Flight Centre beats profit guidance

Flight Centre beats profit guidance
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Flight Centre has said the weakening dollar is unlikely to impact sales or change consumer travel habits as the retailer targets profit growth of 8-12% in 2014.

The early projections came as the firm exceeded its guidance for the year ending June 30 with pre-tax profits rising 20% to $349.2 million.

Flight Centre altered its guidance several times last year with a July upgrade expecting profits to hit between $338m and $342m.

After tax profit climbed 23% to $246.1m while total transaction value (TTV) climbed 7.7% to $14.3b. Revenue saw an 8.7% lift to $2b.

Growth in 2014 will largely be achieved organically although “some strategic acquisition opportunities” are likely, Flight Centre said. July and August trading is ahead of last year.

“Achieving 8-12% underlying profit before tax will not be a formality for a company of our size and given the challenges that can arise, but we are well placed to weather any storm,” managing director Graham Turner said.

“The company’s brand and geographic diversity are obvious strengths – Flight Centre is one of the few companies in the world that mixes business with leisure travel on a large scale – along with its balance sheet.”

Flight Centre said the weakening dollar is likely to see consumers spend less on holiday but not impact their travel plans. The cost of airfares, overall affordability, consumer confidence and job certainty are more likely to influence Australia’s outbound market, it said.

Turner said the key drivers for the 2013 record result included business growth, margin improvement, productivity enhancements and diversity.

“While Australia was again the major result driver, FLT’s international businesses collectively contributed almost $75m to group earnings,” Turner said. “This is a 20% year-on-year increase and a promising sign for the future. Importantly, we have scale and solid platforms for growth overseas, particularly in the UK and USA."

Australia reported a 9% rise in TTV to $8.5b with earnings hitting a record $263m. All 10 countries where Flight Centre operates were profitable for the third consecutive year with the UK ($32m), US ($10.9m), Singapore ($1.6m) and China ($1.5m) all reporting record earnings.

There were also improved results in New Zealand ($11.5m), South Africa ($7.4m) and India ($3.5m). Canada and Dubai saw bottom line results fall from last year with earnings of $3.2m and $2.7m respectively.

In Australia, Flight Centre said the leisure sector performed well, particularly in the second half of the year, which helped offset “softer” domestic corporate travel.

While the Australian corporate travel business generated record earnings and turnover of more than $2b, “results were below initial expectations”.

Globally, the retailer’s corporate brands contributed 31% of group TTV.

Flight Centre said its FY13 results were also aided by a reduction in sales and marketing costs while average rent per shop fell as rent increased at a slower rate than shop and business growth.

“Lowering cost per enquiry remains a priority but FLT’s overall investment in sales and marketing is likely to increase year-on-year in future, as has been the case historically,” Flight Centre said.

Meanwhile, the retailer said it will continue to invest in its online and “blended model” strategy.

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