Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Flight Centre Travel Group Ltd (FGETF, Financial) achieved a record TTV of $23.7 billion, representing a 10% growth in both corporate and leisure segments.
- The company reported an underlying PBT of $320 million, which was within the midpoint of their guidance.
- Revenue margins improved by 100 basis points, reflecting better productivity and strategic initiatives.
- Corporate PBT increased by 44% year-on-year, with record profits for Corporate Traveller.
- The leisure division delivered its best performance in a decade, with a 110 basis point improvement in revenue margin and a net margin of 1.7% for the full year.
Negative Points
- TTV growth slowed in the second half due to deflation in key markets and lower growth rates in the corporate travel sector.
- The closure of GoGo and the Indian foreign exchange business negatively impacted overall performance.
- Operating cost base remains 15% below 2019 levels, indicating ongoing cost discipline challenges.
- The company faces seasonality issues, with PBT margins expected to be lower in the first half of FY25.
- Revenue margins are still about 1.5 percentage points below pre-COVID levels, and the company does not expect them to fully recover.
Q & A Highlights
Q: How should we think about the other costs into fiscal '25?
A: Adam Campbell, CFO: The head office costs will likely remain flat around $60 million, but operating businesses should see further improvements. We expect TP Connect to be under $10 million loss, and TTJ and Infinity losses to improve as well.
Q: What's the net win number for corporate contracts, and how should we think about growth?
A: Chris Galanty, CEO Corporate: Of the $2 billion in new contracts, well over half should trade in the following 12 months. The SME space requires more effort to convert wins into transactions, but we expect significant growth.
Q: How does airfare deflation impact cost and revenue margins across leisure and corporate?
A: Chris Galanty, CEO Corporate: Airfare deflation slightly improves revenue margin due to fixed fee models but doesn't significantly impact cost margin. The main driver for cost margin improvement is productivity gains. James Kavanagh, CEO Leisure: Airfare deflation allows us to sell higher-margin products, offsetting any negative impact on revenue margin.
Q: How did NDC changes in the US impact second-half corporate PBT margin?
A: Chris Galanty, CEO Corporate: There was a minor impact initially due to prioritizing customer access to content, but the situation has been resolved and the impact was largely immaterial.
Q: Can you quantify the drag from unprofitable FCM wins in FY24 and the impact of onboarding returning to normalized levels?
A: Chris Galanty, CEO Corporate: Profitability improved as more volume entered the second or third year of contracts. We expect gradual improvement in FCM profit margins as more volume is in later years of contracts.
Q: How should we think about the return of back-end structures in FY25 versus FY24?
A: Adam Campbell, CFO: Traditional back-end structures are progressing well, particularly in the Americas. We are leading the charge in negotiating deals, and back-end structures across hotel, car, cruise, and touring are stable.
Q: How is the SME business performing, and what portion of the $2 billion new wins was SME?
A: Chris Galanty, CEO Corporate: The SME business is performing very well, particularly in the USA. Corporate Traveller represents roughly 50% of the new wins, and we are seeing strong productivity gains.
Q: How do you see conditions globally for corporate travel, and what are the trends?
A: Chris Galanty, CEO Corporate: We are pleased with the current conditions. July showed strong performance, and we are focused on growing market share irrespective of overall travel trends.
Q: How do you expect seasonality to impact FY25 compared to FY24?
A: Adam Campbell, CFO: We expect similar seasonality in FY25 as in FY24, with a one-third, two-thirds profit weighting. Business travel trends show slightly earlier finishes in December, but overall seasonality remains consistent.
Q: What are the expectations for debt repayment and CapEx in FY25?
A: Adam Campbell, CFO: We will continue to focus on paying down debt, including convertible notes. CapEx is expected to be around $100 million, with 75% allocated to technology and the remainder to growth in physical shops.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
