Flight Centre Travel Group Limited (FLT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Flight Centre Travel Group Limited full year results presentation. [Operator Instructions] And just please be advised that today's conference is being recorded, but I'll now hand the conference over to the Flight Centre Travel Group. Thank you. And please go ahead.

Good morning, everyone. Thanks for joining us for Flight Centre Travel Group's FY '21 full year Results. Today, I'm joined by the usual crew, Adam Campbell, our CFO; Chris Galanty, our Global Corporate CEO; Mel Waters-Ryan, our Global Leisure CEO; and of course, Graham Turner, our Managing Director. [indiscernible] is going to start things off with a few introductory words before handing over to Adam and progressing through. Thanks. Skroo?

Thanks, Haydn. Yes, good morning, everyone. This is Skroo here. I'm in hotel quarantine in New South Wales; day 14, I hope. Yes, we all know 2021 has been a tough year for travel in general. And Flight Centre, I'm afraid, were no different, but we do see some light appearing now at the end of the tunnel. As an organization, we've gone from emergency cost slashing in the fourth quarter last [ end-year ] to maintenance of those significantly reduced expenses, somewhere around that 65% to 70% of [ old ] expenses. And at the same time, we're developing and implementing our technology, improving productivity and fine-tuning our recovery strategies, which will inevitably come. The recover, I mean. So some countries where we have strong corporate presence and growth as well as a significant leisure presence are already coming back strongly, and you'll hear a bit about that later, particularly in the domestic markets. This is the current picture in the U.S.A., Canada and Europe. And we can see very clearly, when lockdowns are lifted and borders opened, travel bounces back very quickly. Recently, and that was in -- July 12, I traveled to the U.K. for a month, working from there with Chris and Steve. Chris is on the call now. Steve and our North American leaders Charlene and Marc came over from Boston, New York, so we had face-to-face meetings, strategy presentations, et cetera. Now both the U.S. and U.K., although they've got large case numbers, life is back to normal. We were just talking about before, I think, the only thing in London you have to do now is wear a mask on some public transport. And this is a picture, hopefully, we will see in Australia and New Zealand shortly, as we've dropped that elimination strategy. It's already being talked about by most of the politicians. And of course, we get a majority of people vaccinated, which we're pretty close to at the moment as well. So Flight Centre Travel Group is a very diversified global travel company, and we want to stay that way. We've got 3 main divisions, leisure, corporate and supply in travel; as well as a few other areas. And we believe in this being a diversified global travel business. It's enormous value to us. And it's great advantage to our major suppliers as well, as if you talk to them, they'll tell you that. Also one of our features is our stable, very capable, very experienced and pretty intelligent or fairly in tourism, anyway, leadership team here and overseas. And they played a major role in getting us to where we are now. And I know they'll play a major role in our future success, yet their average tenure with Flight Centre Travel Group -- well, the 5 people presenting today or talking today here is over 25 years each, with -- Adam is the baby. I think he's only been in about 15 years. As a team, we've learned a lot over the last 18 months. And I think the main thing is the importance of being resilient, being very consistent with the way we work and being as optimistic as possible so that we can see our company through these tough times but not only through it but very successfully; also using these times as an opportunity to improve and streamline our systems, our technology, our operations and our overall business. Although we can't accurately predict the future due to haphazard government restriction decisions, with some exceptions, most of our markets are now living with this pandemic, accepting the virus is with us for the long term and we just have to live with it. We're planning as much as we can plan to be back in the black later this financial year and back to 100% of 2019 [ TTV and revenue ] by around that month of June 2024 but with, importantly, significantly reduced ongoing operating costs. You'll hear some of these plans over the next 30 or so minutes. Over to you, Adam.

Thanks, Skroo. And as Skroo said, there are a number of key themes that you're going to hear throughout this morning's presentation. Our recovery is gaining momentum with trading conditions generally improving, particularly in the heavily weighted EMEA and Americas regions and within our corporate businesses. We continue to invest to win market share, and that investment is working. We're successfully [ executing in ] corporate and leisure strategies. And as a result of all of the above, we are ready to capitalize as travel resumes. Sales revenue is typically increasing month-on-month, with record COVID period revenue of $54 million in June. As you see in the graph on Page 4 of the slide deck, the Americas and in particular the U.S. business saw significant TTV growth in the final quarter. And in fact, quarter 4 revenue in the U.S. for both leisure and corporate exceeded revenue for those businesses for the entire first half. And those good results continued, after year-end, through July. Within Australia, corporate TTV has been consistently growing throughout the year. And as you can see in the graphic, leisure revenue has spiked after each domestic border reopening, which shows us that there is a pent-up demand and that our brands are resonating with our customers. The U.K. and Europe have also seen sales growth towards the latter part of the financial year, as government restrictions are now starting to ease. Throughout the first half of the financial year, as Skroo alluded to, our focus was very much on cost reduction and operating in as lean a manner as possible. We were very mindful, however, not to cut costs to such an extent that it would impede the longer-term success [indiscernible]. And as we progressed through the second half and we've seen vaccination rates increasing and signs of government restrictions easing around the world, we have started to further invest in our key growth drivers. In particular, within our corporate businesses we have deployed game-changing new technologies to enhance what was already a compelling customer offering. And in leisure, our investment has been in strengthening the omnichannel leisure network as part of our cost-effective new growth model. And both Mel and Chris will talk to these strategies in more detail, including the market share growth that these investments are delivering for us already. We've included our most recent trading results for July on Slide 8, which highlights the relative strength of the corporate trading recovery. Those businesses are now trading at around 40% of pre-COVID levels. And you may remember, back in January, that they were trading at around half that level, about 20%. So subject to further investment in our grow-to-win strategy that Chris will talk to, we would expect our corporate businesses overall could become profitable at around 50% of previous volumes, excluding the short-term government quarantine services that we're currently doing at low margin and which we're not expecting to continue into the long term. Our leisure sales, which you can see on that graphic [indiscernible] which are heavily weighted to the ANZ region, are at around about 16% of pre-COVID volumes given the heavy international and domestic travel restrictions still in place within that region. In the Americas, where U.S. citizens are able to travel to the key Mexico and Caribbean markets, volumes have increased above 30%. And again subject to any further investments to turbocharge growth as international borders reopen in the southern hemisphere, the leisure business should break even at around 40% of pre-COVID volumes. Pleasingly, the revenue growth through quarter 4 has been leveraged to EMEA and the Americas regions. Prior to COVID, these regions were our fastest-growing segments and accounted for nearly 40% of our TTV and 55% of our profits in financial year '20, meaning we're extremely well positioned as the northern hemisphere markets do continue to open. In terms of liquidity, we have cash and investments at 30 June of $1.4 billion, which with even the most conservative assumptions of a full working capital unwind, the repayment of the U.K. COVID loan in full and no further reduction in our monthly cash burn means we have an extended liquidity runway well into calendar year 2023. This financial stability positions us well against our [indiscernible]. The monthly cash burn itself was on track to be below $30 million by now prior to the Australian domestic border restrictions starting throughout June and into July. And in the key market of the Americas, we are approaching a neutral monthly cash burn position. As expected, our second half underlying loss was largely in line with half 1, with the reduction in government subsidies during the half of around $40 million partially offsetting increased revenues of over $75 million. We also incurred variable costs of $12 million, generating that additional revenue. Throughout the half, we've also seen a number of our brands approaching or achieving breakeven in specific months. So overall from a financial perspective, we've seen a strengthening of our P&L, our balance sheet and our cash flows over the second half of this year, which we expect to continue as we progress through FY '22. I will now hand over to Chris to discuss our corporate strategy in more detail.

Thanks, Adam. Well, rather than run through the numbers as Adam has already done so, I'm just going to take you through 3 things: firstly, the corporate recovery and how we see it globally; our grow-to-win strategy, which really focused on customer growth and retention, which is a very pleasing story this year; and an update on our strategic priorities and our overall strategy. So starting with a travel outlook for '22. We estimate that corporations will return to roughly 50% to 70% of pre-COVID travel in 2022. Now many customers have traveled throughout what we've called as essential travel, typical industries such as mining, but we're now seeing in many parts of the world a return to normal business travel. You may not feel it if you're sitting in Sydney and Melbourne today, but if you're in Europe, U.K., North America, normality to travel is returning. We think the last stage really of returns will be meetings and events and some internal travel. And there's no doubt that some internal travel for some companies will have gone forever, being replaced by digital technology, and this is a good thing. We want our -- we manage our customers' travel programs. We want them to be efficient. We want them to be sustainable. The key factor that corporations return to travel, this is what our customers tell us, is when travel is more predictable when lockdowns don't keep starting and stopping. And that's certainly the pattern we're seeing emerge both in North America and Europe today. The market has evolved. There's certainly an increased demand for travel management services, particularly in those SME customers that Corporate Traveller serves. And what this means is, prior to COVID, companies were happy for their staff to go book travel independently online and submit expenses. We're now hearing from customers and new customers in the SME category that actually they need to know where their travelers are at all times, where they're going in advance; and have a duty of care program in place, so a big opportunity for us to grow in the SME space. There's definitely the acceptance now of the need for travelers to be vaccinated, double vaccinated. And most of our companies are well on way to make sure that travelers are vaccinated and can therefore travel. Myself and many of my team have been heavily involved in the industry bodies. And the good news is the industry bodies, whether it's IATA or the travel associations in each region, are working closely with governments to make sure that industry's wide adoption of global standards is happening. And that, hopefully, is starting to remove some of the friction. Friction is still there in travel, international travel, but it's starting to be standardized and automated, which will make travel easier. From a competition perspective, the big news in the industry in corporate was Amex' acquisition of Egencia. So what was the traditional 4 has become 3. And we very much see ourselves as #4 in that place and 1 now of only 4 companies in the world with our FCM brand that can really manage enterprise travel. And that's great for us. It means that there's less choice in the marketplace, and we are consequently seeing a big increase in invitations for RFP in the last 6 months. And traditional competitors, who do make up the bulk of the industry -- it's a very fragmented industry. These local regional players, often privately owned, we see that they are -- and we're hearing this from customers. We see that they are struggling to continue to invest in technology and adapt their business offerings for a post-COVID world, which is very different from the approach we've taken. There are still new entrants in the SME space. There's still VC money going into disruption. And we see that is likely to continue, in particular in the dislocation of COVID. And this really matches our strategy with Melon in Corporate Traveller, so we feel we're very well placed to be a disruptor and to take advantage of that. So our key priorities in 2021, just to give you an update on what we said at the half year and what we delivered. #1 was to win and retain customers to grow market share, and I'm really pleased that we've done exceptionally well here. So we have grown share. I'm pleased to say today that we've signed new business, annual new business, of USD 1.4 billion, which is a fantastic number. And also importantly, we have a 98.5% retention rate in our contracted customers in FCM. So yes, again this year we haven't lost a single large customer globally in FCM, which is again really pleasing. Importantly, of those wins, 70% were in Americas and EMEA, so really focused on our fast-growing regions. And we've launched Melon, our new digital platform for corporate travelers with our customers in the U.S. today, getting fantastic feedback, really high NPS scores. And the big market launch is next month, when -- we timed it for the fall when we saw the -- it would really chime with the market coming back to travel in September. We continued to develop our global data and platform capabilities. So we've delivered our global, robotics and AI platforms, which I talked about last time. And this is really important because it gives us that understanding of the customer globally, not just in certain markets. And it really enabled us to adapt our strategies and our customer offering accordingly. FCM, it continues its truly global business plan. And we have seen a new brand launched earlier this year, which has gone down very well in the marketplace and very well with customers. The new FCM global platform, which I'll talk about shortly, has been launched in China and is being launched in the rest of the world later this year. We continue to invest in data science capability. And that's really important as we move our business model into being more of a platform model, like most modern Internet companies, where we use customer data, behavioral data, not just transactional data, to improve their experience and improve our management, understanding and our commercialization of volume. We continue to improve productivity, some great gains here. And this means we can implement for customers faster, which means they trade faster, which means we get the volume faster; and also improve the productivity of our systems and our people, which means we can bring fewer costs back when costs are required to come back. We continue to focus on travel supply content. We are seen as a market global leader in NDC, particularly in the region [indiscernible] Europe. And this is really pleasing for our customers because it means we can get the right content for them through any channel. So just a reminder where we play. We uniquely address the market with 2 brands, which is different from every other major competitor, and we think this is a huge strategic advantage for us. So -- and that's simply because, in the 2 broad categorizations of large enterprise travel and in SME, our customers in those 2 categories have completely different needs. We address the market with 2 different brands with different value propositions, with different offerings, different products, different technology, different pricing and a different sales and marketing model. And this means that, whether you're a large enterprise or a small SME customer spending $200,000 a year, you get a best-in-market solution from Flight Centre because we have a dedicated brand for you. And that is really one of the things that enables us to be a winning business. FCM focuses on global scale and consistency but uniquely offering flexibility. And in the new FCM platform, we've built in a great proprietary experience which has its core philosophy of flexibility, which enables our customers who choose to -- if they want to use our proprietary end-to-end experience, they can, but they can also work with our key partners, be it Concur, [ Citrix ], Serko, et cetera. And again that's based on customer research and feedback. So when we talk about customer growth and retention. A lot of people talk about this. And we're very proud that, we believe, we have the best organic growth model in the industry; some fantastic new wins, USD 1.4 billion of annual spend of new wins. And you can see some of the brands here, many great brands, including Procter & Gamble who we're super proud to be working with now. And we also did a pivot towards government, which I mentioned earlier. And we have -- we were successful on the Crown commercial services bid, for example, in the U.K. We've already implemented globally in over 160 markets the Foreign, Commonwealth & Development Office. And we continue to win more government business in the U.K., which I can't mention today, but that will be revealed when we can; and also growth in the French government too. With organic growth, which means we have brands where we have them in some countries, but because we've done a great job, we've extended into further markets, we're also seeing good growth. And then retention. Importantly, you can see some great brands here. It's not just about winning new customers. It's about retaining them and re-signing 3- or 5-year contracts; and again a great range of brands, where we've done a great job. And they've re-signed with us in the last year, so a really good story around growth and retention. This is our strategy on a page, and it really just sums up very simply why we are winning, starting with the 2 brands at the top: Corporate Traveller, dedicated and focused on the SME market, as I said before, or SMB as they call it in the U.S.; and FCM, the large market enterprise brand which is the alternative for the traditional now big 3. Each of them has their own bespoke brand-new products coming to market this year, Melon in FCM -- sorry, in Corporate Traveller. And I couldn't be more excited about Melon. It really is a transformation of what is the best in market in the category of SME; a really great end-to-end, new platform which offers not just full booking but also offers all the requirements that an SME business needs. So data security, traveler tracking and data analytics, duty of care all in one simple mobile or desktop application. And FCM Platform again, a global platform which will be launched across the whole world, in 100 markets in FCM this year offering great flexibility [ with a ] best-in-class user experience. We then have a sales and marketing machine. The reason we can win so much business every year is we have what we believe is the best marketing machine in travel, in corporate travel. And that really focuses on allowing us to win and retain new customers, with a dedicated marketing function for each brand because the sales cycle is completely different in FCM as it is in Corporate Traveller. We then have our intelligence layer, and this is where all the magic happens. So this is really where we get all the robotics, the artificial intelligence, the data security, the pricing, the analytics and everything that enables us to commercialize our business; really important because this is just how we give a better customer experience than our competitors but also how we make money. We then have our supply layer, which is where we bring in the widest choice of content to our customers. So again we're a global leader in NDC in the airline space but also in the hotel space as well, so it means you get the right product to -- right content to our customers through our products, mobile or desktop, whenever they need it. And the final piece is I think the most important, our culture, our people. This is when I talk to customers. They love our products. They love our brands. They love our content, but really it's our people and our culture they love. And we've been very clear as part of our grow-to-win strategy that we need to retain talent around the world throughout COVID, and we've been very careful to make sure our talent stays onboard. So just [ a quick show ] about proprietary tech. Again we are very proud of both of these platforms, the FCM Platform and the Melon platform in Corporate Traveller, both either live now or going live this year, both we believe will be industry changing. We think they're completely differentiated from what's in the marketplace today, and we're hearing that from our customers. It's not just our view. So we're really excited about what's coming this year. And the final tech slide I'll just show is the FCM Platform in China. So uniquely amongst the large global TMCs, we have a completely bespoke offering in China. So we have, as part of our philosophy and flexibility in FCM, a globally consistent platform for customers that has a unique offering in China designed purely for the Chinese market. And we've always had a platform in China. Typically it's in Chinese but really is a Western platform adapted. This has been purely built for China within the platform. It's live now with customers, so it's not just an idea. It's with customers today. And it gives us an opportunity to grow our market share in China domestically but also to provide a great local experience for enterprise customers who have an important Chinese program. So in summary, why we win: We have 2 global category-leading brands. FCM is the only alternative to the traditional 3 TMCs, giving the best-in-class experience. And Corporate Traveller, purely focused on the SME category, where we combine great proprietary tech with a brilliant people service. And that's why we are winning, and we believe we'll continue to win going into 2022. So that's it from corporate. I'll hand over now to Mel to give you an update on leisure.

Thank you, Chris. And good morning to everyone. Well, it's reasonable to say, as we sit here in Australia, that 2021 was a pretty average year for leisure with, as Adam already mentioned, less than 20% of pre-COVID TTV achieved; and of course, losses during this COVID period as domestic borders here in Australia open and close, open and close and then open and close again; and essentially no international travel globally. However, if we look to the future, it was a really pivotal year for leisure, with 3 key factors providing comfort and optimism that we're in a good place to capitalize on pent-up demand which we've already mentioned exists and when again as travel returns, whenever that may happen, in our various regions. So firstly, we've structurally and permanently changed our cost base in leisure. Secondly, we're fast-tracking investment in our technology, new business models and our existing brands; and thirdly, seeing early evidence to support that we have indeed made the right choices. So to give a little bit more color and detail to each of these 3 key points. In 2021, we have permanently reduced our cost base, and we certainly had a cost issue in leisure pre COVID, in a period of months versus the years that we had initially intended to take. So yes, we do have a smaller network of shops and brands. However, that was already planned even prior to COVID. However, in our core markets like Australia, where we all sit at the moment today, we are still highly accessible and visible to our customers, with 95% of customers still within a physical 5-kilometer [ look of one ] of our locations. We've also retained a smaller but highly experienced and productive network of agents. Just to point something out: A core correlation pre COVID to off-line performance and success was tenure of our people. And this has gone up by years as a result of the COVID measures that we had to take, remembering too that, in this new sort of complexity of traveling that we're seeing at the moment, an expert is very much more in demand. And certainly our experts are seeing that come as we speak. And three, we've also in this year globalized and streamlined a lot of our core support functions, including marketing, financial administration. And our previously federated technology model is now a globalized product management and engineering discipline delivering consistent, scalable capability globally. These major moves were all part of our leisure transformation program and have now been achieved. And we'll ensure our cost-return as travel recovers is less than our top line sales, which is very important for leisure in the future. 2021 also saw us positioning for recovery with 3 core areas of investment and effort to set us up to win in the future. We have deployed or are deploying or improving all of our core technology platforms with 2 key outcomes, either improving our online capability or delivering productivity to our off-line businesses. Our 2 proprietary customer and consultant platforms or interfaces of SOAR, which is our online world; and Helio in our shops have had accelerated development during this period. We've also established a global product design house, which I think I've mentioned before, or our merchandising center, with a global network of product designers and experts bringing irresistible deals to markets courtesy of our new Helio platform. Essentially we [ designed something once ] in the region, and now we can sell it globally at the touch of a button. We've also invested in the rejuvenation of our iconic and market-leading Flight Centre brand with new captains and co-captains and a modernized set of CVPs reflecting a COVID-and-beyond customer. So as an example, flexibility, more than price, even now is a core customer need; and Flight Centre certainly delivers on that. We've also created 4 distinct operating models during this period. The mantra is now less brands, more models. So that's, I think, a very positive change for us. On the next slide is just some imagery of our new modern and highly relevant Flight Centre brand and I believe one of the core assets of this group. And customers love this rejuvenated brand, according to the ongoing customer insights and analysis that we've made. I'd like particularly to draw attention or point out our new captains: [ Tom ] here in Australia and New Zealand. Captain [ Tom ] is out in full force. It's [ Philip ] in South Africa, reflecting a much more localized offering. And hot off the press, and this is actually in the last few minutes, we're about to launch a female captain, our first female captain, in Canada. That's, of course, in combination with all our amazing co-captains. So we know our brand now speaks to a wider, younger and desperate-to-travel customers throughout our global network in a much more relevant and desired time, so we're really proud about our new sort of progress with our Flight Centre brand. Thirdly, we're also optimistic for leisure, as even though it's hard to travel right now -- and I know you guys sitting in Sydney and Melbourne just be -- must be feeling so frustrated, but when you can -- we are certainly seeing early evidence that supports our winning choices and our position. We are achieving increased customer awareness and consideration for Flight Centre globally. We've seen inquiry surges when borders open. And we've seen that just recently in South Africa as it was opened up to a few international markets; the U.S., as Adam has already mentioned. And even a very small example, when the Cooks opened in New Zealand, we were swamped with inquiry and just about booked the place out in a few days. And we are winning both new customers and reengaging with our existing customers at high levels. So when travel can happen, our growth is also higher [ and falls ] to our newest channels in those -- that higher growth, which is exactly as per our intention. So online growth is higher in Flight Centre brand. And our split is now over about 20% of our volume in Flight Centre is coming through our e-commerce channel. Premium with our Travel Associates brand and premium products performed very well. And [ Laurier ], I think, reflecting high savings that Adam also mentioned, is currently in place. And our new model of call center, which our Ignite, My Holiday's acquisition a few years ago, is a great exponent of, which switched its offers purely to domestic and cruise, was in fact profitable from January this year, albeit the last 3 closures haven't necessarily helped. In the B2B growth space, we're also looking good with a very strong pipeline to bring onboard, reflecting I think not just the customers but the industry support of our company too. And we're seeing market share growth, as Adam mentioned, even in suppressed markets like Australia, both on- and off-line. And I've got a few slides reflecting this early evidence. You can see the AUS market share, both online and off-line, has grown. And note that in the U.S.A., when you go to the next slide, we're already, I think it was the month of June, producing 45% of pre-COVID TTV with circa 16% of the traditional sales force. So excellent results and excellent early indicators. In RSA, [indiscernible] mentioned, [ those ] first countries like France opened to the South Africans a few weeks ago. We also saw a huge surge in large international bookings, which remember have been largely missing from our leisure pipeline, both in store and domestically picked up online, which is again exactly what our intentions are for our plans, domestic point-to-point through those commoditized channels like online and the large, meaty bookings through our experts in store. In the next slide, you can actually see the full 12 months of our leisure trading, with an ongoing upward trend over the last year, but you can see the impacts of the Australian lockdowns reflecting the size of the Australian business in the leisure part of Flight Centre; although again I just want to point out our leisure business outside of Australia, pre COVID, achieved nearly $4 billion in sales. And we're seeing some good early movement in those markets, so that's very pleasing. The next slide you have is also a reminder of our key strategies in leisure, which I'm not going to go on about but just remind us. And as I mentioned, we've accelerated these during this COVID period. And as per the early signs I've already mentioned, we'll see us get back to not just the size we were previously, as Skroo mentioned, around that end of the '24 year and into '25, but we'll return Flight Centre leisure travel to a healthy 2% net margin shortly after. So one, that strategy is all about Flight Centre, or Liberty in the States, where we intend to blend our multiple channels, bring irresistible deals to market and offer savvy personal service and take what is a 40-year-old brand in Australia and a 70-year-old brand with Liberty in America from daggy to savvy. Our next [ core so far ] is to become a much larger premium and luxury travel brand with Travel Associates [ and divisions ] working with other key luxury operators; and thirdly, taking our place as the home of the travel entrepreneur, where our unrivaled breadth of content, including NDC, as Chris mentioned, our technology and our culture make us the best choice for either independent agents, agencies or small groups to belong to. And of course, our small collection of independent yet complementary brands, a bit on the side as I call them, becoming #1 in their niche category. StudentUniverse is well placed to become the market-leading global student and youth brand in travel. And My Holiday here in Australia [ and that flash ] holiday category, we have big aspirations to become the #1 and potentially, hopefully, dislodge luxury escapes in that space. And of course, BYO, our leading low-cost OTA. So this related yet smaller portfolio of brands and models is then underpinned by a globally consistent and customer-obsessed set of operations and technology which you can see on the next slide and is a little similar to corporate because some of these strategies are shared with corporate where it is useful for both our divisions; again for example, the aggregation of our content via our investment in TPConnects so that we bring NDC content into all our businesses and indeed our B2B businesses as well. This global leisure core platform is -- now also enables us to really start embracing and delivering and using data intelligence, machine learning and AI to further modernize and improve our customer offering and our business outcomes. So very exciting. So just a reminder. Our strategy which was -- is now deployed, and you can see this in the next slide, was to rebalance our leisure business across 4 operating models. Our shops will still be critical and a cornerstone, but they are not everything. A world-class sales center, [ i.e., the ] Ignite [ My Brands ] model but now within other brands, will also be important; and our independent contractor model; and of course, e-commerce. You will see a rebalancing across these models, and it's already happening. And a reminder that our growth will come from these newer models. Yes, that store network will still provide 50% to 60% of our volumes, but growth will come and is coming from those newer channels. And to pre answer one of the most asked questions I still get 18 months into this COVID crisis: How will you ever get back to pre-COVID TTV with only half the shops? Well, it is this rebalancing, as I said, that's already happening across these models that enables us to not just get back to that top line number but, more importantly, profitably beyond what we were achieving just prior to the COVID crisis. And finally, just a couple of notes. I wanted to stress that it's also important to note that a lot of our investments is not just going into e-commerce. We're also busy digitizing the entire P2P travel retailing experience across all those operating models. It's -- the next slide, I've got some examples of our Trips platform, which we bought a few years ago as the Umapped business based in Toronto, is becoming rapidly a digital interface facilitating a collaboration to build a trip and then ongoing communication during that trip for our consultants and their customers. I'd like to think of this as the Pinterest for travel and, I think, one of the most exciting things that we're doing. Next, you can see our HOTTE portal, our home of the travel entrepreneur, which will be starting to be released before Christmas this -- in the next few months and is a one-stop shop that will simplify the lives of our independent agents, bringing together all the content and tools in one place. They'll then have access to our leading and widest content as well as the digital technologies like Trips that I just mentioned. And we've made some other notable and exciting achievements over the last few months. The Prime Student-StudentUniverse partnership, which was just announced a few weeks ago, has been launched, offering students within Amazon further discounts and exclusive deals. Our Jetmax and Google Flights relationship, which was launched earlier this year, allows both BYO and Aunt Betty to sell in dozen small countries with no physical presence; these partnerships helping to further our e-commerce success and driving, I think, some great opportunities for our leisure division in the future. So in summary. Despite COVID, despite lockdowns in various governments which you may or may not be pleased with, and I'm sure Skroo would love to get into that conversation, I'm very optimistic for leisure at Flight Centre Travel Group. It's not a case of if. It's a case of when. And as I said, the 3 reasons I'm optimistic and we should be is that we've structurally and fundamentally permanently changed our cost base. We've accelerated investments in technology deals and brand and rebalanced the share of our business across different models. And as we said, early signs are showing positive results for all our leisure businesses globally. So thank you for listening. And back to you, Skroo.

Yes. Thanks for that, Mel, yes. Just going on to Slide 45 (sic) [ 46 ], I think it is. These are the other businesses. And in-destination, we have destination management business; hotels, management of hotels; and obviously our tour operations Topdeck and Back-Roads. Now these are varying, but obviously under this COVID thing, there's a fair bit of that is in hibernation at the moment. But it -- as we say here, with the -- Discova in America is actually doing really well and delivering record profits. So that's great. The Pedal Group, you'll see on the next page, is a -- is really interesting, yes. They delivered $54 million in profit this year, up from, I think, about $25 million last year, before tax. AVMIN, which deals with charter business -- and Flight Centre has a 50% interest in that. It's famous for private quarantine services for VIPs. For example -- you'll probably know some of the VIPs that they deal with because they've been in the press for getting special advantages in terms of quarantine. And lastly, we have The Travel Junction, which is basically a bed bank. So that's one of the areas that we want to grow post COVID significantly. As I said, the Pedal Group went from about -- sales of about $200 million to $323 million (sic) [ $333 million ] and profit to about -- I think it's $54 million. We've -- they've expanded a bit over a year ago to New Zealand, where they now have 6 shops, and 2 set to open in the next few months. So that's a really good story. And Flight Centre owns 47%, 48% of that, so it's really one of our success stories. And although it's an entirely different industry, a lot of their business is actually based on the Flight Centre systems, which is how they develop their business model. Moving on from those other businesses, I was just going to mention with Pedal Group that the $54 million profit is important, but one of the other important things is that the staff have about 32% of the shares. Flight Centre has about 47%, 48% of the shares. And I think the really important thing is the asset value. Slide 48, we're on now. And if you see Haydn here -- for those of you who don't know Haydn. This is him on his last international holiday, which was about 2 years ago, as you can see. And Haydn has aged considerably since then. I can assure you. The next slide is on outlook. And we're targeting a return to profitability in corporate and leisure in this fin year. It's -- it requires about 50% of corporate and 40% of leisure [ of the whole of ] 2019 TTV. And we think corporate will come probably earlier in the second 6 months, leisure later in the 6 months, but obviously it depends a lot on the government, what the government does, so we're waiting with -- particularly in Australia because it looks like most of the northern hemisphere governments are -- it's only going to be improved there. We believe we're very well placed for recovery. We've got a leaner and more efficient business now. We've been delivering some growth over the last 6 months despite all the lockdowns and other things. And we think, particularly in the North, that's going to continue over the next 6 months. And Australia will -- and New Zealand will inevitably open sooner or later, certainly well before Christmas, we believe. Also our diversity is really important to us. We've been in 23 countries. We have a corporate division, a leisure division and a supply division. And I think our suppliers really like the fact that we cover different parts of the market. And so as well as being an advantage to us and -- we have great relationships with our suppliers on this reason as well. The next slide, which is 51, I think, the travel industry poised for a rapid take-off. As you can see, a lot of our countries that we're in business with are really starting to get the vaccination programs to pretty high levels. And even in Australia, just in the last couple of weeks, it's been rapidly growing. So this is going to happen pretty quickly, we believe, once most countries get to about 70% of adults and Australia is somewhere between that 70% to 80%. Again there are various routes opening outside Australia and New Zealand, as you know, particularly in the northern hemisphere. The intra Europe and U.K. and Europe is opening quite a lot. Canada and U.S. to the U.K. is opened. The U.S. is not reciprocating yet, but that's going to be a very important one. The transatlantic is a really important route. I think it says here 25% of the U.S. travel TTV is out of the -- is transatlantic. So we're just waiting for that to come back. So trading conditions. This is a very important part of our business, working with our suppliers. We have very good relationships with nearly all of our suppliers we have had for years. As I said before, they like our diversification not just geographically but also in our different divisions, our leisure and corporate divisions in particular. And it details here some of the relationships we have. So that's really important, as well as our domestic carriers in Australia. We have good relationships both in the States and in intra Europe, U.K. and Europe. Next slide is 54. There are some very positive indicators from the consumers. They're confident in terms of, once borders open, they're confident enough to travel pretty quickly; and you've seen some of the graphs with that. Generally it's expected they're fairly well cashed up because they haven't been traveling, particularly in traveling. Some of them having -- haven't been able to move around a lot at all and obviously very keen to travel. And I think we have some -- a survey here in the next slide. This is a survey we did here in Australia. It's pretty typical. And it shows you that about 2/3 of people that we surveyed, about 1,000 people, want to travel within 6 months, so that's a very good sign for us, for travel industry in general. The other thing that's going to be important is the paperwork. As I said, I've just been to the U.K. for a month, and the paperwork is enormous. You need a very good travel agent to look after you. You need obviously vaccination certificates. You need PCR test certificates. You need permission to leave Australia at the moment. You need permission to come into the U.K. to make sure you had the right tests and are vaccinated. So there is going to be more digitalization of this, but over the next 6 to 12 months, people are going to need a lot of help to travel internationally, so this is very important for us as an intermediary, to be able to provide this sort of service. So that's it. Thank you very much. Back to you, Haydn. Thank you.

Well, thanks, Skroo. It might be time now to go for some questions.

[Operator Instructions] But I'll go to our first question. It's from the line of Lachlan Costello from Jefferies.

It definitely looks very positive. First one from me is in regards to your liquidity. You've obviously given us your calculation, but just wondering if you could please provide me further color as to how much headroom there is if lockdown persists in Australia into the new year and northern hemisphere markets continued to recover.

Yes, a good question, Lachlan. It's Adam here. We've -- as you see there, we've got $940 million of liquidity. And that is after taking account of a full working capital unwind and full client creditor or client cash unwind as well, neither of which will happen. Frankly, over the last 18 months, our client cash has not dropped under $300 million, so this is the absolute conservative calculation. And if you take that $940 million [ of ] current cash outflows, you'll see that it takes us well through into calendar year 2023. So from a liquidity perspective, we're very comfortable with where things are tracking. We've had a good balance, we think, in terms of our cash control and our cost controls to ensure that we've kept a lid on the unnecessary costs, the overhead costs, but we have started to invest, particularly in the fourth quarter, in those areas that we think are going to be really important for us as both our leisure and corporate businesses do start to come through and, we think, people traveling again. So from a liquidity perspective, I'm quite comfortable with where we're traveling at the moment.

Great. And then just secondly, in [ leisure's staff ] retention program, I'm just wondering how successful that has been and if you've managed to hold onto high-quality talent and obviously given a challenging environment.

Lachlan, It's Mel. Yes, look. We actually aren't doing too bad on retention. We have an alumni group as well of people that we actually had to stand down during the last year, which we also use when we are needing people. And I think we're getting about half the uptake from that group when we do need new people, but no, retention is pretty good. I mean obviously earnings are down for some of our frontline staff. And we're certainly trying to help them through that period, but yes, no, we're not losing vast amounts of people or any really huge amounts of people.

Okay, your next question comes from Mark Wade from CLSA.

In light of the Qantas commission cuts that are coming up, I mean, can you just remind us on the relevance of the company to the suppliers and the travelers? I know you've discussed a bit already, Skroo, but what's -- has anything changed to you fundamentally from your perspective in the past 12 months?

Skroo, will you address that one initially?

[ Do you want me to try ]?

We might have lost Skroo there, [ but then I think ] Mel...

That's okay.

We'll get Mel to respond.

So Mark, I think -- Mark, the -- it's we've been doing a lot of executive-to-executive exchanges with both our major airline and other supplier partners, cruise lines, tour operators, et cetera. And I think our relevance is actually increasing because, as one group, and Skroo did mention the diversity, we can give a airline who's desperate to fill seats -- where they're allowed to, anyway, not in Australia necessarily. We can give them corporate, leisure, on-, off-line and multiple geographical reach. So if anything, I think we are seeing strengthening in a lot of our -- particularly some of the international relationships as they poise to recover. So no, we're not seeing any degradation of our value. If anything, I think it's increasing.

Mark, Skroo has just [indiscernible] to say [indiscernible], but he's now back on the line. Skroo, Mark was just asking a question about relevance to suppliers, if you want to -- Mel has responded, but if you wanted to make any comments...

Skroo, it's more in light of the fact that -- Qantas indicating that they want to cut commissions. And I would have thought in this environment they should be begging you guys to work together.

Mark, I actually agree with you 100%...

Mark, you can come and do our negotiations.

And look. I think obviously Qantas and Air New Zealand have -- yes, not monopolies but not far off it in the Australian domestic and New Zealand market with Air New Zealand. So they can play it reasonably tough here, but as things come back internationally, it's going to be another story. And there's no doubt in my mind that with the Middle Eastern carriers, the Asian carriers, the American carriers it's going to be very competitive. They're going to want [ added ] distribution, so I'm pretty confident that, although Qantas and Air New Zealand haven't taken a reasonably tough stance domestically, they just don't have the same [ power ] internationally as things come back. And I think obviously Qantas is important to us in Australia, but if you look at the overseas carriers, for example, British Airways in Europe and North America, it's quite important. And they've taken quite a different tack. I think you'd agree, Chris, so -- and certainly the Middle East -- and generally the Middle Eastern carriers and the Asian carriers as well. We've found it's generally been pretty positive, but in the end, we've got to deliver the volume. If we can deliver volume, they'll pay for it. There's no doubt in my mind about that, particularly international.

So just to be clear, Skroo: That's [ a bit ] neutral. The -- you haven't seen the other carriers follow suit at this point.

No, generally not. I mean there was a pivot mentioned by Chris, if you noticed, NDC, but no, definitely not. I mean -- and the reasons -- some of the Middle Eastern carriers obviously still flying fairly regularly into -- such as Qatar and the American carriers too. And I think Charlene, who's on the call, would say the same thing about the American carriers, that they're being quite supportive, but they're not following Qantas. As I say, this is really a domestic market for Qantas at the moment, and that's really what they're thinking about up until the next few months. And once they start flying internationally a bit, I think we'll see a different -- a change there. I wouldn't guarantee it, but at least either us as suppliers or distributors or you as customers, there is plenty of choice. There is going to be plenty of choice.

Yes, no, I agree. And I'm not sure if this is for Chris or yourself, Skroo. On the recovery in corporate, has anything changed there in your view around the idea of the demand destruction perhaps you would get from the likes of the Zooms? I know you -- I know there's talk of a 50% to 70% expected recovery in FY '22. How does that vary across the big and small corporates? And ultimately are you still pretty comfortable on where things can go given the small market share you've got?

Chris, do you...

Just before Chris. I'll just say that, yes, we do expect 2024 probably not to come back quite the same way, but we -- and I think Chris will tell you that we've been quite -- I don't know whether you heard him mention that he's won quite a lot of business this year, but I think, from our point of view, we'll come back to our pre COVID probably quicker than June '24. What do you say, Chris?

Yes. I'm glad for the question actually because it's [ half 2 ] in the morning here and I was really falling asleep, so it's good to get a question, Mark. Thank you, but no, look. I think there's no doubt some travel will go because of Zoom and Teams. We've been very open about that, particularly internal traveler of some customers. So our view has always been the market won't come back to 100% of 2019. That's for sustainability as well as digital replacement reasons, but we do think it will come back to somewhere around 70% to 80%. And our plan has always been just to win market share, win customers. And actually we've been quite surprised at how rapidly some domestic markets have come back because, if anything, the travel that we thought would disappear would be internal domestic travel, but it's actually come back stronger than we thought. But we're not planning on it coming back to 100%. That's never been part of our plan. It's really to win market share and add new customers.

Your next question comes from Tim Plumbe from UBS.

Can you hear me?

Yes, yes.

Yes.

Great. I'll just ask 2 questions, if possible, please. Skroo, just wondering if you can talk a little bit about some of the developments. Pfizer just approved by the FDA, what sort of impact does that have on the U.S. corporate market and in particular employees getting their stuff back into the office? Have you had any clients in -- any discussions with the clients and their views in terms of travel in September?

Tim, we've also got Charlene Leiss on the phone. I didn't introduce her at the start, but Charlene is the Head of the Americas. She might want to also comment on that after Skroo potentially.

Yes. Tim, look. There is a bit of [ a state of flex ] at the moment. As you'll know, Pfizer has just been officially recognized in the States, but AstraZeneca isn't at the moment, which is -- might be a bit of an issue when the reciprocated travel happens, which hopefully will be pretty soon. So -- but Charlene, you -- would you enlarge on the -- about the Pfizer [ on that ]?

Yes, absolutely, Skroo. I would agree. I think those are both very strong indicators and motivators to get people back on the road traveling. And also it's allowing other companies and businesses to mandate the vaccine, which we're seeing more and more of not only in the travel industry but in greater industries at large. And that will certainly help get people back into offices, which as you know also has a flow-on effect for people traveling and visiting customers and having other customer engagements. So we anticipate that the recovery is going to continue here through September and October, especially in the corporate business because those are very strong corporate travel months. And we also are seeing a return to schools in the U.S.A. and across Canada as well. All of the students are going back to school, so that will also encourage people to get back into offices and travel. And we're seeing that all of those factors are playing a big part in the recovery.

Great. And maybe just one for Chris: I think you guys have said that you're back at 41% of corporate travel as at July, but Skroo had also mentioned that there was some government-related TTV that's not as profitable. If we backed out that government-related TTV, what sort of percentage would we be looking at in July across the group?

It's -- yes. It's still going to be high 30s.

Got it.

That relates to -- that comment relates to one customer in Australia.

Okay, your next question comes from Darshana Nair from Goldman Sachs.

First off, I think, for Chris. Just trying to get a sense of how you're seeing recovery come back for the existing accounts versus the new accounts, especially in Americas and EMEA where you're now tracking at about 1/3 of pre-COVID levels.

Yes, it's a good question. It's really mixed actually. So with existing accounts. So some large corporations still have essential-only travel bans in, which means we're seeing below 10% recovery and single-digit recovery in those customers, whereas other existing customers have opened up a lot more fully. So it really varies. The good news is that the new customers who have already been implemented are making an impact on the travel volumes. And also what we're seeing, particularly in North America but also now in South Africa and the U.K., is a strong bounce back in SME. So in our Corporate Traveller business. The Corporate Traveller business tends to be, in the past, throughout recessions, more resilient because SMEs travel really when it is essential to them, whereas large corporations tend to have lots of internal meeting travel. So the SMEs bounced back very strongly, which is really pleasing. So there is a mix of both, but it is very varied across industry segments and also individual customer types.

Yes, all right. And just for Mel, regarding online in leisure, can you give us a sense of how this is tracking in various regions as a part of your mix?

So where we have online presence for Flight Centre brand, which is [ extensively ] in every country, Canada, Australia, New Zealand and South Africa, it's going reasonably well. Canada, of course, has only just started to travel, so that's probably a lag. So Australia, we were seeing, I think, for Flight Centre brand, getting up towards maybe 29% of overall volume was being achieved through the online channel. We don't have online transacting yet in the U.K. That will come in by about March. We're also seeing StudentUniverse track quite well up over this period as well. And Charlene just mentioned the kids go back to school in the next month or 2, so that should see a good impact too. So it's roughly, I think, about 20% of our overall turnover now is online across our various brands. And we -- our aim -- that was previously about sub 10%, beforehand, for Flight Centre. It was as low as 7%. And we'd like to get that probably around the 25%, 30% mark; and the trends are showing us that was -- is where it's going.

Darshana, just to give you a bit more color around that too. Pre COVID, we were doing about $1.2 billion online in leisure. As Mel said, that was about 7% of our leisure TTV. It was fairly evenly among flightcentre.com, most of that coming out of Australia; StudentUniverse, which is predominantly in America but in a couple of other countries; and then BYOjet and Aunt Betty combined. They're not doing a lot at the moment because they're international travel focused. You might have read about the Google Flights deal in the slide. So hopefully, some good growth when international resumes for them.