APPENDIX 4D FLIGHT CENTRE LIMITED (FLT) ABN 25 003 377 188 FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Table of contents Financial report and Appendix 4D For the half-year ended Contents Page Results for announcement to the market 2 Half-year financial report Directors' report 3 Auditor s independence declaration 6 Consolidated balance sheet 7 Consolidated income statement 8 Consolidated statement of comprehensive income 9 Consolidated statement of changes in equity 10 Consolidated statement of cash flows 11 Notes to the financial statements 12 Directors' declaration 20 Independent auditor s review report 21-1 -
ASX Appendix 4D For the half-year ended Results for announcement to the market Results in brief Dec 2011 $m Dec 2010 $m Change $m Change % Total transaction value (TTV) 1 6,180.7 5,668.4 512.3 9.0% Revenue 2 954.1 916.6 37.5 4.1% Gross profit 857.5 791.6 65.9 8.3% Net profit before tax 119.7 101.1 18.6 18.4% Net profit after tax 81.6 70.5 11.1 15.7% 1. Total transaction value (TTV) does not represent revenue in accordance with Australian Accounting standards. TTV represents the price at which travel products and services have been sold across the group's various operations, as agent for various airlines and other service providers, plus revenue from other sources. Flight Centre's revenue is, therefore, derived from TTV. 2. Revenue from the sale of travel services is recorded at the time of issuing travel documents, consistent with an agency relationship. A portion of the United Kingdom (UK) business recognises revenue on an availed basis under a principal relationship, due to the different rules and regulations governing Flight Centre s operations in the UK. The revenue from the sale of travel services and the cost of travel services is disclosed separately for all principal relationships. The treatment in the UK has no influence on the overall group s operations as an agent. Dividends Amount per Security Cents 100% Franked Amount Cents Interim dividend 3 41.0 41.0 30 June 2011 Interim dividend 36.0 36.0 Final dividend 4 48.0 48.0 3. The record date for determining entitlements to the interim dividend of 41.0 cents per share is 16 March 2012. The payment date for the interim dividend is 13 April 2012. 4. Final dividend of 48 cents per share for the year ended 30 June 2011 was declared 23 August 2011. Net tangible assets Dec 2011 $ Dec 2010 $ Net tangible asset backing per ordinary security 4.23 3.28 The report is based on accounts which have been reviewed by the auditor of Flight Centre Limited. There have been no matters of disagreement and a report of its review appears in the half-year financial report. - 2 -
Directors' report Directors' report Your directors present their report on the consolidated entity consisting of Flight Centre Limited and the entities it controlled at the end of, or during, the half-year ended. Directors The following persons were directors of Flight Centre Limited for the full half year and up to the date of this report: G.F. Turner P.R. Morahan P.F. Barrow G.W. Smith Review of operations and results Results overview Flight Centre Limited (FLT) today announced record first half results. The company grew strongly during the six months to December 31 to surpass its previous profit and sales milestones for the period. Profit before tax (PBT) reached $119.7million and was 18% higher than the record $101.1million PBT achieved during the previous corresponding period. Net profit after tax (NPAT) increased 16% to $81.6million. TTV increased 9% to $6.2billion, while gross profit was $858million, up 8%. Income margin was 13.9%. The company continued to expand its sales network globally by opening new shops and businesses, developing and exporting brands and growing its sales force. Sales staff numbers increased 8% year-on-year to 11,866, while shop numbers increased 6% to 2,313. At December 31, 80% of FLT s 14,840 people were in sales roles. Balance sheet, cash and cash flow FLT s global cash and investment portfolio totalled $800million at December 31, 2011, compared to $731million one year earlier. General cash represented $317million of this portfolio, up from $250million at the previous corresponding half year. Total debt was $170million, giving FLT a $147million positive net debt position. The company recorded a $20million operating cash outflow during its seasonally weaker first half. This compares to a $115million outflow during the previous corresponding period. FLT s typical cash flow pattern sees a moderate outflow during the six months to December 31, followed by a large inflow during the six months to June 30, as funds accumulate during peak second half booking periods for payment to suppliers after peak travel periods during the following first half. Operational review First half highlights included: EBIT profits in nine of FLT s 10 regions, with strongest profit growth coming from Australia, the UK and Dubai, plus the Canada and US corporate travel businesses A 52% reduction in overall US losses during the business s seasonally slower trading period TTV growth in all countries when measured in local currencies; and Strong sales growth from the rapidly expanding US corporate travel business and the emerging Dubai and Singapore businesses. FLT s retail travel businesses in China and Hong Kong also recorded strong sales increases from a small base. - 3 -
Directors' report (continued) FLT s top and bottom-line growth coincided with significant investment in the core leisure and corporate travel business and in emerging areas with solid growth prospects. This investment included: Global sales network growth Enhanced front and back office systems, including the successful stage one rollout of the new Universal Desktop for sales consultants in Australia, New Zealand and South Africa; and Investment in FLT s people and customers through new training programs and other initiatives that have been designed to improve interaction and service, whether the customer chooses to interact online or offline At an operational level, the strong UK result was particularly pleasing, given the challenging local trading conditions. In the US, solid overall sales growth contributed to the improved result, with TTV increasing 24% in Australian dollar terms or 36% in local currency. This was largely driven by the corporate business, which generated 39% of first half TTV in the USA. In Australia, the corporate businesses again performed strongly, while the leisure business again benefitted from the combination of cheap international airfares and a strong dollar. Outlook 2011 / 12 FLT s solid start to 2011/12 was built around a strong first quarter globally. Growth slowed in Australia during the second quarter, before rebounding in January. With January s improved trading results included, FLT s PBT for the first seven months increased 20-22%, compared to the previous corresponding period and above FLT s initial full year target of 8-12% PBT growth. FLT will now target 10-18% full year growth (excluding any major abnormal items that may arise and assuming stable trading conditions), which will deliver a result between $270million and $290million. To achieve its full year profit target, the company needs to build on the record second half result achieved last year. This is not a formality, as economic conditions are uncertain in some countries and regions ahead of what is traditionally FLT s busiest trading period. To improve performance in both the short and long-term, the company continues to focus on seven key areas globally: 1. Retail efficiency and productivity 2. Area leader role and One Best Way area 3. Global corporate growth 4. Enquiry management 5. Customer care improvements 6. Supplier relations Emerging businesses Another focus throughout the business, and in Australia in particular, is ensuring that customers can interact with FLT at the times and in the ways that best suit them. Consequently, more shops are now trading outside normal work hours and online offerings including booking facilities are constantly being enhanced to suit those who want to research or make their own arrangements. The aim is to offer customers a blended on and offline solution, which will be a key point of difference in the future. - 4 -
Dividends - Flight Centre Limited Flight Centre Limited Directors' report (continued) FLT s directors today declared a 41.0 cents per share fully franked interim dividend payable on 13 April 2012 to shareholders registered on 16 March 2012. This represents a 50% return of after-tax profit to shareholders, in line with FLT s current policy of returning 50-60% of after-tax profit, subject to the business s needs. The interim dividend paid for the half-year ended 31 December 2010 was 36.0 cents per share. The board will continue to consider FLT s growth requirements, its current cash position, market conditions and the need to maintain a healthy balance sheet, when determining future returns. Matters subsequent to the end of the financial year There are no significant events after the end of the reporting period which have come to our attention. Auditor s independence declaration A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 6. Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the directors' report and financial statements. Amounts in the directors' report and financial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order. This report is made in accordance with a resolution of directors. G.F. Turner Director 21 February 2012-5 -
Auditor s Independence Declaration As lead auditor for the review of Flight Centre Limited for the half-year ended, I declare that to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and b) no contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Flight Centre Limited and the entities it controlled during the period. Steven Bosiljevac Brisbane Partner 21 February 2012 PricewaterhouseCoopers PricewaterhouseCoopers, ABN 52 780 433 757 123 Eagle Street, Brisbane, QLD 4000 DX 77, Brisbane, QLD 4000 T +61 7 3257 5000, F +61 7 3257 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. - 6 -
Consolidated Balance Sheet Restated As at 30 June As at 31 December 2011 2011 Notes ASSETS Current assets Cash and cash equivalents 7 746,678 890,374 Available-for-sale financial assets 48,875 60,119 Financial assets at fair value through profit and loss 4,790 4,790 Trade and other receivables 379,960 404,708 Current tax receivables 11,033 10,130 Inventories 1,305 1,060 Derivative financial instruments 562 - Other assets 8 32,920 6,667 Total current assets 1,226,123 1,377,848 Non-current assets Property, plant and equipment 142,607 138,923 Intangible assets 9 353,069 345,374 Investments accounted for using the equity method 7,375 5,897 Deferred tax assets 53,554 52,403 Other assets 8 40,758 5,304 Total non-current assets 597,363 547,901 Total assets 1,823,486 1,925,749 LIABILITIES Current liabilities Trade and other payables 784,194 901,042 Borrowings 107,630 99,174 Provisions 13,585 11,980 Current tax liabilities 33,002 57,479 Derivative financial instruments 1,100 4,845 Total current liabilities 939,511 1,074,520 Non-current liabilities Trade and other payables 18,594 17,479 Borrowings 62,102 68,601 Provisions 21,360 17,913 Deferred tax liabilities 5,512 6,499 Derivative financial instruments 155 121 Total non-current liabilities 107,723 110,613 Total liabilities 1,047,234 1,185,133 Net assets 776,252 740,616 EQUITY Contributed equity 10 382,147 381,308 Reserves (73,521) (74,741) Retained profits 467,626 434,049 Total equity 776,252 740,616 The above Balance Sheet should be read in conjunction with the accompanying notes. - 7 -
Consolidated Income Statement Half-year ended 31 December 31 December 2011 2010 Notes $ 000 $ 000 Revenue Revenue from the sale of travel services 2 817,159 751,625 Revenue from the sale of travel as principal 2 110,900 143,298 Other revenue 2 26,017 21,704 Total revenue 954,076 916,627 Cost of travel as principal (96,574) (125,055) Gross profit 857,502 791,572 Other income 3 2,875 3,059 Expenses Selling expenses (595,574) (549,169) Administration / support expenses (128,663) (121,905) Finance costs 4 (16,181) (15,402) Other expenses 4 - (6,728) Share of profit / (loss) of joint venture and associates accounted for using the equity method (262) (307) Profit before income tax expense 119,697 101,120 Income tax expense (38,132) (30,630) Profit attributable to members of Flight Centre Limited 81,565 70,490 Earnings per share for profit attributable to the ordinary equity holders of Cents Cents the company: Basic earnings per share 6 81.6 70.6 Diluted earnings per share 6 81.0 69.9 The above Income Statement should be read in conjunction with the accompanying notes. - 8 -
Consolidated Statement of Comprehensive Income Half-year ended 31 December 31 December 2011 2010 $ 000 $ 000 Profit attributable to members of Flight Centre Limited 81,565 70,490 Other comprehensive income Changes in the fair value of available-for-sale financial assets 640 1,255 Changes in the fair value of cash flow hedges 366 1,553 Net exchange differences on translation of foreign operations (200) (27,782) Income tax on items of other comprehensive income (282) (998) Other comprehensive income 524 (25,972) Total comprehensive income for the period attributable to members of Flight Centre Limited 82,089 44,518 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. - 9 -
Consolidated Statement of Changes in Equity Contributed Retained equity Reserves earnings Total Balance at 1 July 2010 378,931 (43,081) 374,802 710,652 Profit for the year - - 70,490 70,490 Other comprehensive income - (25,972) - (25,972) Total comprehensive income for the period - (25,972) 70,490 44,518 Transactions with owners in their capacity as owners: Employee share-based payments 233 1,008-1,241 Dividends provided for or paid - - (43,905) (43,905) Balance at 31 December 2010 379,164 (68,045) 401,387 712,506 Balance at 1 July 2011 381,308 (74,741) 434,049 740,616 Profit for the year - - 81,565 81,565 Other comprehensive income - 524-524 Total comprehensive income for the period - 524 81,565 82,089 Transactions with owners in their capacity as owners: Employee share-based payments 839 696-1,535 Dividends provided for or paid - - (47,988) (47,988) Balance at 382,147 (73,521) 467,626 776,252 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. - 10 -
Consolidated Statement of Cash Flows Half-year ended Restated 31 December 31 December 2011 2010 Notes Cash flows from operating activities Receipts from customers (including GST) 972,000 905,557 Payments to suppliers and employees (including GST) (933,035) (976,116) Interest received 22,967 18,853 Royalties received 269 277 Dividends received 261 388 Interest paid (17,568) (15,561) Income taxes paid (65,093) (48,458) Net cash (outflow) from operating activities (20,199) (115,060) Cash flows from investing activities Payment for purchase of businesses (net cash outflow) (2,001) (5,281) Payments for property, plant and equipment (23,626) (22,738) Payments for intangibles (3,816) (2,028) Proceeds from sale of investments 12,010 24,612 Loans advanced to related parties (2,618) (2,356) Loans repaid by related parties 1,043 299 Net cash (outflow) from investing activities (19,008) (7,492) Cash flows from financing activities Proceeds from borrowings 28,967 24,773 Repayment of borrowings (87,973) (15,988) Proceeds from issue of shares 856 487 Dividends paid to company's shareholders 5 (47,988) (43,905) Net cash (outflow) from financing activities (106,138) (34,633) Net decrease in cash held (145,345) (157,185) Cash and cash equivalents at the beginning of the half year 885,238 816,300 Effects of exchange rate changes on cash and cash equivalents 1,899 (6,641) Cash and cash equivalents at end of the half year 7 741,792 652,474 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. - 11 -
Notes to the financial statements (continued) 1 Summary of significant accounting policies This general purpose financial report for the interim half-year reporting period ended has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by Flight Centre Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. The group has not elected to adopt any new or amended financial reporting standards during the half-year ended 31 December 2011. Improvements in our accounting processes during the year have highlighted an equal and offsetting overstatement of client cash and client creditors that has been corrected. Comparative financial information has been restated for consistency resulting in a decrease in client cash and client creditors at June 2011 of $84,551k, at Dec 2010 of $65,193k and June 2010 of $76,598k. These adjustments have no real cash impact, no impact at a net current asset or net asset level and no income statement impact. 2 Revenue Half-year ended 31 December 31 December 2011 2010 Total transaction value (TTV) 1 6,180,694 5,668,371 Revenue from the sale of travel services Commission and fees from the provision of travel 581,992 530,231 Revenue from the provision of travel 189,285 175,520 Other revenue from travel services 45,882 45,874 817,159 751,625 Revenue from the sale of travel as principal 110,900 143,298 Other revenue Rents and sub-lease rentals 2,573 2,420 Interest 23,202 19,033 Royalties 242 251 26,017 21,704 1. Total transaction value (TTV) does not represent revenue in accordance with Australian Accounting Standards. TTV represents the price at which travel products and services have been sold across the group's various operations, as agent for various airlines and other service providers, plus revenue from other sources. Flight Centre's revenue is derived from TTV. - 12 -
Notes to the financial statements (continued) Half-year ended 31 December 31 December 2011 2010 3 Other income Net foreign exchange gains 2,875 - Gain on revaluation of investment - 744 Gain on sale of financial assets at fair value - 2,315 2,875 3,059 4 Expenses Profit before income tax includes the following specific expenses: Depreciation, amortisation and impairment Depreciation and amortisation 24,855 23,771 Finance costs Interest and finance charges paid / payable 16,181 15,402 Other expenses Net foreign exchange losses - 6,728 5 Dividends Ordinary shares Final fully franked ordinary dividend for the year ended 30 June 2011 of 48.0 cents (2010: 44.0) per fully paid share. 47,988 43,905 47,988 43,905 Dividends not recognised at the end of the half year In addition to the above dividends, since half-year end the directors have recommended the payment of an interim dividend of 41.0 cents (2010: 36.0 cents) per fully paid ordinary share fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 13 April 2012 out of retained profits at 31 December 2011, but not recognised as a liability at the end of the half year is $41,002k (2010: $35,925k). - 13 -
Notes to the financial statements (continued) Half-year ended 31 December 31 December 2011 2010 6 Earnings per share Basic earnings per share Cents Cents Profit attributable to the ordinary equity holders of the company 81.6 70.6 Diluted earnings per share Profit attributable to the ordinary equity holders of the company 81.0 69.9 Reconciliations of earnings used in calculating earnings per share Profit attributable to the ordinary equity holders of the company used in calculating basic and diluted earnings per share 81,565 70,490 Weighted average number of shares used as the denominator Number Number Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 99,976,129 99,785,461 Adjustments for calculation of diluted earnings per share: Options 731,391 1,000,000 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 100,707,520 100,785,461 7 Cash and cash equivalents As at 31 December Restated As at 30 June 2011 2011 Cash at bank and on hand 316,893 376,763 Client account 429,785 513,611 746,678 890,374 Reconciliation to Statement of Cash Flows Cash and cash equivalents 746,678 890,374 Bank overdrafts (4,886) (5,136) Balance per Statement of Cash Flows 741,792 885,238-14 -
Notes to the financial statements (continued) 8 Other assets As at 31 December As at 30 June 2011 2011 Current Loans for BOS debentures 31,038 4,778 Loans to related parties 1,882 1,889 Total current other assets 32,920 6,667 Non-current Loans for BOS debentures 33,685 - Loans to related parties 7,073 5,304 Total non-current other assets 40,758 5,304 9 Intangible assets Goodwill 283,010 275,467 Brand names and customer relationships 51,822 52,766 Other intangibles 18,237 17,141 353,069 345,374 Reconciliation of Goodwill Opening book value 275,467 325,682 Acquisitions - 15,812 PPA adjustments 513 293 Impairment - (27,917) Deferred consideration - 91 Exchange difference 7,030 (38,494) Closing book value 283,010 275,467 10 Contributed equity 31 December 30 June 31 December 30 June 2011 2011 2011 2011 Shares Shares Share capital Fully paid ordinary shares 100,005,264 99,953,554 382,147 381,308 11 Interests in joint ventures and associates Ownership Interest 31 December 2011 30 June 2011 Joint ventures Employment Office Australia Pty Ltd 50% 50% Intrepid Retail Group Pty Ltd 50% 50% Pedal Group Pty Ltd 50% 50% Back Roads Touring Co. Ltd 67% 75% - 15 -
Notes to the financial statements (continued) 12 Business combinations Prior year acquisition The Gapyear Company Limited (i) Summary of acquisition On 7 October 2010, Flight Centre (UK) Limited, a 100% subsidiary of FLT, purchased 80% of shares in The Gapyear Company Limited (Gapyear) for 800k. As part of the purchase agreement Flight Centre (UK) Limited also had an option to acquire the remaining 20% of shares from founder Tom Griffiths. The option means that Flight Centre (UK) Limited has effectively acquired a 100% interest in the subsidiary at the date of the business combination. As such no non-controlling interest will be recognised. This option was exercised on 1 September 2011 for the minimum payment. The contingent consideration was not required to be paid and was released to the income statement. The acquisition will allow cost effective generation of travel-related enquiry in the gap year niche market and generate advertising revenue. From the acquisition date to June 2011 year end, Gapyear contributed a $395k net loss and $207k revenue to FLT. Had the acquisition occurred on 1 July 2010, net loss for the year ended 30 June 2011 attributable to Gapyear would have been $399k and revenue of $328k. Flight Centre Limited has recognised the fair values of the identifiable assets and liabilities of Gapyear based at the reporting date. Business combination accounting is detailed below. These amounts have been calculated using the group's accounting policies. Details of the fair value of the assets and liabilities acquired and goodwill are as follows: Purchase consideration Cash paid 1,292 Contingent consideration 1 441 Deferred consideration 309 Total purchase consideration 2,042 Fair value of net identifiable assets acquired 44 Goodwill 1,998 1 Deferred and contingent consideration arose on acquisition in relation to the option to acquire the remaining 20% of shares. Deferred consideration has been recognised for the minimum payment required to acquire the remaining 20%. The fair value of contingent consideration of $441k was estimated by applying the income approach. The fair value estimates are based on a discount rate of 15.9% (group WACC at acquisition date) and assumed probability adjusted NPAT of Gapyear of between 785k and 873k. The goodwill is attributable to the increased access to the global gap year travel market which will contribute to overall revenue and profitability of the group. (ii) Purchase consideration cash outflow Outflow of cash to acquire subsidiary Cash consideration 1,292 Less: Cash acquired (44) Outflow of cash 1,248 (iii) Assets and liabilities acquired The assets and liabilities arising from the acquisition are as follows: Acquiree s carrying amount Fair value Cash and cash equivalents 44 44 Accounts receivable 100 100 Property, plant and equipment 27 27 Trade creditors (17) (17) Provision for tax (43) (43) Non current trade creditors (67) (67) Net identifiable assets acquired 44 44 (iv) Acquisition related costs Acquisition-related costs of $21k have been recorded as an expense in the income statement and in operating cash flows in the statement of cash flows. - 16 -
Notes to the financial statements (continued) 12 Business combinations (continued) Prior year acquisition Garber s Travel Service, Inc (i) Summary of acquisition On 17 December 2010, Flight Centre USA Inc. (a subsidiary of Flight Centre Limited) acquired the remaining 74% shareholding of Garber s Travel Service, Inc., a travel agency group based in Boston in the United States. From the acquisition date to 30 June 2011 year end, Garber contributed a net profit of $1.117M to FLT and revenue of $11.705M. Had the acquisition occurred on 1 July 2010, the net profit for the year ended 30 June 2011 attributable to Garber would have been $1.176M and revenue of $21.908M. These amounts have been calculated using the group's accounting policies and consequential tax effects. Flight Centre Limited has finalised the purchase price allocation for Garber s Travel Service, Inc. Final fair values are listed below. Purchase consideration Cash paid 10,485 Deferred consideration 713 Fair value of previously held equity interest 7,927 Total purchase consideration 19,125 Fair value of net identifiable assets acquired 5,503 Goodwill 13,622 A gain of $744k was recognised in revaluing the previously held equity interest to fair value at the date of acquisition and is reported in Other Income. The goodwill is attributable to the increased access to the United States corporate travel market which will contribute to overall revenue and profitability of the group. (ii) Purchase consideration cash outflow Outflow of cash to acquire subsidiary Cash consideration 10,485 Less: Cash acquired (6,486) Outflow of cash 3,999 (iii) Assets and liabilities acquired The assets and liabilities arising from the acquisition are as follows: Acquiree s carrying amount Fair value Cash and cash equivalents 6,486 6,486 Accounts receivable 1,216 1,216 Other assets 231 231 Property, plant and equipment 178 178 Investments 118 - Deferred tax assets 495 495 Trade and other payables (1,956) (1,956) Provisions (688) (1,147) Net identifiable assets acquired 6,080 5,503 The fair value of assets and liabilities acquired are based on book values with adjustments for tangible assets where the fair value can be measured reliably. Acquisition provisions were created of $651k for termination payments payable to three existing employees. Per the employee contracts, these termination payments were payable upon the acquisition of Garber by an external third party. (iv) Acquisition related costs Acquisition related costs of $213k have been recorded as an expense in the income statement and in operating cash flows in the statement of cash flows. - 17 -
Notes to the financial statements (continued) 13 Segment information (a) Identification and description of segments FLT has identified its operating segments based on the internal reports that are reviewed and used by the board and executive team (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The executive team currently consists of the following members: Managing Director Chief Financial Officer Executive General Manager Air, Land and IT Executive General Manager Marketing Executive General Manager Peopleworks; and Executive General Manager Asia The board and executive team consider, organise and manage the business from a geographic perspective, being the country of origin where the service was provided. Discrete financial information about each of these operating businesses is reported monthly to the board and executive team, via a group financial report. Three reportable segments have been identified based on the information included in the financial report, including the aggregation of five operating segments for Australia. The aggregation was on the basis of similarity of service provided, economic returns and regulatory environment. (b) Types of products and services FLT and its controlled entities operate predominately in the sale of travel and travel-related services industry. As indicated above, the group is organised and managed globally into geographic areas. (c) Accounting policies and inter-segment transactions The group s accounting policies in reporting segments internally are the same as those contained in the prior period accounts. If items of revenue and expense are not allocated to operating segments, then any associated assets and liabilities are also not allocated to segments, under FLT s policies. This avoids asymmetrical allocations within segments, which management believes would be inconsistent. (d) Segment information presented to the board of directors and executive team The segment information provided to the board of directors and executive team for the reportable segments for the period ended and 31 December 2010 is as follows: Australia United United All other States Kingdom segments Total $ 000 $ 000 $ 000 $ 000 $ 000 TTV 3,697,895 724,943 563,654 1,194,202 6,180,694 Total segment revenue 479,483 91,271 76,373 210,270 857,397 Adjusted EBIT 92,509 (3,337) 10,517 6,357 106,046 31 December 2010 TTV 3,390,849 586,422 522,100 1,169,000 5,668,371 Total segment revenue 440,053 83,214 71,963 200,114 795,344 Adjusted EBIT 85,034 (6,999) 8,868 6,553 93,456-18 -
(e) Segment information presented to the board and executive team Adjusted EBIT Flight Centre Limited Notes to the financial statements (continued) The board and executive team assess the performance of the operating segments based on a measure of adjusted EBIT. This measurement excludes the effects of non-recurring expenditure from the operating segments, deferred consideration and foreign exchange impacts on intercompany loans. A reconciliation of adjusted EBIT to operating profit before income tax is provided as follows: Consolidated 31 December 2011 $ 000 Consolidated 31 December 2010 $ 000 Adjusted EBIT 106,046 93,456 Interest expense (2,845) (4,281) Interest revenue 15,940 13,629 Net interest income / expense 13,095 9,348 Deferred consideration (11) 225 Foreign exchange gains/(losses) on intercompany loans 401 (3,720) Profit on revaluation of investment - 744 Other non-material items 166 1,067 Profit before income tax 119,697 101,120 There has been no material change in the assets of the three reportable segments since the last annual financial statements. 14 Contingencies Since the last annual reporting date, there has been no material change in any contingent assets or liabilities. No material losses are anticipated in respect of any contingent liabilities. 15 Events occurring after the end of the reporting period There are no significant events after the end of the reporting period which have come to our attention. - 19 -
Directors' declaration Directors' declaration In the directors opinion: (a) the financial statements and notes set out on pages 7 to 19 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the consolidated entity's financial position as at and of its performance for the half-year ended on that date; and (b) there are reasonable grounds to believe that Flight Centre Limited will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. G.F. Turner Director 21 February 2012-20 -
Independent auditor s review report to the members of Flight Centre Limited Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Flight Centre Limited, which comprises the balance sheet as at, and the income statement, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, selected explanatory notes and the directors declaration for the Flight Centre Limited Group (the consolidated entity). The consolidated entity comprises both Flight Centre Limited (the company) and the entities it controlled during that half-year. Directors responsibility for the half-year financial report The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Flight Centre Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Flight Centre Limited is not in accordance with the Corporations Act 2001 including: (a) giving a true and fair view of the consolidated entity s financial position as at and of its performance for the half-year ended on that date; and (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. PricewaterhouseCoopers Steven Bosiljevac 21 February 2012 Partner Liability limited by a scheme approved under Professional Standards Legislation. - 21 -