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Thomas Cook and Kingfisher due to post latest results

Published 20/11/2016

Thomas Cook is expected to report a 4.5% drop in full-year profit as European terror attacks and political instability in Turkey hit the balance sheet
Thomas Cook is expected to report a 4.5% drop in full-year profit as European terror attacks and political instability in Turkey hit the balance sheet

Turbulent trading for the travel industry and the impact of the Brexit-hit pound will be centre stage this week when Thomas Cook and Kingfisher update the City.

Travel group Thomas Cook (TCG) is expected to report a 4.5% drop in full-year profit next Wednesday, as European terror attacks and political instability in Turkey hit the balance sheet.

Bookings have been under pressure following a coup attempt in Turkey and terror attacks in Belgium this year.

Analysts expect underlying profit to drop from £310 million to £296 million for the 12 months to September 30, and a slight rise in revenue to £7.95 billion, compared with £7.83 billion in 2015.

Geopolitical turmoil has been an ongoing concern for travel firms like Thomas Cook, which last year suffered from a raft of cancellations in the wake of the deadly terrorist attacks in Tunisia, Egypt and Paris.

Thomas Cook lowered its full-year earnings guidance to around £300 million when it released third-quarter figures back in July, having previously projected profits of between £310 million and £335 million.

The company is now investing in a new raft of own-brand hotels, announcing it will open 14 sites across countries including Croatia, Spain, Italy and Cyprus over the next two years.

Wyn Ellis, an analyst at Numis Securities, said: "For summer 2017, TCG is putting its hopes on more capacity in the Western Mediterranean (Spain, Portugal, Italy and Greece). We would expect these markets to be very competitive. TCG has also extended its long-haul programme for next summer."

B&Q and Screwfix owner Kingfisher is expected to enjoy an earnings boost from the Brexit-hit pound when it reports its third-quarter results on Tuesday.

Jefferies equity analyst James Grzinic warned that French sales could be soft, but expects "solid" sales growth of 9.7% to £2.91 billion in the three months to October 31 thanks to its UK and Polish business.

Mr Grzinic said Jefferies was upgrading its group estimates by 1%-4% on expectations that the post-Brexit collapse of the pound would drive up earnings.

Currency benefits should provide a "buffer" for 2017 earnings, which Jefferies said could be hit by a slowdown in the UK.

"Screwfix remains a strong market share-gainer, but we assume a sharp slowdown in like-for-like momentum into 2017, as more muted housing activity impacts ... This should also have a bearing on B&Q, which is set to be challenged by a number of currently helpful factors coming to an end," said Mr Grzinic.

Kingfisher said there has been no clear evidence of a Brexit-induced drop in demand when it reported first-half profits in August.

Group sales grew 2.7% to £5.75 billion on a constant currency basis during the first half of the year, while pre-tax profit rose 10.6% to £427 million during the period.

Graham Spooner, an investment research analyst at The Share Centre, said: "The encouraging performance was driven by good figures in the UK and Poland while there were signs of stabilisation in France.

"The market will be especially interested to see if the French business is continuing to improve as well as focusing on growth at Screwfix in the UK which has been a strong point recently."

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