Flight Centre Travel Group Ltd (ASX:FLT), as management noted at the annual general meeting held this week, experienced a challenging period in the past financial year.
Chair Gary Smith told the meeting that while the company posted an increase in total transaction value, the underlying profit of $289.1 million "fell short of expectations".
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Business looking up
But managing director Graham Turner struck an optimistic tone when talking about the prospects for this financial year, saying "we believe this will be a year of renewed growth an opportunity for our company''.
He went on to say:
Our fundamentals remain strong – arguably stronger than ever – and we expect to return to profit growth this year. We've worked hard to transform our business divisions and streamline our support structures to create a more productive company with a lower cost base and stronger foundations.
Mr Turner said the company had a strategy across four pillars to grow the business this year, including cost discipline, with the company aiming to keep costs in line with FY25 and reducing capital expenditure by 15% to 20%.
The company would also close or divest underperforming business units, optimise margins, and accelerate investment in initiatives such as the use of artificial intelligence, the imminent launch of the company's loyalty program, and investing generally in high-performing sectors, including cruises and corporate events.
Mr Turner said the current financial year had started well, with first-quarter results and preliminary data for October "confirming momentum across both corporate and leisure segments''.
He added:
For the full year we're targeting underlying profit before tax of $305-$340 million, a 5.5%-17.6% uplift on FY25.
Analysts positive on share price upside
The analysts at Jarden have run the ruler over Flight Centre's trading update, and they like what they see.
As they said in a note to clients:
The backdrop for travel is improving and, outside exogenous events, we believe green shoots are here. We see Flight Centre as an increasingly capital-light business with material margin upside that should trade above its current 12-times one-year forward price to earnings ratio. Our key concern is macro ⁄ geopolitical disruption, with tech (i.e. AI) related risks longer dated, and Flight Centre well positioned to mitigate via being a scale global player with a growing majority of earnings skewed to corporate.
Jarden has updated its price target for Flight Centre from $17.20 to $18, which would be a 37.1% increase from the close on Thursday of $13.13.
Flight Centre also pays a dividend of about 3%.
