The Flight Centre Travel Group Ltd (ASX: FLT) share price is up 1% after giving investors a FY25 guidance update and announcing a share buyback.
Flight Centre is a large travel agent business and also offers corporate travel services.
FY25 profit guidance change
Flight Centre said it remains on track to deliver record total transaction value (TTV).
However, with heightened uncertainty in the company’s busiest trading months (May and June), the company thinks it’s unlikely year on year growth of between 14% to 26.5% needed to achieve its initial FY25 target of between $365 million to $405 million of underlying profit before tax (UPBT).
It was tracking towards the low to mid-point of the range when it released its HY25 result, but now expects FY25 UPBT to be between $300 million and $335 million, with the mid-point broadly in line with the $320 million of UPBT in FY24.
What’s caused this slowdown? It explained that US policy changes began to impact business and consumer confidence, as well as corporate and leisure sales in March. Early April trading results “point to ongoing uncertainty”.
However, Flight Centre’s global leisure business is on track to exceed pre-pandemic profitability levels, while the corporate business continues to “trade solidly in most regions”. It has a “solid pipeline” of new accounts globally while major productivity initiatives are underway to boost future profits.
Flight Centre said that stronger overall results are expected in FY26 and beyond as conditions (hopefully) stabilise.
Initiatives to address volatility
The company is going to make a few actions to respond to these negative factors.
It’s going to fast-track initiatives within its newly created global business services division to reduce its cost base per month by approximately $20 million.
Flight Centre is going to continue with productivity improvements and reducing its number of employees, predominantly in non-customer-facing areas. The corporate business is on track to achieve a 5% reduction of full-time equivalent employees.
It’s also looking to target a 15% to 20% capital expenditure reduction in FY26.
Flight Centre share buyback
The ASX travel share has announced its intention to buy back some shares, in addition to continuing to pay dividends and proactively assess options to manage its outstanding convertible notes.
The leadership said after taking into account its expected operating and cashflow requirements, the board has approved up to $200 million share buyback.
Final thoughts on the Flight Centre share price
The ASX travel share is down 24% since the start of the year. This could be a good time to invest during weakness.
In my view, there are better opportunities out there, so I’ll be focused on those ASX shares instead.
