Record result for Flight Centre as emerging ventures wait in the wings

Record result for Flight Centre as emerging ventures wait in the wings

Travel agency Flight Centre (ASX: FLT) has announced a record underlying profit before tax of $384.7 million for FY18, underpinned by a strong performance in the Americas and EMEA (Europe, Middle East and Africa), as well as a "solid turnaround" in Asia.

Net profit after tax (NPAT) was up 14 per cent at $264.2 million in a year marked by a brand reshuffle in Australia, a fine for attempted price fixing from a Federal Court, a "number of small acquisitions" and the launch of a start-up US home-based agency network.

Yesterday the ABC published a damning report into alleged practices at the company, with allegations its training programs encouraged arbitrary price mark-ups amidst an alcohol-fuelled "work hard, play hard" culture with "excessive" unpaid work hours.

The FLT share price dropped 2 per cent after the news, but whether the drop was in response to the news is uncertain.

No mention of the report was made in today's results announcement, and Flight Centre's mangaging director Graham Turner claims the results highlight the "business model's strength, its ongoing relevance to customers globally and its increasing diversity".

"The Americas and EMEA businesses performed particularly well and together generated a $151 million profit, which more than doubled their combined results just two years ago," he says.

"To put these combined results in context, about 40% of FLT's underlying FY18 PBT came from the Americas and EMEA, compared to just 15% five years ago.

"This is a promising sign for the future, given the size of these markets particularly in corporate travel and our relatively small market-share."

After 2.5 years of work, Flight Centre implemented a new point-of-sale system (GDS) in Australia and New Zealand and also merged its "moderately profitable" Escape Travel and Cruiseabout brands, leading to the redeployment of 1,200 consultants from 250 Escape Travel and Cruiseabout shops.

With average international fares at similar levels to what they were last year, the company is optimistic for FY19 even though modest fare movements are likely. The travel sector in general is expected to grow 3.6 per cent.

"Within FLT's business, the company sees improvement and growth opportunities across its three core sectors and is tailoring strategies accordingly," Turner says.

"In leisure travel, for instance, the company will continue to invest in its Core Flight Centre brand, while also targeting the premium and youth sectors through brands like Travel Associates, Liberty Travel in the USA and StudentUniverse.

"We will continue to grow in emerging areas, including the home-based agency sector and online, and will target new revenue streams and models through initiatives like Flight Centre Exclusives, a new last minute package range that has just been launched in Australia."

Travel results wrap

It has been a busy week with several travel sector companies reporting their annual results. Today, Australia's leading airline Qantas (ASX: QAN) announced a 14 per cent uptick in underlying profit before tax to reach $1.6 billion, while EBITDA was up 71 per cent at $87.4 million for Webjet (ASX: WEB).

This week, Corporate Travel Management (ASX: CTD) registered a record EBITDA of $125.4 million and Helloworld (ASX: HLO) notched an 18.2 per cent lift in EBITDA to $65.2 million.

The Qantas Board has given its shareholders cause for confidence with the announcement of a $332 million share buy-back scheme, following a "particularly strong" performance of both its Qantas and Jetstar domestic flying businesses. Qantas also saw a 7 per cent rise in earnings for its international group, having maintained its margin in the face of heavy competition and higher fuel prices.

"These numbers show a company that's delivering across the board," says Qantas CEO Alan Joyce.

"Our investment in free Wi-Fi and cabin improvements are delivering a better experience for customers as well as higher earnings for Qantas and Jetstar. 

"The overall value of the travelling public remains extremely strong, with domestic sale fares almost 40 per cent lower in real terms than they were fifteen years ago."

Online travel agency (OTA) Webjet highlighted its flight bookings continued to grow at more than three times the underlying market, while ancillary products like packages, care hire, insurance and hotels had higher margins and were growing faster than flights. 

"FY18 was another outstanding year for the company. The Webjet OTA continues to grow share as the #1OTA and scale benefits are flowing through with significant increases in both TTV and EBITDA margins," says Webjet managing director John Guscic.

"Our strong brand is also playing a key role in driving ancillary growth, particularly in packages, car hire and insurance, which helped contribute to the increased TTV margins this year."

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