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Thomas Cook's FY01 net declines 24% YoY - Views on News from Equitymaster
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  • Feb 8, 2001

    Thomas Cook's FY01 net declines 24% YoY

    Thomas Cook India Ltd (TCIL), a leading forex and tourism company has reported a 24% YoY decline in net profit Rs 137 m for FY01. The company's operating margins dropped by over 1,100 basis points to 31.5% in FY01 from 42.6% in FY00, due to a 34% YoY increase in its operating expenditure.

    (Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
    Sales 181 197 8.7% 708 796 12.4%
    Other Income 24 48 100.9% 38 61 61.5%
    Expenditure 91 177 95.1% 406 546 34.3%
    Operating Profit (EBDIT) 91 20 -78.0% 302 250 -17.0%
    Operating Profit Margin (%) 49.9% 10.1%   42.6% 31.5%  
    Interest 15 10 -31.3% 44 36 -18.2%
    Depreciation 13 18 32.9% 49 59 19.8%
    Profit before Tax 86 40 -53.4% 246 216 -12.3%
    Other Adjustments - -3   - -13  
    Tax 13 9   66 66  
    Profit after Tax/(Loss) 74 28 -61.9% 180 137 -24.3%
    Net profit margin (%) 40.6% 14.2%   25.5% 17.1%  
    No. of Shares (eoy) (m) 8.8 14.6   8.8 14.6  
    Diluted number of shares 14.6 14.6   14.6 14.6  
    Diluted Earnings per share*       12.4 9.4  

    The company's sales grew by 12.4% to Rs 796 m in FY01. The main increase to operating expenditure was driven by a 55% increase in staff costs, 36% increase in advertising costs and a 21% increase in other expenses. The company's operating profit fell by 17% YoY in FY01 to Rs 250 m.

    TCIL's expenses rose by 95% in 4QFY01, due to higher expenses related to its new branch opened in Sri Lanka in the last quarter as well as the merger and acquisition expenses relating to the Travel Corporation of India deal which has fallen through.

    The company's aggressive expansion into the leisure segment has resulted in higher advertising costs, as the company has had to increase its visibility in this sector. The company's investments in brand positioning, technology and geographical expansion in India and the Indian Ocean rim has resulted in higher costs.

    Due to lower interest costs in FY01 and higher other income, TCIL's profit before tax declined by 12% YoY. However due to amortisation of start up costs for its wholly owned subsidiary, Thomas Cook (Mauritius) Holding Company Ltd of the amount of Rs 13.3 m in 2QFY01 the company's net profit declined by 24% YoY to Rs137 m for FY01.

    TCIL was in an advanced stage of negotiations to acquire the business of Travel Corporation (India) Ltd as the company was interested in shoring up its strength in the area of inbound travel, which is currently the forte of Travel Corporation of India. The company was keen for a partner in inbound travel, as this fits in well with TCIL's strategy of becoming the "one stop travel shop" as it is currently strong in the areas of foreign exchange and outbound travel. However this deal fell through couple of months back.

    Thomas Cook India Ltd (TCIL) continues to be a leading player in the forex travel market with a network of 50 branches in 15 cities. The company has become very aggressive on the leisure travel front and its revenues from this business are on the rise. As a result the company's revenues from leisure travel business has gone up from 6% of turnover in 1996 to 11% in 1999.

    On the current price of Rs 301, TCIL is trading at 32x FY01 EPS of Rs 9.4.



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