)
At Flight Centre's (ASX: FLT) AGM today, managing director Graham Turner (pictured) revealed key issues that are expected to impact the company's bottom line at HY19.
Turner has warned that lower profits from Flight Centre's Australian business, coupled with rising oil prices, could hit airfares and negatively affect financial performance.
"Overall, the company expects an underlying profit before tax between $140 million and $150 million for the six months to December 31, 2018," Turner said.
"It's likely though that airfare prices, which have remained fairly stable, will come under pressure if oil prices continue to rise."
The guidance range of between $140-150 million is only a slight improvement on the company's HY18 result of $139.7 million.
FLT shares fell by as much as 12 per cent following the guidance update but have since recovered slightly to trade 7.8 per cent down at $47.15 (as of 12:30pm AEST).
Speaking about Flight Centre's Australian leisure division, Turner said the segment has not yet benefitted from changes which were implemented in the business last year.
Turner also said a scathing report by ABC in August that Flight Centre had been accused of "ripping off customers" and "underpaying staff in an alcohol fuelled 'cult' workplace" had added to the company's woes.
"These changes, along with the EBA negotiations and the associated disruption resulting from the ABC story, mean that Australian profit is currently down compared to the same period last year," said Turner.
"We believe the disruption is now abating and that this, coupled with various other initiatives and refinements that are underway, will lead to better second half results."
Profits from Flight Centre's overseas businesses are expected to account for almost half of the company's total earnings during FY19.
Turner says this is because these overseas businesses had a "solid start to the year" and that "some disruption has continued into the first half in the Australian leisure operation."
Flight Centre is optimistic about its future in the American market and has confidence in the performance of New Zealand, South Africa, the United Arab Emirates, Asia and India.
While UK travel is expected to contribute significant revenue to the company in FY19, Turner is cautious regarding the impact of Brexit.
"While we currently expect the UK business to deliver another good full year result, there is also a degree of uncertainty in relation to Brexit and its possible impact on demand for corporate travel, in particular later in the year," he says.
Flight Centre is targeting an underlying profit before tax of between $390-420 million at the full year.
Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.Business News Australia
Get our daily business news
Sign up to our free email news updates.
)
)
)
)
)
