FLT’s main operations are in Australia, New Zealand, Canada, the USA, the UK, South Africa and Hong Kong.
FLT’s stock plunged over 2008 due to weakening travel activity as part of the global economic downturn and sluggish consumer spending.
A return to global economic stability has boded well for FLT and its travel sector peers.
Moreover, a strengthening Australian dollar – which has hovered around 110 US cents of late – will mean that airlines such as QAN will now really benefit from the fall in oil prices.
The climbing Aussie dollar is also enticing Australians to start thinking about overseas travel again and airlines are also benefitting from a turnaround in passenger numbers.
In February, Flight Centre impressed the market by announcing record first half results. Profit before tax increased 37%, to $101.1 million, whilst net profit after tax increased 38%, to $70.5 million.
Both numbers easily surpassed the company’s previous first half records, with first half earnings per share reaching 70.6 cents, up from 51.3 cents.
The company declared an interim dividend of 36 cents, up from 26 cents a year earlier.
Last month, FLT announced it expects FY11 pre-tax profit to be 10% – 20% higher from the prior year.
FLT noted that its guidance for a full year result of $220 million – $240 million was not materially impacted by the recent natural disasters.
The Australian division reported strong operating conditions, due to a combination of lower priced airfares and a strong Aussie dollar.
Although higher oil prices have prompted airlines to increase airfares, we feel the effect of the stronger Aussie dollar is enough to keep Australians travelling.
With the global economic downturn becoming a distant memory and consumers willing to spend on flights again, FLT’s fortunes have turned around, as evidenced in the group’s recent strong results and guidance.
The group remains on track to achieve an FY pretax trading result of $220 million to $240 million.
Improving economic conditions would see FLT’s earnings continue to impress, making it one of the stocks to watch.
FLT’s wholesale operations have performed well and delivered solid margins over the past year, and generally the leisure and wholesale travel businesses have performed well.
The global corporate travel sector is seeing signs of improvement, with Flight Centre continuing to win new corporate accounts, putting the group in a strong position when the market recovers.