Thomas Cook Group - Ms Green, your bags have been packed.

Thomas Cook Group: When Harriet Green arrived at Thomas Cook, it was on its knees. Now, after just over two years, she is on her way, saying that her turnaround task is complete. This all seems at odds with her recent pronouncements that the turnaround was more like a six-year job. Indeed, it seems that all at the company (and its advisers), bar the board, had her booked in to present these results. The consolation is that a well-regarded travel specialist, Peter Frankhauser, landed at Thomas Cook last year with a widely-held  expectation that he would be CEO one day. That day just seems to have arrived very early.

So what of these annual results to end September 2014? There has been major progress, although some self-imposed KPI targets proved elusive. Through the disposal of unwanted business, revenue shrank from £9.3bn to £8.6bn, although there was an underlying LFL change of -£180m due to Ebola, Egypt and sundry geopolitical scares. But more progress on the major cost cutting exercises (amid a sea of exceptionals) led to underlying EBIT moving up from £263m to £323m and underlying eps from 5p to 11.3p. Net debt came down from £421m to £326m. So whilst 2014 showed good progress, the sting in the tail was that 2015 growth will be “more measured” at a “more moderate pace”. Net debt is forecast to come down significantly to “between £100m and £150m”. As well as cost reduction, the migration to the web inches forward with 38% on-line last year up from 36%, but shy of a targeted 40% plus. There is clearly much further to go on this.

Looking at the year to September 2015 let’s work with a modest progression to earnings of 12.5p. There is a wide margin of error around this, but at 120p would be a PE of only 9.6x. There is no dividend, but with debt tumbling and a healthy EBIT line, the balance sheet stress is melting away. So, a dividend in FY2015 is possible and would widen the pool of potential institutional investors. The suspiciously blood like stain on the boardroom carpet aside, this looks like a higher risk nap choice for income investors with patience. (Neil Cumming^, 27^th November 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower