Flight Centre profit takes off


It seems the death of the travel agent has been greatly exaggerated.

Travel agent Flight Centre Limited (ASX: FLT) has reported a 17% increase in underlying full year net profit to $200 million. The company also increased its final dividend by 48%  over the previous year to 71 cents, taking the total dividend for the year to $1.12, quite comfortably within earnings of over $2.00 per share.

Total Transaction Volumes (TTV) rose 8.5% to $13.2 billion, and given net profit increased by 17% suggests the company has become more efficient in translating sales into bottom-line profits. All 10 countries the company operates in generated positive earnings before interest and tax (EBIT), for the second consecutive year. The US business has turned around from a loss of more than $60 million three years ago, to $10 million in EBIT in 2012.

Both shops and online generated healthy growth, with the company’s online sites growing TTV by 25%, but less than Webjet Limited’s (ASX: WEB) 30% growth, and Corporate Travel Management’s (ASX: CTD) 42% growth. The loser appears to be Jetset Travelworld (ASX: JET) whose TTV fell by 3%, which the company blamed on soft demand in the key leisure market, and reduction in average selling prices for international flights.

Cash flows were strong with the company generating $341 million in operating cash flow, some of which was used to repay debt. It closed the year with a net cash position of $294 million.

Looking forward to the next financial year, Flight Centre is targeting a profit before tax of between $305 and $315 million, representing at least 5% growth on this year’s result.

The Foolish bottom line

An excellent result from Flight Centre, which continues to expand its overseas presence – without taking on significant amounts of debt. The one fly in the ointment is the Australian Consumer and Competition Commission’s court case against the company, alleging that Flight Centre colluded with international airlines to fix prices. The hearing is scheduled for October 2012.

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Motley Fool writer/analyst Mike King owns shares in Flight Centre. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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