Flight Centre’s new year has got off to a tough start, with the travel company facing airfare price wars, worries over Zika, the fallout from Brexit and American worries about terrorism in Europe.
The travel group on Thursday reported a 3.8 per cent fall in annual underlying profit and said soft trading conditions in the fourth quarter continued into the start of the 2016/17 financial year and were only just now picking up.
Britain’s surprise decision to leave the European Union hit consumer confidence and demand across the corporate and leisure sectors in the UK, while airfares have been falling in the US as carriers try to offset the effect of worries over the Zika virus in South America and terror attacks in France and Belgium.
Graham Turner, Flight Centre managing director, said it was “impossible to predict future conditions”, but said management could see opportunities for growth in international markets.
“We will be disappointed if we don’t improve on our FY16 performance,” Turner said in a statement.
The travel group has uveiled a number of strategic plans to fast-track growth in six key sectors globally. Targeted sectors include leisure and corporate travel, and high growth sectors where Flight Centre has an emerging presence but is currently under-represented, including student/youth and in-destination travel experiences.
The group announced as part of its broader leisure travel growth plan, the company will open new country-specific websites in FY17 in Europe, Asia, the UAE and South Africa and increase its sales staff count by six to eight per cent. The plan is to complement and enhance the existing online businesses in Australia, the Americas and New Zealand.
The group’s key measure of sales is expected to exceed $20 billion this year from $19.3 billion in 2015/16, but Flight Centre will provide an earnings update at its shareholder meeting in November once it has a clearer picture of the trading environment.
Flight Centre said it had a $429.9 million positive debt position and flagged the possibility of returning surplus cash to shareholders down the track, possibly by increasing its dividend payout ratio, a one-off return or a share buyback.
Flight Centre shares closed up 23 cents, or 0.64 per cent, at $36.23.
“Corporate commentary was perhaps a little stronger than expected and the capital management commentary, saying that surplus cash may be given to shareholders may also be a reason for the gain,” said Sam Dobson, Macquarie Securities analyst.
Underlying profit before tax fell to $352.4 million from $366.3 million a year earlier despite revenue rising 11.2 per cent. Underlying net profit after tax was $246.7 million, down 3.8 per cent, while statutory net profit after tax decreased 4.7 per cent to $244.6 million.
“The strong sales growth was particularly pleasing and meant that, on average, the group sold travel valued at more than $50 million every day of last year,” Turner said.
“TTV increased in both leisure and corporate travel but was generally stronger in corporate as we turned over more than $6 billion globally and consolidated our position as one of the world’s largest travel management companies.”
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