Financial Report Of Thomas Cook Group Plc Finance Essay

Introduction

Thomas Cook Group Plc. has been chosen for this fiscal study bearing in head that it is one the largest and most popular travel companies in the universe. It was started in 1841 by 30 two ( 32 ) twelvemonth old cabinet-maker named Thomas Cook. He was a former Baptist sermonizer, and as a spiritual adult male he believed that most societal jobs at that clip were related to alcohol. Thomas Cook felt that the less alcohol people drank, the more enlightened and educated they became. ( Thomas Cook Group,2010 ) During the 17th century, the railroads and motive power were the biggest manners of transit and Thomas Cook had an thought of prosecuting in their usage and benefits to get down a major societal reform. What started out as an jaunt of 12 stat mis that cost one shilling at that clip grew into a fully-fledged travel company that handled vacations and Tourss to Wales, Ireland, Scotland, Europe, North America and the remainder of the universe. The company is presently known as Thomas Cook Group Plc, with 100s of subordinates and 1000s of shops worldwide.

This fiscal study would be chiefly based on official informations obtained from the Thomas Cook UK & A ; Ireland web site and, besides a fiscal analysis and company information obtained from FAME which is a beginning of information for companies in the UK and Ireland. It covers a three twelvemonth period ( 2007 – 2009 ) of the fiscal statements of Thomas Cook UK & A ; Ireland and would affect an in-depth analysis utilizing different ratios analysis in an effort to find

The current long term solvency of the company

The fiscal public presentation over this period

The consequence of the current universe economic system on the company

Its predicted hereafter public presentation

A concluding analysis and decision of the company ‘s public presentation

Background

This fiscal study covers Thomas Cook UK & A ; Ireland which is a subordinate of the Thomas Cook Group. Thomas Cook UK & A ; Ireland was foremost listed on the London Stock Exchange in December 2007.

In May 2010, the company experienced a slack in its gross revenues of vacation bundles to Greece which fell by 24 % due to the state ‘s public violences and economic downswing. ( Blitz, 2010 ) . Greece is a popular finish for UK vacation shapers and these events affected the company ‘s net incomes. Besides the closing of the European air infinite in April 2010 as a consequence of the Icelandic volcanic ash left the company with 188,000 off engagements or vacations and was left with 177,000 stranded clients whom were already on vacations and had to return.

On October 8th 2010, it was announced that Thomas Cook UK & A ; Ireland was unifying its high street travel stores with those of The Co-op Group in order to make the largest high street travel bureau concatenation in the UK of about 1200 retail mercantile establishments. ( Jacobs, 2010 ) . This amalgamation would be non-cash based and it would affect Thomas Cook having 70 % while Co-op would have 30 % . This was necessary because of the diminution in the Numberss of holiday bundle and tour gross revenues in the UK. In order to remain afloat, both companies decided to synergise their back office operations, shared Information Technology and caput quarters.

As a portion of this trade there will be expected occupation cuts and shuting down of some mercantile establishments. The amalgamation is expected to salvage the combined company an estimated sum of 35 million lbs within the following one twelvemonth. The amalgamation does non affect in their web site thomacook.com, which is the Thomas Cook UK & A ; Ireland offering online.

THOMAS COOK: Comparison OF ABSOLUTE TABLE

Signal-to-noise ratio

Statistics

30/09/2009

12 Calendar months in GBP

30/09/2008

11 Calendar months in GBP

31/10/2007

12 Calendar months in GBP

1.

REVENUE/SALES

2,095,203

1,949,508

1,063,762

2.

Cost OF SALES

-1,931,346

-1,816,749

-1,036,382

3.

OPERATING Net income

-4,764

-38,891

-155,781

4.

Net income ( LOSS ) AFTER Tax

8,108

-3,319

-76,945

5.

FIXED ASSETS

661,644

309,870

127,487

Table1.0

It would be observed from the above tabular array, Table 1.0 that there has been a steady growing in the company ‘s gross over the three twelvemonth period. The gross had more than doubled in two old ages from 1,063,762 to 2,095,203. An addition in the cost the cost of gross revenues has no negative impact on the operating net income because Thomas Cook was doing losingss until 2009 where it declared a net income after revenue enhancement of 8,108. This shows a steady decrease in losingss until an eventual net income. The world-wide recession has besides affected the company ‘s expected net income since there had been a bead in the figure of holiday gross revenues over the old ages. The consequence of the recession has reduced over the old ages. There has been a great addition in fixed assets which has grown more than five times since 2007.

INTERPRETATION OF RATIOS IN TABLE 2.0

Tax return ON CAPITAL EMPLOYED ( % )

This merely tells the investor ( s ) the degree of per centum addition or loss based on the purchase monetary value of an plus which is used to measure the public presentation of an investing.

Thomas Cook has had gradual diminution on return on investing. This could be due to the planetary economic crises. Since it is chiefly a travel and leisure company ; the diminution in returns from 32.5 in 2007 to -1.69 in 2009 is normal given the current universe economic state of affairs since the crisis affected many companies worldwide.

Net income MARGIN ( % )

The net income border says how much an investing makes for every unit of currency, in this instance lb. A profitable investing is expected to supply an increased net income border over clip.

From 2007 to 2008 Thomas Cook was running at a loss and at a really negative net income border. In 2009 though, the company ‘s net income border became positive 0.68 % . This shows steady company growing

FIXED ASSETS TURNOVER

This calculates the entire gross for every currency unit of assets. A company ‘s mark is to hold a low fixed plus turnover ratio which in bend affects the net income border.

In 2009, it would be noticed that Thomas Cook has had a lower fixed plus turnover ratio of 3.17 as compared to 2008 figure of 6.86 and 2007 figure of 8.34. This is consistent with the increased net income border for the old ages mentioned.

STOCK TURNOVER

Stock Turnover is a step of how a company can readily obtain income or gross from its stock. It is a major constituent of fixed plus turnover for companies that do non hold a big fixed plus but posses a big stock.

Thomas has had a reduced turnover of 477.38 in 2009 as compared to 572.16 in 2008. There is no supplied informations for 2007. Since it is a service and, non a fabrication company ; holding a high stock turnover would non hold much consequence on the net income border.

DEBTORS TURNOVER

This ratio shows the rate at which an administration or company collects its debts. It shows the efficiency of its debt direction.

Debt turnover ratio by Thomas Cook over the three twelvemonth period has non be consistent. It went down in 2008 from72.39 the old twelvemonth, 2007 to 44.57. As at 2009 it was 78.12 which shows an betterment.

CURRENT RATIO

This is a really popular and of import ratio analysis in a company ‘s fiscal statement. It indicates short term solvency in that company with a current ration closer to 1 or less, has low liquidness. It indicates a company ‘s ability to settle short term liabilities. Although a company with a high liquid current assets may hold s little currency ratio.

The current ratio dropped in 2009 from 0.37 in 2008 to 0.54. This may be that Thomas made more investings during that twelvemonth period. A low current ratio is acceptable since hard currency is invariably being used by the company as a service based company.

QUICK RATIO

This is a step of a company ‘s ability to bring forth hard currency within a really short period, possibly in hours or yearss. It is an indicant of short term fiscal stableness. It is similar to Current Ratio but without the stock list.

Thomas Cook has a speedy ratio of less than 1 for the three old ages in position. It shows that the company is holding liquidness jobs and would hold to take steps to remain afloat. Its state of affairs in 2009 holding 0.37 is a batch worse than in 2008 with a value of 0.53.

SOLVENCY RATIO ( % )

This is a step of a company ‘s ability to run into its long term liabilities. It gives a prognosis of an administration ‘s ability to run into its long term debt duties. A positive and high solvency ratio shows a strong fiscal standing.

Thomas Cook has had negative values for two old ages running, -56.51in 2009 and -44.10 in 2008. There is no supplied value for 2007. This shows that the company has been fighting manage its fundss

Gearing Ration

This is a really of import ratio to both a company and its investors It shows a company ‘s capacity to keep a steady and unvarying dividend policy during different economic state of affairss.

There are no values supplied for the three old ages taken into consideration in this study.

Employee turnover PER EMPLOYEE ( UNIT )

This ratio gives a step of degree of labour productiveness and efficiency within an administration. A high turnover per employee is good where as a low turnover per employee might bespeak overstaffing and an administration fighting to pay its rewards and wages.

Thomas Cook has a high turnover per employee for both old ages running. But this ratio does non take into consideration that some high degree members of staff pay construction that may non be required.

Tax return ON Stockholder FUNDS ( % )

This indicates how profitable a company has been to its investors and the value of its portions to its stockholders. Investors require a company with a positive and improved per centum.

Thomas did non provide any values for three old ages running, i.e. 2007 to 2009. It besides has to be taken into consideration that historical information does non needfully predict hereafter developments

Interest Coverage RATIO

This ratio shows the ability of an administration to run into its involvement duties. It besides gives an indicant of its recognition evaluation. A high involvement coverage ratio indicates that the company has a strong fiscal base and can still take up more bank loans if necessary.

Thomas Cook had a negative value of -2.262 for 2009 as against a value of 1.274 in 2008 and 5.697 in 2007. Obviously it would be hard to take out new loans and refinancing of old loans may be a better option

Recommendation

The fiscal state of affairs of Thomas Cook has been far from good. The company ‘s fiscal consequence has a negative Interest Coverage ratio of -2.262 for 2009 which does do it appeal to Bankss as a venture to impart money to. It therefore has a low recognition evaluation and would be seen as a high hazard concern. There are no values for Gearing ratios and return on portion holders ‘ financess. This besides makes it unsure as per the hereafter consequences as a n investor has no thought on how much his returns would be.

The current amalgamation with Co-op should be seen as visible radiation at the terminal of the tunnel since it is a amalgamation out of synergism with the premiss that there would be a nest eggs of 35 million lbs within a twelvemonth. The company managers should continue with cautiousness and besides employ executable harm restriction processs in order to stay solvent during the current planetary recession

Decision

It should be taken into awareness that the planetary economic meltdown did affect companies worldwide.Thomas Cook being a travel company that chiefly deals with gross revenues of vacations and Tourss bundles, it would be observed from the above fiscal study that it was severely affected by the universe recession. By and large people were bothered about cut downing mounting debts, looking for occupations / maintaining occupations and seeking to pay debts and mortgages in order to avoid foreclosures of places and loss of concerns. Gross saless in holiday engagements dropped and most companies took steps to cut down losingss.

There has been a turnaround in the world-wide recession and this can be seen in the fiscal statement of Thomas Cook. For the first clip in three old ages, there has been a net income after revenue enhancement ( Appendix, Table 1 ) . There has besides been an addition in gross and decrease in operating losingss. Based on the current tendency, there is expected growing in the hereafter.