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

Good morning, ladies and gentlemen. It is the appointed hour, so we will make a start. Thank you all very much. Good morning, and welcome to our 29th Annual General Meeting. My name is Gary Smith, and as Flight Centre Travel Group Limited's Board Chairman, I will chair this meeting. Moving on to our official AGM duties. As we have the necessary quorum, I declare the meeting open. This meeting is a hybrid meeting with shareholders able to attend either in person or online via the Computershare meeting platform. Shareholders online can listen to our live webcast and watch our presentation. They can also ask questions and submit votes online. I'd like to commence with an acknowledgment of country and followed by an introduction of our directors and some of the executives in the room. We would like to acknowledge the traditional owners of our country throughout Australia and recognize their ongoing connection to lands, waters and communities. We pay our respect to Aboriginal and Torres Strait Islander Elders past, present and future, and support the continuation of cultural, spiritual and educational practices. I'd now like to introduce our directors. Starting from the far end to Kirsty Rankin; Robert Baker; John Eales; Colette Garnsey; and Graham Skroo Turner. Also with us, our CFO, Adam Campbell; and our Company Secretary, David Smith. We're also joined today by various senior executives of the company. They include Greg Parker, our supply CEO; James Kavanagh, our Leisure CEO; Lincoln Turvey, our Head of People and Culture; Melissa Elf, our Corporate Chief Operating Officer; Andrew Stark, Flight Centre Brands Global Managing Director; Joell Ogilvie, MD of our Specialist Brands; Daniella Pittis, our Chief Security Officer; Haydn Long, the back of the room there, our Head of Investor Relations. And I haven't seen it, but Belinda Rafiee, are you here? She is indeed -- our Global CFO. Welcome, Belinda. And finally, our auditor, EY, is represented today by the Audit Department, Allison DeGroote. Given this is a hybrid meeting, there are a few matters I need to run through. Only shareholders, representatives and attorneys of shareholders and proxy holders who are attending in person today and holding blue admission cards and those attending online are entitled to ask questions or vote during this meeting. For attendees attending in person, to ask a question, you will need to raise your hand when I invite questions at the appropriate time. Online attendees can submit questions at any time by selecting the Q&A icon on your device. Select the topic, your question relates to from the drop-down box, then type your question and press the send button. Online attendees can also ask verbal questions by following the instructions written below the broadcast window. Although online shareholders can submit questions at any time, I will address those questions only at the relevant time during the meeting. If we receive multiple similar questions on any topic, we will try to group them together. I'll ask Haydn to act as our moderator to read out the questions at the appropriate time. Voting today will be conducted by a poll on all items of business, and I'll open the voting shortly. For attendees present in person on the reverse of your blue admission card is your voting paper and instructions. You will need to follow the instructions mark a box beside the motion on the voting paper to indicate how you wish to cast your vote, and then lodge it in the ballot box before voting closes. Proxy holders here in person have attached to their blue admission cards a summary of their proxy votes, which detail the voting instructions. By completing the voting paper, you will be deemed to have voted in accordance with those instructions. Proxy holders are entitled to cast any open votes will need to mark a box beside the motion to indicate how you wish to cast your open votes. For attendees online, a polling icon will appear on your device when voting opens. Clicking on the icon will bring up a list of the motions and present you with voting options. You simply select one of the options for the relevant motion to cast your vote. There is no need to hit a submit or enter button as the vote is automatically recorded. You may change your vote at any time up until I declare voting closed. All attendees, whether online or in person, may submit votes at any time from when voting opens until I declare that voting has closed. Finally, I appoint Lewis Brimelow of Computershare Investor Services to be the returning officer and to conduct the poll for this meeting. I now declare voting open on all items of the business. We'll start today's meeting with the Chairman's address, after which I will invite Skroo to address the meeting in relation to our plans and prospects for financial year '25. We'll then move to the formal business for the meeting before finishing with general questions from shareholders. I'll now proceed with the Chairman's address. On behalf of the Board of Directors, again, I welcome you to Flight Centre Travel Group's 2024 Annual General Meeting. Today, in my address, I'll reflect on our key achievements during the 2024 fiscal year before inviting Skroo to address the meeting in relation to our early FY '25 trading and outlook. As outlined in our annual report, the 12 months of June 30, 2024, our 29th year as a listed entity, was another very significant period for your company as we delivered strong financial results in an improved but still volatile trading climate. We strengthened our balance sheet by repaying debt and buying back convertible notes. We returned $62 million to shareholders via the fully franked dividends that were paid during the year, and we developed stronger foundations for the future through our ongoing investment in key growth drivers, including our people, our network and the experience we deliver to our valued customers through our diverse global brand stable. Our financial results are covered in detail in the annual report and highlighted here. While I won't talk to them in detail, I would like to draw your attention to a few key points. Firstly, we delivered a total TTV, or transaction value, of $23.74 billion. This was just above financial year 2019 and circa $1.8 billion or 8% year-on-year improvement. This new TTV milestone was achieved with a lower number of staff compared to FY '19 and a lower cost base, highlighting both the strong productivity gains we have delivered post pandemic and our success in growing our network of highly scalable models, including our online and independent agent and agency business in the leisure sector. Secondly, we achieved a material profit recovery with a 131% underlying profit before tax, or PBT, increased to $320 million, and 212% million statutory PBT increase to $220 million. Thirdly, our underlying profit margin increased by 72 basis points to 1.35%. The improvement was driven predominantly by a 100 basis point revenue margin uplift and a fairly stable cost margin as we made solid progress towards the 2% underlying PBT margin target that Skroo will talk about later. Fourthly, we delivered a record $421 million operating cash inflow, which allowed us to invest in the business, increase shareholder returns and undertake significant capital management initiatives. We also finished the year with a very strong balance sheet with more than $1.1 billion in cash and investments and materially lower debt levels. At the start of FY '24, we unveiled a new capital management policy designed to create shareholder value, both in the short and the long term. Under this policy, we intend to allocate 50% to 60% of net profit after tax, or NPAT, to dividends and/or capital management initiatives, subject, of course, to the anticipated needs at the time. Based on the FY '24 interim dividend and the FY '24 final dividend, which was paid last month, we returned $88 million or 38% of underlying NPAT to shareholders. In total, we invested about $450 million in capital management initiatives during FY '24. As we used $300 million to repay bank debt and overdrafts. We took proactive steps to increase future earnings per share by investing $84 million to buy back and retire convertible notes, which had a face value of $75 million. We returned $62 million to our shareholders via the FY '23 final dividend, which was paid early in the 2024 fiscal year, and the FY '24 interim dividend that was paid in April 2024. In addition, we recently bought back notes with a $60 million face value and restructured our debt facilities by decreasing our traditional loan facilities, or SFA, from $350 million to $200 million. These funds are currently undrawn and provide us with flexibility and the ability to capitalize on opportunities including M&A and liability management that may arise. And we also introduced a new $200 million on balance sheet committed receivables finance facility. This 2-year facility is secured by our corporate client debtor book and provides cheaper funding than the SFA without the usual financial covenants while also diversifying the group's funding sources and access to capital. From an operational perspective, both our leisure and corporate businesses generally performed strongly during FY '24, as illustrated on this slide. The underlying leisure PBT more than doubled to $188 million, while underlying corporate PBT increased by 44% to $211 million. Both businesses are now substantially more productive than they were pre-pandemic. As you can see here, leisure productivity was more than doubled during the past 5 years, largely as a result of system enhancements and the growth in highly scalable, labor-light models like online and Envoyage, our independent agency business. Corporate productivity has also increased solidly, but the more significant benefits should be realized after our productive operations project initiatives that have been fully implemented. We were generally pleased with our financial results. However, the past year has certainly been challenging, testing the resilience of our industry and our people. As the travel sector continued its post-pandemic recovery and evolution we faced several market challenges across the globe, including general economic uncertainty, which impacted discretionary spending, geopolitical unrest and ongoing industry adjustments which have contributed to significant pricing volatility post pandemic. Facing this uncertainty and these challenges, our team of dedicated people have demonstrated remarkable adaptability and commitment to their customers, suppliers and to the Flight Centre Travel Group. Our people remain our greatest asset. Their unwavering dedication to providing exceptional service while navigating the complexities of today's travel landscape is to be commended. We are committed to providing our people with a vibrant and satisfying workplace and aim to foster a dynamic and inclusive culture where people can succeed and grow. The Board actively helps to drive continuous improvement in this critical area. As part of this process, in FY '24, we initiated our first truly global engagement survey in partnership with Great Places to Work. About 65% of our people participated in this research, which led to Flight Centre receiving a Great Places to Work certification in more than 20 countries. Thanks in no small part to our people, our company, our brands also won numerous awards and accolades during the year, including major honors for our corporate and leisure businesses at the annual World Travel Awards. Travel Associates was this month judged Australia's most outstanding travel agency at the National Travel Industry Awards, while Flight Centre brand was recently recognized as Australia's most trusted travel agent brand, and the source of that was the Roy Morgan Risk Report. Last week, FCM was recognized as a Customer Champion by the Australian financial review. So some wonderful recognition with all of those awards. I'd like to turn to talk about ESG, being environmental -- environment, social and governance. In addition to investing in the key areas of ESG during 2024, we released our second sustainability report to highlight our achievements and also outline the targets that we're working towards in various areas. Within the environmental area, Flight Centre brand's Planting for the Planet program proved a great success. This program, which customers can access via Flight Centre Brand's Captain's Pack, comfortably exceeded its 2024 goal of funding the planting of 1 million trees in various locations around the world. In July, I had the privilege of witnessing the benefits of this program firsthand in Morocco, where these trees are supporting more sustainable livelihoods for struggling farming families. It was really impressive. From a social perspective, we continue to engage our employees and our community work. The 2 key programs that are in place in Australia, workplace giving and giving grants. In relation to governance around ESG, we continue to prepare for our first report on climate-related disclosures on the Australian Accounting Standards Board's sustainability reporting standard settings framework. During FY '24, we published information in our sustainability report, which align broadly with the expected requirements. Another area that we've invested significantly in is our digital transformation. To accelerate this transformation, we're investing in a host of new technologies, enhancing our customer-facing platforms and investing in our data analytics capability. In corporate, we introduced the proprietary Melon and FCM platforms during the pandemic and have continued to invest in these products, incorporating new features. More than 90% of our new corporate traveler customers in the Northern Hemisphere are using Melon, while all FCM customers globally have now migrated to the FCM platform. In leisure, our digital capability and mobility investments are geared towards capturing a greater share of wallet, driving customer personalization and supporting sales growth. We have significantly expanded our online capabilities, particularly our product ranges, to include new features such as the ability to book flights from anywhere to anywhere on flightcentre.com, which is proving to be a very popular addition. We're also leveraging machine learning, artificial intelligence, or AI, and natural language processing to enhance our consultants' effectiveness in highlighting options for customers and to improve conversion. In relation to AI, a number of programs are in place within our corporate and leisure businesses, aiming to improve our efficiency and to augment the services that we provide, as you can see on these slides. We've established an AI Center of Excellence to drive these initiatives. Our use of AI is subject to guardrails and governed by an internal AI Governance Board, which includes a director, Kirsty Rankin, and various key executives. This Board has created policies and frameworks to guide our responsible use of this rapidly changing technology. Cybersecurity and data protection are other areas or key areas of focus and continuous uplift and our commitment to responding to evolving risks has resulted in increasing investment. Our programs are driven by our dedicated in-house teams and bolstered by top-tier external experts as and if required. Looking ahead, while we acknowledge the current challenging market dynamics, we remain confident in our strategic direction and our ability to create long-term shareholder value. Our focused continues to be on strengthening our global presence. Already this year, we've acquired Cruise Club in the U.K., a business that we will use to fast track the growth of Ignite's MyCruise business, which is very successful here in the U.K. We're enhancing digital capabilities to boost productivity and enhance the customer experience, as you've heard. We're improving operational efficiency through initiatives like the corporate productive operations project, which Mel Elf is very ably leading; and the creation of a global business services area, which Adam Campbell is leading. We continue to support our valued workforce and, of course, continue our focus on delivering exceptional customer service and customer experience. In closing, I'd like to take this opportunity to thank our shareholders for your continued support, our customers for their loyalty, and most importantly, our people for their tireless efforts and dedication to their customers and to the company. I now invite Skroo to address the meeting. Thank you.

Thank you, Gary. Thank you. Good morning, everyone. And as you've just heard, we're reasonably happy with both our '24 -- financial year '24 results and with the strategic execution across our leisure and corporate businesses, which helped drive some healthy productivity and efficiency gains. And this is obviously post the COVID epidemic we had. We also enhanced our already strong foundations to both prepare us for the future and position us for growth in what we see as a normal market. It's growing at about 4% or 5% a year. Remember, this is after nearly 5 years of COVID-related disruption and then a rapid year-on-year growth coming back from COVID over the last couple of years. Today, I will talk about our company and why we're confident about our ability to capitalize on the strong growth before updating you on our early financial year 2025 trading and our future expectations. As you'll hear, we generally achieved solid ticket volume growth in an inconsistent trading cycle during this first quarter. Our challenge was translating these volumes into TTV growth given significant year-on-year airfare deflation, particularly in Australia and Asia. And obviously, airfare deflation, generally, is good for our business, but it does affect our TTV. We have, however, been heartened by a marked recovery in October in relation to our key metrics of TTV, profit and profit margin, as our people and their businesses and brands focused on delivering value to cost-conscious consumers. Generally, I believe our foundations are strong. We're a diversified travel business that delivers value to customers and suppliers across multiple segments, multiple brands, multiple channels and geographies. The diversity is a point of difference for our company and a key contributor to our proven growth model, which has seen us achieve 37 years of record TTV in our 42-year history. And also, 24 years of that 42, we received -- we've done a PBT, underlying PBT of somewhere between 1.8% and 2-plus percent. Our corporate business has become our largest division in TTV terms and has delivered phenomenal growth through us -- its ongoing Grow to Win strategy, which is based on retaining customers and securing large volumes of new accounts to win market share. The corporate Grow to Win supercharged the business's recovery to about 135% of its pre-COVID size by the end of financial year '24 without major acquisitions and well ahead of the overall industry's rebound, which was estimated to be about 80% of pre-COVID activity. We saw further volume growth during the first quarter, albeit more modest on top of last year's record numbers and a flat market globally, where we focused on deploying the productive operations initiative, which Gary mentioned at Mel Elf is in charge of. The productive operations project operates in tandem with Grow to Win and is a major body of work that is set to deliver material productivity gains and customer benefits over the next 12 to 18 months. This initiative is expected to fast track profit growth in FCM in particular, by reducing overall costs per transaction and delivering scale benefits through a series of projects focused on: one, digitalizing and standardizing our operations; secondly, enabling customer self-service capabilities; and also enhancing content access and distribution. Our leisure business of today is materially different to the legacy business that we traditionally relied on for growth. We now have a trusted portfolio of brands that is significantly more productive, more efficient and more profitable with the flagship Flight Centre Brand maintaining a healthy market share and its relevance to customers in its core Southern Hemisphere markets, both online and offline. And also, our luxury specialists and independent businesses gaining scale, growing more rapidly, albeit off a much smaller base and driving overall TTV. As you can see to the right of this slide, our luxury specialists and independent businesses now capture almost half our leisure TTV compared to about 1/3 5 years ago. We also captured 15% to 20% of our leisure TTV online, about 15% of Flight Centre Brand's TTV is now online within the mass and specialist categories and are now Australia's largest seller of airfares online amongst the intermediaries. In both leisure and corporate, we're effectively expanding our addressable markets by introducing products and offerings that are delivering new revenue streams. Some of the recent investments with -- been highlighted on this slide. The leisure and corporate businesses operate alongside 2 other divisions, the supply division and the Global Business Services, or GBS. Supply procures product and delivers it to our businesses and our customers via our TPC or TPConnects business in Dubai. We also aggregate air content from the global distribution systems, low-cost carriers and via airlines', NDC, which is the new distribution capability that airlines are using now. GBS, run by our CFO, Adam Campbell, is a relatively new area that encompasses most support services such as finance, technology, people and culture and privacy risk and security and risk. In time, it's expected to deliver significant benefits to our frontline teams, including efficiency benefits, cost reduction, better service delivering greater expertise generally. As Gary alluded to earlier, our strong balance sheet and liquidity position underpin our foundations and mean we can invest in future growth drivers and/or move quickly to capitalize on opportunities. For example, given our current share price softness, we may choose to opportunistically reduce our outstanding convertible notes balance. Throughout our company, we remain very focused on investing for the future while also growing sales and profit year-on-year. This long-term focus is evidenced by significant recent investments in: firstly, productive operations, which is expected to drive margin improvement and productivity gains in corporate; the initiatives highlighted earlier that are expanding our addressable markets and delivering new revenue streams; digital enhancements in both leisure and corporate to improve access to product ranges, particularly online the overall customer experience and productivity; also in the leisure businesses with strong growth potential in the luxury, the independent and the cruise categories. Our cruise sales, in particular, are growing strongly, up 31% in Australia last year. And we're now looking to fast track our growth globally in the buoyant sector via the startups, investments and products that are listed on this slide. This year, we'll also invest about $100 million in CapEx, which is about $75 million to be directed towards technology and systems. In addition to network growth, we plan to open about 35 leisure shops, including some 18 Travel Money outlets, and we're generally happy with Flight Centre shop network's size, although there are some growth opportunities, particularly in the U.K., we're just about to open again, for example, in Mayfair and Wilmington, also in the Cruiseabout brand and by upstaffing stores ahead of our peak second half selling seasons. Our year-to-date results. We recently flagged that cyclical challenges that led to patchy first quarter trading compared to a reasonably strong and more consistent period in 2024. Pleasingly, preliminary trading results points to a solid top and bottom line rebound in October after a reasonable July, but relatively soft August and September. This softness early in the year meant that financial year 2025 first quarter TTV increased modestly to just under $6 billion with year-on-year growth adversely impacted by airfare price deflation and to a lesser extent, business closures late in financial year 2024, which was about $50 million in the first quarter TTV impact, or just under 1%. Underlying first quarter profit before tax increased 2% from $64.1 million to $65.5 million, with underlying PBT margin in line with the adjusted financial year 2024 first quarter result of 1.1%. By the end of October, underlying PBT margin was above comparative '24 levels following the solid improvement during that month. The airfare deflation and the associated lack of TTV growth had a flow-on effect to our first quarter super override accruals and ultimately, our profit and profit margin for the period, given that the annual targets we're working towards are often based on TTV growth, rather than ticket number growth. As you can see here, average international fares that we sold in Australia during the first quarter decreased by 9% compared to the same period last year. This is based on fares that we sold by the GDS. So it does not include low-cost carriers sales and provide -- doesn't provide a full picture of the extent of the airfare deflation. Although you will have heard domestically, generally, airfares are still quite strong, as many of you will know. We view these cheaper fares as very positive as it's starting to stimulate sales, as evidenced by a 15% increase in international airfares sold in Australia during this first quarter, a growth rate that was maintained in October. We also have the opportunity to regain some of the lost ground in relation to first quarter super override accruals by delivering stronger leisure and corporate TTV growth in the months ahead. Within our Flight Centre leisure shops, basket sizes have increased and inquiry has generally remained healthy ahead of the year's busier booking periods. Conversion has, however, been slower during the traditionally quieter months earlier in the year, reflecting a cautious consumer at a time when cost of living pressures have curbed discretionary spending across most sectors. Travel has typically outperformed these other sectors and remained a growth industry, which has again underlined its resilience. It is, however, reasonable to assume that more people, particularly families and lower income earners, will travel when cost of living pressures ease and airfares become more affordable, which is what we are starting to see. Leisure travelers who are taking off in the current cycle are typically looking for value, fueling strong growth in the value-added packages, offered by, for example, our My Holiday business, the Ignite business. Both this product range is sold through Flight Centre Brand and directly via Ignite's specialist My Holiday divisions. Globally, corporate transaction volumes increased about 3% during the first quarter in a flat market globally. This volume growth was achieved with a leaner workforce, pointing to our productivity gains and was effectively driven by account wins. FCM secured new contracted accounts with estimated annual spends of about $350 million during the 4 months to October, about the same period last year with a solid pipeline of future targets. Corporate travel, which we believe is a leading global SME, only -- SME-only travel management company, also continues to secure a large volume of wins. The total value of these SME wins is difficult to predict given corporate traveler clients are smaller, typically spending in the order of about $200,000 a year and are not bound by contracts and do not typically enforce strict policy mandates to ensure that all travel is booked through their preferred provider. Group-wide, revenue margin increased from 11.2% during the first quarter of '24 to 11.4% this year. Revenue margin was adversely impacted by reduced super override accruals during the period, which generally offset benefits gain from margin improvement initiatives, like Flight Centre Brand's component strategy, which saw components per booking increase to 2.8 compared with about 2.3 during the 2023 financial year. Underlying cost margin, excluding touring cost of sales, increased slightly but should decrease as TTV recovers and as initiatives like productive operations and the GBS areas creation gain traction. As I mentioned earlier, October improved with TTV up 6% globally, taking the year-to-date growth rate at over 1.5%; underlying PBT increasing about 30% on a like-for-like basis for the month; underlying profit margin up about 30 basis points compared to October 2023; and also promising signs emerging within some of our larger corporate businesses with the business overall achieving a record month in TTV and revenue terms, along with a strong uplift in the corporate traveler transaction volumes. The Australian corporate business achieved its best monthly TTV and profit results since the financial year of 2019, while the large U.S. business recovered strongly in both TTV and profit terms. So our outlook for 2025 financial year. Looking ahead to the full year, we'll target an underlying PBT of between $365 million and $405 million. The midpoint is about $385 million, which represents 20% growth on the 2024 financial year. And if achieved, will be a record eclipsing the $384.7 million in the financial year 2018. It's also broadly in line with adjusted market consensus for the year. This view of consensus is based on updated research notes published by 16 sell-side analysts who cover Flight Centre Travel Group following our most recent market announcement. As mentioned earlier, the broader travel industry is now expected to return to its normal growth trajectory with the IATA forecasting a 3.8% compound annual growth in passenger numbers globally between 2023 and 2043. The Asia Pacific region is set to grow more rapidly at a 5.3% compound annual growth rate. Through our established and emerging brands, we believe we are well placed to capture more than our fair share of this growing market. Earnings this year are again expected to be very heavily second half weighted because our leisure and corporate sector seasonality changes or seasonality records. This seasonality was very clearly illustrated last year when we generated 66% of our underlying profit for 2024 during the second half. While it's impossible to predict our 2025 split at this relatively early stage, various factors suggest a heavier second half profit weighting this year, including, potential tailwinds as the year progresses from improved macroeconomic conditions. Secondly, a more stable political climate following elections early in the year and if geopolitical tensions ease. Also, further leisure and corporate volume growth driven by cheaper airfares and fueling -- which fuel accelerated TTV growth as well as super override recovery as we cycle a lower fare environment, which we're now starting to do. Also growth in our luxury Scott Dun business, which generates most of its profit during the 6 months January to June. Our corporate earnings uplift as early productive operations benefits start to flow and also growth in higher-margin product sales, including tours, cruise and travel insurance as our new leisure contract with Europe Assistance kicks in. And also reduced other segment losses through cost reduction and stronger results from our revenue-generating businesses in that sector. Looking within our business, we continue to focus on underlying profit margin improvement. While we acknowledge we're now unlikely to achieve a 2% underlying PBT margin this year, which was our initial stretch time frame, it remains a priority and a relevant medium-term objective, particularly within our organization. Our primary short-term focus, however, is on profit growth while increasing TTV, which means we will not slow growth in profitable but lower-margin businesses that continue to perform strongly in order to artificially achieve that 2% target, but to the business's longer-term profit detriment. Instead, our margin improvement efforts will again focus on the key drivers that have underpinned our solid progress towards that 2% so far that are outlined on this slide. In conclusion, we believe we are again well placed to grow during financial year 2025. While we've experienced some cyclical or cyclical challenges early in the year, our fundamentals have not changed. Our foundations are now stronger given the investments we continue to make to create sustainable value for our stakeholders. And as I said, we're seeing some promising signs in October. As we approach our busiest trading periods, we are ready to capitalize on opportunities that will arise given our proven ability to grow, our diversified portfolio of brands with strong customer value propositions. Also a strong strategic execution in both the corporate and leisure sectors, which is delivering on improved overall margin and our balance sheet strength. Thank you again for your support of our company, and I'll now hand over to Gary again. Thank you, Gary.

Thank you, Skroo. We'll now move to the meeting's formal business. The notice of meeting has been circulated to all shareholders registered as of the 10th of October 2024, and I will take the notice of meeting as read. The minutes of the previous Annual General Meeting, which was held on the 15th of November [ 2023 ], were approved by the Board and signed by the Chair of that general meeting. Minutes are available for inspection at the company's registered address. We now move to the company's report and accounts. The financial report, directors' report and the auditor's report have been forwarded to shareholders in the annual report and are tabled at this meeting. The first item of business is the reelection of Robert Baker as a Nonexecutive Director of the company. In accordance with the company's constitution, directors may not hold office past the third AGM following their appointment, excluding the Managing Director. At least 1 director retires each year and offers themselves for reelection. Accordingly, Rob retires and offers himself for reelection today. The number of proxies received prior to the meeting should now be showing on your screen. I now invite any questions on this item from shareholders attending in person today. And for any questions today, please give me your name before you ask the question. Are there any questions on this motion? If there are no questions from shareholders attending in person, I ask Haydn, if there are any written online questions.

No questions, Chair.

As there are no further questions, please now cast your vote if you have not already done so. [Voting]

I now move to the next item on the agenda. The second item of business is the reelection of Colette Garnsey as a Nonexecutive Director of the company. Similar to resolution 1, Colette Garnsey also retires and offers herself for reelection today. The number of proxies received prior to the meeting should now be showing on your screen. I now invite any questions on this item from shareholders attending in person today. Are there any questions on this item? There being no further questions from shareholders attending in person, I ask Haydn, if there are any written online questions.

No questions, Chair.

As there are no further questions, please now cast your vote if you have not already done so. [Voting]

I now move to the next item on the agenda. The third item of business today is the approval of the grant of deferred incentive plan rights to the Managing Director. Approval is sought including for the purpose of ASX Listing Rule 10.14 to grant the Managing Director and Group Chief Executive Officer, Graham Turner, up to 27,243 rights under deferred incentive plan, operate under the company's long-term retention plan and his acquisition of ordinary shares in the company on the exercise of those rights. Voting exclusions have and will be applied as outlined in the notice of meeting. The number of proxies received prior to the meeting should now be showing on the screen. I now invite any questions on this item from shareholders attending in person today. If there are no further questions from shareholders attending in person, I ask Haydn if there are any written online questions.

No questions, Chair.

As there are no questions, please now cast your vote if you have not already done so. [Voting]

The fourth item of business is to approve increasing the Nonexecutive Directors' fee pool. Approval is sought, including for the purpose of ASX Listing Rule 10.17, to increase the total aggregate fees that may be payable to nonexecutive directors by $400,000 from $1.1 million to $1.5 million. Voting exclusions have and will be applied as outlined in the notice of meeting. The number of proxies received prior to the meeting should now be showing on the screen. And I now invite any questions on this item from shareholders attending in person today. Are there any questions? As there are no questions from shareholders attending in person, I ask Haydn, if there are any written online questions.

No questions, Chair.

As there are no questions, please now cast your vote if you have not already done so. [Voting]

The fifth and final item of business is the adoption of the directors' remuneration report as presented in the annual report. Just a reminder that the key management person listed in the annual report and their closely related parties are not permitted to vote on this resolution. The number of proxies received prior to the meeting should now be showing on the screen. And I invite any questions on this item from shareholders attending in person today. If there are no questions from shareholders attending in person, I ask Haydn if there are any written online questions.

No questions, Chair.

Since there are no questions, please now cast your vote if you have not already done so. [Voting]

I now move to the next item on the agenda. We'll now address questions and comments submitted on the annual financial report, directors' report, auditor's report or the company's management. As mentioned earlier, Allison DeGroote from EY is available to answer questions about the audit's conduct, the audit reports, preparation and content, the accounting policies adopted by the company in relation to the financial statement preparation and the auditor's independence in relation to the audit's conduct. Are there any questions from shareholders attending in person today? As there are no questions from shareholders attending in person, I ask Haydn if there are any written online questions.

No questions.

As there are no questions, that brings our meeting to a close. Very soon, I'll close the voting on items 1 to 5. Before I do so, I'll pause the meeting to give shareholders a final opportunity to cast your votes. For those attending online, please submit your votes through the online platform. In-person attendees need to complete and lodge your blue voting cards in the ballot box. I'll now pause the meeting for 1 minute so you may finalize your votes.

[indiscernible]

Sorry, yes, there will be. There absolutely will be. No. Sorry. So the voting will conclude, but I will throw it open for general questions. [Voting]

Okay. So we have some roving microphones available today for you to ask any questions. And as I said before, if you can please state your name and then pose your question. So questions?

Thank you, Gary. I'm a long-term shareholder, having suffered a couple of semi crisis. I'm also a member -- a long-term member of team invest. I'm getting to a couple of questions. I noticed the rapid expansion of the Envoyage network and also the partnership arrangements that Scott Dun has made this year. What impact will these arrangements have on the goal of reaching a 2% margin? It seemed to me that the -- whenever you're doing partnerships or anything like that, you can't be ending up with a lower margin.

I'll pass that one to Skroo to answer.

Yes, I don't know if everyone can hear me. But yes, Envoyage, which is the independent model, will tend to be a lower margin than the net margin a bit lower than 2%. Whereas Scott Dun, which is a wholly owned business for Flights Centre, it has more like a net margin of 5% or 6%, I think, is it. So overall -- and it's one of the things, as we said, particularly internally, we are aiming at that 2%. And as I said, we've got 1.8% to 2.2% in 24 years of the 42 years of Flight Centre has been around. So we believe and our CFO sitting next to me actually promised shareholders -- how long ago was that?

I didn't give a date to you.

He reckons he didn't give a date. But -- so -- but we have said, FCM tends to be a huge volume player. We're at a net margin generally under 2% at the moment. But we think we can get it around that too. But because it's a high volume, we're not going to -- and it's profitable, we're not going to give away profits just to get a 2% margin, if you see what I mean. But generally, on the question you asked, we believe we can get the Envoyage to close to 2%, and Scott Dun is significantly over 2%. So that's -- but when you put everything together, obviously, our online and the more our online leisure grows, that will be low margin, too.

And a second question, just the Flight Centre meetings and events branch, if they're likely to become contributed to the overall profit results? Was it always just going to be a small generator?

I might ask Mel Elf, [ Louise ], about the meetings and events because it's reasonably complicated.

So the meetings and events business is typically a higher-margin business than our traditional FCM business. It's a diversified brand that does things from group management, events and production. So it does have various margins. But the good news is we've actually started to globalize that brand effective this year. So we're moving into about 8 countries. It is emerging brand. Our strongest countries at the moment are Australia and India, but we are going into different countries around the world to really expand that offering. The benefit of that offering is we can actually leverage from our corporate business as well. So our existing customers spend a lot in the meetings and events market, and it's typically a very fragmented market where people actually generally don't know what they spend on meetings and events. So it's a great opportunity for us to grow that segment.

Did you have any more questions? Sorry, I'll just finish this gentleman.

Not really a question, but more of a request. I'm just building on the slides that were in Skroo's presentation. It would be very useful if there was a single diagram in the next results presentation or even in the annual report, showing how everything fits together because there's little bits and pieces all over the place, and I and the other team members, there's probably other people in the room would also like to see a big picture of how it all fits together. And I realize that's sort of ongoing and changing, but maybe something like that could be considered for the future.

So our Investor Relations person, Haydn Long, is at the back of the room, and he loves things like that.

I know.

That will give him something to do.

So he hasn't got anything to do. I know that.

Thanks. Yes. Thank you.

Hello. I'm Deb Newell. I have run multiple businesses from food to major events businesses, and I love travel and due Turner -- and I think it was 2010 or 2011 helped me start my Hunter Gatherer Dinner Club. I've flown people into the oak Chicago dunes of the Sahara. We've gone down the Douro River, having fabulous food in Portugal. And then, of course, I had to cancel my come fishing with me in 2022, where we were meant to meet is Oslo and basically end up coming down the fjords, but I was really targeting the opening of the main lobster season in Nova Scotia. It's called the Hunter Gatherer Dinner Club, and we follow the food that people used to eat. And the final bit was getting up British Columbia on 2 different boats, and the competition was to see we could catch the biggest wild court [indiscernible] okay? So that's my sort of event. The next one, we'll be going to Chile. And ideally, we're going there because I find Chile very interesting to look at, and I want to see Patagonia, which is probably the world's last remaining very natural thing. I would really like to speak more to the events groups and whatever because I've enjoyed this. The COVID really ruined quite a few things, including Icelandair, went belly up. So I couldn't jump from Bergen on through Iceland to Nova Scotia. So for the events people, I'd love to talk further. And this whole business was started when Jude helped me start something at a farm owned by Tony Coots outside of Canberra in 2011. That's when I start the Hunter Gatherer Dinner Club.

Thank you, Deb. That's a great story. And I can talk to you over a cup of tea at the end about Patagonia. I trekked in Patagonia, and it's beautiful. But more importantly, you happen to be sitting right behind the 2 people who could perhaps talk to you as well, Mel Elf and Greg Parker around the kind of opportunities for the kind of products you're looking to build.

[indiscernible]

Sure. I'm sure there'll be lots of people here that would be very keen to join those groups.

Hi, my name is Gwen. I'm a shareholder. And thanks for the presentation. Skroo, it was really detailed in regards to where you're going. And just if you can expand on that, possibly, Mr. Chairman, in regards to the tailwinds industry might be experiencing. And organic growth appears to be coming a lot easier currently than what it has in the past. Is that correct? And what are you seeing in regards to that? Just a bit more of an expanded view of the tailwinds, if there are, for the industry? And is growth coming a little bit easier, why is that?

I will pass to Skroo, but I'd start by saying where there's tailwinds, there's also headwinds and lots of volatility. But I'll pass over to Skroo for a more fulsome answer.

Yes. maybe, [indiscernible] got it wrong about the tailwinds. But I'm not sure it's not that obvious that we've really got serious tailwinds at the moment. Certainly coming out of COVID, as you saw, we got -- had serious growth outcomes from obviously during COVID, if you looked at -- if you remember, Flight Centre Travel Group actually in losses and loss profits, assuming the profits would have been similar to pre-COVID, we lost about $3.2 billion, $3.3 billion. But obviously, coming out of that, there was pent-up demand, which we and I think a lot of investors assume would continue past the 2024 financial year. But it's certainly -- and I think as we've made fairly clear, certainly, it looks like it's back to pre-COVID type growth at that 4% or 5% a year TTV growth. And we're reasonably confident as we said that organically, we can continue, particularly in corporate to get more market share by winning more large accounts. And also in leisure by having a lot more attachment to our airfare in brands like Flight Center. But I wouldn't like to give the impression that there's a big tailwind at the moment. It's -- we're going to have to really work for our growth, particularly our organic growth. There's still -- during COVID, as you probably saw, there's quite a few private equity investments in the travel industry. And we've taken advantage. Scott Dun was certainly one of those. That was in -- that investment was well before COVID. And you will have seen the Cruise Club recently, too, which did take some time in the U.K. And we see a lot of opportunities in the U.K. to grow organically, because one of the reasons is we had to be quite savage in our cuts during COVID there, and we've got a long way to come back. It's a big market. We have a lot of opportunities there, not just in the Flight Center Brand, but in something like the -- My Holidays, MyCruises, and that's really where the Cruise Club is going to come into it. So generally, I'm reasonably optimistic, although you've got to remember that, particularly in the Northern Hemisphere, we took a lot of big cuts in -- particularly in our leisure industry. And growing that back a little -- some -- it will happen some through M&A, but organically, it's going to take some time.

My name is [ Terry Whoodlock ]. I own shares in Flight Centre so I'm very close to the company as far as what's happening. Can you give me the reason why the big drop a few weeks ago from $21-odd to about $17 and then to $15. I didn't sort of -- I know there was information given to us whether it was a certain meeting, but I'd certainly appreciate if you could just let me know what the reason was.

Yes, sure. I think Skroo and Adam, our CFO, presented at the Morgan's conference. And Skroo or Adam, would you like to comment on what you think the market reacted to? I think it's fair to say we felt the reaction was unwarranted, but the market is the market. We take a long-term view on the growth of this company, and it is what it is. But we weren't happy about that either. But Skroo, would you like to comment?

Well, I'd like to blame someone else like Adam or Haydn. It was actually Haydn and I at the Morgans conference. But yes, look, I think generally, it was because our first quarter was relatively soft. There was also, the profit growth we had was -- well it was minus 1%, 1.5% on the same period last year. There was some changes in how things were recorded in that. So some analysts took it that the underlying result was significantly lower than a 1% growth. So it's hard to say, do you -- what do you reckon, Haydn?

We were [indiscernible] quite [indiscernible] and after the [indiscernible] first quarter [indiscernible] so people assume that we were going to finish well below that -- well below that [ 450 ] level and the share price fell accordingly.

I think it's also fair to say that I think we -- it was either where or where books came out with their outlook and they got hit by over 30% reduction in their share price. There's another travel company, came out with a similarly less robust -- less than market robust outlook. And so the whole sector had moved, and we had not. And I think just listening to our update, the market just probably moved just to where it had moved everyone else.

It's a good point, Rob. And apologies, Adam, that I should have known, it was Haydn, not you. That's right. Are there any further questions from the floor?

My name is Greg [ Spedding ]. I'm a long-term shareholder and also a team invest member. I know there's a lot of hype around AI, but I'd rather just understand a little bit more from a practical basis, so whatever you can share. Maybe you could share like numbers of people you might have working on it. Are they sort of internally based or you're partnering with an external provider? And also, what are the sort of practical applications that you see with it moving forward. Maybe it's incorporated in some of your software like the Melon platform and that sort of things already. So yes, just a little bit more flavor on the practical application of it.

That's a really good question. And I'll give some preliminary comments, and Kirsty may have some view as she sits on the AI Governance Board so she might be across more of the detail. AI, we're looking at it through the lens of a couple of ways. One is, what can we use for to make us more efficient, and that's really to help us, help our people. And the head of our AI institute of excellence says the big focus from our people's perspective is just trying to engineer out these, his words, the c*** work. So really trying to become more efficient. From a customer-facing side, it's really about what are the pain points for our customers. What are the problems our customers have in booking the travel. How can we use AI as a tool to help us make life better for our customers. So that's sort of overriding principles. We've got a whole range of projects active at any point in time in this AI institute. I think it's based out of the U.S., John Morehouse, head of that area, I think he's called our Chief Experience Officer, he is managing that. And I know he was actually just last week, published an article in a magazine around AI. And he said in that article that he had, in the last 12 months, increased the people involved by 4. Now that might be wonderful. I don't know. Kirsty, you might have more information on that. But it's a growing space. And obviously, a lot of the platforms we use are embedding it as well. So Microsoft are embedding it into the platforms. So there's a whole range of things happening. Kirsty, is there anything you would like to add?

Thanks, Gary. Yes. As you mentioned, efficiency and productivity are one of the key areas of focus. The other is just how do we ensure we give our customers the best experience. And as part of the AI Governance Board, the way we approach it is to look at the priorities within the company in terms of what's going to actually drive the best bang for our buck in terms of investments and our return on investment. And so that whole area spans everything from -- yes, as Gary said, taking c*** work out, being -- enabling our frontline staff, for instance, to bypass all the questions that can just be handled through machine learning, and they just focus on the areas that customers are interested in. It's also important in terms of our personalization capabilities. So being able to understand what our customers' needs are, not serving up the same thing to everybody, but you would get something different to what Dave would get or Gary would get or I would get. So really being able to tailor itineraries and things and manage content. And then also helping our frontline staff, for instance, with itinerary planning. They can actually go on and use AI to help with people's itineraries. I think the important thing, though, with AI is that we're not losing sight of the personal touch and the importance of still having that human intervention. So in terms of numbers, Danny, Danny is our expert on that one.

Yes, I would suggest we have a material number of people working on it, but we've got some really, really clever people, to Gary's point, earlier who are focused on making sure we're getting the right outcome. And one of the quotes from John, who I work closely with on our technology executive team is, in some cases, AI is a hammer looking for a nail. So making sure that we're picking the right solutions to fix actual problems or opportunities for improvement within our company is really, really important and ensuring that we're getting a good return on the investment because it is also very expensive technology to implement and run. So -- and then also, obviously, staying on the right side of emerging legislation in this space, which we've seen a lot come out of Europe as an example. And so making sure that we're closely watching what's happening there and not overinvesting in areas that could create risk for us in the future.

And also done within the ethical framework because a lot of AI can create bias. So we've also got to just make sure that ethically, it fits within our mission and values as well.

Thank you. That was a good question and a very fulsome answer whereas you can see, we're doing a lot in that space. Other questions?

Thanks, Chairman. I'm [indiscernible], ASA. Bearing in mind that the share dilution during COVID and the current share price and assuming that Skroo is correct on his forecast for the second half of the year, what's the Board's thoughts on either share buyback with the current low share price or increasing dividends for this financial year?

It's a good question. And I mentioned in my address, we're looking at a range of capital management initiatives and share buybacks is one of those. We've been more focused on buying back convertible notes, which has the same impact effectively removes that dilution in the future with those notes. So we have no current plans regarding a buyback, but I'm not ruling that out. It's just one of the things we can look at in terms of how we allocate capital. Are there other questions from the floor? Haydn, you have a question? Or is this a question from online?

Questions from online. There's no others...

So I'll just make sure there's no more from the floor first. So are there any other questions from the floor? No. Thank you. So we'll move to online.

Thanks, Gary. It looks like we've got 2 questions from Stephen Mayne. First one, how long has the current audit firm been in place? When did we last run a full tender for the job? And when are we next intending to tender for our audit work?

Okay. The EY are our auditors, and we have Amy and Allison here with us today. EY were appointed in 2012 to audit the books of the company. And we went to tender in the last 12 months and have renewed with EY after a very competitive process. So welcome back, EY. They have provided us good service around the world. And the order tender process was a very valuable one for us to go through. Haydn, you said 2 questions?

And now another one. Second question is, thanks for disclosing the proxies early with the formal addresses, and well done for winning strong voting support. When disclosing the outcome of voting on all resolutions today, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with the scheme of arrangement. This will provide a better gauge of retail shareholder sentiment and all resolution -- on all resolutions insight into the chronically low retail shareholder participation rate.

I'll pass that to David Smith, our Company Secretary.

Yes. Look, we had the same question last year. And as we said, we would disclose that, and we did last year. So I'm not quite sure...

No, thanks. Stephen has just come back to me and said that he realized we did it last year. So he kind of withdrew the question just as I announced it.

Haydn, are there any other questions from online?

No, it doesn't look like it. I think we're all done, Gary.

All done. So last opportunity from the floor? We have one over here.

[indiscernible] So 99 Bikes going [indiscernible]

So 99 Bikes, like a lot of businesses, there were winners and losers through the pandemic. And the Bikes business was a real winner during the pandemic, but it's been challenging post pandemic. But I think it's fair to say it's trading reasonably well now and working through the challenges, I think, pretty well has worked through the challenges. But obviously, discretionary spending is a challenged area, and Bikes is a discretionary spend. So Skroo, would you like to add anything to that?

Yes. I think during COVID, the best year, they made a profit of about $44 million, $45 million. But last year, because of overstocking in the industry generally, lost money, but they're back into profit this year. Flight Centre own, I think, 46%, 47% of them. And they have about -- I think in Australia, we have about 65 locations, about 8 in New Zealand and basically 3 in the U.K. And New Zealand still in the negative. Australia is going pretty well. They also have a wholesale arm called Advanced Traders. So generally, I think as where Flight Centre is generally an investor in the what's called the Pedal Group, and I believe we're quite happy that it's got a pretty good future for us, particularly in places like the U.K., but still in Australia as well because we're obviously the dominant retailer here, and there's a lot of opportunity, I think, to grow that market in the future.

[indiscernible]

Yes, it's a possibility because obviously, the last couple of years hasn't been the time to do something like that, but that is a possibility in the future.

Okay. Ladies and gentlemen, that being the end of all business, I would like to declare the meeting closed, and thank you very much for your support and for your participation coming today. And I'd like to invite you for refreshments outside the room here with some of the senior executives from the team and the Board. So thank you very much.