Flight Centre shares sink on earnings miss
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The news: Flight Centre shares fell 4.7% by 3:32pm AEDT after its half-yearly earnings missed expectations.
What they said: Morningstar analyst Brian Han said analysts had high expectations going into the result and that investors may have felt Flight Centre was too bullish on growth given inflation and higher interest rates.
He noted that during this earnings season many companies referenced the challenging economic environment but that Flight Centre did not and had increased its full-year guidance.
“I think consumer discretionary companies are going to have a tougher second half of the financial year compared to the first as pent up savings from the pandemic will start to deplete,” he said.
“It does seem like consumers are holding up well but we are only in the early stages of the interest rate cycle. From this point onwards I’m not sure spending on consumer discretionary can continue at this rate.”
Flight Centre posts 'second strongest start to a year'
The news: Flight Centre Travel Group reported its "second strongest start to a year" in terms of total transaction value, and hiked its guidance for FY24 as the travel agency swung to profit in the half to December.
The numbers: Flight Centre posted a profit before tax of $120 million over the six months to December 2023, compared to a loss of $18.3 million in the prior corresponding period. The company saw total revenue climb from to $1.3 billion from $1 billion, as total transaction value (TTV) increased 15% to $11.3 billion year on year.
The Brisbane-based group said that trading expectations were unchanged but increased its full-year guidance from an underlying profit before tax of $270 million to $310 million, to $300 million to $340 million, to reflect the removal of convertible notes amortisation from underlying results.
The context: Flight Centre said its first-half profit recovery was underpinned by solid sales growth despite an uncertain macro-economic and geopolitical climate. It also noted that its underlying profit before tax margin — just under 1% — represented its highest first-half level for five years.
Meanwhile, both its corporate and leisure travel divisions experienced double-digit TTV growth, while airfare price deflation — decreasing 13% year on year for the December quarter — impacted the Flight Centre's overall TTV growth rate.
On its outlook, the company flagged that after four years of disruption followed by gradual recovery, 2024 is set to be a "watershed" for travel, with expectations that the new calendar year will surpass 2019 as the industry's busiest 12 months ever.
What they said: Flight Centre's managing director Graham Turner said: "At a time when discretionary budgets are typically tightening, travel remains an outlier and a priority spend for many".
"We are seeing ongoing solid demand for leisure and corporate travel, leading to our second strongest start to a year in TTV terms and accelerated activity in January and February, ahead of our busiest trading months," he said.
The source: ASX announcement
