Result Description FLT reported NPAT down 57.4% to $26.1m. This...

Result Description
FLT reported NPAT down 57.4% to $26.1m. This includes a $30m one off impairment associated with largely equity investments made by Liberty’s previous management.


Normalised NPAT is down 8.8% to $55.8m.


Dividend payout ratio cut from 50-60% to 34%. Fully franked payment for the 1H is 9cps.


Market uncertainty means no FY09 guidance is provided


Impact
Net operating cashflow negative $294m and compares to pcp of positive $21m. FLT says this reflects the seasonality of the new group. In the Northern hemisphere travel is booked in the 1H and paid in the 2H. A greater proportion is now wholesale business where FLT pays direct adding to the seasonality.


Australia which represents 50% of group sales recorded flat sales. Profit before tax is $45m. Margins fell from 16% to 10% which reflects weaker industry conditions. FLT is investing in its sales team and marketing to build market share.


America consisting of Liberty represents 20% of group sales. It recorded a loss of $44m wiping out all the profit made in Australia, Included in this loss is the $30m impairment charge.


Liberty restructure sees 700 staff cut and 40 under performing stores closed. Savings of $30m now achieved. FLT is targeting profit breakeven next year. It sees further cost saving through the introduction of its IT systems.


FLT says Liberty enquiry levels have risen from 20 a day to 70 as it introduces a larger choice to customers through its wholesale inventory.


Recommendation Impact (Last Updated: 24/02/2009)
Despite downgrading our forecast to reflect a weak 1H result at a price below $6 we see long-term value and move to an Accumulate recommendation. We retain a high price risk because uncertainty surrounding the duration of the downturn means share price volatility will remain high.
Price data based on previous close.
Previous Close Market Cap
$4.50 $448 (million)
52 Week High/Low
$29.78 - $4.49
Sector
Consumer Services


Intrinsic Valuation
$6.00
Note