same time last year. Average selling prices have increased by 4% both for package (charter risk) holidays and for seat only bookings on Thomas Cook Airlines, reflecting strong demand for differentiated holidays and flights particularly to long haul destinations, as well as growth in our premium holiday offer, Signature, following its relaunch last winter. This follows a period of significant investment, both in the quality of the hotels we offer in the UK, and in our airlines through the introduction of brand new and refurbished aircraft. As in previous reporting periods, the expansion of our seat only business within the product mix has led to a slight decline in the blended average selling price; in spite of this, the UK continues to perform comfortably ahead of last year.

In Northern Europe, following a slower start to bookings in the first half of the calendar year, demand has accelerated substantially and the business has performed particularly well in the second half of the year, helped by recent poor weather in Scandinavia. Summer 2015 is now 99% sold, with bookings 1% higher than last year and average selling prices 4% higher. This robust performance demonstrates the continuing strength of the Nordic business, which benefits from a market-leading position and attractive product portfolio.

In our Continental Europe business, capacity commitments are 90% sold, similar to the same time last year, with pricing 1% lower. This reflects continuing competitive trading conditions which have put pressure on margins and profitability, and a later booking profile in most markets. Demand in France to MENA destinations has been impacted by geopolitical events, although we have successfully grown sales to other destinations, particularly long haul.

Airlines Germany has sold 89% of its Summer capacity, in line with the same time last year. Bookings are 7% higher than last year, reflecting an increase in both short/medium haul and long haul capacity together with a slight improvement in seat load factor. Overall average selling prices are 1% higher than last year, as improved long haul yields and a higher mix of long haul business has more than compensated for pricing pressures in the short/medium haul market.

Based on cumulative bookings as at 12 September 2015

Notes: (i) UK average selling price is up by 4% for charter risk and 4% for seat only, but down by 1% on a blended basis due to the change in mix(ii) For the tour operator only, the Summer 2015 season is 93% sold, in line with the same time than last year

Winter 2015/16 and Summer 2016

While it is early in the booking cycle, we are encouraged by strong booking and pricing trends for both the Winter 2015/16 and Summer 2016 seasons. In terms of Winter trading, with 39% of the season sold, all of our major source markets are ahead of last year in terms of booking volumes, with improved pricing trends particularly in the UK and Northern Europe.

Transformation update

Our transformation continues at pace, as we execute our strategy for profitable growth. Demand for differentiated holidays is growing. Bookings of our own-brand hotels, which are mostly exclusive to Thomas Cook, have increased by 38% for Summer 15, with particularly strong growth in the UK, Germany, the Netherlands and Belgium. Online, our OneWeb platform is live in the UK and being rolled out to the Netherlands. Our focus on mobile has led to strong bookings growth on smartphones and tablets, up 30% compared to last year and now accounting for one in three bookings made on the OneWeb platform. Conversion has increased compared to last year across all device types.

Building on the significant business improvements already made over the last few years, Thomas Cook is now moving into the next phase of its transformation. The Group has begun to implement its New Operating Model, comprising a set of initiatives which aim to further improve product quality with a core focus on our own-brand hotels and airline, and to eliminate duplicated activities by creating a set of efficient, common technology platforms and process methodologies. We will report on our progress in implementing the New Operating Model from FY16 onwards.

We continue to develop our strategic partnership with Fosun. In particular, we expect our China joint venture, which will develop domestic, inbound and outbound tourism activities for the Chinese market, to become operational by the end of 2015. We are also making progress with jointly establishing our hotel investment vehicle. We will provide a further update on these initiatives at our full year results in November.

Fuel and foreign exchange

The Group operates a rolling programme of hedging to smooth fluctuations in the price of fuel and currency, in order to provide greater price certainty when planning for current and future seasons. The proportion of our forthcoming requirements for Euros, US Dollars and Jet Fuel that have been hedged are shown in the table below.

As at 12 September 2015

The Group's policy is not to hedge the translation impact of profits generated outside the UK. Given the depreciation of the Euro and Swedish Krona versus the Pound during the course of the year, we expect the negative year-on-year impact of translating profits from our non-UK businesses into Pounds Sterling to be approximately £39 million, unchanged from our estimate at the time of our third quarter results.

Outlook

Our underlying business has continued to develop in line with our expectations, despite the impact of disruption in certain destinations and significant foreign exchange headwinds, as previously announced. Demand for our differentiated holidays has accelerated in Northern Europe during the course of the year and has continued to grow in the UK, while conditions in Continental Europe have remained challenging. Our airlines have experienced strong demand as our strategy of investing in the customer experience, expanding our route network and growing our seat only business is paying off. Accordingly, we expect our financial results for the current financial year to be in line with our expectations at the time of our third quarter announcement in July.

Forthcoming announcement dates

The Group intends to announce its results for the year ended 30 September 2015 on 25 November 2015.

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