Shares in travel group Flight Centre Travel Group (FLT) jumped more than 12% yesterday after the feared slowdown caused by fewer Australians travelling offshore because of the weakening Australian dollar, failed to have any real impact on the company’s performance.
Flight Centre said in market commentary that it is seeing some “positive signs” of a recovery in trading conditions in Australia in the second half after reporting a 5.9% slide in first-half underlying profit before tax to $137.6 million.
The result was in line with the reduced guidance range of $136 million to $142 million issued to the market in a December trading update which put the company’s share price under some pressure at the time.
Investors were relieved that the result wasn’t worse than forecast, and took heart from the phrase “positive signs” from management in their commentary on the outlook for the current half year.
Also helping ease investors concerns were the unchanged 55c a share interim dividend and directors maintaining the full year guidance in the range of $360 million to $390 million.
Directors also said the company aimed to grow its global sales network organically by 5% to 7% in the year to June.
As a result of all this the shares soared in early trading yesterday, rising nearly 13% to a high of $39.58, before easing a touch to end the day up 12.2% at $39.50.
FLT 1Y – Flight Centre shares rebound on improved outlook
Flight Centre said the positive signs included a good number of customer inquiries, solid sales results at recent travel conferences in Australia, record corporate account wins, market share growth in some sectors and a new round of airfare discounting.
“The outlook in Australia is unclear, but we anticipate some recovery as the year progresses and as travellers start to take advantage of the cheap international flights that we are seeing in this golden era for travel," Flight Centre founder and managing director Graham Turner said.
“We are now heading into what is normally a peak booking period and there is a chance to achieve accelerated growth, given the fourth quarter last year was a comparatively weaker period in Australia,” he added.
Flight Centre’s share price was hit hard as it took hits to leisure bookings as a result of a fall in consumer confidence after last May’s Federal Budget and then market fears of the potential impact of the weakening Aussie dollar.
But Mr Turner said yesterday that to date, the lower Australian dollar had not led to any discernible changes in Flight Centre’s product mix in Australia, with the split between domestic and international tickets steady year on year.
The total value of the company’s transactions rose 8.8% in the half year to a record $8.1 billion while actual company revenue rose 4.6% to $1.1 billion.
However, the company’s profit margin fell by 50 basis points to 13.6% in part due to agents discounting commissions to achieve sales in Australia along with Flight Centre’s decision to increase base pay for its staff.
Statutory profit after tax fell by 9.5% to $10 0.3 million.
