Flight Centre profits down due to ABC story and EBA negotiations

Flight Centre general manager Graham ‘Skroo’ Turner said Australian profit is down compared to last year due to EBA negotiations and the aftermath of an ABC expose on the company’s ‘cult-like’ culture.

The comments were made as the travel agency released a somewhat conservative outlook for its full-year results, causing shares to take a sharp drop this morning.

Speaking at Flight Centre Travel Group’s annual general meeting, Skroo said overseas businesses have driven profit growth for the group for FY19 trading so far.

“Almost half of our FY18 sales were generated outside of Australia and that percentage should reach or exceed 50 per cent for the first time this year,” he said, according to a statement on the ASX.

“What that means is that we now have scale internationally and we no longer rely solely on the Australian business – and the leisure business in particular – to drive overall growth.

“Australia does, however, remain very important to us and it is far and away our largest individual operation.”

Skroo said the Australian leisure portion of the business has not yet benefitted from changes implemented last year.

“These changes, along with the EBA negotiations and the associated disruption resulting from the ABC story, mean that Australian profit is currently down compared to the same period last year,” Skroo said.

“We believe the disruption is now abating and that this, coupled with various other initiatives and refinements that are underway, will lead to better second-half results.”

According to Skroo, these ‘initiatives and refinements’ include:

A new pay structure via the EBA
Ongoing network changes to strengthen the company’s footprint, focusing on improving the performance of shops that were rebranded last year as part of the Rebrand & Grow strategy and will also look to move about 35 shops to better locations
Up-staffing to return FC’s network to its capacity after the contraction last year and to generate more rapid TTV growth later in FY19.

The company expects an underlying profit before tax of between $140 million and $150 million for the six months to December 31 2018, up 7 per cent on the $139.7 first half result.

“A result at the bottom of this range would be a modest increase on the record FY18 result, while a result at the top of the range would represent 9 per cent growth,” Skroo said.

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