The Flight Centre Travel Group Ltd (ASX: FLT) share price will be on watch when trading opens this morning after the ASX 200 travel share released its 1H20 results.
Flight Centre also provided an update with regards to the impact of the coronavirus, and consequently downgraded its FY20 guidance.
What did Flight Centre announce?
For the six months to 31 December 2019, Flight Centre recorded underlying profit before tax (PBT) of $102.7 million. This was in line with guidance but a significant decline on the $140.4 million achieved in the prior corresponding period (pcp) of 1H19.
The company's first-half Total Transaction Value (TTV) came in at $12.4 billion, an increase of 11.2% on the pcp. Flight Centre commented that it had achieved record TTV in all geographic segments in both its leisure and corporate sectors despite challenging conditions.
Statutory PBT for the period was $38.8 million, a very sharp decline from the $127.4 million achieved in the pcp. This lower result was driven by a series of nonrecurring expenses and non-cash adjustments during the period that totalled $63.9 million.
The company declared a 40 cents per share fully franked interim dividend which is payable on 17 April 2020. This represents a 50% return of underlying net profit after tax (NPAT) to shareholders.
Impact of coronavirus on operations
Flight Centre noted that its Greater China and Singapore corporate businesses have been significantly impacted by the Chinese inbound and outbound travel shutdowns. The company added that its corporate businesses elsewhere in the world have also been significantly impacted, particularly during the past three weeks.
With this, Flight Centre noted that its corporate clients globally were amending travel policies to prevent travel to China and other locations in the short-term.
The company further added that leisure demand was softening due to the impact of the virus, as some customers were reviewing or reconsidering their future travel plans.
Commenting on Flight Centre's 1H20 results, managing director Graham Turner said:
"In a reasonably challenging trading climate globally, we were able to deliver record sales at accelerated growth rates. Unfortunately, we were unable to fully benefit from this accelerated leisure and corporate TTV growth, with our underlying profit of $102.7 million being below the prior year result."
FY20 guidance
Flight Centre stated that while it is impossible to predict the impact of the virus at this time, it expects the virus will lead to subdued activity through to the end of FY20. This is based on the company's previous experiences, particularly in relation to SARS.
In light of the recent global developments with regards to the coronavirus, and the impact that this is having on the company, Flight Centre has downgraded its FY20 guidance for underlying PBT.
The company's new PBT guidance range is between $240 million and $300 million, down from the previously guided $310 million and $350 million.
Commenting on FY20 outlook, Mr Turner said:
"As we address this challenge, we will draw on our SARS experience and focus on our people and customers in the short-term, with a view to benefitting from any pent-up demand, particularly in leisure, when the situation stabilises and improves."
"We will also work with our suppliers to aggressively promote travel to destinations that are not significantly affected – including Australia, the Americas and the UK – to stimulate demand and are already starting to see extremely attractive offers," he added.
