FY17 Results AUGUST 24, 2017

Transcription

1 FY17 Results AUGUST 24, 2017

2 Today s Agenda The FLT Story Graham Turner (CEO) FY17 Financial Results Adam Campbell (CFO) Strategy & Business Transformation Melanie Waters-Ryan (COO) FY18 Outlook Graham Turner (CEO)

3 FLT Today Three Core Pillars in Five Key Geographies: TEN Australia/NZ EMEA Asia Americas Global (in-destination) Leisure Corporate

4 Leisure Travel OTA CONTACT CENTRES FLAGSHIP STORES COMMUNITY INDEPENDENT CONTRACTOR SPECIALIST EVENTS High volume, simple transactions 24/7 sales, Chat & assist Hyperstores Super regionals Smaller shopping centres, CBDs & strip locations Affiliates Mobile agents FCBT Travel Expos, First & Business Discover Europe Round the Discover America World Lower touch offerings Higher touch offerings Omni channel network customers can transact & interact when & how they want Key distribution channel for suppliers & for FLT s travel experiences businesses Australian leisure business generates about 50% of group profit

5 Corporate Travel Continued Sales Growth: $6.6b in FY17 TTV, consolidating FLT s position as one of the world s largest travel managers Underlying Strength: Almost 9% year-on-year TTV growth on constant currency basis Brand Diversity: Specialist SME, TMS, MICE, education, entertainment businesses System Enhancements: Ongoing upgrades to leading technology & product suite Going Global: Expansion into 8 new countries during FY17 12 in past 3 years

6 Travel Experience Network Greater control over customer offering Tour Operators Ability to create unique products Hotel Management Destination Management Companies (DMCs) Distribution via FLT shop & corporate business network Margin vertical integration New external revenue streams B2B & B2C Sales

7 FY17: A Snapshot Key Targets Achieved Highlights Lowlights $20b + TTV $1b+ in online leisure TTV PBT within targeted range (but below FY16) Record global sales Accelerated 2H growth Balance sheet strength Acquisitions in key countries & sectors Successfully executing key strategies productivity, product development, core sector growth, better cost control Airfare deflation Lower cost growth, but increase outpaced revenue growth FX affecting result translation Underperformance in some countries & businesses Political uncertainty early in 1H

8 Financial Results Achieved $20b+ TTV target 21st year of growth in 22 years since listing Reasonable cost control in low revenue growth trading cycle $9m increase in D&A expense reflects higher capital expenditure in recent years 30bps decline in underlying revenue margin changing business mix (large corporate & online growth) Underlying PBT adjustments: FY17: $4m for cost of exiting Employment Office FY16: $25m impairment charges, $6m gain on sale of NZ building and $11m gain from ACCC fine refund Profit & Loss PCP Mov't AUD $m FY17 FY16 % Group TTV 20,109 19,305 4% Operating revenue 2,647 2,612 1% Other revenue % Total revenue 2,677 2,642 1% Other income 4 14 (68%) Employee benefits (1,451) (1,433) 1% Marketing expense (200) (199) 0% Finance costs (29) (29) (0%) D&A (75) (66) 13% Other expenses (601) (584) 3% PBT (6%) Underlying PBT (7%) Basic EPS (cents) (6%) Margins Underlying Revenue Margin 13.3% 13.6% (30bps) Underlying PBT Margin 1.6% 1.8% (20bps) Marketing % TTV 1.0% 1.0% -

9 Financial Results Underlying Half Year Comparison 1H 1H PCP Mov't 2H 2H PCP Mov't Full Year Full Year PCP Mov't AUD $m Dec-16 Dec-15 % Jun-17 Jun-16 % % Group TTV 9,343 9, % 10,766 10, % 20,109 19, % Revenue 1,251 1, % 1,426 1, % 2,677 2, % Underlying Income Margin % 13.4% 13.6% (20bps) 13.2% 13.7% (50bps) 13.3% 13.6% (30bps) Other Income 4 11 (64.7%) 1 (3) 117.1% 4 7 (42.2%) Total Costs (1,142) (1,112) 2.7% (1,210) (1,174) 3.1% (2,351) (2,286) 2.9% Underlying PBT (22.4%) % (6.5%) Underlying PBT Margin % 1.2% 1.6% (40bps) 2.0% 2.0% - 1.6% 1.8% (20bps) Accelerated 2H Growth 6.4% 2H TTV growth, after 1.8% 1H growth 4.7% underlying 2H PBT increase, after 22.4% 1H decrease 2% underlying 2H PBT margin, after 1.2% 1H result

10 Financial Results Underlying TTV Growth (constant currency) Leisure Corporate Total PCP Mov't PCP Mov't PCP Mov't % % % Australia & New Zealand 5.8% 3.8% 5.4% Americas 9.1% 5.4% 5.6% EMEA 8.9% 16.8% 11.7% Asia 81.6% 18.2% 25.3% Other n/a n/a 1.0% Total 7.4% 8.7% 7.1% $804m year-on-year increase in TTV during FY17, despite deflation & FX impacts 7.1% growth on constant currency basis Growth within all major regions Strong growth in online leisure TTV Solid corporate growth globally & in all major geographies Ticket volume growth in Australia well above TTV growth as a result of international fare deflation

11 Sales Growth Outpacing Industry Growth FY17 Growth (%) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Australian Outbound Departures FLT Australian Leisure TTV FLT International Tickets (ex Australia)

12 Productivity Gains Productivity Growth in Local Currency PCP Mov't in thousands FY17 FY16 % India INR 24,904 17, % China CNY 6,299 5, % Hong Kong HKD 5,534 5, % South Africa ZAR 5,046 4, % UAE AED 2,618 2,621 (0.1%) Malaysia MYR 1, % Australia AUD 1,145 1, % United States USD 1,143 1, % Singapore SGD 1, % New Zealand NZD 1, % Canada CAD % United Kingdom GBP % Driving Productivity Growth Tech & system changes The right product & margin Person-to-person Enquiry & conversion Online & blended sales FLT s Key Productivity Metric is TTV Per Person

13 Strategic Acquisitions Leisure Ignite Sunny Travel Partners Travel Managers Strategic Rational Date Completed Segment Ownership Voucher-based model selling unique product offers direct & via shop network Provides FCTG the required licence to sell outbound travel to Chinese nationals Expansion of Australia leisure business into independent contractor & affiliate models Sep-16 Aust & NZ 49% Oct-16 Asia 100% n/a Aust & NZ 100% Expansion of New Zealand leisure into brokers & franchisee models n/a Aust & NZ 100% Travel Tours Expansion of India's leisure business Feb-17 Asia 100% Corporate Nordics & Germany Further expansion of corporate business into Europe and access to inhouse developed OBT technology Dec-16 EMEA 100% 3Mundi (France) Further geographical expansion into Europe through acquisition of high performing FCM Licensee Jun-17 EMEA 25% Bibam Access to new technology, potential low cost base for future IT development and geographical expansion Apr-17 Americas 24.1% Les Voyages Laurier du Vallon Increased market share within Quebec region and synergies with existing operations Aug-17 Americas 75% Executive Travel Increased corporate market share within New Zealand n/a Aust & NZ 100% Travel Experiences Buffalo (Vietnam) Olympus BHMA Expansion of existing DMC network to include Vietnam providing a dominate DMC presence across Asia Apr-17 Other 58.5% Geographical DMC presence in Central America and the Caribbean Aug-17 Other 100% Expansion of Travel Experience Network offerings through the acquisition of Jul-17 Other 100% hotel management operating platform and specialist IP

14 FY17: Challenges Airfare Deflation Impacted top & bottom-line results Cost Growth Modest cost increase during FY17 but growth exceeded revenue growth in low-fare environment Cost increases inevitable, but strategies in place to slow future growth FX Adversely Affected Result Translation 7% TTV increase at constant currency $8m impact on PBT UK profit up 9% in LC but down 10% in AUD Underperformance in Some Countries & Businesses Asia, touring businesses Political Uncertainty Early in 1H Elections, Brexit

15 Financial Results Australia & New Zealand Segment PCP Mov't AUD $m FY17 FY16 % TTV 11,707 11,080 6% External Revenue 1,472 1,442 2% Underlying PBT (7%) Sales Teams 1,752 1,760 (0%) Margins Revenue Margin 12.6% 13.0% (40bps) Underlying PBT Margin 2.2% 2.5% (30bps) Note: Underlying Profit Before Tax and Royalty FY16 adjusted by $6m gain on sale of NZ building Australia/NZ Result Overview Record TTV in both countries but profits down 7% Corporate growth in relatively flat market driven largely by account wins, successful focus on client retention $2.6b in corporate TTV in Australia & NZ Leisure profits down slightly in Australia, despite record TTV & strong ticket volume growth All brands profitable in Australia, apart from MAT (close to break-even) & emerging OTAs Income margin contraction brought about by changing business mix (large corporate & rapid OTA growth)

16 Financial Results EMEA Segment PCP Mov't AUD $m FY17 FY16 % TTV 2,682 2,760 (3%) External Revenue (7%) PBT (5%) Sales Teams % Margins Revenue Margin 13.3% 14.0% (70bps) PBT Margin 2.3% 2.3% - Note: Profit Before Tax and Royalty EMEA Results Overview Region generated circa 20% of group profit & record sales (up 12% in LC) but translation heavily impacted by FX Strong UK results in LC Significant expansion on Continental Europe (acquisitions) Strong South Africa results & expansion into Namibia Reduced profit contribution from UAE Productivity gains through business improvement & new in-store systems in UK

17 Financial Results Americas Segment PCP Mov't AUD $m FY17 FY16 % TTV 4,304 4,227 2% External Revenue % Underlying PBT % Sales Teams (4%) Margins Revenue Margin 11.7% 11.5% 20bps Underlying PBT Margin 0.8% 0.5% 30bps Note: Underlying Profit Before Tax and Royalty FY16 adjusted by $12m impairment charge Americas Result Overview Region generated circa 10% of group profit Record profit & sales contribution underpinned by strong corporate results, StudentUniverse & slight decrease in leisure & wholesale losses Strong turnaround in Canada $US1b in corporate TTV in the USA for 1st time Increased leisure & wholesale productivity GOGO wholesale business downsized Starting to reduce leisure footprint Opening lower cost micro-stores in key US malls & centres

18 Financial Results Asia Segment PCP Mov't AUD $m FY17 FY16 % TTV 1, % External Revenue % PBT (3) (3) 0% Sales Teams % Margins Revenue Margin 7.4% 8.5% (110bps) PBT Margin (0.3%) (0.4%) 10bps Note: Profit Before Tax and Royalty Asia Result Overview Solid TTV growth topped $1b for 1 st time - but small overall loss Good Mainland China results offset by modest losses in Hong Kong, Singapore (now restructured) & India Travel Tours acquisition Regional leadership team now in place for Singapore, Malaysia & Greater China Stronger FY18 expected consolidated Asia structure, reduced leisure losses, some shops & ancillary businesses closed

19 Financial Results Other Segment PCP Mov't AUD $m FY17 FY16 % TTV (1%) External Underlying Revenue External Revenue % 9% Underlying PBT (22) (11) (98%) Sales Teams 6 6 0% Margins Revenue Underlying Margin Revenue Margin 75.0% 71.1% 68.0% 390bps 700bps Underlying PBT Margin (6.3%) (3.1%) (320bps) Note: Underlying Profit Before Tax and Royalty FY16 adjusted by $13m impairment charge and $11m ACCC fine refund FY17 adjusted by $4m cost of exiting Employement Employment Office Result Overview Includes FLT s global businesses (TEN + others) TTV decrease largely due to FX Solid contribution from Buffalo Tours DMC (now expanded) Significant negative swing in touring businesses profits (circa $10m) despite solid passenger number growth Brought about by operational issues (now rectified) in Top Deck, translation & FEC losses Improvement expected FY18 Segment result will also include Olympus & BHMA

20 Financial Results Trade receivables increase due to turnover growth & new corporate client wins on account Financial assets include external investments & repurchase agreement entered into during FY16 Other non-current assets increased by $25.5m due to the Buffalo investment & $8m increase in related party loans to 3Mundi & Buffalo PPE & intangible increase due to network enhancements, acquisitions & head office relocations Borrowings reduced by 27% due to decrease in repurchase arrangements General cash of $426m + $104m in general investments (externally managed funds) Strong positive net debt position - $474m Balance Sheet 30-Jun 30-Jun PCP Mov't AUD $m % Assets Cash & cash equivalents 1,282 1,316 (3%) Trade & other receivables % Financial assets (2%) Other current assets % Current assets 2,338 2,263 3% PPE % Intangibles % Other non-current assets % Non-current assets % Total assets 3,195 3,003 6% Liabilities Trade payables & other liabilities 1,579 1,490 6% Borrowings (27%) Current liabilities 1,635 1,567 4% Trade payables & other liabilities % Provisions % Non-current liabilities % Total liabilities 1,767 1,657 7% Net assets 1,429 1,346 6% General cash (16%) General investments % Client cash % Client investments (8%) Total cash & investments 1,482 1,521 (3%) Positive net debt (11%)

21 Financial Results $295m operating cash inflow recorded Year-on-year movement driven by timing of airline payment cycle (BSP) & increased corporate travel debtors. Net cash impacts of FY17 acquisitions include: Buffalo ($24m) Ignite ($10m) Bibam ($9m) Europe Corporate business ($6m) Travel Tours ($3m) 3Mundi ($3m) Reduced cap-ex in 2H FY17 with completion of new South Point HO in 1H FY17. FY18 cap-ex targeted to be below $100m $26m reduction in short-term borrowings used for investment purposes. Cash Flow Statement AUD $m FY17 FY16 Operating activities Operating activities before interest and tax Net interest and tax paid (103) (110) Cash flow from operating activities Investing activities Acquisitions (57) (56) Sale of PPE - 17 Purchases of PPE and intangibles (104) (121) Purchases of financial assets (1) (139) Other investing cash flows 1 8 Cash flow from investing activities (161) (290) Financing activities Financing activities before dividends (18) 48 Dividends paid (138) (158) Cash flow from financing activities (156) (110) Increase/(decrease) in cash held (22) (44) FX impact (12) (19) Cash and cash equivalents 1,282 1,315 General cash (excl. Investments) Client cash Bank overdraft - (1) Total cash 1,282 1,315

22 Business Transformation Program Launched March Year Timeline Focus on Core Businesses & Vertical Integration TTV Growth & Cost Efficiencies Team of Senior Executives, Backed by External Resources When Required Medium-Term Goals in Place

23 Transformation Targets Profitable, Scalable Growth TTV Growth Targeting 7% per annum growth on average in constant currency Equals $4.5b TTV growth over next 3 years Efficiency Every business & brand in every geography in material profit All current loss-making businesses pivoted & profitable or divested/closed within three years Lower cost growth less than $100m in constant currency during FY18 (FY17: circa $130m in constant currency) Net Margin Targeting a return to 2% PBT as percentage of TTV within 3 to 5 years (subject to business mix) Medium-term transformation goals will be monitored and amended as FLT finetunes its strategies, as market conditions change and as business mix shifts. FLT will continue to provide separate annual guidance

24 Key Initiatives Digital Commerce Growth Globalisation Air, Land & IT Investment in Growth Brands & Business Models in Leisure, Corporate & Travel Experience Network Controlling Costs & Improving Efficiency

25 Digital Commerce Online Completion $1B Platforms & Tech DIGITAL COMMERCE Online Origination Online Completion Online Origination $4B+ * Digital Commerce Team 300+ Countries Served 10+

26 Record Online Leisure Sales $1b+ in TTV During FY17 Student Universe flightcentre.com.au BYOjet & Aunt Betty Other Targeting an additional 30% TTV growth during FY18

27 Progress Update Multiproduct Platform Investing in scalable travel tech Best Practice Sharing Internal consulting and synergies Conversion Rate Optimization Testing, UX/UI, rebuilding Enquiry Management Tech Matching, tracking, converting Mobile Services Responsive sites and native apps Surfacing Unique Content Hotels online and more Marketing Involvement SEO, PPC, automation, brand Modern UX and UI Process Making it easier to buy from us

28 Building for Scale Platform Flight Centre Escape Travel Student Flights OTHER... CUSTOM FEATURES PLATFORM FEATURES Leverage work on one platform across multiple brands Set up FLT for shared services with worldwide contribution Improve our speed to market across portfolio Reduce overall cost of development and associated risks

29 Growth Brands & Models Ensuring every brand in every geography is materially profitable Rigorous market & business model analysis of every business in every geography Underperforming business models to pivot within 3 years or be divested/closed Investment to accelerate growth of successful business models Further investment in tech solutions to improve enquiry management & enhance conversion

30 Globalisation Air New air revenue streams & business models Centralised ticketing structure on the way (currently regionalised) Land Global DMC, touring & hotel networks now being created Enhancing global procurement & distribution networks wholesale & external B2B sales IT Strengthening the IT backbone infrastructure, PCI Microsoft Dynamics global deployment (Australia roll-out to start FY18) New in-store systems now almost fully deployed Australia roll-out underway Corporate system enhancements & further world class customer technology (Sam:])

31 Cost Reduction Strategies Staffing Globalisation, offshoring & outsourcing System streamlining & automation Redundancies (completed in Australia) Consultant productivity enhancements Real Estate Better utilisation & leasing efficiencies Slower growth (people & teams) & reduced physical network Walk away from leases where commercials are unacceptable Cap-ex Spending starting to decrease, which will lead to lower future depreciation & amortisation expense Stronger Network Returns Focus on core sectors Removal of lossmaking businesses

32 Progress Update Costs Modest FY17 growth well below historic averages ($150m per year between FY07 & FY16, $655m increase in 3 years between FY13 & FY16) Redundancy program Australia & Global Travel Money USA closed Cruiseabout Canada closed Student Flights South Africa & NZ absorbed into Flight Centre brand US wholesale & Canada leisure downsized Singapore & Hong Kong leisure pivot & ancillary businesses closed (Singapore) Growth Investment in low-cost & scalable leisure models, including Independent Contractor model in Australia & NZ Ongoing e-commerce developments New corporate businesses acquired in NZ & Canada, recent acquisitions being integrated 1 st investment in accommodation sector (BHMA acquisition) Further progress in strategy to create global DMC Olympus acquisition Voucher-based business model to compete in growth sector Get Luxe Brand rationalisation & regionalisation in Asia (leadership & support structures)

33 Voucher Based Unique Product Model Get Luxe

34 Independent Contractor/Home-Based Model Strong growth sector globally Lower cost model Access to new talent pool of highly experienced agents Greater flexibility & new career opportunities for FLT staff Added convenience & choice for customers New distribution channels for FLT's manufactured products

35 FY18 Outlook Positive Momentum: Stronger 2H results achieved after tough 1H Growth Expected: Targeting continued sales growth & return to profit growth Income Margin: Growth in lower margin sectors (online, multi-national corporate, FX) likely to drive modest short-term decline Focus on Core Business: Improvement prospects in Leisure, Corporate & Indestination travel experiences Too Early to Provide FY18 Guidance: Impossible to predict likely conditions after just one month of trading Specific FY18 Targets to Be Outlined After Q1: Guidance to be provided at AGM (November 2017)

36 Outlook: Network Growth Modest expansion globally during FY17 1.8% increase in sales teams, circa 1% increase in sales consultants Primary focus on network enhancements & productivity improvement during FY18 modest overall growth expected Some businesses being pivoted or downsized (Asia & Americas), some shops being closed & teams relocated to better sites Ongoing growth in lower cost models Sales staff numbers in Australia to decrease during 1H as new in-store systems are embedded (fully deployed by January 2018)

37 End of Presentation Questions?

38 Appendix 1: Results By Country Canada TTV: $1.2b, up 1% in AUD (up 4% in lc) AUD EBIT: $7.6m BUSINESSES: 223 USA & Mexico TTV: $3.1b, up 2% in AUD (up 6% in lc) AUD EBIT: $24.7m BUSINESSES: 281 Europe United Kingdom TTV: $170m, up 170% in AUD AUD EBIT: ($1.9m) BUSINESSES: 20 TTV: $1.9b, down 11% in AUD (up 8% in lc) AUD EBIT: $44.8m BUSINESSES: 283 South Africa UAE TTV: $547m, up 11% in AUD (up 8% in lc) AUD EBIT: $12.9m BUSINESSES: 199 India TTV: $92m, down 12% in AUD (down 9% in lc) AUD EBIT: $1.0m BUSINESSES: 13 TTV: $571m, up 36% in AUD (up 40% in lc) AUD EBIT: $0.1m BUSINESSES: 128 Australia TTV: $10.6b, up 5% AUD EBIT: $242.9m BUSINESSES: 1,547 Greater China TTV: $281m, up 5% in AUD (up 8% in lc) AUD EBIT: $0.0m BUSINESSES: 42 South East Asia TTV: $209m, up 8% in AUD (up 13% in lc) AUD EBIT: ($1.8m) BUSINESSES: 19 New Zealand TTV: $1.1b, up 10% in AUD (up 7% in lc) AUD EBIT: $17.1m BUSINESSES: 205

39 Appendix 2: Historical Results 5 Year Summary 30-Jun 30-Jun 30-Jun 30-Jun 30-Jun AUD $m FY17 FY16 FY15 FY14 FY13 TTV $ 20,109 m $ 19,305 m $ 17,598 m $ 16,049 m $ 14,259 m Income margin 13.3% 13.7% 13.6% 14.0% 13.9% EBITDA $ m $ m $ m $ m $ m PBT (actual) $ m $ m $ m $ m $ m PBT (underlying) $ m $ m $ m $ m $ m NPAT $ m $ m $ m $ m $ m EPS c c c c c DPS c c c c c ROE 16.2% 18.2% 20.2% 18.8% 24.0% Cap-ex (Cash flow) $ m $ m $ 82.9 m $ 55.4 m $ 51.4 m Selling staff 15,118 14,760 14,433 13,575 12,701 General cash $ m $ m $ m $ m $ m Client cash $ m $ m $ m $ m $ m Cash and cash equivalents $ 1,281.6 m $ 1,316.0 m $ 1,378.0 m $ 1,261.6 m $ 1,227.0 m Financial Asset Investments $ m $ m $ 75.7 m $ 41.2 m $ 36.8 m Cash and investments $ 1,481.6 m $ 1,520.5 m $ 1,453.7 m $ 1,302.8 m $ 1,263.8 m

40 Appendix 3: Breaking News New Marketing Initiatives 48 Hour Destination New Travel Show 13-part travel show, featuring Flight Centre consultant Greer Gardiner High profile new ad campaign now underway. First episode airs Sunday (August 27) on Channel 10 or tenplay.com.au