* Sees $521 mln profit improvement by 2015 due to cost cuts
* Targets sales growth of at least 3.5 pct/yr by 2015
* Targets UK EBIT margin of more than 5 pct by 2015
* Shares up 15 pct, hit highest in 19 months
(Adds CEO, analyst comment, further detail)
By Rhys Jones
LONDON, March 13 Travel firm Thomas Cook
aims to boost profits by more than $500 million in the next
three years by moving more of its operations online and further
cutting costs, it said on Wednesday.
A long-awaited strategy update from Chief Executive Harriet
Green gave the latest positive signal that the company is
responding to radical changes in its industry and sent its
shares up more than 15 percent to their highest in 19 months.
The 172-year-old group has struggled over the last two years
with a slump in sales that has forced it to renegotiate bank
loans and sell off planes and retail outlets to lighten its debt
Since travel industry outsider Green took over as CEO last
summer, she has identified 160 million pounds of cost savings
through measures such as merging its airline businesses. She
said she had earmarked a further 50 million pounds of cost cuts.
With previous management having announced savings of 140
million pounds in 2011, that takes taking total annual savings
to 350 million pounds ($521 million) by the end of 2015.
Green is targeting sales growth of at least 3.5 percent a
year by 2015 as part of the plan, under which the world's oldest
tour operator will simplify its business and place a greater
emphasis on selling holidays online.
"We need to move from turnaround to transformation now and
create a simplified, restructured business, which translates our
strengths into profitable growth," Green told reporters.
Thomas Cook last week announced plans to cut 2,500 UK jobs
and close 195 stores in Britain as it seeks to restore its UK
business to health.
The company said it would also make disposals to raise up to
150 million pounds, with analysts expecting it to sell luxury
travel agent Elegant Resorts, long-haul specialist Gold Medal
and ski firm Neilson.
Thomas Cook is targeting new product revenue of some 500
million pounds by 2015, with around half of sales coming from
online transactions. This should lift its UK earnings margin to
at least 5 percent by 2015, from zero, the company said.
Thomas Cook, a quarter of whose 2012 sales are already made
online, will focus on driving more web sales to help it catch
rival TUI Travel, which last year made a third of its
sales via the web.
To do this, Green has created a digital advisory board,
involving independent experts, to help it ramp up its online
offering. It also plans to reduce its online brands to three in
the UK and one in Germany, improve the performance of its
websites and extend products offered online.
It also plans to increase its annual investment in
technology by 9 percent to 60 million pounds.
The group will also boost its presence in the concept
hotels, city break and winter sun markets over the next five
years, while seeking better terms from hotel partners.
"Plans to focus the product offer and hotel inventory is
important as we believe Thomas Cook's past inability to sell the
right product through the most efficient channel to the right
customer at the right price has harmed profitability," said
analyst Ian Rennardson at brokerage Jefferies.
Shares in Thomas Cook, which have more than doubled in value
over the last three months, were up 15.5 percent at 100.5p by
1015 GMT, valuing the company at around 875 million pounds.
The stock rose as high as 1004p, its highest since July 2011
when it had plummeted after the company warned earnings would
fall short of market expectations.
Thomas Cook last month reported reduced first-quarter
operating losses and said recent trade had been robust with
summer bookings going well.
The company has lately been boosted by a rise in fixed-price
holiday bookings as cash-strapped Europeans opt for risk-free
deals in a volatile economic climate.
($1 = 0.6718 British pounds)
(Editing by John Stonestreet and David Holmes)