Flight Centre lands $70m profit and rewards investors as turnaround exceeds expectations

The bottom-line profit, which compares with a $377.78 million loss in FY22, was driven by a 112 per cent increase in total transaction value (TTV) to $22 billion.

It was also accompanied by Flight Centre’s first dividend payment to shareholders since before the pandemic hit, and a profit turnaround that CEO Graham Turner says exceeds expectations.

The profit comes after three years of pain for the group that led to a total of $2 billion in statutory losses and the need for the company to take on $800 million in convertible notes during the pandemic.

“After an incredibly challenging period, we are pleased to report material profit and sales uplifts (and) improved conditions during FY23, leading to stronger shareholder returns,” Turner says.

“Our $485 million profit turnaround exceeded our initial expectations as our diverse global business benefitted from the removal of unprecedented restrictions that were imposed on travellers for some two-and-a-half years and from the strategies that we implemented to preserve our key assets and ensure we re-emerged in a position of strength.

“Sales more than doubled group-wide, as our leisure and corporate divisions both delivered more than $10 billion in annual TTV for the first time.”

Corporate travel proved to be the big winner for Flight Centre, with record TTV of $11 billion up from $5.6 billion in FY22 and almost 25 per cent better than the previous record of $8.9 billion in FY19.

The company says its corporate travel business ‘comfortably outpaced’ the broader industry recovery, led by new contract wins in each of its regions, with the biggest improvement in the EMEA (Europe, Middle East and Africa) business which lifted transaction volumes by 59 per cent.

The company says it secured new accounts totalling $1.6 billion during the year, largely from competitors.

The Americas was Flight Centre’s largest corporate operation, generating 31 per cent of corporate TTV, just ahead of Australia and New Zealand (30 per cent), EMEA (28 per cent) and Asia (11 per cent). However, this growth came with some extra costs.

While the corporate travel business delivered a $190 million in underlying EBITDA profit, up from $6 million just a year ago, significant upfront costs to win big contracts, including the employment of 1,000 new sales and support staff, took some of the shine off the result.

Flight Centre added an extra 2,500 people globally during the year with the corporate business now ‘fully staffed’ and the leisure business ramping up to meet future demand.

The leisure travel division remains the biggest contributor of earnings for Flight Centre as TTV surged 162 per cent to $10 billion in FY23, aided by improved cost margins.

Underlying profit for the leisure business in the second half of the year exceeded the same period in FY19, helping drive EBITDA for the division 207 per cent higher to $172million.

“Group-wide, we have successfully executed our key strategies, which has led to ongoing cost discipline, strong productivity and efficiency gains underlined by higher revenue margin and record-low cost margin,” Turner says.

“This in turn has delivered stronger profit margin and underlying earnings per share growth to 36.9 cents, compared to minus 135.2 cents during FY22.

“Looking ahead to FY24, we are well placed to capitalise on opportunities that will arise as industry recovery continues.

“Already, we have seen further solid TTV and profit growth in early trading in a resilient travel market that seems to be holding up reasonably well compared to other sectors.”

Flight Centre sees better conditions for travellers in FY24 as competition on international routes increases and airfares come down ‘more significantly’.

The company says it is meeting increased demand with a ‘leaner cost base and a scalable brand and a channel stable that has started to deliver meaningful TTV at improved margins’.

Flight Centre is paying a final dividend of 18c per share.