FLIGHT CENTRE MAKES MOST OF GLOBAL TRAVEL BUG

Written on the 24 February 2016

FLIGHT CENTRE MAKES MOST OF GLOBAL TRAVEL BUG

FLIGHT Centre (ASX:FLT) has snared a bigger share of the wanderlust market across the world, with record global sales lifting half-year profits.

The Brisbane-based travel retailer delivered a 16.3 per cent lift in net profit to $116.7 million in the first half, compared to a year earlier.

The result includes an $11 million windfall refund, after Flight Centre won an appeal against the ACCC in a lengthy competition law case last July.

Developing a stronger international presence has paid dividends for the company, with total transaction value (TTV) up 12.8 per cent to $9.2 billion and revenue increasing 15.1 per cent to $1.3 billion in comparison to HY15.

All countries were profitable within Flight Centre's network in the first half, except for the Americas and India which traditionally record slower sales growth during the period.

The UK, Ireland and South Africa performed particularly well, coupled with growing interest in the United Arab Emirates and a solid contribution from youth touring business Top Deck.

Flight Centre managing director Graham Turner says growth in TTV is testament to a number of operational improvements across the board.

"These broad-ranging enhancements have been geared towards improving longer-term results and, in some cases, have led to a slight slowdown in profit before tax (PBT) growth so far this year," Turner says.

"They have, however, delivered a platform for stronger future returns and should lead to longer-term benefits.

"Importantly, we have maintained an exceptionally strong balance sheet, while acquiring businesses to fast-track our growth in key sectors, and made significant strategic progress."

Flight Centre has been reinvesting in the business to achieve growth, with several acquisitions in under-represented sectors and increased marketing spend.

The company acquired booking service StudentUniverse.com and plans to increase its stake in online travel agency BYOjet.com from 70 per cent to 90 per cent. Contributions from both deals are expected to materialise in the second half.

The corporate travel market is also poised to deliver gains in coming months, with contract wins including the NSW Government and Cricket Australia set to offset the loss of the Australian Government contract last year.

Flight Centre reaffirmed its full-year guidance of between $380 million and $395 million PBT, without taking into account the ACCC refund and potential impairments.

Turner says the target represents a 4 to 8 per cent improvement on last year's result and a new record for the group.

"While we will be disappointed if we do not achieve our goal, establishing a new profit milestone will not be a formality given our size, the strategic investments we are making and the volatile conditions in some geographies heading into our peak booking months," he says.

"For example, consumer confidence in Australia has not yet recovered from the cyclical downturn late in the 2014 fiscal year and outbound travel from Australia has grown at a slower rate than normal.

"There have, however, been some positive signs recently with record sales and attendance at the annual Travel Expos that have been held throughout Australia and some of the cheapest fares in recent memory being advertised.

"These ongoing improvements in airfare affordability, coupled with the extensive product related enhancements we are seeing, reinforce our belief that this is a golden era of travel."

Flight Centre plans to tackle the high-end travel market in Europe and China, following successful launches in Malaysia and Mexico in the first half.

The group will also focus on extending it non-travel portfolio with the creation of 'innovation incubation hubs' to attract travel startups in the long term.

A dividend of 60c per share will be paid on April 14.

 


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