The COVID pandemic has led to Flight Centre’s share price being reduced significantly. The share price fell by a staggering 85.92% according to investors. Is the current discount a good deal for investors? What should I do? Flight Centre is a leading business in the travel industry. We have all heard it before. COVID brought down the entire sector in a matter of hours. With the return to travel and money, the sector will see a dramatic rise in prices. This is true for Flight Centre?
This post will talk about whether I should buy FLT shares and the history of flight centre ASX dividend history.
FLT’s principal activity is travel distribution, both in the corporate and leisure travel sectors. In-destination travel experience business includes tour operations, destination management and hotels management. Market Index
Flight Centre, a travel agency founded in 1982, is located in Brisbane, Australia. They can book flights, holidays and hotels, as well as car rental, cruises, coach trips, travel insurance, visas and redemption of frequent flyer points.
Flight Centre is known by many names in Australia, New Zealand and the United States.
Flight Centre shares were at an all-time high of $75.13 in August 2018, just before the COVID recession. The Flight Centre share price today is $15.24. This is mid-range in its 52-week range between $9.76-20.16. It is still around 80% below its peak. The FLT has only increased 6.58% in this year.
The broader market, however, is up 27.56% in this year’s first quarter and has fully recovered after the recession, pushing it to new heights.
Flight centre dividends | Flight centre ASX dividend history
Flight Centre shares usually announce a dividend when it delivers its half-yearly results, which are typically in February, and its full-year results, which are in August. This is as per their financial calendar. Dividends are often paid twice per year: in March (interim dividend), and September (final dividend).
Since 1998, FLT has paid biannual dividends each year. This includes during the GFC of 2008. However, the dividends were not paid during the COVID recession in 2020 or interim 2021. All FLT shares that paid dividends during this period were fully-franked.
We surveyed 99 Investors to determine their current Flight Centre shares sentiment. The results are here:
This survey shows that there is a bullish investor sentiment for FLT shares. What is FLT’s value? Let’s dive in.
|Flight Centre Shares Essential information|
|Traded as||ASX: FLT|
|Headquarters||Brisbane, Queensland, Australia|
|Key people||Graham Turner and Charlotte Blake|
|Number of employees||6,000 (July 2020)|
|52 Week High||23.38 USD|
|52 Week Low||13.86 USD|
|S&P500 52-Week Change||-15.45%|
The Flight Centre group releases its half-yearly results for February. Here are the highlights.
The Flight Centre Travel Group (FLT), continues to meet the challenges presented by COVID-19, and the extraordinary travel restrictions in place to limit its spread.
The 2021 financial year was released by FLT. FLT today released its first half (1H) accounts for FY21. It stated that, while trading conditions worldwide remained volatile, the results had steadily improved due to targeted cost-base reductions, revenue increases, and other factors.
The Business has been able to adapt since the crisis erupted in March 2020.
- It has reduced its cost base by 66%, which represents a $1.9billion annualized savings. This does not affect its investment in key growth drivers nor its ability to rebound quickly if conditions improve.
- Initiated to generate total transaction values (TTV) as well as revenue in a domestic-only travel market. December revenue was its highest level since March 2020 when travel restrictions were implemented globally.
- Month-on-month decrease in net operating cash flow during the 1H
- To help the company withstand an extended downturn and capitalize on opportunities during recovery, it maintained a liquidity runway of $1.2billion. This could be used to fast-track the launch of the largest-ever vaccination program in the world.
Why is Flight Centre going down in Income statements?
The Income statement shows that the group’s revenue dropped 90%, from $1.546B down to $160M. We can see that FLT was primarily focused on reducing expenses. The income statement shows that costs have been cut by roughly half across the board. The group suffered an end loss of $317M and a defeatist EPs of -117.2 Cents per share.
Source: FLT Income Statement
We’ll see what has remained stable despite the difficult year. Despite a 90% loss in income, assets have only slightly declined. The debts of the various groups has remained low because they have not taken on additional debt.
The cash balance of the group is still $ 1.67 billion. The company seems to have adequate capital in place for a responsible future, given current costs. We don’t expect to see a demand for a sensible capital rise.
Source: FLT Balance Sheet
Statement on Cash Flow
We see a cash flow statement that shows a $426M inflow from financing ventures. FLT reports that $400m was raised by the issue of changeable bonds and $117m from the Bank of England COVID-19 funding facility.
FLT Cash Flow Statement Source
|Year||FLT Price prediction||Change %|
Technical Analysis is generally bearish on FLT shares. The Technical Factors and moving averages indicate a strong sell.
A short-term rebound to $17.4 seems plausible. A second scenario would be that $13.3 and $12.5 would be required for a $14.3 disadvantage breakout.
Here is a breakdown of the Technical Factors.
Flight Centre wanted to be a part of $1.2 billion in government bailouts during the recession.
“It’s a very small and very meagre package at best.”
FLT was able to save itself with little or no government assistance. In April 2020, FLT released a capital raise report.
These are the details:
- A fully underwritten equity capital raising of $700,000,000, which includes a $282million institutional placement (Placement), and a $419million 1-for-1.74 pro-rata, non-renounceable entitlement offering (Entitlement offer) (together, the Equity Rising).
- A $200 million increase in commitment from existing lenders
- It has been confirmed that the previously announced cost control and cash preservation initiatives will reduce annualized operating costs by $1.9 billion2 (to about $65 million per monthly, by July 2020).
The placement was successful and raised approximately A$562 millions at A$7.20 per Share.
Flight Centre is represented by a decent 17% ownership. General investors hold 39.3% of the assets, while organizations control 35.5%. Private companies own 7.9%.
Graham “Skroo” Turner, the CEO and major representative of FLT, is responsible for $275 million.
Travel industry crashes
Over the past year, the Travel industry has suffered huge losses. Three major brands (QAN FLT and WEB) are now on sale at a discount of around 30-50 percent. While the market has generally recovered, investors are beginning to see potential in these stocks.
The international table will soon be gone. According to the latest federal budget, Australia will be banned from international travel at least until mid-2022.
This is our analysis on the Travel industry.
Tourism is disrupted
Tourism has been severely disrupted by the COVID-19 pandemic, both in Australia and extensively. The following happened to the industry:
- International visitation suddenly stops
- Restrictions on domestic mobility
- Increasing safety and health concerns
The pandemic was managed by Australia’s entrepreneurial management. This has helped to protect domestic tourism demand. The overall success in controlling the virus has made it easier to determine safety for Australian tourist destinations.
In late September 2020, almost two-thirds (63%) of Australians said they felt safe travelling within Australia. This is an increase of 45% from late July 2021, when it was only 45%. However, only:
- 51% of Australians intend to travel within the next six months
- 16% plan to book a vacation in the next month (as at 23 September 20021).
The COVID-19 effects on aviation were immediate and severe. They required the company to quickly adapt in the face massive disruptions.
- Volatile border closures and sudden loss of buyer interest caused a 95% decrease in domestic passenger numbers in June quarter 2020 compared to June quarter 2019. (Source: Bureau of Transportation Research and Economics Aviation Statistics 2020).
- In June 2020, domestic overnight travel that included air travel declined from 24% down to 6% compared to June 2019.
- In April 2020, Virgin Australia entered voluntary administration. Bain Capital, a private equity firm in the United States, later acquired it.
- Qantas Australia and Virgin Australia have announced thousands of job losses. Airlines operations were under severe pressure due to the stop-start nature family border closures.
- Airports have seen the effects of reduced airline activity. To stay afloat, many had to cut back on staff and close down their businesses on certain days.
The prospects for the future are uncertain at this point. The above statistics show that the international travel industry is dead for the foreseeable future. We are expecting a strong recovery of domestic travel. FLT relies on strong returns because they have significant exposure to domestic/regional tourism.
FLT targets a return-to-breakeven in leisure and corporate travel for the 2021 calendar year, based on the possibility that domestic borders will open permanently and that some (low risk), international travel may be permitted.
As reservations return returns have increased, so has the recovery in domestic tourism.
Booking Count graph, Source: Half-Year reports
Here is FLT Feature’s current outlook.
- As long as there is a stable cost base and no clarity about revenue trajectory, there will be no guidance. There are no timeframes to lift restrictions.
- Domestic recovery is possible in the short-term, after permanent border reopenings
- We expect some international travel to occur in 2021, if unvaccinated people and groups are vaccinated.
- Secure long-term relationships with key suppliers through multi-year agreements and attractive global deals
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