Airfares poised to climb
Flight Centre profit dips, clear skies ahead for travel agent
FLIGHT Centre shares were the star performers on the ASX 200 yesterday after it upgraded its profit outlook.
The Brisbane-based travel agent’s full-year profit slipped 6 per cent to $230.8 million in the year to June, partly due to an intense airfare price war.
Flight Centre chief executive Graham Turner said he now expected a normal trading environment during the 2017-18 financial year, with modest decreases and increases in average fares as opposed to steep declines across the board.
The positive outlook pleased investors, who drove Flight Centre shares up by $4.73, or 10.7 per cent, to $49.10. It was a cracker day for Mr Turner with his 15 per cent stake in the company jumping by $72 million on paper to $746 million.
He will also get to pocket $14.3 million when the final dividend is paid.
CMC Markets chief market strategist Michael McCarthy said the outlook was more upbeat than expected and Flight Centre performed well despite a difficult year featuring lower consumer spending and increased competition.
“This is also a heavily shorted stock and it looks like some of those shorts have been forced into the market to buy back given the result,” he said.
The company’s underlying profit before tax of $329.5 million hit the top end of its guidance released in July, but was at the lower end of its initial target of $320 million to $355 million.
The first half was hit with political uncertainty sparked by the United Kingdom’s Brexit vote and US and Australian elections that resulted in subdued trade.
Mr Turner said the first half also had the steepest fare cuts with the group “advertising some of the cheapest international airfare deals” it had ever offered.
The group’s Americas business accounted for about 10 per cent of Flight Centre’s profit thanks to record profit from the US and Canada’s strong turnaround. Flight Centre’s full year revenue rose 1.3 per cent to $2.7 billion.