Flight Centre (ASX:FLT) share price on watch after $364 million loss in FY21

It has been another tough year for this travel agent…

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The Flight Centre Travel Group Ltd (ASX: FLT) share price will be in focus today.

This follows the release of the travel agent's full year results for FY 2021.

Flight Centre share price on watch after $364 million loss

  • Group total transaction value (TTV) down 74.2% to $3,945 million
  • Total revenue down 79.1% to $396 million
  • Underlying loss before tax flat at $507 million
  • Underlying loss after tax improved to $364 million
  • Cash balance of $1.36 billion

What happened in FY 2021 for Flight Centre?

It was another tough year for Flight Centre because of the COVID-19 pandemic and its impact on the travel market. For the 12 months ended 30 June, Flight Centre recorded a 74.2% reduction in TTV to $3,945 million.

The main drag on its performance was its global leisure businesses, which were still tracking at 16% of pre-COVID TTV levels at the end of July. Flight Centre's global corporate businesses performed better and contributed 55% of TTV during the year. This is up from 38% a year earlier.

Flight Centre reported a revenue margin of 10% for the year. This was in line with expectations but lower than normal as a result of heavier than normal domestic travel weightings, a higher proportion of corporate TTV, and a relatively high proportion of low margin government repatriation business in Australia.

This ultimately led to Flight Centre reporting an underlying loss before tax of $507.1 million and an underlying loss after tax of $364 million for FY 2021. And while underlying losses were similar in both FY 2021 and FY 2020 and in the first and second halves of FY 2021, management notes that its operational performance has improved significantly during the pandemic. Particularly given how its second half results were significantly impacted by the reduction and subsequent loss of the JobKeeper subsidy in Australia.

This led to monthly recurring costs hitting $70 million to $75 million and a second half cash burn of between $30 million and $40 million per month. Positively, management believes the company is well-placed financially to deal with this. After deducting all client cash and allowing for a complete unwind of working capital, Flight Centre had a $941 million liquidity runway. This could potentially bode well for the Flight Centre share price.

What did management say?

Flight Centre's CEO, Graham Turner, commented: "FY21 was another challenging year for our industry, but conditions have gradually started to improve. When lockdowns have lifted and borders have re-opened – as they have just started to do in a more meaningful way outside of Australia and New Zealand – we have typically seen immediate and strong travel recovery, which is what we have now started to see in key locations like the US, Canada and Europe. The near-term outlook has also improved in the UK, another large and important market for our company, with most restrictions now lifted and people learning to live with the virus."

"As an organisation, we too have learnt a lot during the past 18 months, particularly about being resilient, consistent and as optimistic as possible during tough times. Our priorities have evolved from emergency cost cutting at the beginning of the crisis to maintaining those significantly reduced expenses, while still developing and implementing our technology, improving productivity and finetuning our recovery strategies to drive stronger future returns."

What's next for Flight Centre in FY 2022?

Potentially giving the Flight Centre share price a boost today was the company's outlook.

Mr Turner revealed that he is positive on the long term and believes the company could achieve profitability in FY 2022. The CEO is also targeting June 2024 for a return to pre-COVID TTV levels, but with much lower costs.

He said: "Looking ahead, we believe our position as a diversified global business with compelling customer offerings across three main travel divisions – leisure, corporate and supply – will be of enormous value and a great advantage to us and to our major suppliers. Although we can't predict the future, given the current government-enforced restrictions, we are targeting a return to monthly profitability later in FY22 and to return to pre-COVID TTV by June 2024, but with significantly reduced ongoing operating costs."

"Travel will inevitably be more complex in the post-COVID world and customers will require more assistance as they navigate new requirements and try to understand any restrictions that may still apply. In this type of environment, our people's knowledge and our enhanced systems will prove invaluable at every step of the customer journey."

To reach break-even in FY 2022, the company needs to generate ~50% of its pre-COVID TTV in corporate and ~40% in leisure. However, this is based on its current spending. As a result, things could change if Flight Centre increases its investment in key growth drivers like marketing, sales channels or technology to generate stronger future returns.

And while no other guidance can be provided for FY 2022 due to the uncertainty it faces, management revealed that the financial year has started positively. It notes that global gross TTV was tracking at 26% of pre-COVID levels in July. This reflects 41% pre-COVID corporate TTV and 16% pre-COVID leisure TTV. It also sees significant leisure upside potential as international travel resumes.

Flight Centre share price performance

The Flight Centre share price has unsurprisingly underperformed this year and is up just 2% year to date. This compares to a 12.7% gain by the ASX 200.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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