Flight Centre shares have surged more than 10 per cent after the travel retailer defied sceptics with a better than expected profit result and stronger outlook for the year ahead.
The company’s underlying pre-tax profit slipped 3.4 per cent to $363.7 million, which was at the upper end of the guidance it released in June and above analysts’ expectations.
And the company has flagged growth of between four and eight per cent for the year ahead, citing an improved outlook for its core Australian market and the strength of its overseas operations.
Flight Centre is one of the most shorted stocks on the Australian market so the better-than-expected result saw its share price rally on Thursday.
The company’s shares closed up $3.72, or 11.5 per cent, at $36.01, after earlier being more than 15 per cent higher.
Chief executive and founder Graham “Skroo” Turner said the company’ international operations and corporate travel operations were growing well, but its guidance for next year was contingent on a better performance from its Australian leisure business.
“We’re pretty confident most of our overseas (operations) will grow reasonably, Australia is the key part of our market and that is going to be the key thing,” he said.
Flight Centre’s Australian business was its key point of weakness during 2014/15, being weighed down by weak consumer sentiment and a rising wages bill.
The company has also recently reported losing some market share to online players like Airbnb and low-cost carriers, which has contributed to a 30 per cent fall in its share price in the past two months.
But chief financial officer Andrew Flannery said investors had overacted to the statement and the company was still performing well in the more lucrative parts of the market.
“Our personal, in-house view was that the market reaction to that was completely over-egged, to be kind,” he said.
“We have lost a little bit of market share, but, largely speaking, they were in markets that we haven’t focused on to date.”
Flight Centre’s net profit for the year $256.55 million, which was up 24 per cent compared to 2013/14, when the result was weighed down by one-off costs.
The company also kept its fully franked final dividend flat at 97 cents.
FLIGHT CENTRE BEATS EXPECTATIONS
* Net profit up 24pct to $256.5m
* Revenue up 6.8pct to $206.9m
* Final dividend flat at 97 cents.