Investors couldn’t quite decide about the Flight Centre interim results yesterday. First up they were unhappy and pushed the shares down more than 4% to a day’s low of $41.40, then they changed their minds and chased the shares back up to where they ended the day at $44.30, up 2.8%.
All in all the shares traded in a volatile range of more than 9%.
The early weakness followed the company warning that its performance was currently tracking towards the bottom end of its targeted full-year profit before tax guidance range of $390 million to $420 million.
Directors warned that the key Australian Leisure business is facing ongoing volatility ahead of the busiest trading months.
Then investors decided to support a whacking great special dividend and chased the shares higher.
Flight Centre will pay shareholders a steady 60 cents a share fully franked interim dividend, accompanied by a $1.49 a share fully franked special dividend.
That is the company telling the market that it thinks the ALP has a very good chance of winning the next federal election which will mean a crackdown on franked dividend payments to investors not earning any other income. The special dividend will use up most of the company’s reserves of franking credits.
The company’s profit performance was pretty weak for the December half year. Net profit of $85 million in the six months to December was down 17% on the previous corresponding period.
Revenue was up 7.4% to $1.461 billion for the December half.
Flight Centre blamed the profit dip to “disappointing Australian leisure profits” but said this was offset by strong returns in its global markets.
The company’s ANZ segment was the biggest drag on its results – revenue fell 2% and underlying profit before tax fell 31% to $73 million. This segment was impacted by its new EBA with employees (the old one generated a lot of bad publicity), lower margins, and the slowdown in retail spending late in the half.
Europe, Middle East (EMEA) segment saw a 9% increase in revenue and profit before tax growth of 13% to $39 million.
The performance of the Americas segment was the highlight – revenue up17%, and profit before tax jumped 292% to $33 million. This was driven partly by a strong half from its US operations.
Also performing well was the company’s Asia segment. The company says it is still early days for the segment, but it is showing promise and delivered solid growth in revenue, and profit before tax during the half.
The Other segment, which includes the company’s Travel Experiences Network businesses, had another positive half. It reported a 52% increase in revenue and its underlying loss improved to $8 million, compared to $11 million in December 2017 half.
