Flight Centre Travel FY14 result

About the author:

Author name:

By Belinda Moore

Job title:

Senior Analyst

Date posted:

28 August 2014, 9:35 AM

Sectors Covered:

Agriculture, Food & Beverage, Travel and Chemicals

Given FLT's FY14 result was well guided, there were few surprises. However, its FY15 guidance was lower than expected.

While there is uncertainty over trading conditions, it is difficult to see how the share price will outperform. The company is also trading on a fair multiple. We retain a Hold rating and new price target of A$49.55.

FY14 result was largely in line with expectations

Growth clearly slowed in the 2H14 due to a tough trading environment for the Australian leisure travel business following the decline in consumer confidence post the budget. While the Australian business saw EBIT growth of 10% for the full year, we highlight that the 1H14 EBIT was up 20% on the pcp.

In FY14, the group revenue margin increased slightly to 14.0% vs 13.9% due to higher overrides, however NPBT margin fell due to increased marketing spend and an FX loss of A$15m. 

Guidance was lower than expected; flat 1H15, growth 2H15

FLT's FY15 NPBT guidance is A$395-405m, up 5-8% (vs our previous forecast of A$409.6m and consensus of A$413.1m).

FLT expects 1H15 NPBT will be flat on 1H14 with the 2H15 expected to show growth as the company cycles weak comps post the Budget slump. Guidance may prove conservative given sales increased modestly in Australian Leisure in both June and July (after a flat May).

Given the weaker than expected guidance, our FY15 and FY16 NPBT forecasts have fallen by 2.3% and 0.9% respectively.

Hold recommendation

In the current economic environment, reporting 10% earnings growth is a commendable outcome. While FLT is typically conservative in setting its guidance (particularly this early in the year), the market was clearly disappointed with the growth rate provided.

The concern and major unknown is how long the weak consumer environment persists in Australia.

Based on our revised forecasts, FLT is trading on FY15 PE of 16.7x which is fair in our view. While there is uncertainty over trading conditions, we retain a Hold rating. 

More information

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