Flight Centre (FLT) has reported a 57.4% fall in first half profit after global sales slowed in the travel sector and it has hacked into its interim payout to shareholders to conserve cash, like so many other reporting groups are doing.
The result, released just before the market closed, saw the shares sold off quickly by 9.2% to $5.35, a 52 week low and a long way from where the private buyout activity was priced at around $17.
The Brisbane-based company’s net profit for the December half year fell to $26.1 million, from $61.2 million in the previous corresponding period.
But it declared a reduced interim dividend of 9 cents, compared with the 37.5 cents a share paid out a year ago.
"While the company does not currently intend to alter its policy permanently, FLT’s board believes the reduced pay-out is prudent in the current climate," directors said in their report yesterday.
"The board will continue to consider FLT’s growth requirements, its current cash position, market conditions and the need to maintain a healthy balance sheet, when determining future returns."
So if profits continue at their current rate, the final will be cut as well.
The company said its result reflected losses incurred by the Liberty travel agency business in the US, which it acquired in late 2007, as well as sluggish sales.
"Sluggish sales globally during the second quarter impacted on FLT’s results, following a reasonable first quarter," the company said in a statement with the results.
"The current volatility in world economies continues to affect consumer confidence globally,” Flight Centre founder and returning managing director Graham Turner said in a statement on Tuesday.
"While demand in some travel sectors has remained healthy, the slowdown in global sales the company experienced in November and December, after a reasonable first quarter, has continued into January and February.”
"In a challenging global trading cycle during the six months to December 31, 2008, the company’s established businesses (excluding United States acquisition Liberty) achieved a $77.7million pre-tax trading profit.
"This compares to a record $90.9 million pretax profit in superior trading conditions during the previous corresponding period and a $53m trading result two years ago.
"As announced previously, losses and non recurring restructuring expenses within Liberty, which was acquired during the second half of 2007/08, and one-off losses within FLT’s global investment portfolio significantly affected FLT’s overall performance during the first half.
"These combined losses amounted to $43.5 million, giving FLT an actual pre-tax result of $34.2 million, in line with recent guidance."
The company said its "cash and investment portfolio was $657million, compared to $631.9 million last year.
"Currently, about 78% of the overall portfolio is cash, 19% is in fixed income investments and 3% is in corporate collateralized debt obligations (CDOs), half of which are due to mature late in 2010.
"The CDOs relate to blue-chip US corporations and are not directly exposed to subprime mortgage products."
"The ongoing uncertainty that saw sales growth stall during the second quarter after a reasonable first quarter means that FLT is not currently in a position to provide meaningful guidance in relation to its likely full year result at this time.
For some reason the market took a look at the expected lower profit reported by Suncorp Metway yesterday and said yuk.
The shares fell 24c, or 5.8% to $4.75, only 25c above the $4.50 issue price in the controversial $900 million issue earlier this month that also saw CEO, John Mulcahy’s departure announced.
Yesterday was his last announcement and Chief Financial Officer, Chris Skilton is in as interim CEO, but he won’t be staying around once a new CEO is chosen.
And departing CEO, John Mulcahy is going next week, instead in a couple of months time. That should have been a bullpoint, so it looks as though the impending departure of Mr Skilton may have upset the market.
Suncorp owns a regional bank in Queensland, a wealth management business, and is Australia’s third-largest general insurer.
It was the combination of dud property and corporate lending, rising bad debts, falling returns from investments and the run of bad weather events in insurance that eventually brought Suncorp and Mr Mulcahy undone.
First-half profit slumped 33% to $258 million, compared with the range of $250 million to $270 million given in the update on February 5 when the profit slump and capital raising were announced.
That’s down from $384 million in the previous corresponding period.
Earnings before one off factors fell 22% to $482 million, against the February 5 range of $470 million to $500 million.
Interim dividend is 20c a share, as signalled earlier in the month, down from 52c a year ago.
And another company to follow a profit downgrade was poker machine maker, Aristocrat Leisure, which yesterday confirmed second half earnings fell sharply, dragging down the overall year’s result.
The drop was more than 70%, to around $31 million from $121 million in the last half of 2007.
Full year profit for 2008 came in at a very slim $101.2 million full-year.
Earnings before items for the year were $140.3 million, matching the company’s forecast
