Thomas Cook pays first dividend since 2011

Travel agents have had a terrible 2016. Both London's big players - TUI and Thomas Cook - are down heavily as terrorists close down previously lucrative holiday destinations.

However, Cook managed to make more money than expected this year, admittedly driven by currency gains, and says it will pay a first dividend since 2011. It's why the share price just soared 10% to a six-month high.

Warning in May that demand for trips to Turkey, Tunisia and Egypt had dried up sent Cook shares to their lowest since early 2013. That unwound three-quarters of the incredible 1,500% rally between 2012 and January 2014.

But business has clearly picked up, with the shift to alternative destinations plus currency translation benefits offsetting a lack of interest in Turkey. Demand is up in the UK, and selling more premium holidays improved profit margin here to a record 6.4% in the 12 months ended 30 September.

Group underlying operating profit fell by £2 million to £308 million, a tad better than recently lowered guidance of around £300 million, on revenue down slightly to £7.81 billion.

Despite a £22 million slump in profit from continental Europe, where Turkey was a big loser, a strong euro meant Cook was £39 million better off converting earnings there back into pounds, about £7 million more than previously thought. Strip that out and profit actually fell by £41 million.

Still, business was brisk in the Nordic region, where Cook made a record £124 million, up £22 million on last year like-for-like, giving a market-leading margin of 11%.

That helped offset a plunge into the red at Cook's German airline Condor, hit by Turkey and overcapacity on routes to the Canaries and Balearics during the peak summer period.

Demand for winter breaks is in line with our expectations, with the season already 61% sold, about 2% better than this time last year. Predictably, there's been a shift away from Turkey and North Africa to Spain and long-haul destinations.

Look for underlying operating profit of £327 million on revenue of £8.9 billion, says NumisAfter everything's been put through the wash, including the tax bill, there's £9 million left, enough to spend £7.7 million on a 0.5p per share final dividend, the first for more than five years.

Chief executive Peter Fankhauser remains bullish and predicts that profit in the current financial year should meet expectations.

Currently, Wyn Ellis at Numis Securities pencils in underlying operating profit of £327 million on revenue of £8.9 billion. That gives earnings per share (EPS) of 11.1p, putting Cook on a forward price/earnings (PE) ratio of 7.3 times.

That looks cheap, but Ellis is not buying it. "We remain unenthusiastic about the investment merits of TCG," he said Wednesday. "We believe that the basic business model continues to face structural challenges," he continued, adding that the miserly valuation was justified by "major uncertainties about future growth". His price target sticks at 74p.

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