A man looks at a travel brochure of travel company Thomas Cook in London
A man looks at a travel brochure inside a branch of the travel company Thomas Cook in London. REUTERS

Travel company Thomas Cook Group Plc posted lower annual profits as revenue fell due to a softer summer trading environment and planned winter capacity cuts.

The company said trading in the UK was even tougher than anticipated, hit by reduced capacity and the impact of the volcanic ash cloud.

Thomas Cook estimates lost revenue associated with the volcanic ash cloud to be around 100 million pounds.

As we enter the current year, although the UK environment remains uncertain, we are encouraged by a better market environment in our major Continental and Scandinavian markets, chief executive Manny Fontenla-Novoa said.

He said that the company had streamlined its UK business resulting in significant cost savings.

The Europe's second-biggest tour operator expects to save between 40 million pounds and 50 million pounds in the UK mainly through reduction of over 500 managerial and support jobs and renegotiation of supplier costs and reduction in buying requirements.

I am confident that the actions we have now taken to reinforce the UK business, together with continued progress on our strategic initiatives, leave us well positioned to make progress in the current year, Fontenla-Novoa said.

Adjusted underlying profit from operations fell to 391 million pounds from 415 million pounds last year, because of reduced capacity and the impact of weaker sterling on flying and accommodation costs. Pretax profit fell to 41.7 million pounds from 45.1 million pounds.

The company said revenue fell 4 percent to 8.89 billion pounds ($13.85 billion), citing planned winter capacity reductions and lost sales due to the volcanic ash cloud incident.

Uncontrollable events have conspired to make for difficult reading, said analyst Keith Bowman of Hargreaves Lansdown Stockbrokers. Nonetheless, management ‘self help’ initiatives do provide positives, whilst an encouraging start to the winter bookings season provides further cheer.

In all, despite a year which investors and management will want to quickly forget, the company continues to receive the benefit of the doubt, Bowman said.

As such, despite a difficult backdrop and aided by current difficulties hindering the valuation, market consensus opinion currently denotes a strong buy,” said Bowman.

Europe's biggest tour operator TUI Travel is scheduled to report full-year results on Thursday.

Shares of Thomas Cook are trading 4.83 percent lower at 177.30 pence at 09:12 am GMT Wednesday on the London Stock Exchange.