Helloworld Travel Limited (HLO) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Helloworld Travel Limited Investor Briefing Full Year FY '26. [Operator Instructions] I'd now like to hand the conference over to Mr. Andrew Burnes, AO and Chief Executive Officer. Please go ahead. .

Thank you very much, and good morning, everyone. Welcome to our investor call. Thanks for joining us this morning. Now you've had an opportunity to look at some of the information we've put out today. And it shows a reasonable outcome, I think, for the company, particularly in light of, obviously, what happened in the Middle East earlier in the year, which now impacted the business. But we still managed to get some TTV growth in there and got to just tie a little bit under $4 billion, which was up 4.1% on the previous year would have been a lot better had it not been for the June quarter being impacted by events in the Middle East. But in any event, it wasn't about outcome, all things being considered. What we are seeing now on a positive front is that the growth for the September quarter and beyond are actually quite reasonable, and we're very pleased with the way that, that is progressing. I think the pent-up demand that were created by the impact of the Middle Eastern conflict earlier on in the year. It's now starting to come back through in new bookings that we are seeing around our agency networks in Australia and New Zealand. Our revenue margin increased from 4.9% to 5.1%, and whilst that probably doesn't sound like much on the face of it, that's sort of an increase in revenue margin is very significant from our perspective. We work very hard to maintain that revenue margin and even harder try and grow it, but to actually achieve 0.2% growth in that margin, I think, across the full financial year was a very good outcome. And it's reflective of some commentary that I've made in the past as well about the good relationships that we have with the carriers. We contract with 154 airline carriers around the world and also with our major supplier partners in some of our ancillary revenue lines, including crews, hotels, insurance, and car. So we're very pleased to see that 0.2% increase across that $4 billion TTV. Our investment strategy has played out reasonably well throughout the year with 1 small exception, which I will touch on momentarily. But our acquisitions across the business, particularly MTA and acquiring the other 50% of that business. We initially bought into it in 2016. And 10 years later, we bought the remaining 50% of that business that we didn't own, and that's now wholly owned by Helloworld, that's gone very well, and our other investments have to. The only one that hasn't is, of course, Webjet, and we have some concerns about the way that is running. And it's currently -- our investment is currently sitting at 20.29% of the shares in the group, and it's crossed the 20% threshold because of the share buyback, which they are continuing to maintain despite our best efforts to tell them, that's not really a very good idea. But it's fallen in value. We all know that. It's less than what we paid for it. It's less than what just about everyone paid for at the moment, I have to say. And I think that the major shareholders in that group, including ourselves, are not very happy with its performance to date. I'm not going to go on about Webjet. I'm here to talk to you about Helloworld, but is part of our overall investment profile. And we are looking for some way big improvements coming out of that business in the next 12 months. Back to our business, and that's really -- as you know, we have the largest network of travel agents and brokers across Australia and New Zealand, and we've got 2,600 agencies and brokers and there's over 10,000 travel professionals working in those businesses. So they are doing a fabulous job. They continue -- there continues to be significant demand. We've got really strong brand recognition, not only in the Helloworld brand but across some of our other brands as well. And the trust and the support services that our agents offer to customers is really very, very much appreciated and needed. So whilst everyone has been saying to me, basically since I started in the travel industry in 1987, the travel agents will not be around in the next whatever period of time as I've now become the CEO of the largest independent network of agents and brokers across the country, and I've been doing that for a decade. I see the demand for services from travel agents are continuing to, in fact, expand. Our agents report that their businesses are growing. The number of customers coming in the door is growing, and they are going extremely well. And as I said, that's really the trust and support services that our agents provide travelers is very much valued by our travelers. This is not like buying a television. It's not like buying motor car. It's not like buying a lot of products. Travel is complex. Anyone who returns in international travel isn't complex, is kidding themselves. And even though you might just be taking 7 nights in bar or 7 nights in New Zealand somewhere, what have you, that still can be complex, and it can turn from a wonderful holiday experience is something that's actually not such a wonderful experience really at the drop of a hat. And whether that's weather-related events, whether that's volcano-related events, whether it's airline-related events, whether it's wars in various parts of the world, et cetera, et cetera. There's many things out there to concern what it looks like on the face of it quite simple program itinerary, it concern to something that's very, very complex and requires help. And as a travel you need that help. And so we see the demand for the services of our agencies as growing. And that's contrary to what a lot of people think. But in any event, that's actually what's happening out there. If I go to Page 6 sorry, of our investor presentation, we have the key financial metrics sit out there. You can see them on that page. I'm not going to go through each one of them. But I think importantly for investors, I'll just bring to your attention our final dividend per share $0.05 fully franked brings our annual dividend across the year to $0.10. And we think that, that's quite a good return particularly given that our shares have been trading around $1.45 to $1.55 range. They're up a little bit this morning, but we think that's a good outcome, and we will continue, obviously, to reward our investors with reasonable dividends as we go forward. Our EBITDA margin for the year was 28.9%. That's up 0.1% on the previous year. Look, it would have been -- we would have got to our goal of 30% had it not been for the June quarter. And whilst we set out in various papers throughout the presentation here, our quarterly results and outcomes. The June quarter, although we had a little bit of growth in that quarter, it was nowhere near what we expected in March, early March when we were calculating what our forwards look like, we were expecting growth, certainly, double-digit growth of around 15% to 20%. As it turned out, it was only 4% and that was a result of the many cancellations that came in once the war kicked off in Iran and the Middle Eastern carriers stop flying here for a period of time. And of course, that put a big dent into our TTV and our earnings. I have to say that many, many customers got refunds, nearly $200 million worth, but most of those customers reinvested that either in booking with other carriers or booking later in the year. So that's pretty -- was a pretty solid outcome from our perspective. If I look on Page 10, we've got actually, you can see here the quarterly results. We -- first quarter, we were down 1.5%. In the second quarter, we were up 6%. In the third quarter, we went up 11.9%, and as I said, we were expecting growth in the fourth quarter of somewhere in the vicinity of 15% to 20%. So that actually shrank to 3.3% with the cancellations that unfortunately occurred, and it wasn't really what we were expecting, obviously, but sorry to repeat myself, but we are expecting that in the coming September quarter and the December quarter that we will start -- we will see some very good growth based on our existing forward bookings. So we're very happy with that. I'll take any questions, obviously shortly, but just wanted to run through some of the key points in some of the material that you have hopefully received now. So the underlying expenses, they were up 6%, and that's important for us to note, we are very, very careful with our expenses, as you know. We manage those very closely. And we thought that a 6% increase on the back of what happened. And obviously, we have a large number of personnel servicing all the needs of our agents around the country. But we weren't in a position, and we didn't think it was appropriate to when any of those personnel go, given what was going on in the Middle East as we felt it would be relatively short term, and we felt it would bounce back pretty quickly. And I think we were right in that and we are quite very comfortable with our staffing levels and other cost levels in the business at the present point in time. I'm going to pass over to Mike Smith, our Chief Financial Officer, just to take us through the cash flow numbers that are on Page 13 of the presentation. And Mike, over to you.

Yes. Thanks, Andrew, and good morning to everyone. Probably the things I'd just sort of like to point out in our cash flow was that our operating cash flows for FY '26 from continuing operations for $23.3 million million, that compares to a net cash outflow last year of $12.5 million. The reason for the improved result in FY '26 is because in FY '25, there's one additional BSP payment. So there was an additional BSP payment in '25 whereas in 2026, we see the same number of BSP payments as collections from agents. Having said that, we're very happy with the cash conversion that we saw in FY '26. You'll see that our interest income or interest received is down on the prior year from $5.8 million down to $3.2 million. Offsetting that is a higher dividend income, in particular from Webjet. So the cash that we would have otherwise have used to generate interest income, which was invested in Webjet has generated a dividend approximately the same value. In terms of the tax paid, I think it's probably just worth pointing out that due to the company coming out of tax loss positions in 2023, what we've seen take place in '25 and '26 is effectively 3 years of tax payments being made. So although the numbers are similar year-on-year, those 2 years in total equate to 3 years of tax payments just because of the way the installment rates work with the ATO and inland revenue in New Zealand. So in FY '20 -- we're now back to making tax installments on a normal basis. So 2027, we'd expect it to be more normal levels below the $20-odd million. In terms of investing cash flows, as you can see there, a good proportion of the outflow investing activity was around the investments that we made. Andrew has covered a number of those being Webjet MTA from financing activities. You can see the largest new item there in FY '26 is proceeds from borrowings. So in October '25, we drew down on our Citibank debt facility to fund some of the business acquisitions that took place. So overall, capable with the cash flow results that were seen in FY '26.

Thanks, Mike. When we look at the divisional outcomes and the divisional commentary that we have in the presentation, the first one is retail. And retail is our biggest part of our business includes our air ticketing business and all of our agency networks across the country, both countries in Australia and New Zealand. And I think there's a couple of things just to point out there, approximately 2,600 members. That includes our individual brokers who were part of the various broking networks in Australia and New Zealand, plus all of our agencies as well. So they have -- with the agency staff and all of the brokers looking over 10,000 people is that we put and provide them with as part of their network membership. In 2026, we were very pleased with the Helloworld Travel, our branded network. They're one of the most outstanding travel agency group at the NCAA awards, which was and combination of the way they look after their customers. Billboard activity that we've got a lot of billboard activity going on out there at the minute. We advertise a lot in the press. We advertise a lot digitally. And from next March we'll have a new stadium that's actually going to be called Helloworld Stadium, you probably all know that. But we've taken the naming rights of that stadium. We've got a 5-plus 5-year deal. So we got the first 5 years kicking off in February 2027, and I think that will provide us with a lot of brand -- further brand recognition, the bigger, particularly in the markets of Queensland and New South Wales, where we used the #1 game plate. Our Helloworld Travel Academy. I mentioned that during the presentation, and that's certainly really contributing to the growth in our business and particularly making important newer consultants that come into the business. Firstly, they're trained properly and secondly, stick around. And that longevity is extremely important for the growth of those agency businesses. In the wholesale and inbound areas, I'm joined here this morning by Cinzia Burnes, who heads up the wholesale and inbound side of things. So I'm going to pass over to her to give us a little bit of background on what's going on in those parts of the business.

Thank you. Good morning, everyone. So wholesale and inbound are going very well. Wholesale in particular, is benefiting from the acquisition of 100% of MTA, where the advisers that were previously using alternative suppliers and with some of the internal promotions we have done, we have seen triple-digit growth from that group of advisers. Certainly, the winner out of all the brands in wholesale rail rooms with 50% growth in TTV and continues to have more and more agents using that platform. Our team in essence that this is a proprietary system, and they continue to do a great job in enhancing it. The VIVA and GO Holidays brand as well as cruise core for cruise are benefiting from more and more loyalty from the network, and the Cruise division also won the NTIA award last year for Best Wholesale Brand in Australia, which was very pleasing. Inbound had a good year last year and that was very much helped by the alliance and the as given that the U.K. is the #1 inbound market for our division. But we look at at least matching what last year was in FY '27, thanks to some more group series that are materializing for the next few months.

Thank you for that. I think the important thing to note, particularly with our wholesale and inbound divisions is, they really -- particularly when it comes to domestic content, including both Australia and New Zealand, they fill up each other. We have a large wholesale business that's selling the whole world, including Australia and New Zealand have significant content sales through those divisions. But inbound as well coming from, as Cinzia has said, the U.K. #1 market, a lot of European visitors, a lot from North America. They're selling exactly the same content that wholesalers is selling. So we've got good margin out of both of those businesses and they continue to be material -- very material in terms of our overall profitability. So just to point that out, air consolidation, our air tickets business sits really as part of the retail division, but it's a very significant consolidator. As I mentioned earlier, 154 global airline partners. And we have very, very strong relationships with our top dozen or so carriers, both domestically and internationally. And we're very pleased with the way both carriers have reacted, particularly to the challenges of the Middle East and our Middle Eastern partners have been really tremendous to deal with. So that's being one of the -- really the highlights throughout the year. It's how everyone responded to that. Technology and innovation, I'm not going to spend too much time on that. We spend a lot of money on that. I can tell you, and our tech is extremely good without picking any particular parts of it, but the investments that we've made really over the last decade, and we continue to make throughout COVID. We knew we'd come out the other side of that, and we need to continue to invest in that. Our investments in that have been extensive, and it's delivered an enormous amount of efficiency and service to our customers as a result of that. We are at the minute is like all good companies everywhere in the world, doesn't have to neck in AI, but we're not up to a neck in AI, but we're up to our neck and thinking about it and finding the various applications that we can utilize to significantly enhance the efficiency and effectiveness of our businesses. Now I'm not going to give on my soap box and give you my AI talk about what I think of the prospects of it and the overhyping of it. But there is a tremendous amount of hype. The one thing that I take out of -- I'm conscious of in all of this is that -- when we look at why a customer walks into an agency or calls an agency or correspond with an agency, that's a travel agent, not some sort of digital agent. When they are engaged with their travel agent, why do they do it like that? Why aren't they just happy to sit at home punching in a computer and book it all themselves, utilizing some sort of AI or ticketing generator or what have you, where people actually enjoy the process of planning their holiday. There is a lot of research out in the marketplace that indicates that, in fact, people enjoy planning their holiday more than they enjoyed taking the holiday as extraordinary as that might sound. But the planning of the troop is one of the most -- particularly for leisure, the planning of the trip is one of the most delightful experiences that people can have. And so it's not sitting there on the looking at the computer screen and getting some agentic agent to come up with some sort of an itinerary through Italy, Greece, Spain, wherever it might be. It's actually sitting down and talking to somebody about what can they do? Where can they go? What are the options? Can they get from here to there? What's the best way to do it? Should they take the train, the plane, the bus, the private car, whatever, it's all of that process that people just love doing. And from where we sit, there are more and more of them are loving doing it. And more and more of them are coming into our agencies. So we see a lot of positives in the continued high level of customer service that we provide. Our average -- and you all know this, but our average age for our customers is 55. It's been 55 for a decade, it hasn't gone from 55 to 65. It's still at 55, which is where it was when we researched it back in 2016, and it's where it is today when we researched in 2026 and pretty much where it's been every time we undertaking that specific research around our demographics for our business. And I think that I can't see that, that is changing anytime soon. So we have a lot of confidence for the future of our business and a lot of confidence for the agents who make up the major part of our footprint in both Australia and New Zealand. So our operations, just to quickly talk about those, and there's a piece on Page 21 of our investor presentation. Australia, obviously, 420 people here. New Zealand. We have a pretty big team over there as well and wooden where we have a number of operations undertaken there, our coach operations we inherited back in 2014 actually when we purchased ACS-specific as IOT of Helloworld. And we've also got an inbound business in Fiji and we also have quite a number of personnel in Fiji working in our own finance teams. Our Tech division, a big chunk of our tech division is based in Athens, that came about as a result of the purchase of Excite Holidays back in 2019. And that had some interesting outcomes. But of course, we've got through COVID with that still intact, and that's actually been what has driven our ready rooms development, which as Cinzia indicated earlier, is going extremely well. What's the TTV?

It's just under $100 million.

Just under $100 million. So when we bought it in 2019, they were doing about $50 million excited that weren't making any money, but that ultimately fell over and we purchased it from the administrative. But it really has grown and our agency network continued to embrace it more and more every day. It features 250,000 hotels on it bookable with automated confirmations, has a very, very big selection of touring product on it and a very big selection of car hire as well. So it's a tremendous function and facility, and it's continuing to drive our TTV and profits forward. So I'm going to pass over to Mike to any general comments that you'd like to make, Mike, at this point?

No, Andrew, no, I think personally, I think it was a good year in light of the changes that hit us unexpectedly in respectively, in Q4. So I think to -- have delivered an increase in underlying EBITDA above $60 million with growth in the underlying -- in the revenue margin and also slight growth in the underlying EBITDA margin is a good result.

Thank you. Cinzia, any commentary you got to make?

I just wanted to go back for a second to AI and just put into perspective the 2 extremes that we had, for example, in the wholesale area, we're bringing process, we continue to bring process because that's what the agents want in their jobs. They call it shop front, they need something on the shelf. And as a result, in fact, a lot of our suppliers that started printing rosins again because of the demand. And then on the other side, we've got a current AI project in development, which will allow us to upload the over 2,000 -- or actually 3,000 contracts we received from hotels and touring companies, et cetera straight into the system without the interventional -- minimal intervention from the -- manual intervention from humans. So we are picking where AI is applicable within our business while keeping the traditional things that the agents and the clients are looking for.