In an announcement to the ASX today, Flight Centre Travel Group (FLT) has estimated an $825m-$875m loss for the 2019/20 financial year due to the impact of COVID-19. Despite the gloomy forecast, the Group says they remain positive about the company’s long-term liquidity and outlook.
With $200million in funding sourced during July and more than $1billion since April to protect the business from a prolonged virus-related downturn, Flight Centre Travel Group (FLT) today confirmed that it had also surpassed its key target of keeping its bottom line monthly costs below forecast.
Back in April, FLT outlined an immediate response and plan to cut $1.9billion from its annual overheads including closing around 60% of its shops and standing down or making around 70% of FLT’s staff redundant.
The Group says $53million was outlaid in July on costs – well below the $65million target and reducing to $43million after the $10million per month benefit flowing from JobKeeper for retained employees in Australia.
In addition to slowing its cashflow, FLT has now sold its Melbourne head office, secured a government-backed United Kingdom loan and retained its ongoing eligibility for the JobKeeper until the end of March 2021.
All of these recent developments the Group says should add to FLT’s ‘liquidity runway’ in order to aid their journey out the other side of the pandemic.
In what is a sign of the times for the entire travel industry, the outlook is a far cry from last year’s financial year 2018/19 result that saw Flight Centre Travel Group achieve a profit of $343million, even if it was down 10.8% on the previous record financial year.
“COVID-19 and, specifically, the government responses to it have clearly had devastating impacts on businesses worldwide and on the airline, travel, tourism and hospitality industries in particular. This has severely impacted us and our people and some very tough decisions have been made over the past four or five months.
Graham Skroo Turner, Managing Director Flight Centre Travel Group
Revenue is still coming in, mostly fuelled by corporate travel
Despite the ongoing impact of the heavy travel restrictions, FLT says they achieved around $17million in revenue (excluding $10million in JobKeeper) in July, as total turnover exceeded $200million globally for the month and approached $100million in Australia.
To date, the Group says their corporate travel businesses have predominantly fuelled the company’s income during the COVID-19 lockdowns.
The corporate businesses, which were growing strongly and on track to deliver more than $10billion in annual turnover before restrictions were imposed, traded profitably and have won a record amount of new business during the year say the Group.
Within the leisure sector, revenue generation has generally been more subdued, given that heavier restrictions have typically been applied to discretionary leisure travel and given relatively low consumer confidence.
Within the leisure sector, FLT has retained additional people to process the large volume of refund and booking amendment requests that have been received.
To date, FLT says they have processed full or partial refunds totalling almost $500million in Australia-alone with an estimated $1billion still to be sorted through.
While FLT has focussed on cost reduction, it says it has also continued to invest, where appropriate, in important initiatives and growth drivers.
In the corporate sector, the company has retained a strong network of business development managers and implementation teams to win and onboard new customers, while also developing new products for customers and enhancing its technology offerings.
Speaking about the update, Flight Centre Travel Group Managing Director Graham Skroo Turner said:
“Despite ongoing restrictions, revenue has now started to increase, particularly in Europe, and we have surpassed our initial cash flow target, thereby extending our liquidity runway.
“Learning to live with the virus involves protecting the vulnerable, particularly the elderly, while ramping up testing, contact tracing and ultimately isolation so we don’t overwhelm intensive care units. Adopting this approach, while continuing to take sensible health precautions, flattening the curve and getting society and business back to a reasonable level of normality must be priorities to reduce the already dire economic outcomes being experienced.
“Within the travel and tourism sectors, we need to know what COVID-19 conditions need to be present in each state, territory and at a national and international level for governments to ease restrictions, stop lockdowns and open borders. This will allow businesses to plan for the future, to prepare to restart their operations and to bring back thousands of our people who are currently on stand-down.”
FLT will release its audited accounts for the financial year 2020 on August 27.
Find out more: www.asx.com.au/FLT
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