CHEAP AIRFARES CUT FLIGHT CENTRE PROFIT, TURNER REMAINS OPTIMISTIC
Written on the 24 August 2017 by Paris Faint
A GLOBAL travel trend towards heavily discounted airfares took its toll on Flight Centre's (ASX: FLT) profit margin this year, particularly during the first half.
At the end of 1H17, the company was forced to readjust its full year guidance to $300-330 million.
The company's overall FY17 net profit fell by 5.6 per cent to $230.7 million and although its total underlying earnings neared the top of its revised guidance range, the result was still heavily impacted by the market as well as $25 million worth of impairment charges.
Cheap international airfares have repeatedly plagued Flight Centre's financial performance in the past few years, however managing director Graham Turner expects the company is nearing the end of the tunnel.
He revealed details of a new business transformation program which is forecast to generate a total transaction value (TTV) increase of 7 per cent per annum over the next three years. The program is designed to cut costs and fast-track revenue growth across the board.
"We believe we are well placed to improve, given the investments we have made, the strategies that have been implemented and the benefits that we have started to see from the transformation program," says Turner.
"Accordingly, we will be disappointed if we don't grow sales and profits during FY18 as we work towards achieving the high level, medium-term goals that we are targeting."
During FY17, Flight Centre's corporate travel division generated around $6.6 billion taking the company's overall TTV result to $20.1 billion.
In FY18 the company is expecting improved results across its leisure division as it continues to reduce losses in the Americas and Asia markets.
FLT shares spiked 6.9 per cent during early trade to reach $47.44 (as of 10:35am AEST).
The company has declared a final dividend of 94 cents per share.
Business News Australia
Author: Paris Faint