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Thomas Cook profits to slump after difficult summer

Holiday giant Thomas Cook is expected to lay bare the impact of a European heatwave and a fall in demand for last-minute trips abroad when it unveils falling profits next week.

A consensus of City analysts expects the firm to post a 15% dive in underlying operating profit to £280 million for the full year to September.

It comes after the FTSE 250-listed group said earlier this year that an “unprecedented” prolonged period of hot weather across the continent meant more people spent June and July enjoying the sunshine at home and put off booking holidays abroad.

However, Thomas Cook’s current trading performance should have improved or at least stabilised since it warned over profits in September.

Since then, holiday bookings for European destinations have not waned, broker Numis said, despite fears of a potential hard Brexit.

Kathryn Leonard, analyst at Numis, said: “The data suggests that demand has improved since Thomas Cook last reported.

“Indeed, the growth of keyword search terms versus the prior year have, on average, improved by circa 5% in the UK and by circa 17% in the Nordics.”

Adding credence to the data, budget carriers easyJet recently said that forward bookings for next summer are “slightly ahead” of this summer, while Ryanair said Brexit had not affected demand from UK or European consumers for travel.

Numis said the comments from airlines are “supportive for the wider UK-listed travel sector, as investors remain vigilant of any slowdown in demand and later booking cycle”, which would negatively impact profitability and working capital.

But it still flagged Brexit as a “key risk” for next year’s figures.

The travel sector has been struggling lately due to ambiguity around Brexit, rising costs and slowing demand with recent profit warnings from Ryanair and Flybe, which last week put itself up for sale.

However, easyJet shrugged off strike woes and surging costs to notch up a 41% jump in annual profits last week.