The Flight Centre Travel Group Ltd (ASX: FLT) share price visited the moon yesterday, rocketing as much as 10% higher following the release of its FY19 results.

Flight Centre is Australia’s leading travel agent and has company-owned operations in more than 23 countries, while their corporate travel management network spans more than 90 countries. The Group employs more than 19,000 people and owns 2,800 businesses.

What Did Flight Centre Report?

Flight Centre’s Total Transaction Volume (TTV), which represents the dollar amount of how much travel is booked through Flight Centre’s network, rose 8.8% to $23.7 billion, uplifting revenue 4.5% to around $3 billion. The two different growth rates, ~9% compared to 4.5%, hints to investors that the company is facing pressure on the margins it earns from bookings. Profit for the period was down 0.2% or flat year-over-year.

Flight Centre’s underlying profit before tax, which we consider to be a reasonable measure of performance since it excludes once-off costs, was down 11%. The video below explains the difference between statutory profit and underlying profit.

Bumper Dividends

Pleasingly for shareholders, the company declared a generous final dividend of 98 cents per share. Although it was down from the $1.07 paid this time last year, we have to keep in mind that Flight Centre also paid a special dividend of $1.49 per share earlier in the year. This takes total FY19 dividends to $3.07 (fully franked), representing a trailing yield of more than 6% at the time of writing.

Impressively, the company noted that half (52%) of its TTV and profit before tax is now generated overseas and it made $100 million profit in the Americas division. Flight Centre’s corporate travel business also claimed to be gaining share, reporting 15% growth in TTV. We like this because the corporate segment earns a more ‘sticky’ or recurring type of revenue than the retail/leisure side of the business.

Soft Leisure Results

Evidently, Flight Centre pinned the company’s softer overall results on cyclical and internal factors within its Australian leisure/retail business. The internal factors included a new IT system, staffing and reduced margins. It is the latter factor which concerns us the most, however, we place lots of stock in founder Graham ‘Skroo’ Turner and his team’s ability to chalk up more growth. After all, under Turner’s watch Flight Centre has achieved 23 years of growth (out of a possible 24) as an ASX-listed company.

Turner said he was disappointed with the underlying results but noted:

“In any given year, TTV growth is crucial and it’s pleasing to report another milestone result almost $2billion higher than our previous record, particularly in light of the challenging conditions in key markets like the UK, where Brexit is causing uncertainty, and Australia, where consumer confidence and leisure market growth appear to be reasonably subdued.”

So, What Now?

This summary is an extract from our coverage for Rask Invest, our members-only investing research platform. We share all of our analysis there.

Nevertheless, in brief, given that we expected Flight Centre’s soft leisure results, we were pleased with just about everything we saw in the report and the accompanying commentary on outlook.

Now, we need to carefully consider how the latest round of results will feed into our valuation modelling, which we’ll be working on in the coming weeks. So until then, we’re happy to keep Flight Centre on our watchlist.

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Disclosure: At the time of writing, Owen does not have a financial interest in any of the companies mentioned.