AS Flight Centre (ASX: FLT) works hard to keep speed in the 'golden era of travel', challenging conditions and heavy investment has taken a toll on the Brisbane company's annual profit.
The travel company underperformed in India, the United Arab Emirates (UAE) and Asia.
Flight Centre's result was impacted by price wars in the second half - it's now cheaper than ever to head overseas - as well as network upgrades and investments in businesses under its 30-plus brand umbrella.
Brexit slowed down business, as expected, and also delivered a $3 million loss on contracts primarily related to Flight Centre's inaugural brand, Top Deck, and Back-Roads Touring.
Flight Centre's statutory net profit after tax slipped 4.7 per cent to $244.6 million for the period.
However, the company logged a record total transaction value (TTV) for the period, which at $19.3 billion was $1.7 billion higher than its previous milestone.
"TTV increased in both leisure and corporate travel but was generally stronger in corporate as we turned over more than $6 billion globally and consolidated our position as one of the world's largest travel management companies," says Flight Centre managing director and founder Graham Turner.
Corporate travel now accounts for 33 per cent of Flight Centre's global sales.
The company expects online TTV for FY17 to be more impressive again and exceed $1 billion, largely owing to the BYOjet and StudentUniverse businesses, acquired in the previous half.
Flight Centre keeps spreading internationally, exporting Corporate Traveller to Asia and the UAE, TopDeck to Asia, BYOjet and Stage and Screen to Europe, cievents to Canada and Travel Money, Campus Travel and 4th Dimension to the USA.
This is all while relocating head offices in Australia, Singapore and the USA, and refitting shops with more technology and paying staff more, which drove capital expenditure upwards from $82.9 million to $121 million.
"There is a degree of uncertainty within our key economies at the start of the new year and it's impossible to predict future conditions, but we see opportunities within our businesses and growth prospects globally," says Turner.
"We will be disappointed if we don't improve on our FY16 performance.
"While the soft trading conditions experienced during the FY16 fourth quarter continued into July, we have started to see some recovery this month, led by the Australian business.
"The outbound travel market continues to grow - albeit at a slower rate than in the past - with this growth being fuelled, in part, but incredibly cheap international airfares to destinations like London, Los Angeles, New York and Hawaii, which are among the lowest we have seen.
"Last year I said no way prices could go any lower, but now I see all destinations but two have decreased in price. It's the golden era of travel."
Despite the drop, the company has elected to return $153 million to shareholders, a payout above its current dividend policy of 50 to 60 per cent of net profit after tax.
Shareholders will receive a fully franked final dividend of 92c per share, taking the full year dividend to $1.52 per share. This full year dividend is in line with FY14 and FY15.
Flight Centre came in at number seven on Brisbane Top Listed Companies 2016.
Read the story behind Flight Centre founder, Graham 'Skroo' Turner, who has soared to the top from humble beginnings.
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