Flight Centre’s Annual General Meeting has shown a positive start for the 2018 Financial Year, despite Managing Director Skroo Turner admitting it numerous changes still need implementing for the local business, in particular, to recover from the “challenging” conditions.
According to Skroo, these changes will include closing or “pivoting” businesses that don’t perform to their standards and are running at a loss.
Flight Centre admitted that an in-store system change is underway, with disruptions likely to occur during the first half of the FY18. This was flagged in an earlier article, which covered a number of redundancies that were made amidst a restructuring program for staff.
“In Australia, we currently expect first half profit will be slightly down on last year, while we make some important system changes within the business,” Skroo said.
“These changes will inevitably lead to some distraction and disruption for our people in-store while the upgrades are underway.
“While very few shops in Australia are unprofitable, we will close or relocate stores that do not meet our expectations, as part of our overall network planning.
“Sales team numbers are likely to be reasonably flat this year, with the likely closures offset by expansion in some channels, particularly flagship stores in super regional shopping centres, and in some specialist sectors.”
For FY18, Flight Centre expects to generate between $350-380 million in underlying profit before tax, reflecting a growth of up to 15.6 per cent on FY17.
“Although it is still early days in the new year, our businesses generally are performing well and are tracking towards a $120 million to $135 million underlying first half Profit Before Tax,” Skroo said.
Flight Centre has confirmed that for 2018, international business is expected to be a key driver of growth, with a stronger contribution expected from larger networks of in-destination businesses.
Flight Centre made a number of acquisitions in 2017, with DMCs and in-destination companies a big player in this field.
But, Turner admitted, “We weren’t particularly happy with last year’s results”.
He did, however, add that it was “pleasing” to deliver an underlying profit before tax in the order of $330 million, and deliver a record Total Transaction Value in what Skroo called a “fairly challenging trading climate”.
And it’s not been all bad news for Flight Centre – far from it, in fact. For one thing, studies show the travel agency is front of mind for millennials, while its booming acquisition spree has wrapped up nicely, with the Group expecting strong growth to come from these purchases.
“While external factors had a significant impact, particularly during the first half, market conditions were not solely to blame for our inability to deliver a record profit to match our record sales,” Skroo said.
“Some of our businesses simply did not deliver the results that were expected of them… At the moment, our focus is on training our people and embedding the new system, rather than replacing any departing leisure travel staff.
“Within the Australian shop network, flagships and specialist teams are expected to drive shop-based TTV growth in the short to medium-term, with profit improvement, rather than physical expansion, the primary focus within the community shop network.
“On a positive note, international airfare prices appear to have stabilised, following the across-the-board discounting last year.”
In conclusion, Skroo said, “Further changes are inevitable as we continue to evolve, in response to market conditions and to tap into new opportunities that will arise as travellers continue to take advantage of what we call “the Golden Era for Travel”.
“Fares have never been cheaper or more accessible; flights are becoming more direct, as evidences by Qantas’s impending launch of non-stop services from Perth-London, and in-flight facilities are being enhanced.
“This obviously creates huge opportunities that we are well placed to capitalise on, given our brand and geographic diversity, our extremely healthy balance sheet and with the strength of our offerings across multiple channels.”