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Flight Centre shares sink lower despite special dividend news

The Flight Centre Travel Group Ltd (ASX: FLT) share price has come under pressure on Thursday following the release of its half year results.

At the time of writing the travel agent giant’s shares are down 4% to $41.40.

What happened in the first half?

In the first half Flight Centre achieved a 9.9% increase in group total transaction value (TTV) to $11,155 million, a 7.4% increase in revenue to $1,462 million, and a 0.7% lift in underlying profit before tax to $140 million.

Underlying earnings per share came in 1% lower on the prior corresponding period at 100.1 cents. Approximately 60% of this will be paid to shareholders in the form of a 60 cents per share fully franked interim dividend. Accompanying this dividend will be a $1.49 per share fully franked special dividend.

How did its businesses perform?

The company’s ANZ segment was the biggest drag on its results. Although TTV increased 2%, revenue fell 2% and underlying profit before tax fell 31% to $73 million. This segment was impacted by its new EBA, lower margins, and the slowdown in retail spending late in the half.

The EMEA segment achieved a 12% lift in TTV, a 9% increase in revenue, and profit before tax growth of 13% to $39 million.

The performance of the Americas segment was the highlight of the half. TTV was up 18%, revenue lifted 17%, and profit before tax jumped 292% to $33 million. This was driven partly by a strong half from its U.S. operations.

Also performing well was the company’s Asia segment. It is still early days for the segment, but it is showing promise and delivered solid growth in TTV, revenue, and profit before tax during the half.

The Other segment, which includes the company’s Travel Experiences Network businesses, had another positive half. It reported a 104% lift in TTV, a 52% increase in revenue, and an improvement in its underlying loss before tax. It posted an underlying loss before tax of $8 million, compared to $11 million in the prior corresponding period.

Outlook.

Management revealed that the company is currently tracking towards the bottom end of its targeted full year profit before tax guidance range of $390 million to $420 million. Though it has warned that the key Australian Leisure business is facing ongoing volatility ahead of the busiest trading months.

Should you invest?

Other than the special dividend, I didn’t think there were many positives in this result.

So, with the outlook for the second half looking decidedly mixed, I would suggest investors stay clear of its shares for now and focus on other options in the industry such as Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Helloworld Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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