Flight Centre stuns again

It may be one of the most shorted stocks on the market, but Flight Centre (FLT) founder Graham Turner continues to thwart the bears.

The company once again produced a record result, up 23% to $246.1 million, easily beating analyst expectations and exceeding the upgraded guidance delivered just a few weeks ago which in turn followed a May upgrade.

It was a result struck on a combination of increased revenue and higher margins at both an income and net level through cost control (see Flight Centre's high-flying journey).

As for the dividend, the 91c final payment was 28% up on last year and way above expectations, taking the full-year payout to a record $1.37, which has elevated it into the exalted position of being a growth stock with a decent yield of more than 3%.

The company earned profits in each of the 10 countries in which it operates for the third year in a row and took advantage of the stronger Australian dollar to reduce debt associated with previous international expansions.

For a business that was supposed to be made redundant by the rise of the internet, Flight Centre has proven that many consumers still require human contact. It also has embraced online technology and continues to win business by offering unique products rather than simply repackaging airfares.

Unlike the vast bulk of earnings this year, Flight Centre has painted a rosy picture of 2014, forecasting 8% to 12% growth which, if achieved, will deliver the company’s 15^th record result in its 19 years as a public company.

With a mix of leisure, corporate and online travel and geographic diversity, it has built an earnings profile that insulates it from downturns in any one area. 

The forecast drop in the currency, for example, is likely to encourage greater inbound tourism, see Australians travel domestically and boost foreign earnings.

According to this morning’s statement, the company continues to build cash reserves, accumulating franking credits of almost $200 million even after paying the 2012/13 with a policy of continually increasing yield rather than one-off capital returns.