Travel Agents

Flight Centre’s half-yearly profit nosedives, as Skroo warns of further pain

Huntley Mitchell

Huntley Mitchell

Flight Centre Travel Group (FCTG) has left a bad taste in the mouths of investors, posting a whopping fall in profit for the first half of the 2020 financial year.

The company’s net profit after tax was $22.1 million for the six months to 31 December 2019 – down 74 per cent compared the prior corresponding period.

FCTG’s earnings before interest, taxes, depreciation and amortisation declined by 1.4 per cent to $165 million.

On a more positive note, overall revenue rose 5.8 per cent to $1.5 billion, and total transaction value grew by 11.2 per cent to $12.4 million.

FCTG’s Australia and New Zealand operations recorded an underlying half-yearly profit before tax of $56 million (down 23 per cent), while TTV increased by six per cent to $6.3 billion.

The company pinned its dour profit result on a number of external factors, including the collapses of Cox & Kings and Thomas Cook, Brexit, the US-China trade wars, the Hong Kong protests, a safety-related downturn in travel to the Dominican Republic, and a subdued Australian consumer environment.

FCTG also noted that its half-yearly profit was also affected by the under-performance of some of its businesses and brands, predominantly within the leisure and in-destination sectors, as well as cost growth and a lower revenue margin.

The company noted that it was impossible to predict the impact of the coronavirus outbreak at this time, but expects it will lead to subdued activity through to the end of FY20 based on previous experiences, particularly in relation to SARS.

As such, FCTG says its underlying full-year profit before tax is likely to be between $240 million and $300 million – down significantly from the previous predicted range of $310 million and $350 million.

“It is, of course, an evolving situation, and we will continue to monitor developments, particularly the ongoing efforts to contain the virus’s spread,” FCTG managing director Graham “Skroo” Turner said.

“As we address this challenge, we will draw on our SARS experience and focus on our people and customers in the short-term, with a view to benefitting from any pent-up demand, particularly in leisure, when the situation stabilises and improves.

“We will also work with our suppliers to aggressively promote travel to destinations that are not significantly affected – including Australia, the Americas and the UK – to stimulate demand and are already starting to see extremely attractive offers.

“We will also continue our cost focus in this subdued climate and are already introducing flexible work arrangements in our Asia-based businesses that are heavily impacted.”

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