Web Travel Group Limited (WEB) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Webjet Limited Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead.

Thank you, Travis, and welcome, everyone, to Webjet's First Half Financial Year '20 Results. Joining me in less stormy Sydney today is Tony Ristevski, our CFO. So moving on to Slide 2. Outstanding performance from WebBeds has been the key driver of the underlying results that we're going to take you through today. TTV up a solid 25%. Revenue up 24%. So margins were consistent across the business. EBITDA up 43%. We'll cover off the key driver of the outperformance on the EBITDA side. NPAT up 44% before AA, and cash conversion up 102 within the realms of our 95 to 110 that we target for the year. Moving on to the next slide. As you can see, pictorially, the key driver of growth over the last 2 previous compared period of the first half of those respective years has been the significant growth that we've seen in our WebBeds business. EBITDA for this year compared to first half of '19 was up more than 80%, contributing to the group EBITDA being up more than 14%. So let's get into the detail of how we were able to achieve that. So as we have highlighted previously, WebBeds is now the clear #2 player in the B2B industry. We are also the fastest-growing player in the industry. As you can see, bookings increased 53%, TTV up 42%, revenue up 50%, EBITDA up 81%, margin up basically 0.5%. And EBITDA margin tracking towards our target of a 4% EBITDA margin. That translates to -- the 45% EBITDA margin translates to 3.9% EBITDA against TTV. Very pleasing to see the initiatives that we've undertaken over the last 7 years have contributed to the most meaningful impact to our overall results. The key driver has been the increased scale and benefits from having the direct contracts driving the growth of our business. All businesses were profitable. All businesses substantially increased their profit. And we are seeing the multi-supply aggregation strategy of having direct contracts, along with the long tail covered by third parties, contributing to our efficiencies. The key driver of EBITDA improvement has been the growth in our Asia Pacific business, the annualization of DOTW. The revenue synergies coming through from that acquisition in financial year '18 and strong cost management. The 8/4/4 profitability target, we're tracking ahead of plan, and we'll cover that off in a few slides' time. And as we like to measure our effectiveness on an ongoing basis, we look at what does each incremental $100 of TTV delivered with regards to EBITDA. And in the full year of FY '19, it was $5. This year, it's up to $6. So it talks to -- well, sorry, demonstrates that the strong cost management, growth in underlying EBITDA revenue margins and organic growth has contributed to an outperformance in our WebBeds divisions. So let's break it down another layer and go into a pro forma comparison. So this is on the assumption that we had owned DOTW for all of FY '19. For those who don't recall, we actually made the acquisition and completed that in the third week of '19 -- in 2018. So we've got the assumption of the full year, what would that look like in our business of ownership, pro forma bookings up 11%; pro forma TTV up 10%; revenue up 13%; EBITDA are up, on a pro forma basis, up 33%; margin up; and EBITDA margin up substantially. So that all excludes on the basis that Thomas Cook was -- didn't occur. If we had included -- excluded Thomas Cook from the prior comparative, would have been up 14 and 14 at TTV in bookings level. So what's driving the 33% of EBITDA on a pro forma basis? Clearly, we're winning more customers. Clearly, we're increasing the share of wallet with existing customers. The revenue synergies and the acquisition case that we suggested would occur when we purchased DOTW has come to fruition, and we've improved our cost management. And obviously, there is a sense of underlying organic growth that underpins that business. So to put that into context, as we drive forward into the start of FY -- first month of the second half of FY '20, we've seen that in January, we had bookings up 28%; TTV up 21%. And that was modestly impacted at the end of January because of COVID-19. So the -- what we've seen during the course of the first 7 months of this financial year is an acceleration of our organic growth rates across the business. As we've already comped and compared to the DOTW business by this stage, the -- January is a proxy for our underlying growth rate of our WebBeds division, and that underlying growth rate is -- consists entirely of organic growth from that point on. There is no free kick from the acquisition of DOTW in that number. So a very real -- a great improvement to the scale of our business, a great improvement to the delivery of all of our assumptions in the acquisition case. And the management team have executed strong organic growth on the back of the bigger and improved assets that we own in the WebBeds business. Breaking it down now by region. We go to APAC. We operate in 18 markets. Bookings are up 142%. TTV is up 108%. EBITDA has gone from a modest loss in the first half '19 to $8.2 million. And as you can see in our last 3 halves, we've gone from a small loss first half '19, strong profit in second half '19, improved profit in first half '20. The thesis that we have consistently spoken with the market about, which is the investment in the distribution network of our Asia Pacific business and the contracting has come to fruition, as we expected it would, and we're seeing significant growth in the larger markets of Asia that we're targeting, particularly, India is up 150% year-on-year. Japan is up 50%. China is up 23%. Our increased size and scale makes us more relevant to everybody in the supply chain. But in particular, our supply partners and our ability to get better deals that makes us more competitive is a testament to those outcomes. So we're delighted that we're seeing the scale benefits continue to flow through in our fastest-growing region. We've continued to focus and target emerging parts of the market, such as other OTAs, which have been there for a while. But in particular, we're excited about the opportunities in a couple of markets around super Apps, which dominate the travel landscape in markets like South Korea and Indonesia. And on the innovation side, we launched WebBeds Destination Index, which is a tool for hoteliers that we provide them that gives them real-time information that enables them to make pricing decisions, and that's an exclusive initiative undertaken by the WebBeds business, which we believe will solidify our relationship with our supply partners. As we move to Europe, stellar improvement in the underlying economics, as demonstrated by the improved EBITDA of 54%. Clearly, Europe was impacted at a bookings and TTV level by the collapse of the Thomas Cook business. So whilst bookings were up 2%, TTV was up 10%, we had a massive improvement in our EBITDA, and that was driven by margin improvement as customer mix changed, better negotiated deals, enabling us to put that into -- those prices into market, and phenomenal cost management and the synergies that we expect to extricate from the DOTW integration coming through. Key markets that were growing were U.K. up 9% in what has been a challenging British market. If you exclude Thomas Cook, up 24%; Germany, up 10%. If you include Thomas Cook, up 127%; Spain up 14%; France, 22%; Russia, 133%. The destination mix continues to shift around, which goes to the strength of our business model. It doesn't really matter where consumers and travelers want to go. There is inventory supply across the world that we now operate. But in particular, in our European business, we saw significant growth in this half in Italy, Greece, Turkey, UAE, Thailand, Croatia and Egypt. Moving on to AMEA. Delighted to talk about the success we've had in the Americas in this division. As you can see, bookings up 78%; TTV, 67%; EBITDA 57%. The standout has been the strong contribution in North America, driven by a number of significant wins we've had with new clients in that marketplace that are producing high volume. We continue to invest into the Latin America business, that is also growing. Middle East business, where we are already #1. It's the first geographic region where we are the #1 player in the market. We've expanded our reach to 36 markets, and we are still winning share and continuing to grow that business through organic initiatives that we've undertaken. Not a lot to report yet on Umrah Holidays. We have -- for those who don't know or haven't had an update previously, Umrah Holidays is a religious tourism initiative that we have undertaken through a 50-50 joint venture. It's an opportunity that we believe will be significant to our business over the following years. We did make a little bit of progress, but there's still a lot more to come. And we see tremendous upside opportunity down the track from Umrah. So at this point, I just want to come back and sort of revisit some of the assumptions that underpin the hypothesis that is the investment in Webjet. Clearly, the growth driver of our business for a number of years now has been the WebBeds division. And within that, we have previously identified specific opportunities that will make a meaningful contribution to those results. So let's target -- let's see how we've done against some of those, and then we'll talk about what our profitability targets are going to be in the near term. So I'll start with Destinations of the World. That acquisition was completed in November of '18. We had identified that we would get from Destinations of the World in this financial year, obviously, the 5-month contribution, which we clearly have achieved, and we separated out the pro forma numbers to talk about the improvement beyond that. The cost synergies we identified that we would achieve, $4 million. They have now been delivered. And delighted with the progress that we've made ahead of schedule on the cost synergies front. On the revenue synergies, it's as advertised 12 months ago, on track, and the annualization of that is $10 million per annum, and we've been able to achieve that so far. If we talk about the greatest growth initiative for us in WebBeds for the next 2 to 3 years will be Asia Pacific. The Asia Pacific market is the fastest-growing travel market in the world, and it's one which we have made significant investment in. We called out that in FY '20, we would deliver an incremental $75 million to $125 million of TTV. We are tracking ahead of plan against that deliverable as of the half year. And not everything was a silver lining to our underlying performance. As we called out in September and updated to the market at our AGM in November, Thomas Cook, our largest European customer, went into liquidation, and they were expected to deliver up to $200 million in TTV. Obviously, that has not come through. And at the point of liquidation, they owed us AUD 44 million, and we wrote off that bad debt to the P&L in the first half, and we'll cover that off when we get to the statutory accounts a little bit further down into the presentation. And for clarity, the -- one of the things when we initially did the deal way back in 2016 with Thomas Cook was that we acquired 3,000 hotel contracts. They are still our contracts. Nothing's changed. They have been contracted by us for a significant period of time, and they're clearly driving some of the outperformance that we saw, in particular, in the European results earlier on. So let's go to this mythical beast known as 8/4/4, and it drives our profitability target. So again, just to step back for those who are joining us for the first time. Over the journey, for the last 7 years as we've built out this B2B business, we've spoken, in particular, the last 2 to 3 years about a target of profitability called 8/4/4, which is 8% revenue to TTV, 4% cost, 4% EBITDA to TTV, and the hypothesis is that we can deliver 50% EBITDA margins in our B2B business. So we have previously indicated to the market that we would achieve this by FY '22. We're clearly currently ahead of plan. And if you look at our results, our revenue to TTV margin is higher than the 8%. Our costs are still higher than the 4% and the 4.8%, but our EBITDA TTV is actually almost on the FY '22 target. Clearly, we're on track to achieve that. Bottom line of FY '22 4%, EBITDA to TTV target before FY '22. So we're delighted with the progress that we've made. There are a number of initiatives that we'll talk about shortly that go to address the cost of TTV elements. And we clearly believe we can deliver the 4% EBITDA to TTV in FY '21. So the reason that we have a high degree of confidence in being able to achieve these numbers and potentially exceed the 4% is the revenue to TTV. So our margin -- our take rate is higher than anticipated. The costs are coming down quickly. And clearly, the EBITDA is a function of those mathematical element. So the direct result will be that as we continue to think about our business, there are still scale benefits that we can extract, and those scale benefits will improve the EBITDA margin. In particular, our IT operating costs are now in scope to achieve lower than organic growth rate improvements in our underlying activity through bookings and TTV, and we believe that will contribute to a lowering of our costs. Our risk change solution as it gets deployed to more nodes in the network will contribute to lowering costs for ourselves and our partners, which should improve our connectivity with many of our trade partners because they want to put -- deal with people who are reliable partners that can lower their cost to serve their customers. And we have 2 new initiatives that we are calling out for the first time as part of our cost takeout, which align to finance and operations functions across the WebBeds business, the streamlining of those and the capital investment to building out an ERP solution that Tony will talk about shortly will contribute to us taking even more costs at a run rate basis out of our business and scaling up the absolute number of EBITDA and also the percentage against TTV. So actually, I'll take it back. I'll be talking about this. So the financial and operational functions under the -- we're going to invest $33 million, and there will be a $5 million one-off investment to provide an ROI of greater than 30% for the alignment of sales and contracting functions. And we've started that process through WebBeds -- sorry, WebConnect and Rezchain. There are other initiatives that we'll undertake. And Phase 2, we are talking about a finance transformation investing in an ERP solution, which will contribute to some of the AI capability that we believe is fundamental in our ability to compete on an ongoing basis down the track. And our customer service transformation, the standardization and the ability to have the right people in the right time zone with the right language skills at the right cost base to drive superior levels of customer service, which contribute to the 3 pillars of our business, which are convenience, choice and customer service. That investment in Phase 2 will begin in the second half of '20 and will incur an approximate $5 million of incremental CapEx. So that rounds out our WebBeds business. We'll move on to the B2C division, starting with Webjet, the OTA. Bookings up 1%; TTV up 3%; revenue up 1%; EBITDA flat. TTV revenue margins, EBITDA margins modestly down. First half was one of the more challenging markets that we've experienced in the last 10 years. As has been noted in the consumer press, significant reduction in capacity by the -- both international and domestic carriers, reducing our opportunities to outperform, weaker consumer travel sentiment, which has been an unusual outcome. We haven't seen that for, again, a number of years. And clearly, the bushfires over the latter part of the half impacted consumer sentiment and demand. Our flight bookings at both the domestic and international level were up on the previous compare. The key driver of the historic outperformance of TTV to revenue margins of ancillary products have been stable and consistent at approximately 25% of our revenues and the strongest contributor to that. And we still see significant opportunities, the attachment of hotels, in particular, to flight bookings. Cars have done a pretty good job and has been a meaningful contributor for a number of years, but we have seen a turnaround that has been consistent over 2019 calendar year that has enabled us to increase the amount of hotel attachment, and we still think there are opportunities for us to ramp that up. Notwithstanding all of that, the brand has done what it's always done. It's insulated us against the challenges and the competitive actions that are undertaken by our traditional competitors, and I put Google Flights on that traditional competitive basket. They've been in market now for about 4 or 5 years. We haven't seen any meaningful impact of their changes. And we did do a clarification to the market earlier about why the way we capture clients and how we effectively use our marketing dollar doesn't expose us to the vagaries of Google as it does to many of our, in particular, American competitors who are heavily Google-reliant. The second point is that as we have spoken about for many, many years, and it's probably been a 15-year mantra, we don't participate in metasearch. We don't go for cheap wins by diluting our brand effectiveness by competing in a price comparison site. So as a consequence, the travails of the metasearch industry don't bother us at all, and the impact of Google Flights is virtually negligible in an environment where the vast majority of our traffic comes to us organically through the Webjet brand term, which is the key driver of our business. And many, many, many of our competitors don't have that luxury. Moving on to the next slide. We continue to enhance the Webjet platform. We have lots of activity, and we have a number of outcomes that we're talking about there. There are 1 or 2 that we will deliver in the second half that again will contribute once again to the underlying growth that we expect for the OTA business in excess of what we achieved in the first half of financial year '20. Moving on to the second part of our online B2C division, Online Republic. As we called out at the full year results, we now have a new management in place and delivering to a revised strategy for that business. At bookings and TTV level, solid performance, up 5%, up 7%, modestly down at revenue and EBITDA. As has been the same song that we've sung now for a couple of years, cars and Motorhomes have performed well. Cruise hasn't. And there is a plan underway to improve its [ stake hold ] and return it to profitability through the use of technology and product, and we're in that cycle as we speak. And there were some restructuring costs as we implemented the changes that I've just described, the management and to the operational base of that particular business. So the divisional highlights are on the next page. Motorhomes, again, we continue to be the worldwide leader in the rental of motor homes. Strong booking TTV and revenue growth. Kind of higher by activity is significantly the most meaningful contributor to the results. Again, strong bookings in TTV. And Cruises were impacted a lot by ourselves with technical and website challenges and a little bit of capacity. But as we'll talk about in a second, there are some potential longer-term structural things that could improve the Cruise capability of our business. So with that, I will hand over to Tony Ristevski, our CFO.

Thank you, John, and good morning, all. If you turn to now the corporate division slide, the slide that [indiscernible] we've just give an update of the key highlights here. The key things in there is obviously the focus around FX. As John highlighted earlier, we've had substantial growth in TTV, with it brings a high degree of complexity regarding currency management. Credit to the team in as far as we've able to, obviously, get a handle across that versus last year, with the implementation of the hedging program resulting in a turnaround. We expect in the second half for that to be neutral because that ultimately what good looks like for us. The other aspect is how to think about the cost in the second half. We're expecting the corporate costs through greater cost control to deliver something in around just under 5% on a year-on-year growth number, which is down on what we said at the AGM between 5% and 10%. The step-up in the second half, we anticipate, will come through in the insurance program that gets renewed every second half. If you turn to now the first half financial highlights slide. The key call-out here is, obviously, the introduction of the new accounting standard, AASB 16 for leases. On the bottom there, we've described the impact in the current year, as with the corresponding year. And just for those looking at our result and all the numbers that John has quoted, we've gone back and restated all the compares to incorporate the new accounting standards. So therefore, all the compares are on a like-for-like basis. The other thing to call out here is, obviously, our statutory EBITDA is down as it relates to the underlying operations. John talked about Thomas Cook, which we took the write-off of. That's one item that comprises of the adjustment in the statutory results. So for further detail, we do provide that in our statutory accounts, Note 3.2, where there is a handful of other adjustments, and happy to take questions towards the end as it relates to those, but we have provided a higher degree of narrative [ for folks ] to understand what those look like. The other call-out here is I've included tax on this slide. In past periods, we've left that in the appendix. Tax is becoming more relevant as it relates to our B2B business inherently through the operations as they've been established 7 years ago to the Middle East. We do have a lower tax rate as earnings become more relevant at a global level. So our effective tax at a group level before AA for underlying operations will be close enough to 15%, and we see that slightly trending downwards over the years. And lastly, just from an EPS perspective, our key highlights there with net profit after tax and before AA being up 44% and EPS being up 29%. Obviously, last year, we had the equity raise towards the end of the year. So as you compare the issued equity is a lot lower in the compare period. As we cycle through that, we'll find that EPS will gradually catch up to the net profit after tax number. Now if we can turn to the balance sheet highlights slide next. The key call out here is the strength of our balance sheet, particularly around cash, despite the write-off of the Thomas Cook debt. We ended the year just shy of $160 million. And on top of that, we also have $88 million of unused facilities sitting there on the side. Working capital has been a key focus for the team in region. We did talk about this at the full year regarding our debt is greater than 180 days, as described there in the summary. We have been focused on that. A portion of that was due to its provision relating to DOTW, which we wrote off. And therefore, overall level has come down. The 180 as a percentage of overall debt is 7% this year. It was 12% the last year. And year before that, it was 10%. So it is, historically, at the lowest point as a percentage of overall debt for our business. During the year or the half year, we've also paid down debt of about $14 million as well. So our overall debt position has diminished. And therefore, at a net debt level, we're extremely happy with the position we're in and very low from a gearing perspective. The capital measures, return on equity and invested capital, they're definitely way above our cost of capital. And cost of capital will improve over time, will decrease over time as the relevance of B2B becomes a greater proportion of earnings and the cost of capital is definitely a lower cost of the Australian market driven by the tax rate. Moving forward to our cash flow side. As we guided at the AGM, our cash conversion of 102% as a function of statutory EBITDA is within the range that we quoted of 95% to 110%. We've also called out some fair value adjustment there as part of that process, which were incorporated in our statutory EBITDA that present a true operating cash position. The other thing to call out is, obviously, as I said earlier, there was a $14 million repayment of debt. And equally, our tax in the first half is proportionately higher. We had a true-up as it relates to the Australian business. We had -- the installment rate in financial year '19 was predicated on the previous year in '18, where the earnings did step up materially versus '17. So there was a semi true-up payment in December. So we will see a lower payment going forward in the second half overall. I can then move to the CapEx summary on the next slide. What we've got here is at the half year, we're just shy of $17 million. We're on track for the full year to be at an underlying level between 5% and 10%, lower than what we anticipated at the AGM. Obviously, up 19% for the half on a compare with DOTW not in there for the first 5 months. We did sell some land and building, so it brought the net CapEx down to just over $15 million. The ERP/mid office solution that John talked about in the earlier slide, that investment, what that does do is bring together 4 disparate general ledger platforms in mid-office solutions into one, whilst keeping the platforms and the connectivity at the customer level, which has always been our operating model intact as a priority. In terms of how people should think about CapEx going forward as it relates to the distribution of that $33 million over time, in the current year, we'll probably incur about 15% of that; in 2021, about 60%; '22 about 20%; and then '23 about 5% is the way that it would be distributed over time. But the way to think about underlying CapEx is obviously at around 5% year-on-year, which still would trail materially below the EBITDA growth that we experienced. And lastly, on the dividend slide. We're declaring an interim dividend of $0.09 fully franked. In the near term, we'll continue to pay fully franked dividends. As I mentioned earlier, we still pay tax here in Australia, so it enables us to continue to provide 100% franked dividend. I just want to say thank you to the finance team in helping get through this half year. And I'll hand over to John.

Thank you, Tony. So we -- as we look forward to the balance of the year, clearly, the impact of COVID-19 is changing the nature of global trade, let alone travel industry, and we're not immune to those -- to the impact of COVID-19. We are already seeing an impact on our bookings in TTV across our business. We have -- we expect the impact of COVID-19 to be one-off in nature. It will reduce our earnings during this current half. There is a high degree of traveler uncertainty. But what we do know is that based on historical evidence, and if you go to -- and you'll see in our appendix some information on -- from IATA about what happened in previous outbreaks, what the impact is and then also what the recovery looks like, we do see that the disruption will be temporary. We believe that our earnings profile as a consequence will return to their underlying trajectory. And our expectation, subject to this being brought under control in the latter part of the financial year would dictate a strong rebound into FY '21 and won't change the earnings trajectory of our business because what happens, as we've seen in the past, people rebooked their deferred travel and people then continue to operate, both at a corporate and a leisure level at a seemingly uninterrupted place (sic) [pace]. So what's happened so far and what we -- and our observations, and clearly, this has been a consuming amount of work within our organization over the last 2 to 3 weeks as it's become increasingly clear that this is not going to disappear in the next week or 2. But what we're seeing is a material slowdown in our Chinese business -- well, material slowdown being that -- to put that into perspective, rental occupancies in China are down to 10%, and the vast majority of the international airlines are no longer flying there, so you can't get in or out. All those schedules are being canceled until the end of March, and a number of carriers have now canceled until the end of April. So no matter what happens, the Chinese travel market will have -- be nonexistent over that period, and that will impact us. There is, obviously, a knock-on effect across, in particular, countries that are close to China geographically. So in the rest of APAC, we are seeing an impact as well. Clearly, nowhere near the same levels as in China, but it is reducing our growth rate there. And a less impact in Europe and AMEA, virtually nonexistent in the Americas, and a modest impact on our growth rate. So our growth rate is just about the same as they are in those businesses. We're still growing those particular businesses. On the B2C division, there, it impacts both Webjet and Online Republic. Webjet exclusives offering, our most popular tour was to China. So as a consequence, we won't be selling that. And we have seen a slowing down in international and domestic travel over this 3-week period. And in particular, international travel is -- has shown a higher level of softness in comparison to domestic. On the Online Republic business, the Motorhomes business, which had exposure to China as a source market, will be impacted as well as the Cruise business. So that's the unfortunate impact of COVID-19 and -- on our business. So if we go to our outlook and guidance slide. Our current EBITDA guidance range for the changes that Tony mentioned about the accounting of AASB 16 is that we were expecting to deliver $162 million to $172 million, as you can see from our first half performance and the stellar growth in January of this year. At this point, we would have upgraded FY '20 EBITDA guidance. Clearly, for the reasons that I've outlined about COVID-19, it's going to impact our business in the second half. At this stage, it is our best estimate, and it's been a bottoms-up approach from the finance team to -- and the business units to look at trajectories, run rates, markets that are going to be impacted, the markets that haven't. And based on the collection of all that information, the -- our best estimate is that second half EBITDA will be impacted between $7 million to $15 million. As a result, our revised FY '20 guidance is $147 million to $165 million. That's an increase of 14% to 28%. But as you can see, our range, which was previously $10 million, has increased to $15 million, which reflects the uncertainty that we have with regards to what the impact of COVID-19 will be across our entire business. So before I hand over to questions, it's been a -- notwithstanding Thomas Cook, it's been a tremendous half for the business, in particular, WebBeds, to think that less than 7 years ago, yes, 7 years ago, virtually today, we took our first booking. And through a combination of organic and acquisitions, building our management team, working on the thesis that we could disrupt the incumbents with a multi-supply aggregation strategy, working on a thematic that the low-cost provider wins at the end of the day and working on a thematic that providing superior levels of innovation in a travel vertical that hasn't had the level of investment and level of capital management that we can bring, that we'd get to a clear #2 position, the largest driver of EBITDA for our overall results and significant upside opportunity, where even as the #2 player today, we have only 4% of the addressable market. So as our business grows, and we're over 20 -- we're 22 years old, at Webjet, we still see that the best years are ahead of us, and we're clearly delighted with what we've been able to achieve in the first half. And we look forward to the execution of our strategy on an ongoing basis in FY '20 and beyond. And we feel that this current period of weakness will disappear, and we will be giving even greater opportunities to accelerate our growth. So with that, Travis, happy to take any questions.

[Operator Instructions] The first question today comes from John O'Shea from Ord Minnett.

Obviously, a very good first half, John. Just a question in relation to your guidance for the second half of the coronavirus. Obviously, I appreciate the fact that it's difficult to give -- to quantify that. But the impact on flowing through into '21, have you sort of given that some thought at this point? Or how do you think we should think about that?

It's difficult for us to make any judgment call on FY '21. We -- if you go to Slide 35, the best proxy is SARS, but it's only a proxy because we haven't hit the bottom yet. But the best proxy with SARS, and you see SARS, as soon as -- the recovery was rapid. So within 2 months, we're back to the underlying level, and then you saw a significant growth beyond that. So if the virus is perceived to be under control by April, May, I think it'll have minimal, if any, impact into FY '21.

The next question comes from Tim Plumbe from UBS.

A couple of questions from me, if possible. Just a follow-on from John's question. Sorry, the line went a little bit -- it was a little bit bad on my side, I suspect for other people as well. What have you assumed in terms of the impact of the coronavirus? Are you assuming a full 6-month impact similar to what you see in SARS on Slide 35?

Yes, similar. And the assumption we've got is this continues as-is to May, and we see a little bit of improvement in June, but it's not material. So for the sake of completeness, we say similar. And to give a little bit more clarity about our thinking, we have eliminated all earnings from China from our numbers. And as you strip that out as a fixed amount, it sort of then goes a sort of a 60-40 split between our B2B and B2C business of just reduced demand across various markets. So they're the assumptions that we've made if I have to aggregate them. If you go into the detail, and country by country, we've gone through that exact same exercise.

Got it. And just a couple of other questions, if possible. B2C, how do you think the rest of the industry -- or what do you think the industry growth was for the first half?

Less than 1% in aggregate.

Okay. And last question, just in B2B, I understand it's difficult to split out synergies, et cetera, but how should we think about those Destinations of the World? So you said that the $4 million of synergies was -- cost synergies was accomplished? So that's $2 million? And out of the $10 million of revenue synergies, like $5 million for the half, how much do you think you managed to achieve the first half of '20?

A little bit more than $5 million. We -- the revenue synergies, we're on track. So on an ongoing basis -- and the second half will be a reflection purely of our activity. There'll be no TTV or bookings benefit from the acquisition of DOTW. We've now lapped the 12 months. And we would, under any other circumstances, expect to see revenue TTV margins improve of a similar nature to the first half versus the first half of '19. So full year, notwithstanding coronavirus, we would expect revenue and TTV margins to increase. And EBITDA costs would have decreased at a lower rate than underlying bookings. And EBITDA -- sorry, OpEx would have increased at a lower rate than underlying bookings. And then EBITDA margin would have increased again in the second half compared to the second half of '19. So the thesis under which we acquired DOTW has delivered all of our expectations.

The next question comes from Wei-Weng Chen from JPMorgan.

Just a question on the outlook and guidance. You've said that the -- you were on track to upgrade guidance. And then at this stage, your best estimate is a reduction of $7 million to $15 million at investor guidance. But what was the actual reduction with respect to coronavirus because it would have been off a higher number, yes?

The logic is correct. We haven't put a number out because it's clearly a hypothetical exercise, but your logic is correct, Wei-Weng. It would have been -- it's a more meaningful impact. It's taken away some of the growth, clearly, and it's going to go negative in a number of markets. So you are correct.

Okay. All right. Cool. And then any comments that you can make on some of the, I guess, media reports that there have been some private equity funds sniffing around in -- with Webjet?

As per the document we loaded on the ASX back in December, if anything meaningful was to require to be disclosed, we would. So no further comment.

Okay. And then just on the 8/4/4, which obviously you've highlighted is ahead of schedule. Is there -- I mean is that as good as it gets? Or should we sort of -- or are you guys kind of looking at what the next sort of stage could be in terms of cost out?

So the 8/4/4 clearly isn't as good as it gets if we can get to 3.9%. So let's break out the 8/4/4 to its component pieces. We're outperforming on a revenue element, which is absolutely great. Costs from 4.8%, we still believe we can get to 4%. And clearly, that will drive a better than 4% outcome if we maintain revenue to TTV margins. As we've called out in this presentation, we believe there are a number of things that we can do to drive those outcomes. And I would refer you to Slide 13, in particular, which talks out about those financial and operational functions. And in particular, the 30% ROI. That 30% ROI, we reflected in lower cost per booking. And the thesis that we have is, and I'll repeat what I said in summation of the presentation, the thesis that we have is that the low-cost provider wins in this industry, we have the ability to extricate further costs. There are a number of initiatives that we are undertaking that will do that. The first one that we undertook on the back of the DOTW acquisition has been successfully completed, and that's only Phase 1. Phase 2 will be more impactful than Phase 1. So there's a lot that we can do to take costs out, and the net impact is that the EBITDA to TTV number will improve.

[Operator Instructions] The next question is from Mark Wade from CLSA.