Flight Centre Shatters Records with Explosive Profit Growth.

About Flight Centre Limited

Flight Centre Limited (Flight Centre, the Group, ASX: FLT) is an Australian born international travel business established 40 years ago and today is one of the world’s five largest travel agencies with more than 2,000 leisure, corporate and wholesale businesses in 11 countries.

Diversification and resilience underpin FY24 result

The record total transaction value of $23.74 billion, driven by strong growth from both the leisure and corporate businesses, enabled Flight Centre to deliver a $230 million underlying profit for FY24. This is 111 percent up on the prior year and reflects the earnings resilience of a diversified global travel business in a subdued economic environment. The Group also achieved its best operating cash inflow of circa $420 million. The robust cash flow has reduced the Group’s bank debt to $100 million by repaying $252 million and has reduced overdraft facilities by almost $50 million.

A key aspect of the result is the significant airfare deflation, with average international economy fares sold in Australia during the second half 13 percent lower than during the previous corresponding period. This deflation was partially offset by volume growth, with ticket sales increasing 10 percent during the same period, supplemented by increased basket sizes in various leisure brands.

Flight Centre achieved a significantly improved Underlying Profit Margin improvement to 1.35 percent, up from 0.63 percent in FY23.

Directors have declared a fully franked 30 cents per share FY24 final dividend to be paid on October 17. The $66 million total payment, plus the $22 million interim dividend payment, represents a 38 percent return of underlying FY24 Net Profit After Tax to shareholders.

It’s people and not capital that are the strategic resources in a service business

It is significant that Flight Centre exceeded its FY19 pre-covid sales record with just 63 percent of its FY19 workforce. This productivity increase has seen expenses at 15 percent below pre-Covid levels and increased ancillary sales as the Group broadens its product mix.

Staff retention has improved, and Flight Centre was recognised as a Great Place To Work in 25 countries during FY24.

Positive outlook

The airfare deflation will impact short-term Total Transaction Value growth rates; however, it makes travel more affordable and should drive volume growth into FY25.

Revenue margin is recovering as management maintains tight controls over costs by investing in technology and systems to enhance productivity and the customer experience. Flight Centre is not about growth for growth’s sake and is acutely focused on profitable growth. To this end, Flight Centre is targeting the return to a 2 percent Underlying Profit Margin for the first time since FY15. The Group has mapped a clear path to 2 percent and aspires to achieve it during FY25 although it remains a stretch target within this time frame.

Flight centre’s strong brand and improving margin profile as it makes meaningful progress towards its group-wide 2 percent target should deliver higher earnings and dividends at least over the medium term.