Flight Centre
(ASX:FLT) shares experienced a nearly 3% decline at one point yesterday, despite the company unveiling a better-than-expected performance for 2022-23 as travel rebounded to pre-pandemic levels across most markets in Australia and internationally.
Even the distribution of the first dividend payment to shareholders in four years failed to enthuse investors, although this may be a one-off event as the company implements a new payout policy.
Having already revised its performance outlook for the fiscal year ending in June, Flight Centre demonstrated a remarkable 127% increase in revenue, amounting to $2.281 billion, along with a 112% surge in the total value of its transactions (TTV) to nearly $22 billion.
The Corporate and Leisure segments both delivered strong performances, with Corporate TTV rising by 96% to $11 billion, resulting in an 86% revenue increase to $978 million. Leisure TTV soared by 162% to $10 billion, with revenue experiencing a remarkable 171% surge to $1.121 billion.
The company's earnings exhibited a significant turnaround as travel demand rebounded. Flight Centre reported underlying EBITDA at the upper end of its guidance range, reaching $302 million, marking a substantial $485 million improvement from the $183 million EBITDA loss in the previous year. Furthermore, a profit before tax of $70 million was reported, a notable shift from the $378 million pre-tax loss in the previous year.
Flight Centre's resurgence aligns with similar progress observed among its peers, including Webjet, Corporate Travel, and Helloworld.
Shareholders of Flight Centre will receive a final dividend of 18 cents per share, marking the first dividend payment in four years, following the 98 cents per share dividend paid in late 2019.
This dividend distribution won't stand alone, as Flight Centre has established a new capital management policy for the current financial year, aiming to allocate 50% to 60% of net profit after tax to dividends and/or share buybacks, which could be a response to its narrowing profit margins.
CEO Graham Turner expressed contentment with the company's revival, stating in an ASX release:
"After an incredibly challenging period, we are pleased to report material profit and sales uplifts in improved conditions during FY23, leading to stronger shareholder returns.
"Our $485 million profit turnaround exceeded our initial expectations as our diverse global business benefited from the removal of unprecedented restrictions that were imposed on travelers for some two-and-a-half years and from the strategies that we implemented to preserve our key assets and ensure we re-emerged in a position of strength."
While Flight Centre refrained from providing guidance for 2023-24 (unlike Brambles, which displayed optimism for the coming year), CEO Turner remains positive about the year ahead, given the solid start.
Looking to the future, Turner said, "Looking ahead to FY24, we are well placed to capitalize on opportunities that will arise as industry recovery continues. Already, we have seen further solid TTV and profit growth in early trading in a resilient travel market that seems to be holding up reasonably well compared to other sectors."
Analysts, however, drew attention to a potential concern highlighted in the results—Flight Centre indicated that its revenue margin is "expected to remain below historic levels, predominantly as a result of planned and ongoing business mix changes brought about by rapid growth in lower revenue and lower cost margin businesses and sectors."
Flight Centre announced plans to provide profit guidance at its annual general meeting in November, as it has done in previous years.
