FLIGHT CENTRE DOWNGRADES PROFIT DESPITE RECORD SALES
Written on the 23 May 2016
POLITICAL uncertainty and the Zika virus have been blamed for Flight Centre Travel Group's (ASX:FLT) downgraded profit guidance.
The Brisbane-based company expects full-year profit to fall by 2 to 5 per cent compared to $366.3 million a year earlier, down from its initial forecast of between $380 million to $395 million.
Flight Centre says Australia's Federal election in July and Brexit referendum in the UK next month have impacted confidence during the important May-June trading period, while the Zika virus has taken a toll on popular destinations for American holidaymakers.
The company's share price tumbled as much as 9 per cent to $33.40 each following the announcement.
Flight Centre managing director Graham Turner says the company is building a strong platform for growth, despite the profit downgrade.
He says this includes international expansion of acquired sites StudentUniverse.com and BYOjet.com, as well as the launch of transactional Flight Centre websites in several markets.
"While we will be disappointed to miss the short term profit target we set in August last year, we are investing significantly in our future and in the strategies that will underpin our longer term growth," Turner says.
"In relation to current trading, we are experiencing some uncertainty heading into the final six weeks of the year and during what is traditionally our busiest sales period, which makes it difficult to forecast final results.
"On a positive note, all countries/regions were tracking towards sales records at the end of last month and South Africa, New Zealand and the UAE could deliver full-year profit. The Canada business has also returned to profit after disappointing results last year."
Flight Centre's annual sales are expected to exceed its record by $1.4 billion, while total transaction value (TTV) was expected to climb to $19 billion globally in the full-year.
Airfare price wars in Australia, the UK, the US and India, which generate more than 80 per cent of TTV, will stimulate ticket sales but impact the company's ability to meet supplier targets.
"This discounting by airlines reinforces our belief that this is a Golden Era of Travel and is delivering incredible value to travellers, including some of the cheapest international fares we have ever advertised," Turner says.
A one-off impairment charge of US$19 million relating to the company's US leisure business will be partly offset by an $11 million refund from the ACCC and $6.3 million sale of its New Zealand head office.
Flight Centre will release its full-year results on August 25.