Thomas Cook is restructuring its independent business and targeting “significant” long term growth in the European online travel agency sector.
The revamp emerged as the group reported flat annual pre-tax profits of £308.2 million for the year ending September.
The group, which described current trading conditions as in line with expectations in a “challenging environment”, had a pre-tax profit of £309.3 million the year before.
There was a 13% increase in adjusted group EBIT to £414.9 million against £365.9 million.
Group revenue for the 12 months just ended was up by nine per cent to £9,268.8 million.
The result comes on the back of industry-wide mainstream travel capacity cuts by UK operators of around 30% over the last two years.
The company is continuing to develop its independent business and says it is benefiting from the rapid growth in this area.
Independent travel passengers increased by 18% in the past year through investment in dynamic packaging capabilities, a focus on ecommerce operations and expansion of the product offering.
With the strength of the Thomas Cook retail brand, access to inventory and a "true multi-channel capability", the strategy to develop an international online travel agent represents a "compelling customer proposition".
Independent travel now represents 23% of revenue.
“We have continued to invest in our dynamic packaging capabilities and products and we have, in parallel, improved our online capabilities across the group,” said group chief executive Manny Fontenla-Novoa.
“As well as ongoing content management, merchandising, programming and technology investment, we have also ensured that customers booking travel online have access to all the same services that are available in-store and receive a seamless customer experience across channels.”
Russia and China are being targeted for expansion, two countries where Thomas Cook is “particularly encouraged” by the opportunities.
Russia and China are expected to become two of the largest travel markets within the next few years.
Fontenla-Novoa said: “We are looking at limited investment in partnership and joint venture structures in these markets to manage risks, but with an opportunity to take majority or full control over time.
“In Russia, we seek to establish a strong presence early on and would expect to leverage our destination strengths, particularly in Turkey.
“However, in China, we believe it is essential to first establish a foothold to gain experience.”
Looking forward to summer 2010, he said brochures for the UK market were produced later in response to the later booking pattern.
As a result, only 20% of capacity in the UK has been sold to date and “trends therefore are difficult to ascertain”.
“Nevertheless, we have seen encouraging signs in the last four weeks, with bookings up 14% and average selling prices up 2%, and differentiated and exclusive products selling particularly well.
“Sales of higher margin, all-inclusive holidays and four and five star products are also proving resilient.”
Overall capacity is expected to be flat year on year.
“However, we will continue to monitor changes in behaviour to ensure we can adapt as we need to and, if necessary, bring to bear the considerable flexibility we have,” said Fontenla-Novoa.
Reviewing the past year’s financial performance, he said: “We have delivered a strong performance in 2009 achieving full year results ahead of market expectations.
“This is particularly pleasing as it comes despite the worldwide recession and the financial impact of the swine flu outbreak.
“Profit from operations grew 13%, demonstrating the resilience of the package holiday and the power of our brands.
“The adjusted EBIT margin rose from 4.2% to 4.5%, driven by our focus on medium haul and higher margin product, careful capacity and cost management and a strong contribution from our acquisitions.
“Looking ahead, the late booking trend is still evident but our winter 09/10 trading position continues to improve and trend towards our planned capacity.
“Although it is still early in the cycle, bookings for summer 10 are also in line with our expectations.
“Recent customer research shows that UK consumers remain intent on taking their holidays abroad next summer and we continue to see strong growth in bookings to medium haul destinations such as Turkey and Egypt.”
He added that the company remained “committed to achieving significant growth” and had embarked on a programme of strategic initiatives that will deliver revenue, profit and margin expansion over the medium term.
These include centralising accommodation purchasing in order to leverage the scale of buying power in mainstream travel; building on financial services heritage in key markets; targeted acquisitions in emerging markets; and taking advantage of consolidation opportunities as they arise.
