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02 October 2019

Darwin's delight

With a sad sense of inevitability, we have seen a slow-motion car crash as Thomas Cook hit the buffers. The tour giant was a byword for holidays and epitomised the early popularisation of travel and eventually the package tour market, giving everyone, including those on modest incomes, an opportunity for a trip or annual holiday.

Fast forward to the present day and the demise is not just sad news for stranded holiday makers but is also a salutary lesson for shareholders. Changing consumer habits and new technologies, coupled with a rising cost base, have eaten into earnings and a market space it traditionally inhabited.

The rapid growth of Europe’s economy airlines and rival package providers with easy-to-use websites has undermined the personal offering of Thomas Cook and its company infrastructure such as physical premises. Add to that additional staff costs, airline fuel and possible Brexit issues and the mix is quite potent for all but the most robust of operators.  

Although rescue plans and packages have been put together, none made it over the finishing line, but the long-term weaknesses of the company’s finances have always been in the background. One finance rescue package could have provided a solution, but the general consensus is that would simply have postponed an inevitable outcome. It is arguable that the substantial refinancing in 2013 should have provided equilibrium but the interest payments on the debt portion weighed heavily.

Some companies in a similar position have been described as ‘zombie companies’, with little or no future but propped up by an era of very low interest rates. Confidence among consumers is waning and high-profile events such as Thomas Cook’s collapse do not help the outlook.

Elsewhere, manufacturing also has to adapt, as illustrated by the administration of Harland and Wolff in Northern Ireland. The yard built many famous ships, including the ill-fated Titanic, but in the end was reduced to wind farm component making. As ever, the failure may be attributable to a number of factors as the world moves on. However disruptive, the new technologies and ways of working could lead ultimately to greater prosperity and hopefully greater efficiencies and greener solutions. 

The internet is revolutionising many aspects of everyday life such as booking holidays and people are willing to do themselves what was previously left to others, bringing the consumer closer to the product through the procurement stage. This may work for more straightforward decisions, such as which hotel to book or size and style of trainer to order, but what about more complicated examples, where a more nuanced or professional approach is required? It would seem human interaction has yet to be replaced with machine learning, notwithstanding some quite astounding technological advances in the past decades and this will always be the case. This is not a cause for complacency; rather a cause to celebrate human ingenuity, inventiveness and the ability to adapt.
  
Andrew Feldhaus, Investment Manager
 
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Redmayne Bentley offers a full range of services, from investment management services suitable for different life stages, through to traditional stockbroking, dealing with advice and tax efficient investments.
Redmayne Bentley’s service has repeatedly been recognised with quality service and administration awards, most recently Best Full Service Stockbroker, Best Stockbroker for Customer Service, Best Self Select ISA and overall Stockbroker of the Year at the Investors Chronicle / Financial Times Investment and Wealth Management Awards 2018.
 
 
Darwin's delight

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