Flight Centre: Combination of cyclical and internal factors adversely affected FY2017 profit

    Flight Centre chairman Gary Smith reported (09-Nov-2017) FY2017 profit was adversely affected by a “combination of factors”, some of which were “cyclical influences” and some that “were within our direct control”.

    • Cyclical factors included:
      • Airfare deflation in Australia, which was driven primarily by rapid international capacity growth and “delivered some of the cheapest fares we have ever advertised and was positive for our customers”. International ticket sales increased 10.5% year-on-year, outpacing the 4.1% outbound travel growth rate, but revenue growth was “relatively modest”;
      • Currency movements: Rapid devaluation of the GBP following Brexit “provided a significant headwind”, reducing the profit of the UK business by 10% after translation into AUD. Business total transaction value increased 4% year-on-year, but at like-for-like exchange rates, TTV would have increased 7% compared to 2016;
    • Changes to the company’s business mix included:
      • Corporate travel growth – the company won a number of large and high profile accounts in Australia that are “lower touch and trade on lower income margins”;
      • Strong growth in direct online transactions or e-commerce, which is weighted towards simple and lower margin airfare transactions. [more – original PR]