Flight Centre Travel Group Ltd (ASX: FLT) shareholders have had a tough 12 months. The company's exposure to domestic discretionary spending and consumer confidence has seen the share price plunge from a high of $55.72 in March 2014 to today's price of $36.10, following a brief dip towards $31.
Tough Conditions
Flight Centre's United Kingdom and United States businesses have been performing well, perhaps even ahead of expectations, however this outperformance has been smothered by poor trading conditions in Australia.
Low consumer confidence, a lower Australian dollar and uncertainty surrounding interest rates, local jobs, and the housing market has resulted in lower holiday spending by Australians.
In an announcement to the market in mid-February, Flight Centre announced that spending and margins had contracted in the five months to November 30, while spending had also increased to expand the store network. Accordingly, Flight Centre will be unable to achieve its forecast full year underlying profit before tax (PBT) of $395 million to $405 million (representing between 5% and 8% growth).
Half-Year Results
While it's unlikely that the group will reveal any startling revelations tomorrow, I expect that the share price could move significantly in either direction. Analysts will be looking for evidence that the company is on track to achieve, or has achieved:
- Underlying first half PBT of between $136 million and $142 million
- PBT for 2014/15 of between $360 million and $390 million
- Australian leisure business total transaction value (TTV) growth well above 2%.
- US segment earnings before interest and tax (EBIT) between US$17 million and US$18 million
- Around $370 million in company cash and a modest level of debt.
Importantly, the outlook notes will be just as pivotal as the actual results. Shareholders should look for:
- Stronger demand from the Australian leisure business
- An update on the Topdeck acquisition from the first half
- Successful rollout of the hyperstore format in the US
- A strong likelihood of delivering more than $AUD 1billion in US-generated TTV
Any hints of an increase in the dividend payout from 152 cents per share (4.2% fully franked)
