Travel group, Flight Centre expects its sold first half growth rate will run out of puff in the next few months of the 2011 financial year.
The company has benefited from more Australians wanting to travel overseas, thanks to the high value of the Australian dollar and the strong jobs market.
The number of Australians travelling overseas rose 13% in the year to December, the steepest rise for years.
Offshore travel is one area of consumer spending that is not suffering from the current bout of consumer caution (nor are new care sales).
Flight Centre said yesterday interim profit was up 38% but it does not expect to maintain that growth rate over the full year.
The company also reported pressure eon profit margins from bargain conscious travellers looking for deals.
In other words, the outlook is positive, with earnings expected to rise, but not by the strong growth rate of the first half and with continuing pressure on the company to cut margins to win business.
In fact the company said it was continuing to target its previously targeted $220m-$240m pre-tax profit, excluding any major abnormal items for the full year.
That means the second half could see a noticeable slowdown, on current projections from the company.
Net profit rose to $70.5 million in the six months to December 31, compared with $51.1 million in the prior corresponding period.
Profit before tax (PBT) and after tax (NPAT), were records, with PBT topping $100 million for a half year period for the first time.
"Both results easily surpassed FLT’s previous first half records, with PBT and NPAT topping the highs achieved during the corresponding period of 2007/08 by 11% and 15% respectively," directors said in yesterday’s statement.
That was on a 12% rise in revenue to $916.6 million.
Flight Centre reported an interim dividend of 36c fully franked, up 38% from the interim paid in the 2010 financial year.
Flight Centre managing director Graham Turner said results improved in all geographies, with Australia, the UK and Canada delivering record first half EBIT.
While Flight Centre had started the year well, it had not amended its guidance, he said.
"It will continue to target a full year profit before tax of between $220 million and $240 million, excluding any abnormal items that may arise," Mr Turner said.
If achieved, this would represent 10%-20% on the $198.5 million 2009-10 result.
"While we have had a good first half and a reasonable January, the months that traditionally represent our busiest trading periods are still to come," Mr Turner said.
"Given some ongoing economic volatility, it would be premature to guarantee full year earnings will be materially outside the relatively broad range we have outlined."
He said the 2009-10 second half was a stronger trading period, so the firm would not expect to maintain its current profit growth rate of greater than 30% over the full year.
"Several recent events have also affected the broader travel sector including unrest in Cairo, North Queensland’s cyclones and the tragic floods in parts of Australia.
"These events have adversely impacted tourism to affected regions, but have not materially affected FLT’s earnings as travellers have typically postponed holidays or travelled to alternative destinations rather than cancelled plans.
“In leisure travel, enquiry levels and profits have been reasonable, but customers have generally been cautious and value focused.
"The company is not yet seeing the levels of consumer confidence experienced during the fourth quarter of 2009/10.
"By contrast, the global corporate travel sector was recovering last year and should continue to deliver healthy growth," Mr Turner said.
Flight Centre shares fell 3% or more to a day’s low of $22.67, then bounced to close up 23c (1%) at $23.65 and just under the day’s high of $22.67.
