Flight Centre share price sinks lower following trading update


The Flight Centre Travel Group Ltd (ASX: FLT) share price has come under pressure on Wednesday following the release of a trading update at the Morgans Queensland conference.

At the time of writing the travel agent’s shares are down 7% to $43.91.

What was in Flight Centre’s update?

At the event managing director Graham Turner revealed that online leisure sales in Australia had doubled during the three months to September 30. This is despite a relatively challenging trading climate.

Mr Turner also announced that its TTV had continued to increase solidly across the group during the first quarter.

Whilst this was positive, the preliminary details of its likely trading patterns for the year appear to have spooked investors.

The company intends to release its profit guidance for FY 2020 at its annual general meeting in November, but gave investors a taste of what’s to come this morning.

The chief executive advised that “while TTV was again increasing solidly early in the year, underlying profit would be below the prior corresponding period (PCP) during the H1 and was likely to be heavily weighted towards the second half (2H) of FY20.”

What has been weighing on its performance?

Contributing to its poor financial performance has been a tough comparable period.

“Comparatively strong results during the first four months of FY19. Trading conditions and results deteriorated significantly in Australia, particularly within the leisure business, in November and December of 2018 and have remained subdued, meaning Q2 was likely to provide a more meaningful result comparison”

In addition to this, unrest and uncertainty has weighed on its performance. As has an increase in costs early in FY 2020. This is because Flight Centre introduced a new wage model in October 2018, which led to the company paying an additional $4.2 million in wages to its leisure salespeople during the first quarter.

Furthermore, lower than expected profits from the emerging in-destination businesses, lower interest earnings, and the collapse of Thomas Cook have also had an impact.

In respect to the latter, it advised: “Thomas Cook’s high profile collapse in the UK had a minimal impact on FLT and its customers, but the company expected to incur in the order of $7million in costs associated with its decision to ensure its customers were re-accommodated and not adversely affected by the collapse of Bentours and Tempo Holidays in Australia.”

The post Flight Centre share price sinks lower following trading update appeared first on Motley Fool Australia.

News of these tough trading conditions appears to have put pressure on its rivals today. The shares of Helloworld Travel Ltd (ASX: HLO) and Webjet Limited (ASX: WEB) are both trading lower this morning.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited and Helloworld Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019



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