We’re starting 2018 with “solid momentum”: Skroo

Flight Centre yesterday posted a $325.4 million profit before tax, achieving their major sales target despite what CEO Skroo Turner called “a challenging trading cycle”.

And if you’re anything like us, numbers can get a bit dull after a while, so we’ve found Skroo’s speech on his company’s annual results, for a more interesting take on the profits.

“Flight Centre has started FY18 with solid momentum, which should lead to reasonable first quarter growth,” Turner said.

“In terms of airfare pricing, Flight Centre currently expects a more normal trading environment during FY18 in Australia, with modest decreases or increases in average fares, rather than steep declines across the board.

Turner said that in addition to more a favourable pricing climate, other growth opportunities in FY18 included:

Improved leisure results, as Flight Centre expands into new and highly scalable sectors, moves to reduce leisure losses in parts of the Americas and Asia and enhances its network by closing some shops and relocating teams to superior locations
Ongoing corporate market-share growth globally, as Flight Centre continues to win accounts across multiple sectors and expands into important new international markets
A Stronger contribution from TEN as a result of improved performance from the touring businesses and as the new acquisitions are integrated; and
The corporate business’s strong product suite, which complements its people offering, is also leading to rapid growth in auto-fulfilled (touch-less) transactions. This will allow the company to grow TTV without growing cost base.

Turner admitted the first quarter of 2017 financial year was a “subdued trading period as a result of the US and Australian elections and the UK’s Brexit referendum, which led to the Pound’s significant devaluation.

“Airfare deflation also impacted first half FY17 growth… with Flight Centre advertising some of the cheapest international airfare deals it has ever offered during FY17.

“While these offers contributed to the strong ticket volume growth that Flight Centre achieved in markets like Australia, the overall market growth rate (Australia outbound travel) of just over four per cent was fairly subdued by historical standards, pointing to some ongoing consumer uncertainty.”

But when it comes to network growth, Skroo said some sectors can be expected to bloom, while staff numbers should remain relatively flat.

“In terms of network growth, sales team and sales staff numbers are likely to remain relatively flat during FY18, after increasing by 1.8 per cent and around one per cent, respectively, during FY17, as the company focuses on network enhancements and productivity improvements,” Turner said.

“Growth is expected in some sectors and in some lower cost models, along with some closures or changes in strategic direction in some locations.

“In Australia, sales staff numbers are expected to decrease through natural attrition during the first half as new in-store systems are embedded.

“These systems should be fully deployed by early in the 2018 calendar year.

“We believe we are well placed to improve, given the investments we have made, the strategies that have been implemented and the benefits that we have started to see from the transformation program,” Turner added.

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flight centre graham turner Skroo Turner