Thomson ousts chief executive
Tuesday 27 July 1999
Paul Brett, who had been Thomson's chief executive for 10 years, will collect a pounds 400,000 pay-off, equivalent to one year's salary.
His departure followed a warning from Thomson that profits this year would be hit by heavy discounting of late summer holidays. Analysts now expect Thomson, which also owns the Lunn Poly chain of travel agents and Britannia Airways, to report full-year profits of pounds 113m to pounds 115m. This compares with profits of pounds 123m last year and the pounds 138m it had been forecast to make in 1999.
Thomson shares fell by more than 10 per cent to 127p, dragging the rest of the sector down with them. The shares were priced at 170p when Thomson was listed just over a year ago in what proved to be the most popular public offering since the heyday of privatisation. The flotation attracted 500,000 investors, lured in part by the promise of cut-price holidays as members of Thomson's Founder's Club.
Announcing Mr Brett's departure, Thomson said its board had decided that it was "timely to introduce new leadership" to take the group forward. It will be concentrating more on specialist markets and developing its international presence in regions such as Scandinavia, Poland, Germany and the Benelux countries
Mr Brett, 55, will be replaced temporarily by Thomson's chief operating officer, Roger Burnell, until a successor is appointed. Mr Burnell is regarded both inside and outside the group as a strong contender for the job on a permanent basis.
The departure of Mr Brett is the culmination of a difficult year for Thomson following its stock market debut in May 1998.
The flotation itself was marred by complaints that thousands of applicants had missed out on their entitlements. Since then, the shares have underperformed the market by 35 per cent.
In April, Thomson alarmed the market and prompted a further plunge in its share price after threatening to launch a price war in the package holiday market in response to Airtours' bid for First Choice.
Mr Brett announced the launch of a new budget brand and said that Thomson, which has about 28 per cent of the UK package tour market, intended to offer an extra 1 million holidays in the next three years. "We have been market leader for 25 years and we do not intend to relinquish that position," he added.
Thomson said that the latest setback had to be seen against the backdrop of an industry-wide problem, with tour operators' margins under pressure. However, other tour operators and analysts disputed this.
Airtours does not expect analysts to downgrade forecasts of pre-tax profits in the range of pounds 158m to pounds 160m this year. Bruce Jones, leisure analyst with Merrill Lynch, said: "It does appear that Thomson has been worse affected than other tour operators who have sold better, earlier."
Thomson said that bookings so far this year were down by 3 percentage points on last year, with 84 per cent of its capacity sold.
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