Flight Centre results dragged down by flat Australian market
Flight Centre Group has seen a record global total transactional value result offset by a soft Australian leisure travel market in FY19.
While Flight Centre enjoyed total transactional value of $25 billion (A$23.7 billion) globally during FY19, net profit remained flat at $279.1 million (A$263.8 million) – a 0.1 per cent increase on the prior corresponding period.
In New Zealand, the brand saw EBIT reach $23.59 million, with total transactional value growing 4 per cent in to $1.48 billion.
Australian total transactional value rose 1 per cent to A$11.2 billion, delivering a local EBIT of A$173.1 million.
“While FY19 was not the year of record profits that we initially expected, we have started the new fiscal year with strong foundations and with reasonable growth prospects,” Flight Centre chief executive Graham Turner said.
“While our focus is on factors that we can control, we are facing some external challenges early in FY20, including the trading cycle in Australia and its impacts on leisure travel demand, uncertainty relating to Brexit in the UK and the recent unrest in Hong Kong.”
The group will release FY20 guidance during its annual general meeting in November, though did outline its longer-term vision out to 2025.
The plan, according to chief operations officer Mel Waters-Ryan, is to become a brand with a distinctive entrepreneurial culture, that offers famous brands which reflect their DNA, through winning models which are growing, productive and replicable.
More tangibly, the group is chasing 7 per cent compounding annual total transactional value growth, an underlying cost margin of less than 10 per cent, and a return of a 2 per cent net profit margin.
Waters-Ryan noted that apart from the soft result in Australia the group itself is largely on its way to achieving these goals.
Australian stores to be re-evaluated
Turner stated the travel group has plenty of work to do in the Australian market, being almost finished with a re-evaluation of the Flight Centre network which will see between 20 and 30 stores shuttered.
Nearly all of these stores will be approaching end of lease, or out of lease, while a further 20 will be opened in more advantageous locations and another 30 to 40 stores relocated.
“It’s about looking at individual shops, looking at the market review and demographics in those areas, and seeing what we can do with those locations,” Turner told investors.
“We’ve got quite a few growth opportunities to open in new areas, and to relocate some shops.”
A further 30 stores Flight Centre locations will be rebranded as either Travel Associates or the new youth-focused Universal Traveller brand, depending on location – with each re-fit expected to cost between $52,000 and $104,000 (A$50,000 and A$100,000).
This story originally appeared on Inside Retail Australia.
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