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One more year of big losses before profits return for Flight Centre, say analysts

Armed with more than $3.4 billion in new account “wins” during the pandemic, travel firm Flight Centre is expected to be back in the black soon but not before some big losses, according to Morgans.

Mar 01, 2022, updated Mar 01, 2022
(Photo: Ellen Smith/AAP PHOTOS)

(Photo: Ellen Smith/AAP PHOTOS)

The stockbroker said Flight Centre’s losses in the December half were bigger than expected because of the impact of the Omicron variant.

Morgans has increased its forecast loss for 2022 to $382 million, up from a loss of $235 million.

But its second half losses should be only $112 million and the company should return to pre-Covid earnings in 2024.

Analyst Belinda Moore said Flight Centre had plenty of liquidity to work through the period before profits return in 2023.

“However, importantly February has seen a material improvement and it should get stronger from here,” Moore said.

“Management is confident about returning to pre-Covid levels of total transaction value by 2024, on a materially lower cost base.

“We have increased our full year 2022 loss, however the changes to 2023 and 2024 are immaterial and we expect Flight Centre to be profitable in 2023.”

Flight Centre was still burning through cash to keep the business running. In December it was almost $40 million, but February had brought improvements and it still had liquidity of more than $1 billion.

“The outflow in February has fallen materially, in line with improved trading,” Moore said.

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Positive signs had re-emerged in its key markets and total transaction value was up by 50 per cent in February.

“FLT continues to target a return to profitability towards the end of 2022 on a monthly basis. Specifically, corporate is now expected to be profitably in March/April and Leisure in the late fourth quarter.”

She said FLT had won $3.4 billion in new corporate accounts which were won during the pandemic.

“Twelve of the company’s 20 largest clients globally have been secured during Covid,” Moore said.

The Brisbane based travel company was churned through $39 million in December but the outflow slowed in February as trading improved.

 

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