THE HALF a million holidaymakers who bought shares in Thomson Travel must be feeling as if they have been hit by a particularly nasty bout of jetlag. When it was floated off from the Canadian Thomson group in May, Thomson Travel shares were priced at 170p. They then shot up to 199p within two weeks, causing howls of protest from another half a million would-be shareholders who missed the over-subscribed offering. But by the end of August, the stock lost over a quarter of its value and slumped to around 130p, underperforming a declining market
Travel company share prices are always hit by fears of a slowdown in consumer spending. Thomson was also hit in August by bad news from Sweden, when rival operator Airtours warned that its Swedish acquisition, SLG, had run into problems of overcapacity.
Yesterday's half-year figures showed that Thomson's Scandinavian adventure has not gone to plan. Margins there shrank due to overcapacity, and start- up costs were higher than expected. This helped push pre-tax profits down from pounds 12.3 to pounds 5.5m.
Some action is being taken. Thomson and its rivals agree that capacity needs to be cut by at least 5 per cent. And the consolidation in the market, underlined by Thomson's recent pounds 66.2m takeover of Crystal Travel, should help the main players.
Thomson argues that the capacity problem is temporary. Other bad news for holiday sales - such as falling demand for holiday cottages, the weather, the World Cup - is also exceptional, Thomson says, though some analysts are starting to wonder.
ABN Amro forecasts 9.3p per share for the full year, putting the company on a p/e for 1998/99 of nearly 15. This is a 20 per cent discount to the market's prospective p/e of 19. Hold.
times 1998 forecast earnings of pounds 35m, they are a good long-term punt, but for the time being they are no more than a hold.