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Flight Centre Travel Group (ASX: FLT) has finally found its wings as the business defied cheaper airfares to post record transaction volumes and improved margins to help drive a doubling of underlying net profit after tax (NPAT) to $230 million in FY24.
The news follows a significant uplift in profit announced yesterday by another travel agency group, Helloworld (ASX: HLO), and a less encouraging result for Corporate Travel Management (ASX: CTD) released last week due to issues unrelated to the travel industry.
The strength of today's result has led Flight Centre to reward shareholders with a 38 per cent cut of this figure through an $88 million payout in dividends for the year, with $66 million of that total representing the final dividend of 30c per share.
Flight Centre posted record total transaction value (TTV) of $23.74 billion in FY24, marginally eclipsing the pre-COVID figure of $23.7 billion in FY19.
While TTV was up 7.7 per cent over the past year, improved margins led to an 18 per cent increase in revenue to $2.72 billion for the group which benefitted from strong growth in corporate and leisure travel.
Flight Centre also delivered EBITDA growth of 58.8 per cent to $422.56 million in FY24 and posted a bottom-line profit of $139.6 million, up 193 per cent.
“In an uncertain macro-economic and geopolitical climate, our business and the industry in general continued to grow – once again highlighting the sector’s resilience and our strength as a diversified global travel company,” says Flight Centre CEO Graham Turner.
“We recorded circa $1.8 billion year-on-year TTV growth and surpassed our record FY19 result – with a substantially leaner workforce and a structurally lower cost base, highlighting the strong productivity gains we have delivered in both leisure and corporate travel.
“Our year-on-year growth was also achieved in a deflationary airfare environment, which saw average international economy airfares decrease by 6 per cent globally and by 13 per cent in Australia during the 2H.
“While this long-awaited deflation will impact short-term TTV growth rates, we view it as extremely positive given it makes travel more affordable for families in particular and is likely to drive volume growth into FY25.”
Turner notes that Flight Centre delivered “material profit improvement” during the year as revenue margins recovered and the group maintained “tight controls over costs”.
Leisure travel pre-tax profit profit more than doubled to $188 million, its highest level since FY14, adding to a solid corporate travel result which saw underlying profit before tax increase 44 per cent to $211 million.
Flight Centre also delivered record operating cash inflow of $421 million, allowing the group to cut bank debt to $100 million after repaying $252 million, and reducing overdraft facilities by almost $50 million.
“Given this profit recovery and strong cash generation, we invested about $450 million in capital management initiatives to reduce debt and convertible notes and to increase dividend payments to our shareholders,” says Turner. “Importantly, we also strengthened our foundations for the future by investing in key growth drivers.”
Flight Centre expects the global travel sector to return to normal growth levels of 4 to 5 per cent in the current year, and notes that its performance over FY24 positions the business to capitalise on opportunities.
The group anticipates staff numbers will remain at current levels during the year, pointing to productivity gains within the business over the lean post-COVID years.
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