Flight Centre smashed by investors over ‘vague’ market update

Almost $1bn has been wiped from the market value of Flight Centre by investors after the travel agency delivered a vague update that appeared to reveal a 2025 profit downgrade.

Almost $1bn has been wiped from the market value of Flight Centre by investors after the travel agency delivered a vague update that appeared to reveal a 2025 profit downgrade.

The Morgans conference presentation published on the ASX on Friday indicated that first-quarter trading was only marginally above that in the same period last year due to flat corporate sector ­activity.

A reduction in airfares and “downtrading in some large corporate accounts” had adversely ­affected first-quarter growth, but there were “positive early signs for October”.

“(Flight Centre) is starting to enter a seasonally busier trading period with leisure sales under way and corporate travel activity set to increase after the northern hemisphere holiday period,” the update said.

The presentation triggered an immediate plunge in Flight Centre’s share price that only got worse as the day went on. The shares closed 20 per cent lower at $17.20, making the stock the worst performer on the benchmark S&P/ASX 200.

The drop amounted to a near-$1bn reduction in Flight Centre’s market capitalisation, from $4.8bn to $3.82bn.

The plunge sliced almost $75m from the value of managing director Graham Turner’s 16.6 million shares in the company.

Elsewhere in the sector, Corporate Travel management shares slumped 9.5 per cent to $11.33, Web Travel was off 4.1 per cent at $4.20 and Webjet down 2.4 per cent at 83c.

RBC Capital Markets provided the gloomy analysis that Flight Centre was the “next travel domino to fall”. Research analyst Wei-Weng Chen said it appeared the travel agent had followed Corporate Travel Management and Webjet in delivering a 2025 financial year downgrade.

“Incomplete details have been provided, but our interpretation of Flight Centre’s trading update ­appears to suggest a large downgrade to first-half consensus and likely full-year expectations,” Mr Chen said.

He said further comments from Flight Centre that the financial year was expected to be “heavily second half-weighted” sug­gested that the skew this year could be greater than last year’s 33-67.

“Guidance will be provided at the November 14 AGM. We expect that the range could be quite large with investors likely focusing on what the low end or worse case could be,” Mr Chen said.

RBC has a price target of $22 on the stock.

Citi analyst Samuel Seow said it was implied by the “omission” from commentary that there had been a decline in revenue margin.

“Given the lack of detail we have limited insight,” Mr Seow said. “However, it appears there has been a decline in revenue margin, which we imply from the ‘omission’ from commentary.

“This potentially has led to a PBT (profit before tax) margin that appears only marginally above year on year – despite exiting 2H24 at +2 per cent in leisure, and +2 per cent in 4Q24 for corporate.”

UBS analyst Tim Plumbe said it was a “relatively negative” first-quarter trading update, especially in the context of growth required to get to PBT consensus for the current financial year. “Our analysis suggests 1Q24 was 17 per cent of FY24 PBT, so a seasonally smaller quarter – but will make achieving consensus numbers challenging – in our view,” Mr Plumbe said.

Moderating airfares were previously called out by Flight Centre as a potential dampener to revenue growth, but in August Mr Turner said increased bookings were more than accounting for any price falls.

In the year to June 30, Flight Centre recorded a $230m underlying net profit, up 111 per cent, and a tripling of statutory net profit to $194m.

This week the company released data showing international economy airfares were down an average of 10 per cent on a year ago and business class about 4 per cent cheaper.

Flight Centre Corporate global chief Melissa Elf said the data indicated “increasing stability” in the travel industry.

Originally published as Flight Centre smashed by investors over ‘vague’ market update