Friday bought some conflicting reports about 2013-14 profitability from two middle ranking industrial stocks.
Flight Centre (FLT) had some good news – a record profit, but also some write downs, and possible higher future dividend payments; while consumer products group, GUD had bad news with a big fall in earnings and weak sales as competition heats up for some of its core household products.
Flight Centre told the ASX that it will increase its full-year 2014 underlying profit by close to 10% and said it saw continued growth in the coming year.
The company, which is the country’s biggest travel group, also said that customers were maintaining bookings in the wake of the shooting down 10 days ago of Malaysia Airlines flight MH17.
Customers who had cancelled future Malaysia Airlines bookings generally rebooked on other airlines, rather than cancelling their trips outright, the group said.
"The tragic loss of MH17 is likely to have a modest impact on results, as most travellers are currently opting to maintain their bookings with Malaysia Airlines or other carriers," it said.
Flight Centre said it expects underlying profit before tax between $375 million and $377 million for the year to June 30, up 9% to 10% the record set in the previous year. The company said the expected profit falls within previous guidance of $370 million to $380 million.
FLT 2Y – Flight Centre confident, hints at higher payouts
But Flight Centre again noted slowing growth in its Australian leisure travel business, corresponding to a fall in consumer confidence around the federal budget in mid-May.
The company also revealed non-cash writedowns to goodwill and brand names totalling $61.3 million in India and the United States.
The company said that the underlying profit figure also didn’t include $11 million in fines imposed after the ACCC’s competition law test case.
"FLT has appealed both the judgment and the fines that were subsequently imposed," it said in the statement.
Also not included was a one-off $19.6 million gain within the Flight Centre Global Product (FCGP) business.
"Including these items, FLT expects to report a statutory PBT in the order of $322million – $324million, when it releases audited accounts on August 27, 2014," the company said on Friday.
And directors held out a strong hint to shareholders that some extra cash might be coming their way soon via higher dividends rather than one off payments.
"At June 30 2014, FLT had in the order of $480million in company cash, in line with its internal goal of retaining sufficient cash to cover operating expenses for three months," the company explained.
"The company expects to use some cash for acquisitions, organic expansion and to meet its normal working capital requirements.
"If FLT continues to accumulate cash and reaches a level that significantly exceeds its target in the future, the board’s current intention is to return surplus funds to shareholders via dividends, rather than one-off distributions.
"FLT’s current dividend policy is to return 50-60% of net profit after tax (NPAT) to shareholders. Dividend payments for 2013/14 are currently expected to be based on underlying NPAT," the company’s statement concluded.
Despite that confidence, Flight Centre shares slid 1% to $46.80 on Friday.
