Travel giants Flight Centre and Webjet soaring on strong profits

Written on the 22 August 2019 by Business News Australia

Travel giants Flight Centre and Webjet soaring on strong profits

Travel industry juggernauts Webjet (ASX: WEB) and Flight Centre (ASX: FLT) released their FY19 results today, with both groups still at cruising altitude.

Webjet delivered a 43 per cent increase in earnings to $124.6 million, a 26 per cent increase in revenue to $366.4 million and net profit after tax was up 46 per cent at $81.3 million.

Following the acquisitions of JacTravel and Destinations of the World, the company's hotel booking business WebBeds is now the largest business across bookings, total transaction value (TTV) and earnings for Webjet.

WebBeds' TTV was up 59 per cent to $2.2 billion, and earnings was up 148 per cent to $67.3 million.

Webjet managing director John Gusic says the strong performance owes a lot to the success of WebBeds.

"It was a phenomenal year for our WebBeds business," says Gusic.

"In just over six years since launching our startup in the Middle East, our global business is now delivering over $2 billion in TTV."

"Our results demonstrate that the investments we have made ahead of the curve to be well placed to pursue growth are now paying off in terms of increased bookings, TTV and EBITDA."

Competitor Flight Centre (ASX: FLT) similarly recorded solid FY19 results.

The group reached a new TTV milestone of $23.7 billion during the financial year and hit the group's amended profit guidance by posting an underlying profit result of $343.1 million.

Globally, TTV exceeded the record FY18 result by almost $2 billion as the company achieved record results in all countries and regions except for the Nordics, and its 23rd year of growth in 24 years as a listed company.

TTV growth outpaced revenue growth which mean that revenue margin decreased during the year to 12.9 per cent. While Flight Centre says this was expected the FY19 movement was larger than anticipated.

"The margin movement reflected both the disappointing Australian leisure results and, to a greater degree, ongoing and expected business mix changes resulting from the rapid growth in lower revenue margin brands during FY19," says Flight Centre.

Flight Centre's non-Australian businesses delivered 52 per cent of total TTV and for the first time generated more than half of group profit as the company's globalisation strategy gained momentum.

The company says its business in North America was the major driver of international growth, delivering $102.5 million in profit before tax, surpassing the FY18 result by 44.4 per cent.

The group's global push was also reflected by record profit contributions from the Europe, the Middle East and Africa, the Asian, and the New Zealand businesses.

Flight Centre's managing director Graham Turner says the results are pleasing in some areas and disappointing in others.

"While we were disappointed that our $343.1 million underlying profit was below our record FY18 result, we can be pleased with our achievements in some important areas and with some of the progress towards our longer-term goals," says Turner.

"In any given year, TTV growth is crucial and it's pleasing to report another milestone result almost $2 billion higher than our previous record, particularly in light of the challenging conditions in key markets like the UK, where Brexit is causing uncertainty, and Australia, where consumer confidence and leisure market growth appear to be reasonably subdued."

Shares in Flight Centre are up 8.19 per cent to $47.43 per share at 11.08am AEST while shares in Webjet are down 7.58 per cent to $12.08 per share at 11.09am AEST.

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