Flight Centre (ASX:FLT) share price lower following Q3 update

The Flight Centre Travel Group Ltd (ASX: FLT) share price is under pressure on Tuesday morning.

In early trade, the travel agent’s shares are down 1% to $16.70.

Why is the Flight Centre share price trading lower?

Investors have been selling the company’s shares following the release of a presentation ahead of its appearance at the Macquarie Group Ltd (ASX: MQG) Australia 2021 Conference.

That presentation included an update on its performance during the third quarter of FY 2021.

According to the release, after a subdued sales period in January and February, Flight Centre delivered record COVID-period sales revenue in the month of March.

The release explains that March turnover was more than $100 million higher than February, up 32.7% month-on-month. This took gross quarterly total transaction value (TTV) back above $1 billion for first time since COVID-19.

Positively, management advised that it is expecting to report further growth in April, though no actual figures were provided.

Balance sheet

At the end of the third quarter, the company’s strong balance sheet was maintained. It has $1.5 billion in cash and $1.1 billion in total liquidity.

Furthermore, the company has repaid $100 million in short-term bank debt during the second half following its $400 million convertible note issue.

However, Flight Centre is still operating at a loss. During the third quarter, its monthly operating cash outflows were steady at $30 million to $40 million per month. This reflects the heavy restrictions that are still in place, which are preventing more rapid revenue growth, and reduced JobKeeper subsidies.

In light of this, it is expecting its second half underlying loss to be broadly in line with its first half loss in FY 2021. This could be what is weighing on the Flight Centre share price today.

Positively, management does believe that a return to profitability is coming. It continues to target a return to profit in FY 2022 on a month-to-month basis in both the corporate and leisure segments.

This will be supported by a potential Trans-Atlantic corridor opening between the UK and North America and pent-up demand in leisure and corporate markets.

Current trading levels

Flight Centre provided an update on current trading levels compared to pre-COVID times.

In respect to corporate business, it was tracking at 29% of historic TTV levels at the end of the third quarter. Based on this, management believes it is winning market share.

As for global leisure TTV, that was tracking at 14% of historic levels at the end of the third quarter. Management notes that this is recovering slower than the corporate market due to its heavy weighting towards international travel. Though it sees significant uplift opportunities as travel corridors/bubbles open and restrictions ease for vaccinated travellers.

Following today’s decline, the Flight Centre share price is down 10.5% since this time last month.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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