Shares of Flight Centre Travel Group Ltd (ASX: FLT) took off this morning, soaring almost 9% higher after the travel agent posted its half-year profit results.
So What: Late last year, Flight Centre downgraded its profit guidance as a result of slow leisure travel sales caused by low consumer confidence. As expected, the company's net profit was down significantly having fallen 9.5% to $100.3 million, compared to the $110.8 million achieved in the prior corresponding period, while revenues lifted 4.6% to $1.10 billion.
Record sales were achieved in all 10 of Flight Centre's geographic regions, providing a level of support for overall profits, but a subdued trading environment, costs and higher levels of investment impacted its core Australian business. It said that total transaction value in its Australian leisure business increased just 2.1% in the first half, which compares to the 6.6% compound annual growth achieved over the last five years.
However, it appears as though the market was expecting more bad news when the company reported its earnings today. The shares surged after Flight Centre said there were "some early signs of a recovery in Australia", while cheap airfares are available and likely to stimulate demand. It also reaffirmed its full-year guidance of profit before tax between $360-$390 million, which would represent a growth of 4% on the prior year at the high end, or a decline of 4% at the low end of the range provided.
What's more, Flight Centre maintained its fully franked interim dividend of 55 cent per share, putting it on a fully franked yield of 4%.
Now What: While Flight Centre could continue to experience tough trading conditions in the near term, the company represents an excellent long-term prospect. At $38.38 per share, the stock is trading at a 31% discount to its 52-week high and could be set to rally following today's strong result.
