Helloworld Travel Limited (HLO) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Helloworld Travel Limited acquisition of Crown Currency Exchange. [Operator Instructions] I would now like to hand the conference over to Andrew Burnes, AO, Chief Executive Officer. Please go ahead.

Thank you. Good afternoon, everyone, and thank you very much for joining us this afternoon. As you obviously saw this morning, we announced an acquisition of Crown Currency Exchange this morning, and that will complete at the end of October, and we're very excited about this acquisition. It's a great bolt-on to the rest of our retail travel agency businesses. And we believe that there's a lot of upside in this business. I want to thank Greg Woolley and Emily Palermo as well, respectively the Chairman and owner of this business and Emily Palermo, the CEO, for their assistance throughout the conversations and negotiations to get this deal across the line. I think that foreign exchange, it's one of those things that sort of sits really not much on people's radars, but it is an important part of the travel industry, in particular, because obviously, given the nature of the people who are buying the currency, they're all going somewhere. We sell about 2.4 million airline tickets a year to people going overseas. And whilst we have provided limited currency services to our Helloworld and other associated brands, their retail outlets over the years, it's not been something that's been particularly focused on, and it's certainly going to get a lot more focus now, of course. The Crown business has been a very successful business. It's been extremely well run by Greg and Emily over the last 7 or 8 years, whilst they -- and particularly Greg has had the ownership of it. And I think that it was something that for us, we were looking for a solution there. We have a number of Travelex outlets located in our agencies in Australia, 18 of them to be precise at the moment. But that was diminishing only because Travelex have been shutting a few outlets of late. And we were looking for a better solution now, it's just either we could start it up or alternatively, we could get involved with a business such as Crown. And when I say get involved with a business such as Crown, there aren't really many of these businesses out there. There's really only 3. And one is Crown Currency Exchange, one is Travelex and one is Travel Money Oz. Travel Money Oz is owned by Flight Centre. Travelex is owned by a U.K.-based Travelex organization. And of course, Crown is owned by Greg Woolley down in Hobart, Tasmania. And it was really the best potential acquisition from our perspective. So this is -- as I said, it's quite an exciting opportunity for us. It's a business with good margins, good turnover. The average transaction within most of the currency exchange business is around AUD 750. So it's not that we're at all restricted and held back by it being a small number of large volume transactions. It's a large volume of small transactions, and that generates quite a good outcome overall for the business. So I think that the AUD 135 million price that we've paid -- we're paying for this business, an implied multiple of 6.1 based on the FY '26 EBITDA of AUD 22 million. And we're funding that through 3 means. The first is a facility from the National Australia Bank for 50% of the AUD 135 million. The second is through a placement of shares to the vendors. And the third is through a vendor loan facility repayable across the next 3 years. So a very reasonable setup from the vendors for us to help fund our way into the business. And I think that -- from our perspective, the commitment, particularly of Greg and Emily to this business in the longer term and to the broader Helloworld business in the longer term has been extremely appreciated, and we're looking forward to working with them with this business and expanding it through our businesses here at Helloworld. So I think I'll just pass over -- first, I just want to quickly thank David Hall and Mike Smith for the tremendous amount of work they put in over the last few weeks to get this deal over the line. Also our advisers have been very helpful at Freehills and KPMG. And our thanks to them. And my apologies, that's my phone that I haven't switched off, making sure before David and Mike's were. And we are very grateful for all of the assistance that they've provided and also to our bankers, the National Australia Bank, who also were very accommodating. As I'm sure you all know, and I just wanted to touch on, obviously, we've been looking at the Webjet business for some time. We own just over 20% of that business. We were considering our options in relation to that business and whether or not we would make a full tilt for that business. I don't think anyone has missed the decline in that share price, which sank below AUD 0.30 on Friday was below AUD 0.30 earlier today. I think we might have just got back there again in the latter part of this afternoon. But in any event, what we decided to do was pivot and pivoted away from that business, and we pivoted to the CCE business and made the decision to make that acquisition. And I think that's a very wise decision on behalf of our business, on behalf of our Board, on behalf of our shareholders to actually get into what is a genuinely strong profit-making business that works in a segment and sector that we are very familiar with and allows us to as well add value to it moving forward. So as far as Webjet goes, where is that sitting at the moment? Well, we own just over 20% of it. And we're fascinated to see what Mr. Weiss and/or others might be able to come up with to try and preserve some value in that business and create some better outcomes for shareholders. But we'll just have to see where that goes. In any event, that's probably enough of an introduction from me. Mike, would you want to add anything to...?

No, Andrew, I think from our perspective, this is a great opportunity. As Andrew mentioned, that link between currency exchange and travel agents it's obviously strong. And this just gives us an opportunity to roll out Crown Currency Exchanges into a number of our travel agencies within our networks. So a real opportunity to grow the footprint of Crown Currency Exchange. So obviously, that will improve the top line deal value and flow through to the bottom line. So we're really excited by the potential upside in EBITDA earnings.

Thanks very much, and I'll ask our Head of Acquisitions and Integrations. We've just finished the acquisition. So now he's responsible for the integration, Mr. David Hall, to make a couple of comments.

Thank you, Andrew. Good afternoon, everybody. I'm very excited by this investment, having done a lot of work on the due diligence alongside Mike, our CFO. It's run by a very capable team with great leadership, a lean but very capable head office down in Hobart and a very expansive network predominantly across the Eastern Seaboard of Australia across New South Wales, Victoria and Queensland, roughly about 30% each and that 15% across the other states and territories, including Hobart. And the quality of the reporting, the quality of the compliance, I've been very impressed by and very soundly run, very financially astute business with good returns and look forward to completing that transaction over the next month, Andrew.

Thank you. Thank you, David. As I said, that's probably enough from an introductory standpoint from us here at Helloworld, and we'll pass over back to you in the central commentary box and see if there's any questions.

[Operator Instructions] Your first question comes from Philip Pepe from Shaw and Partners.

Congrats on the acquisition. Just a couple, if I may, please. Firstly, you mentioned good margins. What are the margins? You haven't given us the revenue figure. And secondly, please, what proportion is equity issued to the vendor?

I think that's commercially sensitive information, Philip, in relation to what are the margins. So I think we'll just keep them to ourselves for the moment. And sorry, what was the second part of your question?

You mentioned 50% of the funding is from the NAB facility. Are there any shares...