On Wednesday 11 February, Thomas Cook is due to post its first quarter figures. This will be the first set of numbers from the travel agent since last November’s surprise announcement that CEO Harriet Green would be stepping down. From the beginning of 2015 she will be on gardening leave up until her June release date. The news of her departure hit the shares hard, as they fell by over 20%. Subsequently they have recovered some of that lost ground, but have struggled to break back above the 130p level.
This uncertainty has not dented institutional enthusiasm too badly, as 12 analysts have the company as a ‘buy’ while six have it as a ‘hold’ and only two firms are calling the shares a ‘sell’. The average 12-month target for the share price is 153p – almost 30p above the current levels and back to a price last seen in May 2014.
Thomas Cook has announced that it is looking to sell €400 million of corporate debt. This will have a number of effects for the company: first it will be able to cancel the €164 million bank debt due in 2017, while at the same time repaying its corporate bond debt due in 2015. This will improve the company’s financial flexibility and, arguably more importantly, will pave the way for it to start paying out dividends, should it wish.
As much as Harriet Green’s departure has spooked the markets, the company looks to be continuing on the right path to full recovery, and this debt restructuring is just further proof of that. Both the 50- and 100-day moving averages appear to be broadly supportive of the share price, and a break above 130p could well trigger an attempt by the shares to fill the gap back up to late November levels.