Flight Centre Travel Group Tumbles On FY19 Guidance

Flight Centre Travel Group Limited  (ASX:FLT) nosedived 9.982% at the week start. Its stock has fallen as much as $5.110 to last trade at $46.080 on the day of its Annual General Meeting, 22 October 2018.

The plunge in Flight Centre’s share price seems to be driven by the investor’s disappointment on FY19 guidance presented by the management in 2018 Annual General Meeting of the company held in Brisbane today. The forecast outlines an underlying profit before tax (PBT) to range between $140 million and $150 million for the six months to 31 December 2018 whereas for full year FY19 the target is set to $390 million - $420 million underlying PBT.

If the financial performance of the company yields as planned, it will represent 0-7% growth in 1H FY19 compared with 1H FY18 and approximately 1-9% annual growth on record FY18 result.Â

Talking about trading update for year to date, the management informed that in first quarter of Fy19 the total transaction value (TTV) was floating slightly above the company’s long-term target of 7% annual growth in constant currency through to FY22. It has been stated that underlying profit before tax for 1Q FY19 has shown modest improvement compared to previous corresponding period. But, the company remained silent on numbers.

Global travel agency Flight Centre Travel has witnessed a strong profit growth largely driven by its overseas business in Americas and EMEA. The company further reported a significant growth in operations across New Zealand, South Africa, the UAE, Asia and India, but it did not disclose any figure to support the statement.

The company’s positive start in EMEA businesses was dragged down by the impact of investment in Germany’s corporate start-up and UK credit-card regulations change that were applied during the FY18 second half.

The dark cloud of Brexit creates uncertainty in company’s expectation to corporate travel demand in UK and an estimate for overall business performance in that region for the full fiscal year 2019.

The company expects a notable improvement in its Australia’s leisure business during second half of FY19 underpinned by full year contribution from the home-based businesses acquired in previous financial year 2018.

The management stated that since almost half of FY18 sales were driven by operations outside Australia, the company expects the overseas sales to increase by around 50% in FY19. Further, the profit from overseas business of the company is expected to approach 50% of company’s total earnings for the first time in Fiscal 2019.

The company operates in three key sectors, that is TEN, leisure and corporate across five key geographies including Australia/ New Zealand, The Americas, EMEA, Asia, and global. During FY18 the company has delivered record TTV of $21.8 billion, up 8.5% on FY17 record. Its underlying profit for fiscal 2018 grew 16.8% year-on-year to record $384.7 million while EPS grew by 14%.

In today’s trading session, 22 October 2018, FLT witnessed a decline of $5.110 in daily price change before last trading at $46.080. Whereas, its PE ratio was 19.650 x with market capitalization of $5.17 billion.

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