Flight Centre lifts guidance
Flight centre has upgraded its full-year guidance after a strong first-half performance, with net profit after-tax up 37.2 per cent to $102.1 million, rebounding from difficult trading in the prior corresponding period (PCP).
The result exceeded FLT’s first-half profit guidance, prompting an upgrade in full-year underlying profit before-tax forecasts to between $360 – $385 million, a 13 per cent increase at the mid-point.
Total transaction value (TTV) from global operations increased by 8.7 per cent to $10.16 billion in the first-half, while revenue increased by 5.4 per cent to $1.37 billion.
“In Australia and New Zealand, we are well placed to grow in the corporate sector, given the positive 1H momentum,” said Flight Centre managing director Graham Turner.
FLT’s Australian leisure shop network, which includes the fast-growing Travel Money business, generated around 44 per cent of the company’s first-half profit, with a particularly strong contribution from flagship and hyperstore locations.
Leisure travel profits improved as the business mixed up its offer and downsized its network, closing some loss-making brands and businesses.
Online sales generated 27 per cent TTV growth in the first-half, on strong growth from specialist OTA brands BYOjet, StudentUniverse and Aunt Betty.
Under FLT’s strategy smaller Australian leisure brands will be merged into three larger businesses targeted at different parts of the market.
The mass market segment will include Flight Centre and BYOjet/Aunt Betty; while a premium segment will combine Travel Associates and Travel partners; and a youth segment will see Student Flights and StudentUniverse merge.
“Generally, we can be pleased with our performance to date, given that we are tracking at or near record levels in most key financial areas,” said Turner, who added the first-half results highlighted FLT’s decreasing reliance on its Australian business, with international operations in the UK, US, Canada and South Africa driving growth and delivering record profits.
North America, which delivered a $7 million loss in the PCP, recorded an $8 million profit for 1H18.
“For the first time, the US business was profitable during the seasonally softer 1H, while the Canada business continued its strong improvement trajectory,” Turner said.
In Asia, FLT downsized its leisure business, which has traditionally been loss making, helping it to return to profitability in the region during the half.
Flight Centre’s corporate business grew by 19 per cent in the half, generating just under $3.8 billion in TTV.
Revenue as a percentage of TTV was lower (income margin), primarily on strong growth in FLT’s low margin businesses such as FCM, BYOjet, Aunt Betty, Student Universe and Travel Money – which together accounted for 30 per cent of first-half TTV.
However, the contraction in income margins was offset by an improvement in net margins, driven by a slower rate of cost growth of 3 per cent, productivity gains and better network returns.
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