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Flight Centre Lifts Profit by 16%; Raises Dividend to 60 Cents

Flight Centre Lifts Profit by 16%; Raises Dividend to 60 Cents
Flight expanded its reach into various segments across the global online booking network via acquisitions
Feb 24, 2016 By Simon Herrmann Tags: FLT

Online travel booking provider Flight Centre Limited (ASX:FLT) announced its half-year results this morning, and revealed a net profit after tax of $117million, a 16% rise compared to the previous corresponding period. Flight Centre’s results were boosted by higher sales, but also a $11m refund from the ACCC.

Record Transactions Drive Flight Centre’s Profit

On an underlying basis, the higher profit was a result of a 13% lift in total transaction value (‘TTV’) to $9.2billion. TTV is the indicator for all global sales across Flight Centre’s platforms and the half year result exceeded the previous half year record by more than $1billion. As revenue is derived from global sales, Flight Centre experienced a 15% rise in revenue to $1.3bn, an increase of $167million. TTV in Australia rose 7%.

Net profit after tax rose 16%, but only 5.4% excluding the ACCC refund. Capital expenditure reached $58.2million, significantly above last year’s figure of $39.5m. The company targets ‘capex’ to reach $120million this year as Flight Centre invests in its systems, platforms and head office relocation in various countries.

Flight Centre’s track record is arguably impressive with TTV growth during the first half in 19 of the last 20 years since the company listed as a public entity.  In Australian Dollar terms, TTV rose in all of the company’s countries.

The board announced an interim dividend of 60 cents, which is 5 cents or 9% above last year’s interim distribution.

High Corporate Activity in the First Half

Flight Centre has had a busy half year as management focused on strategic acquisitions to drive future growth. In December 2015 Flight Centre acquired StudentUniverse.com for US$28m, a Boston-based online travel booking service focused on students and young adults. Flight Centre also acquired Mexican corporate travel provider Koch Overseas, Brisbane-based AVMIN Pty Ltd (51% interest), Malaysian World Aviation Services (40% interest) and BYOjet.com (90% interest).

Management believes that all acquisitions are complimentary to Flight Centre’s business model and align with the company’s strategy. The strategy is focused on acquiring businesses that provide Flight Centre with new revenue streams in key markets across the global online booking network, which creates a stronger omni-channel sales network.

Strong Balance Sheet and $1bn Cash

Flight Centre reduced its debt to $21.2million, down from $32.8million. The positive net debt position at the end of the year was $408.6million.

Flight Centre’s cash and investment portfolio balance totalled $1.15bn which could allow for further acquisition or shareholder returns. 

Stock Eases on the Opening but Medium-Term Bullish

FLT eased slightly on the opening this morning, down nearly 2% after just 10 minutes of trading. Investors seem to be reacting cautious to the increase in capital expenditure. FLT has rebounded more than 30% since its August low, indicating that the market has priced in ongoing growth. Today’s movement is not as important and it will be interesting to see if FLT can remain within its medium-term ascending channel (see screenshot below). The stock has gained this year despite an overall declining market, which is generally a positive sign.

 

FLT Daily Candlesticks

Image: A daily chart for FLT displaying the medium term uptrend.

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Simon Herrmann Author: Simon Herrmann Feb 24, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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