Flight Centre share price on watch amid $485m turnaround and dividend return

Flight Centre has returned to profit and resumed dividend payments.

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The Flight Centre Travel Group Ltd (ASX: FLT) share price will be one to watch this morning.

That's because the travel agent giant has just released its FY 2023 results. How did it perform?

Flight Centre share price on watch following FY 2023 results

  • Group total transaction value (TTV) up 112% to $21,939 million
  • Revenue up 127% to $2,281 million
  • Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $302 million
  • Profit before tax of $70 million
  • Final dividend of 18 cents per share declared
  • Cash of $1,279 million

What happened in FY 2023?

For the 12 months ended 30 June, Flight Centre reported a 127% increase in revenue to $2,281 million. This was driven by a 112% lift in TTV and an improvement in its revenue margin. Flight Centre's TTV recovered towards pre-pandemic levels thanks to increased volumes and higher-than-normal fares.

The company's Corporate and Leisure segments had a strong 12 months. Corporate TTV jumped 96% to $11,006 million and revenue rose 86% to $978 million. Whereas Leisure TTV was up 162% to $10,006 million and revenue surged 171% to $1,121 million.

Things were even better for Flight Centre's earnings, with the company reporting underlying EBITDA at the upper end of its guidance range at $302 million. This represents a massive $485 million turnaround from an EBITDA loss of $183 million a year earlier.

And on the very bottom line, a profit before tax of $70 million was reported. This compares to a loss before tax of $378 million a year earlier.

This allowed the Flight Centre board to declare its first dividend since 2019. It will be paying a fully franked 18 cents per share final dividend to shareholders.

But it won't be the last. A new capital management policy has been put in place for FY 2024 given its solid cash flows and cash generation. Flight Centre plans to allocate 50% to 60% of net profit after tax to dividends and/or share buy-backs.

Management commentary

Flight Centre's managing director, Graham Turner, was pleased with the turnaround. He said:

After an incredibly challenging period, we are pleased to report material profit and sales uplifts.in improved conditions during FY23, leading to stronger shareholder returns. Our $485million profit turnaround exceeded our initial expectations as our diverse global business benefitted from the removal of unprecedented restrictions that were imposed on travellers for some two-and-a-half years and from the strategies that we implemented to preserve our key assets and ensure we re-emerged in a position of strength.

Outlook

No guidance has been provided for FY 2024. However, Turner appears optimistic on the year ahead following a solid start. He said:

Looking ahead to FY24, we are well placed to capitalise on opportunities that will arise as industry recovery continues. Already, we have seen further solid TTV and profit growth in early trading in a resilient travel market that seems to be holding up reasonably well compared to other sectors.

However, one negative is that the company has warned that its revenue margin is "is expected to remain below historic levels, predominantly as a result of planned and ongoing business mix changes brought about by rapid growth in lower revenue and lower cost margin businesses and sectors."

Management intends to provide profit guidance at its annual general meeting in November.

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. 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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