Slide 1: Flight Centre Limited - Macquarie Australia Conference
For personal use only Flight Centre Limited Macquarie Australia Conference 2M May 2012 Presentation by Andrew Flannery - chief financial officer
Slide 2: FLT: An overview
FLT: An overview For personal use only Established in early 80s as Australia’s first airfare discounter COMPANY Listed in 1995 at an issue price of 95cents HISTORY Current market cap about $2.1billion More than 2300 company company-owned owned businesses in 11 countries GEOGRAPHIC Almost half are lo
Slide 3: A: The Aussie Dollar v The US Dollar
An A-Z of FLT For personal use only A: The Aussie Dollar v The US Dollar Historic correlation between FLT’s share price and the USD No correlation between results and a high AUD Avg g annual AUD-USD exchange g rate has fluctuated between 52c and $1.04 $ since listing g Profit has generally g
Slide 4: B: Balance Sheet
An A-Z of FLT For personal use only B B B: Balance l Sh Sheett One of FLT’s strengths – solid cash reserves and moderate debt $800million cash and investments at 1H– likely increase during seasonally stronger 2H Positive net debt p position – $ $317million in g general cash and about $170milli
Slide 5: C: Corporate, Retail and Wholesale Travel
An A-Z of FLT For personal use only C C C: Corporate, t R Retail t il and d Wh Wholesale l l Travel T l FLT is best known for its network of red and white FC-branded leisure travel shops Now one of the world’s largest corporate travel managers – corporate generates 30-35% of TTV Corporate bran
Slide 6: D: Dubai and Asia
An A-Z of FLT For personal use only D D D: Dubai b i and d Asia A i Developed or acquired businesses in India, Dubai, Singapore, China and Hong Kong Initial aim was to have a strong company-owned presence for corporate clients – service offering All businesses profitable last year Dubai perf
Slide 7: E: Expansion
An A-Z of FLT For personal use only E Expansion E: E i • FLT typically targets 8-10% annual growth in sales staff globally • Growth targets in place in all countries, but some variation in targeted rates between established and emerging brands • In USA, relatively slow growth in Liberty, but corpora
Slide 8: F: Flight Centre Global Product
An A-Z of FLT For personal use only F Flight F: Fli ht Centre C t Global Gl b l Product P d t • FCGP is FLT’s global wholesale and corporate product procurement division • Currently delivers about 20,000 products to FLT’s wholesale, retail and online brands • , Plus 17,000 hotels and car hire contra
Slide 9: H: Hyperstores
An A-Z of FLT For personal use only H Hyperstores H: H t Concept developed in UK Can house up to 50 consultants (8 teams) D li Delivers cost-effective t ff ti access to t prime i retail t il sites it – costs t di divided id d across multiple lti l teams t FC teams in prime walk-in locations,
Slide 10: FLT's Manchester Hyperstore
FLT’s Manchester Hyperstore For personal use only More information? 10
Slide 11: I: Interest
An A-Z of FLT For personal use only I Interest I: I t t A key part of the FLT business model FLT generates strong interest revenue on its cash reserves – managed conservatively by in-house Treasury team $23million in interest income generated in 1H 2011/12 $16million paid out in interest exp
Slide 12: J: Joint Ventures
An A-Z of FLT For personal use only J Joint J: J i tV Ventures t Most FLT businesses are wholly-owned Handful of franchisees in Escape Travel brand in Australia p y involved in some joint Company j ventures including: g Bikes – Advance Traders Australia (wholesale) and 99 Bikes (retail) Recrui
Slide 13: K: Kiwi, Canada and South Africa Businesses
An A-Z of FLT For personal use only K Ki K: Kiwi, i Canada C d and d South S th Africa Af i Businesses B i All solid contributors to group profit New Zealand business historically a strong performer for FLT, but some challenges in recent years – economy, natural disasters Rugby World Cup also
Slide 14: L: Liberty and the USA
An A-Z of FLT For personal use only L Liberty L: Lib t and d the th USA FLT launched US business in 1999 Acquired Liberty and GoGo in Feb 2008 to gain larger footprint and to access to directly contracted North American product (a key acquisition rationale) Losses incurred as business was rest
Slide 15: M: Margins
An A-Z of FLT For personal use only M M M: Margins i Income margin has historically varied between 12.5% and low 14% Towards top of this range in recent years Internal expectation is for overall margin in order of 13.5-13.8% Earnings vary from product to product – margin can be influenced by
Slide 16: N: The Net
An A-Z of FLT For personal use only N Th N: The Net N t A growth opportunity, but at the same time FLT’s biggest competitor Globally, greatest penetration has been commoditised product – last minute hotel and simple point-to-point airfares (domestic) Relatively low penetration in international
Slide 17: O: On and Offline Interplay
An A-Z of FLT For personal use only O On O: O and d Offline Offli Interplay I t l FLT’s online sales are increasing, as are offline sales Unique opportunity to offer customers a blended on and offline travel solution Able to replicate p online booking g facilities OTAs offer and couple p this
Slide 18: FLT's on and offline interplay
FLT’s on and offline interplay For personal use only 18
Slide 19: P: Product Innovation
An A-Z of FLT For personal use only P Product P: P d t Innovation I ti Focus on developing/manufacturing unique product for customers myTime – VIP bonuses at participating properties and resorts p Flights Double Dip g Black Market Flights Mystery Escapes Constructed round-the-world fares
Slide 20: Double dip flights
Double dip flights – 2 for 1 For personal use only 20
Slide 21: R: Rent, Wages and Other Costs
An A-Z of FLT For personal use only R R R: Rent, t WWages and d Other Oth Costs C t FLT’s major expense items are wages, rent and marketing Wage bill is variable and flexes with revenue – reflects FLT’s incentive system Advertising g bill tends to increase – aim to deliver desired level of enq
Slide 22: S: Saturation in Australia
An A-Z of FLT For personal use only S Saturation S: S t ti in i Australia A t li Growth opportunities in all brands in Australia Flight Centre leisure brand will grow at a slower rate than some others Cruiseabout,, Travel Money y Oz and other brands can grow g more rapidly p y Flight Centre
Slide 23: T: travelthere.com
An A-Z of FLT For personal use only T travelthere.com T: t lth Acquired almost 10 years ago – now a testing ground for FLT’s online initiatives International airfare booking engine that is now on flightcentre.com.au was tested on travelthere.com New hotel booking engine on flightcentre.com.au
Slide 24: U: The UK
An A-Z of FLT For personal use only U Th U: The UK Business performing strongly in challenging market conditions On track for best full year result p Experienced and innovative management g team in place p Focus on corporate travel and niche leisure areas paying dividends Hyperstore model
Slide 25: V: Virgin, Qantas and Supplier Relations
An A-Z of FLT For personal use only V Virgin, V: Vi i Qantas Q t and d Supplier S li Relations R l ti Good relationships with air and land suppliers – aim to be the retailer that suppliers choose to work with Contract terms are negotiated annually Similar contract structures in place to recent
Slide 26: W: Wage Model
An A-Z of FLT For personal use only W Wage W: W Model M d l Highly incentivised workforce Pay includes a retainer (guaranteed) and incentive (subject to performance) g Staff rewarded with higher earnings g when shareholders rewarded with higher g returns Sales consultants are initially incen
Slide 27: X: The X Team
An A-Z of FLT For personal use only X The X: Th X Team T FLT is managed globally by its Brisbane-based executive team (X Team) Team includes: Managing director Graham “Skroo” Turner Chief operating p g officer Melanie Waters-Ryan y Peopleworks leader Michael Murphy Marketing executive ge
Slide 28: Y: Yields
An A-Z of FLT For personal use only Y Yields Y: Yi ld International airfares remain highly affordable On some routes, advertised fares remain below GFC levels – includes Bangkok, Auckland, Paris and Rome New entrants growing capacity and offering attractive fares Pricing trend varies from ro
Slide 29: Z: Z Class
An A-Z of FLT For personal use only Z Z Class Z: Cl A category of business class travel for some airlines Discounting that has been commonplace in economy in recent years has also reached the business class cabins Positive for corporate and leisure travellers Flight Centre currently offering
Slide 30: G: Guidance
An A-Z of FLT For personal use only G Guidance G: G id • Currently targeting a PBT between $270million and $290million (excluding any major abnormal items) • Guidance was upgraded in February, following strong start to the year • New targeted range represents 10-18% growth on underlying $245.2millio
Slide 31: Q: Questions
An A-Z of FLT For personal use only Q Questions Q: Q ti More information? 31