FLIGHT Centre is forecasting another year of double-digit growth in pre-tax profit as cheap fares and a strong dollar continue to encourage Australians to travel abroad.
Australia's biggest travel agency yesterday unveiled an annual net profit of $139.8 million for the year to June 30, almost unchanged on the previous year. But underlying pre-tax profit rose almost 20 per cent to $245 million due largely to the performance of its core Australian business.
Managing director Graham Turner said healthy demand for international travel due to cheap fares and a strong Australian dollar had helped offset weaknesses in domestic tourism.
International fares had increased only modestly since the global financial crisis in late 2008.
The corporate travel market remained strong, but Mr Turner said "we are just finding trouble getting growth in domestic leisure".
Flight Centre's income margins were squeezed slightly during the year because of strong competition in the retail segment and its increasing exposure to corporate travel.
The company has forecast a pre-tax profit of between $265 million and $275 million for this financial year. It is expecting growth of 10 per cent in all of its markets except the US.
"We are confident we can build on the profit this year barring any major misfortunes," Mr Turner said.
"The year hasn't started off too badly and we have our fingers crossed and a couple of toes as well.
"We will be reasonably happy if we can maintain both 10 per cent [growth] in [total transaction value] and the bottom-line. Australia is our profit powerhouse at this stage but the other countries are becoming more important and having them in a [pre-tax profit] position is particularly important for our future."
Shares in Flight Centre rose almost 4 per cent to $18.66 yesterday.
While adopting a bullish outlook compared with many retail-exposed sectors, Flight Centre cautioned that economic conditions remained volatile, particularly in Britain and the US.
The company described the performance of its British operations over the past financial year as disappointing.
It had witnessed a softening in demand since the British government implemented austerity measures.
In the US, profits from corporate travel helped overcome small losses in its leisure and wholesale operations. Flight Centre has stripped out $30 million in annual costs from the US business.
The company will pay a final dividend of 48? a share on October 7, taking the payout for the year to 84?.
Frequently Asked Questions about this Article…
What profit results did Flight Centre report for the year to June 30?
Flight Centre reported an annual net profit of $139.8 million for the year to June 30, almost unchanged from the prior year. Its underlying pre-tax profit rose almost 20% to $245 million, largely driven by the performance of its core Australian business.
Why is Flight Centre forecasting another year of double‑digit pre‑tax profit growth?
Management points to healthy demand for international travel—helped by cheap airfares and a strong Australian dollar—as key drivers. The company also benefits from a strong corporate travel market and expects to build on profits barring any major misfortunes.
What guidance did Flight Centre give for its current financial year?
Flight Centre forecast a pre‑tax profit range of $265 million to $275 million for the current financial year. It is expecting roughly 10% growth in all markets except the US and aims to maintain about 10% growth in total transaction value and the bottom line.
How have cheap fares and the strong Australian dollar affected Flight Centre's business?
Cheap international fares (which have risen only modestly since the global financial crisis) and a strong Australian dollar have encouraged Australians to travel abroad, boosting international travel demand and supporting Flight Centre’s profit growth.
Are Flight Centre’s profit margins under pressure?
Yes. The company said income margins were squeezed slightly during the year due to strong competition in the retail segment and its increasing exposure to corporate travel.
How did Flight Centre perform across regions like Australia, Britain and the US?
Australia remains Flight Centre’s profit powerhouse. The British operations were described as disappointing after a softening in demand following UK austerity measures. In the US, profits from corporate travel helped offset small losses in leisure and wholesale, and the company has removed about $30 million in annual costs from the US business.
How did the market react to Flight Centre’s results?
Shares in Flight Centre rose almost 4% to $18.66 the day after the results were released.
Will Flight Centre pay a dividend and what are the dividend details?
According to the report, the company will pay a final dividend of 48? a share on October 7, taking the payout for the year to 84?.
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