Thomas Cook's 1QFY02 net declines 29% YoY - Views on News from Equitymaster

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Thomas Cook's 1QFY02 net declines 29% YoY

Apr 26, 2001

Thomas Cook India Ltd (TCIL), a leading forex and tourism company has reported a 29% YoY decline in net profit to Rs 31m for 1QFY02. The company's operating margins declined by over 1,490 basis points to 31.9% in 1QFY02 from 46.8% in 1QFY01, due to a 41% YoY increase in its operating expenditure. The company's sales however reported a growth of 10% during this period.

(Rs m) 1QFY01 1QFY02 Change
Sales 200 220 9.9%
Other Income 3 2 -29.9%
Expenditure 107 150 40.6%
Operating Profit (EBDIT) 94 70 -25.0%
Operating Profit Margin (%) 46.8% 31.9%
Interest 15 8 -47.2%
Depreciation 14 15 9.2%
Profit before Tax 68 49 -27.3%
Other Adjustments -3 -3
Tax 22 16
Profit after Tax/(Loss) 43 31 -28.7%
Net profit margin (%) 21.6% 14.0%
No. of Shares (eoy) (m) 8.8 14.6
Diluted number of shares 14.6 14.6
Diluted Earnings per share* 11.8 8.4
*(annualised)

The main increase to its operating expenditure was driven by a 38% increase in its staff costs, 27% increase in advertising costs and a 45% increase in other expenses. The company's operating profit fell by 25% YoY in 1QFY02 to Rs 70 m.

The main reason for higher expenses is increased investments in marketing their leisure travel business, expansion of their distribution network and expenses related to their new branches in Sri Lanka and Mauritius. TCIL has also made investments in its back office operations, through implementation of SAP.

The company's aggressive expansion into the leisure segment has resulted in higher advertising costs, as it is trying to increase its visibility. The company's expenses on brand positioning, technology and geographical expansion in India, is expected to pay off when the peak season begins in May 2001.

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 expected to rise. The company's revenues from leisure travel business have gone up from 6% of turnover in 1996 to 11% in 1999.

On the current price of Rs 207.5 , TCIL is trading at 22.1x FY01 EPS of Rs 9.4.

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