In morning trade the Flight Centre Travel Group Ltd (ASX: FLT) share price has surged higher following the release of its full year results.
At the time of writing the travel agent's shares are up 8% to $47.38.
How did Flight Centre perform in FY 2019?
In FY 2019 Flight Centre posted record total transaction value (TTV) of $23.7 billion, which was an increase of 8.8% on the prior corresponding period. It achieved this despite a reduction in its sales staff to 14,346 from 14,622.
But due to a 55-basis point reduction in its revenue margin to 12.9% brought about by weakness in the Australian leisure segment and ongoing business mix changes due to the rapid growth in lower revenue margin brands, total revenue grew just 4.5% over the period to $3,055 million.
This revenue margin decline was larger than management expected, which ultimately led to the company posting a 10.8% decline in underlying profit before tax to $343 million.
Managing director, Graham Turner, commented: "While we were disappointed that our $343.1million underlying profit was below our record FY18 result, we can be pleased with our achievements in some important areas and with some of the progress towards our longer term goals."
"In any given year, TTV growth is crucial and it's pleasing to report another milestone result almost $2 billion higher than our previous record, particularly in light of the challenging conditions in key markets like the UK, where Brexit is causing uncertainty, and Australia, where consumer confidence and leisure market growth appear to be reasonably subdued," he added.
Flight Centre declared a fully franked final dividend of 98 cents per share, which brought its full year dividend to $3.07 per share including its special 60 cents per share dividend.
Strategic update.
Flight Centre advised that it is working towards a 2025 vision across its three core divisions of leisure, corporate and at-destination travel.
Within the leisure division, plans are in place to ensure long-term success in mass market, premium and youth travel – which are its three core pillars within this sector.
ln Australia, New Zealand and South Africa, the Flight Centre brand will remain a major mass market player with high market share, whereas in the USA, Canada, and UK, the company will take a more specialised approach and will target key market segments.
Within its corporate travel division, the company has developed a compelling offering that is resonating with customers globally, as evidenced by its strong and consistent growth record within the sector.
Medium term strategies will focus on dominating the SME sector through the Corporate Traveller brand and developing FCM as a truly global alternative to the three established global travel management companies.
And its in-destination businesses are part of a broader division now known as The Travel Group, which is seen as a longer-term driver of shareholder value.
In addition to this, to improve its front-end productivity and network performance, management is currently focusing on cost and efficiency strategies across areas including robotics and automation, outsourcing, and head office real estate efficiency.
Outlook.
As is normally the case, management intends to release its guidance at its annual general meeting in November.
In the meantime, Mr Turner appears optimistic on the year ahead. He said: "Our overseas businesses have become strong and consistent performers and, for the first time, generated the majority of our profit during FY19. We expect this trend to continue, given our success and relatively small share of very large markets overseas."
"In Australia, we expect gradual leisure sector recovery as the year progresses, as the trading climate improves and as our improvement strategies gain traction. While market conditions and the consumer environment remain subdued, we have seen some margin stabilisation recently," he added.
Also on the move today in the industry today is the Webjet Limited (ASX: WEB) share price. It has dropped 11% following the release of its full year results.
