Thomas Cook

The company has just managed to survive; there have been many changes and acquisitions over the eleven years, but the analysis presented does not reveal any significant improvements in results. Its staff and operating cost were almost variable costs; as sales went up, so did they.

Long term investment went up by just over 2.1 million pounds and so did long and short term loans –  by 655 thousand pounds, from 772 million in 2008 to 1,427 million 2018. These investments have made almost no impact upon the company’s ability to convert sales revenue into cash.

Operating funds outflow are about 86% of sales revenue, staff costs are 11%. Consequently, the funds generated from operations is about 3%, a very low percentage of sales revenue.

Given that the company made very little profit, one could almost say it was being run like a charity, for the benefit of its employees and, of course, the banks, on whose support it was dependent for its very existence.

The Government was right, to refuse to rescue it.

The Directors

The financial statements do show that the directors were well aware of the situation but, although many actions were taken, the figures do not reflect any improvements.

When presenting their companies’ performances to the shareholders, the directors  do so in the best light possible, which mean s they are selective in their choice of which parts of the published results in their financial statements they wish to comment on. This is true for all companies.

Thomas Cook is no exception. Its reports have an air of optimism about them. A great deal of emphasis is placed upon its mission to look after customers and its staff. Where weaknesses were recognized the explanations frequently, and no doubt correctly, blame external forces over which they have no control; the hot summer that altered customer holiday plans; the air controllers strike in France are two examples of such. In presenting the financial results they also give the best views that they can. In particular the results frequently refer to continuing operations and exclude the very considerable exceptional items.

It is very sad that such an old company has gone under but there was no way of saving it.