Corporate travel growth drives Flight Centre revenue
Flight Centre continues to consolidate its position as one of the world’s largest and most successful travel management companies in the corporate sphere.
The Flight Centre Travel Group’s financial results are in, with the company posting a $325.4 million statutory underlying profit before tax for 2017.
The results have landed squarely in the $320-$355 million range that Flight Centre initially targeted, despite being down on 2016’s financial results, which saw the Group reach $352.4 million underlying profit before tax.
The overall statutory profit before tax was 5.7 per cent lower than 2016, impacted by factors like significant airfare deflation in key markets, currency fluctuations, and political uncertainty (think Trump and Brexit) resulting in a soft first quarter trading globally.
During FY17, the corporate travel brands generated almost $7 billion in Total Transaction Value, an 8.7 per cent increase on a constant currency basis.
The revenue income increased by 1.4 per cent to $2.7 billion, which was largely driven by business mix changes, including strong corporate travel growth.
The company won a number of large and high-profile accounts in Australia, coupled with a concerted focus on clients retention, growing the bottom line. Flight Centre also recently acquired corporate travel companies and global DMCs in Mexico, New Zealand, Canada, Europe, and Asia, along with a hotel management company in Asia.
In Australia and New Zealand, sales increased in both leisure and corporate travel, with the company achieving record air volumes and record room nights.
The business’s corporate arms in Canada and the US also performed strongly, topping US$1 billion in Total Transaction Value for the first time, while a small profit was also garnered from the Mexican corporate sector.
Longer term plans are also gaining momentum and delivering growth in key sectors, including corporate travel, which now accounts for a third of the company’s overall business.
Flight Centre also blamed general underperformance in Asia, Middle East and UK-based touring businesses for the dip in profit.
“In a challenging trading cycle, characterised by record low airfares, we achieved our major sales targets of topping $20 billion in TTV for the first time and growing online leisure TTV beyond $1 billion,” Managing Director and CEO, Graham ‘Skroo’ Turner, said.
“Flight Centre has now delivered 21 years of TTV growth in 22 years as a listed entity, a statistic that highlights its diversity, the strength of its continuously evolving omni-channel network and its ability to change strategic direction and target new growth opportunities.”
Following on from the launch of its business transformation program, the Group confirmed cost-saving measures are top priority, with a goal of having all brands worldwide become profitable by 2020, or else be “pivoted” or closed.
Flight Centre’s business transformation program involves a specialist team led by Chief Operating Officer Melanie Waters-Ryan to focus on digital commerce growth, investment in growth brands and business models, globalising air, land and IT businesses, and reducing cost growth and network inefficiencies.
This strategic move has already seen new business approaches, including the pivoting or closure of some loss-making businesses around the world.
Flight Centre did say some shops will close, with teams moving to better locations, while a small number of shops with sub-standard profit and sales histories are also being filtered to ensure they meet performance metrics. This will lead to either improved results or final closure.
“We believe we are well placed to improve, given the investments we have made, the strategies that have been implemented and the benefits that we have started to see from the transformation program,” Turner added.
“We will be disappointed if we don’t grow sales and profits globally during FY18 as we work towards achieving the high level, medium-term goals that we are targeting.”
“In addition to starting FY18 with stronger momentum, we have also started the new year with stronger foundations,” Turner added, citing Flight Centre’s many acquisitions.
Aussie leisure profits were down, with international airfare deflation impacting results, while international ticket sales down under jumped more than 10 per cent.
The Americas businesses also generated about 10 per cent of the total FY17 profits.
Flight Centre said it’s too early to gauge likely trading conditions, and chose not to provide any predictions for FY18 results.
Email the Travel Weekly team at traveldesk@travelweekly.com.au
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