Flight Centre share price on watch after FY20 results

The Flight Centre share price is on watch this morning after releasing its FY20 results and announcing a $849 million statutory loss.

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The Flight Centre Travel Group Ltd (ASX: FLT) share price could be on the move today following the release of the company's FY20 results. The Flight Centre share price has been hit hard by the pandemic, falling more than 68% in year-to-date trading.

FY20 results

After navigating a challenging environment during FY20, the company has delivered an underlying loss before tax of $510 million before one-off items, including COVID-19 induced expenses of $339 million. On a statutory basis, Flight Centre delivered a loss of $849 million before tax. 

Investors will be watching the Flight Centre share price as the company revealed it has exceeded its short-term cash flow target. Flight Centre reported its annual cost base was lowered by approximately $1.9 billion to 31.5% of pre-COVID levels and revenue was above initial expectations by 31 July.

As of 29 February this year, it had achieved an underlying profit of $150 million and delivered a record total transaction value (TTV).

Flight Centre had a cash balance of $1.9 billion at 30 June including approximately $1.1 billion in liquidity (pre bank covenants).

The company's global corporate business delivered an underlying profit before tax of $74 million during FY20. Additionally, it strengthened its diverse client base and organically increased market share. Accounts included flagship, enterprise level and government clients with annual pre-COVID spends of $1.8 billion. Furthermore, Flight Centre has secured an additional $390 million of new business already in FY21.

Despite the success of its global corporate business, Flight Centre's global leisure business was the heaviest hit by the coronavirus pandemic. Profit was approximately $20 million to 29 February before losses were incurred. As a result, $200 million of revenue was reversed and minimal forward bookings were made since March.

Management comments

Flight Centre Managing Director, Graham Turner, commented "Travel is starting to gradually recover in locations like North America, Europe and South America, where domestic borders are now open, although we are seeing heightened restrictions in Australia and New Zealand, after earlier restrictions,"

"In the near term, TTV is likely to be domestic and corporate travel weighted, given that heavy restrictions still apply to international travel, although we are seeing some travel bubbles or corridors open as countries learn to live with the virus," he added. 

Outlook

The company has seen an uplift in demand since April. However, the widespread and ongoing travel restrictions continue to prevent a meaningful, industry-wide recovery. As a result, Flight Centre is not in a position to provide market guidance.

Flight Centre believes international travel will not fully recover before FY23 or FY24 in the absence of a vaccine. Despite this, it expects gradual sales growth during the year as travel bubbles and corridors open between countries, which is happening now. The company is also optimistic that businesses and governments can work together to develop re-opening strategies, as is happening in some countries. 

Additionally, Flight Centre will continue to receive federal government subsidies through the JobKeeper program to retain employees. The Flight Centre share price closed yesterday's session at $12.61.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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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