Shares in travel company Thomas Cook (LON:TCG) took a tumble on Wednesday, after UK profits slowed for the year to September end.
Underlying profit in the company’s UK arm fell by £34 million during the period, despite a 3 percent rise in revenues, rippling across the group as overall profit margin declined 23.4 percent to 22.1 percent.
This was attributed to travel claim costs from Hurricane Irma, various fraudulent illness claims and a downturn in tourism for previously popular destinations such as Turkey and Egypt.
Conversely, travelers turned to consistently popular holiday destination locations such as Spain, which consequently slimmed profits given fierce competition among other travel agencies.
In addition, the de-valuation of the pound currency, also impacted profitability across the financial year to September-end.
Despite disappointment at its UK division, overall underlying earnings across the Thomas Cook group grew by £24 million to £330 million, boosted by a recovery at its German airline Condor.
Without taking into consideration foreign exchange movements, pre-tax profit was up 8 percent to £46 million, with revenues up 9 percent yo £9 billion.
The groups chief executive Peter Fankhauser vowed to boost efforts to overturn the downturn across its UK business, he said: “While conditions are challenging in the UK, we have implemented a set of actions to improve performance.”
“With destinations in the eastern Mediterranean out of favour following political unrest, holiday providers are dashing headlong into Spanish resorts,” commented Nicholas Hyett, equity analyst at Hargreaves Lansdown.
“The increased competition is a double whammy for Thomas Cook, pushing up the cost of beds while piling the pressure on pricing as well.
Despite efforts by the travel firm to boost performances, Mr Hyett added:
“…margins in the travel agent sector have always been tight, and news that they’re being squeezed even further is far from welcome.”
Shares in the company are currently trading down 8.71 percent as of 12.12PM (GMT), as investors react to the update.