Flight Centre Lowers Profit Expectations

Travel group Flight Centre (FLT) has cut its profit forecast, joining the growing list of companies blaming the recent post budget slide in consumer confidence for a drop in holiday bookings.

The company said yesterday that while its Australian leisure travel business continues to grow and increase market share, it did not achieve the high levels of growth in recent months seen earlier in the financial year, the company’s CEO, Graham Turner said in a trading update yesterday.

As is usual now with companies issuing weak updates, the shares were sold down by investors.

The shares lost 2.3% to $44.08 in early trading, but as investors realised the downgrade wasn’t an actual fall, the shares rose to finish the day up 1.1% at $46.43.

In fact the downgrade is only minor compared to recent reductions in sales growth and earnings announced by other companies.

Flight Centre will still earn a record profit before one-off items in the year to June.

"This slowdown in growth was most evident in May and corresponded with the widely reported decline in consumer confidence in Australia," Mr Turner said.

The Federal budget was released on May 13 and companies such as The Reject Shop, RCG Corporation, Noni B and Nuplex Industries (the chemicals business) have all fingered the budget and May as when they saw a big slide in sales and revenues, especially in the wake of the budget.

"While demand often rebounds quickly after a short term downturn in the leisure market, conditions are uncertain and it is obviously impossible to predict the timeframe for recovery," Mr Turner said.

Flight Centre now expects its underlying profit before tax to be between $370 million and $385 million in the year to June 30, at the lower end of its previous guidance range.

Mr Turner said the performance of company’s leisure operations in Canada had also been disappointing.

Flight Centre’s US operations had improved, with corporate travel its main profit driver.

The expected record underlying results do not include $11 million in penalties to ACCC, a larger one-off gain by systems improvements and goodwill impairment, the company said in a statement yesterday’s statement.

“Entering the final month of our financial year, we remain comfortable with our overall guidance – specifically, we aim to deliver an underlying PBT between $370 million and $385 million,” Mr Turner told the market.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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