Flight Centre Travel Group (FLT) has today released its results for the 2019/20 financial year, reporting an $849million statutory loss due to the impact of COVID-19. Despite the results, the Group says they remain upbeat about the company’s long-term liquidity and outlook.
Following on from Flight Centre Travel Group’s (FCTG) end of year forecast two weeks ago, the final results for the 12 months to June 30, 2020, were within their estimate and included a $510million underlying loss before tax in what the group says has been ‘the most challenging trading environment the company has experienced.’
FCTG says the losses were incurred entirely during the March-June 30 period, when governments locked-down borders to slow COVID-19’s spread, thereby preventing or severely restricting leisure and corporate travel globally.
Total turnover (TTV) finished the year 36% down on last year at $15.3 billion after minimal sales were recorded between March and June 30, with most of the company’s forward leisure bookings cancelled and transactions reversed.
Speaking about the results, FCTG managing director Graham ‘Skroo’ Turner said “COVID-19 and, specifically, government responses to it have created the most challenging trading environment that we have experienced in our almost 40 years in business.
“Until the past four or five months, we had not seen – and could not have imagined – a scenario in which virtually all flights and travel plans globally would effectively be grounded for an extended period.”
“This extraordinary trading environment has already had a devastating impact on businesses and on people, particularly those in the aviation, travel, tourism and hospitality sectors, with tens of thousands of jobs lost in Australia alone and many businesses struggling to survive.”
Graham ‘Skroo’ Turner, Managing Director Flight Centre Travel Group
FCTG remains upbeat about the future
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) had already confirmed two weeks ago that it had also surpassed its key target of keeping its bottom line monthly costs below forecast.
Back in April, FCTG outlined an immediate response and planned to cut $1.9billion from its annual overheads including closing around 60% of its shops and standing down or making redundant approximately 70% of its staff.
The Group says $53million was outlaid in July on costs – well below the $65 million targets and reducing further to $43 million after the $10 million per month benefit flowing from JobKeeper for retained employees in Australia.
In addition to slowing its cashflow, the Group has sold its Melbourne head office, retired the Infinity Holidays brand, hibernated Travel Money Oz and retained its ongoing eligibility for the JobKeeper until the end of March 2021.
All of these recent developments FCTG says should add to FLT’s ‘liquidity runway’ in order to help fuel their journey out the other side of the pandemic.
Regardless, the result 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.
Such has been the impact of 2020.
Revenue is still coming in, mostly fuelled by corporate travel
Despite the ongoing impact of the heavy travel restrictions, FLT reported that they had 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.
Looking ahead, the group says revenue generation opportunities in the short-term include domestic travel, which is approaching or above prior year levels in some countries including New Zealand and the Ignite ready-made package business in Australia, which will be a key driver for the company’s corporate businesses globally.
FCTG has also retained additional leisure consultants to help process the large volume of refund and booking amendment requests that have been received.
To date, the Group says they have processed full or partial refunds totalling almost $500million in Australia-alone with an estimated $1billion still to be sorted through.
While FCTG 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:
“Costs have reached the targeted level and we have capacity to service about 40% of normal TTV with the current cost base, which means we will be able to reach a break-even position without incurring significant additional expenses.
“In the near-term, TTV is likely to be domestic and corporate travel weighted, given that heavy restrictions still apply to international travel, although we are seeing some travel bubbles or corridors open as countries learn to live with the virus.”
Graham ‘Skroo’ Turner, Managing Director Flight Centre Travel Group
READ: End Of An Era: Flight Centre Retires Infinity Holidays Brand After 25 years
READ: Jobkeeper 2.0, Hard Lockdowns And $1b Owed In Refunds: Skroo Turner
READ: Virgin Australia To Move In With Flight Centre In Joint Brisbane Headquarters
Find out more: www.asx.com.au/FLT