Investors took a wary, but slightly positive stance with Flight Centre’s (FLT) 2015-16 results yesterday and veiled warning about the current financial year.
The shares ended up 0.6% at $36.33 on a day when the wider market found it tough going and struggled all day before closing lower.
After revealing a dip in earnings (forecast back earlier in the year, but still the third best in its history) Flight Centre warned that an on-going airfare war in Australia, poor consumer confidence in Britain following Brexit and volatile conditions in the United States would hit its 2016-17 results.
In May, the company warned that its pre-tax profit would likely fall, citing elections in the United States and Australia and the then-pending Brexit vote in the United Kingdom as dampeners on business travel.
The company said conditions "remain volatile in some markets" such as the UK and the US, where demand has been dented by travel warnings for regions affected by the Zika Virus and the instability in Europe.
"There is a degree of uncertainty within our key economies at the start of the new year and it’s impossible to predict future conditions," Flight Centre boss Graham Turner said yesterday. "But we see improvement opportunities within our businesses and growth prospects globally.
“We will be disappointed if we don’t improve on our [financial year 2016] performance,” he said.
Normally, that would been enough to kick the chucks from under the company’s wheels and send the shares sharply lower, especially after net profit fell 4.7% to $244.6 million in the year to June.
But no, investors absorbed the warning implicit in the statement (without any hard numbers to hang a future accounting on) and the company managed to avoid being punished, mostly because of its consistent pattern of warning on the downside, and upside, where appropriate.
Flight Centre is not a serial ’surpriser’ so far as most investors are these days. They also liked Mr Turner’s comment about being disappointed if the 2016-17 result is lower than the latest figures (And so would be a lot of investors, and almost certainly, the share price would be lower as well)
And despite the implicit warning for the current financial year, investors accepted Flight Centre’s comments that it is too early to provide profit guidance for the 2017 year. But there will be some clearer idea sought by shareholders at the annual meeting later this year when the outlook should become clearer.
The company said yesterday that while revenue rose 11.2% to $2.7 billion, underlying profit eased almost 4% $246.7 million due to lower margins in Australia and investment in new businesses and technology.
This was under market forecasts around $254 million.
The company declared a final dividend of 92 cents a share down 5 cents from a year ago. That made a full year payout of a steady $1.95 a share after thehigher interim at the start of the year.