Flight Centre (ASX: FLT) likely to benefit from increased international tourism spending

Highlights

• Flight Centre is a travel retailer which largely deals in the corporate and leisure travel sector
• In FY23, underlying EBITDA of FLT zoomed by 265% YoY to AUD 301.6 million
• Tourism Research Australia data indicated that travel industry saw significant improvement in July 2023

Flight Centre Travel Group Limited (ASX:FLT) is a travel retail company which deals in corporate and leisure travel sectors. Also, the company offers in-destination travel experience compromising hotel management, wholesaling, tour operator and destination management companies.

During the financial year 2023 (FY23), the company witnessed a significant improvement in financial performance with an improvement in trading conditions. In FY23, the underlying EBITDA reached AUD 301.6 million, an increase of 265% over the previous corresponding period, while the total transaction value (TTV) increased by nearly 115% YoY to AUD 22 billion, including 162% YoY growth in leisure TTV and 96% YoY growth in corporate TTV.

Constructive indicators

A report by Tourism Research Australia showed that international tourism spent in the nation was AUD 3.5 billion in July 2023, nearly 98% of pre-COVID levels. In July 2023, the overseas arrival surged to around 1,743k, compared to nearly 1,358k in June 2023.

The accommodation and food services segment witnesses a 26.4% QoQ and 44.2% YoY increase in total expenditure, driven by increased domestic and international travel.

Key risks

The monthly CPI indicator increased by 5.2% YoY in August 2023, and a significant rise was observed from transport, housing and food & non-alcoholic beverages.

In July 203, for international travel, the total number of trips (556k) and nights spent (24.2 million) in Australia was below the pre-COVID levels. During the stated period, on a domestic scale, the nights spent in the nation were 35.8 million, around 3% lower than the previous corresponding period.

Outlook

In FY24, the company expects to observe further growth in leisure and corporate TTV, a gradual increase in revenue margin, and a decrease in cost margins, especially in the corporate segment.

Modest profit is anticipated from destination management, hotel management and tour business in FY24.

For FY25, the company intends to achieve an underlying PBT margin of 2%.

Share performance of FLT

FLT shares closed 0.93% lower at AUD 19.2 apiece on 9 October 2023. With this, FLT’s shares witnessed a rise of 29.12% in the past year and an increase of 4.465 in the past six months.

The 52-week high of FLT is AUD 23.5 apiece, recorded on 31 July 2023, and the 52-week low is AUD 13.86 apiece, recorded on 3 October 2023.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 09 October 2023. The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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