The Flight Centre Travel Group Ltd (ASX: FLT) share price is up 5% at the time of writing.
What is happening?
Flight Centre is hurting with the COVID-19 impacts across its global business. It’s holding its AGM today to give an update.
Management ran through what happened in FY20.
It made a full year loss before tax of $510 million in FY20 and said there are limited revenue generation opportunities since widespread travel restrictions were applied in March 2020 to slow COVID-19’s spread.
That’s why the company developed and implemented plans during the COVID-19 crisis to lower costs by around 70% and preserve cash. It reduced its workforce, announced plans to shut more than half of its global stores, negotiated its rental agreements, paused marketing, reduced other internal discretionary and deferred non-essential capital expenditure.
It also did a capital raising so that it had more than $1 billion of cash and liquidity.
Management said the company has achieved its short term objectives and it’s positioned to weather a prolonged downturn, though there is limited visibility around the timeframes for widespread government restrictions to be lifted.
Flight Centre continues to focus on its costs, cash and revenue whilst maintaining its businesses to be ready for the recovery.
FY21 outlook
Management then outlined some points about FY21. Conditions continue to be uncertain, but management believe the company is well equipped to survive and then prosper in the longer term.
At 30 September 2020 it had just over $1 billion of liquidity available.
Sales are gradually increasing and it’s heavily focusing on local travel. The leisure total transaction value (TTV) is 25% to 30% of pre-COVID levels. Flight Centre is expecting the corporate business to return to profit first, but leisure is expected to take longer to rebound.
At 3o September 2020, Flight Centre said that its current underlying net operating cash outflow was $40 million (excluding one off costs), which included $25 million of cash revenue. One-off costs paid so far amount to $84 million, with another $141 million to be paid to January 2021.
Summary thoughts
Flight Centre is on the right track, but there’s still a long way to go. I’m not sure if it’s a buy now. Some of its earnings will definitely come back, but I’m not sure enough will come back to justify its share price going above $30, particularly after a large amount of new shares were issued.
There are other ASX growth shares I’d rather buy first such as Pushpay Holdings Ltd (ASX: PPH) which I wrote about today here.
