Shares in Thomas Cook Group (LSE: TCG) fell by 20% when markets opened this morning, following the shock news that the firms high-profile chief executive, Harriet Green, is to leave with immediate effect.
Ms Green is credited with turning around the travel company, and has presided over a near 10-bagging gain for investors who bought in at the bottom, when Thomas Cook shares were trading for just 14p.
The news comes on the same day that the firm reported a 44% rise in operating profit and a 22% reduction in net debt, along with underlying earnings per share of 11.3p well ahead of consensus forecasts for earnings of 9.6p per share.
These results would probably have been well received by the market, had Ms Green not made a sudden exit following their publication so do investors need to be alarmed?
Ms Green was hired two years ago, at a time when Thomas Cook was near bankruptcy.
Her remit was to turn the firm around and put its finances back on a solid footing, and she seems to have been successful. In that sense, Ms Greens decision to leave is logical enough, but the sudden haste with which it has happened is puzzling, and a little worrying.
Harriet Green will be replaced by Thomas Cooks chief operating officer Peter Fankhauser, a travel industry veteran who has spent the last 13 years at the firm.
Ms Greens departure becomes even more concerning given Thomas Cooks outlook for the year ahead: the firm says that trading conditions will be tougher and says that growth will be at a more moderate pace.
Reading between the lines, this outlook suggests to me that growth could be minimal during the year ahead, and that analysts bullish forecasts for the year are likely to be downgraded. In particular, there may be a risk that the groups dividend may not be reinstated next year, or may be smaller than expected.
Has Harriet Green departed ahead of bad news?
Is Thomas Cook still a buy?
Thomas Cook is back on its feet, but the patient hasnt recovered fully. As I write, the firms share price is 112p around 10 times this years adjusted earnings per share.
Personally, Id be tempted to take profits, given the uncertain outlook and the lack of a dividend: Thomas Cooks larger peerTUI Travellooks more appealing, trading on around 13 times this years forecast earnings, and with a 3.3% prospective yield.
Indeed, even before today’s fall, Thomas Cook had lagged the FTSE 100 by nearly 20% so far this year, suggesting that it would not pass the 7-step process described in “7 Simple Steps For Seeking Serious Wealth“.
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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.