Flight Centre’s first half warning

06-FlightCentre_signage_2Flight Centre has warned its annual underlying profit could fall because airline companies are offering so many discounted or substantially cheaper international airfares, particularly in the key markets of Australia, the US and India.

The travel retailer expects its underlying profit before tax to be between $320 million and $355 million in 2016/17, compared to the $352 million from the previous corresponding period, with profits weakest in the first half of the year.

According to Flight Centre, the average international airfares the company has sold in the first half of the financial year are down seven per cent compared to the prior corresponding period.

“When we released full year accounts for FY16, we said we expected to surpass the $20 billion TTV barrier for the first time this year and that we would be disappointed if we didn’t grow underling PBT,” said Graham Turner, MD, Flight Centre.

“That remains the case, although the internal and external factors that are currently impacting top and bottom-line results mean that we will not be tracking at those levels by the end of the first half, despite a relatively strong sales performance.”

The company’s shares nosedived after it announced its warning its underlying profit before tax for the first half of this financial year is set to fall by up to 28 per cent from a year ago, as revenue growth has slowed because of lower airfares.

Its shares were down 7.4 per cent at 1440 AEDT on Friday, dropping $2.45 to $30.50.

The pound’s sharp drop since Britain’s vote to leave the European Union will also hurt Flight Centre, devaluing its overseas profits, and it said trading in the UK has been subdued so far this financial year due to the vote.

Uncertainty about the US presidential election, and concerns about the Zika virus, have also hit trading in the US, Flight Centre said.

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