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Flight Centre share price tumbles on FY 2020 guidance update

The Flight Centre Travel Group Ltd (ASX: FLT) share price is tumbling lower today ahead of its annual general meeting.

In morning trade the travel agent giant’s shares were down over 7.5% to $39.20.

Why is the Flight Centre share price tumbling lower?

Investors have been selling Flight Centre’s shares after it released a trading update and its guidance for FY 2020 with its AGM presentation.

According to the release, the first four months of FY 2020 have been a challenging period for Flight Centre. This is due to a continuation of the issues and disruptions that significantly impacted its second half results in FY 2019.

During the first four months of the new financial year, the company’s total transaction value (TTV) growth has been strong. However, its profit “has been well down in comparison to a strong prior corresponding period.”

Why will profits be lower?

The company explained that numerous factors have been weighing on its profitability.

These include continuing disruption in its Australian leisure business. This has led to a reduction in TTV in its shop network, which has impacted back-end revenue and overall revenue margins. An increase in staff costs from the new EBA is also weighing on segment profits.

A significant downturn in travel to the Dominican Republic is also a factor. This is the US leisure business’s largest market and an important market for Canadian leisure customers.

Uncertainty due to Brexit, unrest in Hong Kong, and the underperformance of in-destination businesses have also had a negative impact.


In light of the above, Flight Centre expects first half underlying profit before tax to be in the range of $90 million and $110 million. This is a 22% to 36% decline on the $140.4 million achieved a year earlier.

A stronger second half is expected, with management targeting a full year underlying profit before tax between $310 million and $350 million. The mid-point of this range represents a 3.8% decrease on FY 2019’s $343.1 million.

Also on the slide today is fellow travel company Experience Co Ltd (ASX: EXP). A disappointing trading update sent investors to the exits this morning.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of EXPERNCECO FPO. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia has recommended EXPERNCECO FPO. 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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