The Flight Centre Travel Group Ltd (ASX: FLT) share price has sunk 8% after the company reported its FY24 first half result.
Flight Centre is one of the largest travel agents in Australia. It also has a growing global business travel business.
HY24 result
Here are some of the main numbers from the first six months of FY24:
- Total transaction value (TTV) rose 15% to $11.3 billion
- Revenue rose 28% to $1.29 billion
- Underlying EBITDA grew 99% to $189 million
- Underlying profit before tax (PBT) increased 565% to $120 million
- Profit / earnings per share (EPS) rose 505% to $0.397
- Dividend declared of $0.10 per share
Flight Centre said the airfare price deflation affected its overall TTV growth rate, with the average international fares in Australia decreasing 13% during the three months to 31 December 2023, and there was an approximate 7% decrease globally in the first half.
The ASX travel share said it welcomes the airfare decreases and expects a “gradual” volume increase as fares become more affordable for families in-particular.
It managed to grow revenue faster than TTV after a 130 basis point (1.30%) increase of the revenue margin, underpinned by improved supplier margins and strategic initiatives, with an increase in attachment, ancilliary sales and new product and service offerings.
Flight Centre said travel remains an “outlier” and a priority spending category “for many”. It’s seeing “ongoing solid demand for leisure and corporate travel”, with accelerated activity in January and February.
Outlook for the Flight Centre share price
The company said it has good momentum and early trading in the second half has been “strong”.
International capacity is expected to be almost back to pre-COVID levels in Australia by the end of FY24.
It’s expecting to make “significant progress” towards its underlying PBT margin target of 2%. The company is working on hitting that 2% target by the end of FY25.
The company is investing in digitisation and standardisation of operations, enabling self-service capabilities. As part of this, it’s investing in artificial intelligence (AI) to improve the customer experience and productivity.
The travel industry body IATA is predicting that 2024 could surpass 2019 as the busiest 12 months ever for travel. Flight Centre said it’s on track to surpass its $23.7 billion TTV record achieved in FY19.
Flight Centre’s guidance for underlying PBT in FY24 is for between $300 million to $340 million.
The business has now gone through the COVID-19 recovery and investors know what to expect, so I wouldn’t call it a buy. I’d prefer Webjet Ltd (ASX: WEB) shares and other ASX growth shares with better growth and profit margin potential.
