FLIGHT CENTRE STRIKES PROFIT GOLD
Written on the 28 August 2014 by Laura Daquino
FLIGHT Centre (ASX: FLT) has released its full year results, passing through the year with flying colours and ending with a record profit.
The company’s revenue grew 13 per cent to $2.2 billion, underlying profit before tax 9.7 per cent to $376.5 million, and underlying net profit after tax 9.8 per cent to $263.6 million.
Underlying profit results were within the range the company had initially targeted, $370 million to $385 million.
Adding to this positive outcome, FLT has declared a fully franked $0.67 per share final dividend for 2013/14.
Taking into account a $0.55 per share interim dividend paid in April 2014, this raises FLT’s total dividends for the year to a record $1.52 per share, an increase of 11 per cent from 2012/13.
FLT CEO and managing director Graham Turner says the company’s Australian business has been the top performer, but overseas businesses performed far above par.
This is despite hiccups such as global travel scares and fallout from the Federal Budget released earlier this year.
“For the fourth consecutive year, all ten countries were profitable,” says Turner.
“Record TTV was generated in each of these countries in local currency and seven businesses – Australia, the United Kingdom, the United States, New Zealand, South Africa, Singapore and Greater China – delivered record EBIT.
“While the Australian business remained the company’s main profit and sales driver, significant progress was again made overseas.
“Together, FLT’s international businesses contributed $90.2 million to group EBIT, a 21 per cent year-on-year increase.
“This means EBIT has now almost tripled over the past four years.”
Growth was seen in staff and stores as well, with 1200 new jobs created cross the network’s brands.
The first Flight Centre Australian hyperstore in Brisbane’s Queen Street Mall has been profitable every month since opening in October, and a second one has since been planned for Darwin to open in the first half of 2014/15.
FLT also experienced nonorganic growth across the year, acquiring an Ireland corporate travel business in April 2014, Travelplan Corporate, and has announced plans to create a destination management joint venture in Asia trading under the Buffalo Tours brand.
The company’s appetite for acquisitions didn’t stopped there, however – perhaps most noteworthy is the announcement of a 90 per cent purchase into Topdeck Tours that came attached with FLT’s full year results.
The remaining 10 per cent of the company will be held by Topdeck Tours managing director and FLT’s partner in the Back-Roads business James Nathan.
The investment marks a return to business roots for Turner, who famously founded Topdeck Tours in the United Kingdom in 1973.
FLT prides itself on its business blueprint which currently revolves around seven key strategies including ‘experts, not agents’ for quality staff and ‘redefining the shop’ for a quality customer experience online and offline.
Turner says the recent result is largely reflective of the company’s success in executing its seven-point strategy over the past year.
“In each of these areas, we have made significant progress during 2013/14,” says Turner.
“We have been particularly active and successful in developing and launching unique product ranges.
“For example, our Red Label range of airfares and holidays was launched in June 2013 and, in its first year, some 50,000 Red Label tickets were sold in Australia alone – that’s $130 million in TTV from a start-up product range.”
Turner released the full year results with a statement that we are entering “the golden era of travel” – as more and more companies are contending on factors such as price and comfort to win customers.
FLT’s analysis shows the average fare this year for its top 10 destinations was 3.5 per cent cheaper than it was last year, with the biggest discounts across Asia and Europe.
“The cheap airfares we are seeing create exciting travel opportunities for our customers and we will continue to proactively promote the best deals,” says Turner.
“Low cost carriers don’t suit all travellers, but they have forced traditional carriers to be innovative and have helped make it affordable for huge numbers of people to experience this golden era of travel.
“Travellers are the big winners.”
With this, FLT has outlined a 2014/15 underlying profit before tax guidance between $395 million and $405 million, which would represent growth on the record result achieved this year.