SPENDING DIPS, FLIGHT CENTRE CUTS FORECAST
Written on the 11 June 2014 by Laura Daquino
A SPENDING slump has caused Flight Centre (ASX: FLT) to lower its profit expectations for the financial year, the company now projecting a profit before tax at the low to middle point of current market guidance.
Managing director Graham Turner (pictured) says the company’s underlying profit before tax is now expected in the bottom half of the $370 million to $380 million proposed range.
Despite the revision in market guidance, the result is still expected to represent 8-11 per cent growth on full-year 2012/13.
Turner attributes the revision to a decline in consumer confidence from the previous quarter, notably domestically.
“Our ability to hit the top of our targeted range has been adversely affected by disappointing leisure travel results in Canada and a tougher trading environment for the large Australian leisure business during the past eight weeks,” says Turner.
“The slowdown was most evident in May and corresponded with the widely reported decline in Australian consumer confidence.”
Turner says current conditions are “uncertain” – but is confident that continued downward pressure on airfares will assist recovery.
“While demand often rebounds quickly after a short-term downturn in the leisure market, conditions are uncertain and it is obviously impossible to predict the timeframe for recovery.
“Cheap fares, which the market is currently experiencing, have historically proven to be a key factor in stimulating demand and a leisure travel rebound, as travellers move quickly to secure bargain flight deals before they return to more sustainable levels.”
Additionally, Turner says the company is still on track for record full-year results.
“Australian leisure continues to grow and increase market share, it is just not achieving the high levels of growth as it recorded earlier in the year,” he says.
“Several countries are on track to achieve record full-year results, including Australia, the UK and the USA.
FLT’s underlying results exclude $11 million in penalties from the ACCC’s case against the company and any potential goodwill fallout, and systems improvements which cannot yet be quantified.
The company’s full-year results will be released in August.