Flight Centre (ASX:FLT) share price tumbles after posting $188m half year loss

Flight Centre is still posting heavy losses…

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Key points

  • Flight Centre delivered strong top line growth during the first half
  • However, it hasn't reached a scale that makes its operations profitable
  • This led to Flight Centre posting a massive $188 million first half loss

The Flight Centre Travel Group Ltd (ASX: FLT) share price is under pressure on Thursday.

In morning trade, the travel agent's shares are down more than 5% to $19.01 following the release of its half year results.

Flight Centre share price down after posting another large loss

  • Total transaction value (TTV) up 112.9% over the prior corresponding period to $3.26 billion
  • Revenue up 98.1% to $315.7 million
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) loss increased 18.3% to $184 million
  • Underlying loss after tax up 4% to $188 million
  • Balance sheet remains strong with $1.5 billion of cash and investments

What happened during the first half?

Flight Centre delivered a much-improved top line result during the six months ended 31 December. The travel agent more than doubled its TTV to $3.26 billion and almost doubled its revenue to $315.7 million.

Management notes that this reflects a significant rebound in sales immediately after the Delta spike in late August and early September, which led to COVID-period record gross TTV of $859 million in November. This rebound was short-lived, though, with the emergence of the Omicron variant hitting demand in December.

A highlight was its corporate business, which contributed about 60% of first half sales and organically increased TTV by almost 150% to $2.04 billion.

However, despite its solid top line growth, Flight Centre continues to post sizeable losses. In fact, its losses have increased year on year, with the company reporting an 18.3% increase in its EBITDA loss to $184 million. Management advised that this was driven partly by the prior corresponding period benefiting from $65 million of government subsidies.

Management commentary

Flight Centre managing director Graham Turner appears optimistic that the worst is now behind the company, saying:

After two years of lockdowns and heavy restrictions, we are now seeing the strongest indicators of a return to normalcy. Borders are now generally open and some governments, particularly in Europe, are starting to treat the virus as endemic.

Changes are happening at pace – we are seeing positive new developments relating to travel every day. Confidence in the recovery is building and momentum is taking off globally, as we are clearly seeing right now in both the corporate and leisure sectors and particularly in the three regions that materially drive our results – EMEA, the Americas and Australia.

There is, of course, some uncertainty around future variants and government responses to them, so we will continue to monitor developments.

Outlook

Management remains confident with the company's pre-Omicron return to profit timetables and is continuing to target a return to monthly profitability in corporate and leisure during FY 2022.

Mr Turner commented: "The corporate business is now targeting profit in March-April and a return to PC [pre-COVID] TTV levels on a monthly basis during FY23, assuming client activity increases to circa 60-75% and with a significant contribution from our new accounts.

"The global leisure business is expected to return to profit later in the FY22 2H, when its core product of international travel is likely to be back in a more meaningful way."

"We are not yet able to provide specific FY22 profit guidance, given the lack of visibility around the likely timeframes for – and extent of – recovery and government reactions to future variants. In many ways, we are entering uncharted waters after two years of unprecedented restrictions," he concluded.

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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