FY17 Results AUGUST 24, 2017 Todays Agenda The FLT Story Graham - - PowerPoint PPT Presentation

FY17 Results

AUGUST 24, 2017

Today’s Agenda

The FLT Story

• Graham Turner (CEO)

FY17 Financial Results

• Adam Campbell (CFO)

Strategy & Business Transformation

• Melanie Waters-Ryan (COO)

FY18 Outlook

• Graham Turner (CEO)

Three Core Pillars in Five Key Geographies:

FLT Today

Leisure Corporate TEN Australia/NZ EMEA Asia Americas Global (in-destination)

Leisure Travel

• Hyperstores
• Super regionals
• Smaller

shopping centres, CBDs & strip locations

• Affiliates
• Mobile agents
• Travel Expos,

Discover Europe Discover America

• High volume,

simple transactions

• 24/7 sales,

Chat & assist OTA CONTACT CENTRES INDEPENDENT CONTRACTOR EVENTS FLAGSHIP STORES COMMUNITY

Lower touch offerings Higher touch offerings

• Omni channel network – customers can transact & interact when & how they want
• Key distribution channel for suppliers & for FLT’s travel experiences businesses
• Australian leisure business generates about 50% of group profit

SPECIALIST

• FCBT
• First & Business
• Round the

World

• Continued Sales Growth:

$6.6b in FY17 TTV, consolidating FLT’s position as one of the world’s largest travel managers

• Underlying Strength:

Almost 9% year-on-year TTV growth on constant currency basis

• Brand Diversity: Specialist

SME, TMS, MICE, education, entertainment businesses

• System Enhancements:

Ongoing upgrades to leading technology & product suite

• Going Global: Expansion

into 8 new countries during FY17 – 12 in past 3 years

Corporate Travel

Travel Experience Network

Tour Operators Destination Management Companies (DMCs) Hotel Management Greater control over customer offering Ability to create unique products Distribution via FLT shop & corporate business network Margin – vertical integration New external revenue streams – B2B & B2C Sales

FY17: A Snapshot

Key Targets Achieved

• $20b + TTV
• $1b+ in online leisure

TTV

• PBT within targeted

range (but below FY16) Highlights

• Record global sales
• Accelerated 2H growth
• Balance sheet strength
• Acquisitions in key

countries & sectors

• Successfully executing

key strategies – productivity, product development, core sector growth, better cost control Lowlights

• Airfare deflation
• Lower cost growth, but

increase outpaced revenue growth

• FX affecting result

translation

• Underperformance in

some countries & businesses

• Political uncertainty

early in 1H

Financial Results

• Achieved $20b+ TTV target
• 21st year of growth in 22 years since listing
• Reasonable cost control in low revenue growth

trading cycle

• $9m increase in D&A expense – reflects higher

capital expenditure in recent years

• 30bps decline in underlying revenue margin –

changing business mix (large corporate & online growth)

• Underlying PBT adjustments:
• FY17: $4m for cost of exiting Employment

Office

• FY16: $25m impairment charges, $6m gain
• n sale of NZ building and $11m gain from

ACCC fine refund Profit & Loss

PCP Mov't AUD $m FY17 FY16 % Group TTV 20,109 19,305 4% Operating revenue 2,647 2,612 1% Other revenue 30 30 0% Total revenue 2,677 2,642 1% Other income 4 14 (68%) Employee benefits (1,451) (1,433) 1% Marketing expense (200) (199) 0% Finance costs (29) (29) (0%) D&A (75) (66) 13% Other expenses (601) (584) 3% PBT 325 345 (6%) Underlying PBT 330 352 (7%) Basic EPS (cents) 228.5 242.4 (6%) Margins Underlying Revenue Margin 13.3% 13.6% (30bps) Underlying PBT Margin 1.6% 1.8% (20bps) Marketing % TTV 1.0% 1.0%

Financial Results

Accelerated 2H Growth

• 6.4% 2H TTV growth, after 1.8% 1H growth
• 4.7% underlying 2H PBT increase, after 22.4% 1H decrease
• 2% underlying 2H PBT margin, after 1.2% 1H result

Underlying Half Year Comparison

1H 1H PCP Mov't 2H 2H PCP Mov't Full Year Full Year PCP Mov't AUD $m Dec-16 Dec-15 % Jun-17 Jun-16 % 2017 2016 % Group TTV 9,343 9,182 1.8% 10,766 10,123 6.4% 20,109 19,305 4.2% Revenue 1,251 1,247 0.3% 1,426 1,384 3.1% 2,677 2,631 1.8% Underlying Income Margin % 13.4% 13.6%

(20bps)

13.2% 13.7%

(50bps)

13.3% 13.6%

(30bps)

Other Income 4 11 (64.7%) 1 (3) 117.1% 4 7 (42.2%) Total Costs (1,142) (1,112) 2.7% (1,210) (1,174) 3.1% (2,351) (2,286) 2.9% Underlying PBT 113 146 (22.4%) 216 207 4.7% 330 352 (6.5%) Underlying PBT Margin % 1.2% 1.6%

(40bps)

2.0% 2.0%

• 1.6%

1.8%

(20bps)

Financial Results

• $804m year-on-year increase in TTV during FY17, despite deflation & FX impacts
• 7.1% growth on constant currency basis
• Growth within all major regions
• Strong growth in online leisure TTV
• Solid corporate growth globally & in all major geographies
• Ticket volume growth in Australia well above TTV growth as a result of international fare deflation

Underlying TTV Growth (constant currency)

Leisure Corporate Total PCP Mov't PCP Mov't PCP Mov't % % % Australia & New Zealand 5.8% 3.8% 5.4% Americas 9.1% 5.4% 5.6% EMEA 8.9% 16.8% 11.7% Asia 81.6% 18.2% 25.3% Other n/a n/a 1.0% Total 7.4% 8.7% 7.1%

Sales Growth Outpacing Industry Growth

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Australian Outbound Departures FLT Australian Leisure TTV FLT International Tickets (ex Australia)

FY17 Growth (%)

Productivity Gains

Driving Productivity Growth

• Tech & system changes
• The right product & margin
• Person-to-person
• Enquiry & conversion
• Online & blended sales

FLT’s Key Productivity Metric is TTV Per Person

Productivity Growth in Local Currency PCP Mov't in thousands FY17 FY16 % India INR 24,904 17,966 38.6% China CNY 6,299 5,295 19.0% Hong Kong HKD 5,534 5,448 1.6% South Africa ZAR 5,046 4,778 5.6% UAE AED 2,618 2,621 (0.1%) Malaysia MYR 1,278 908 40.7% Australia AUD 1,145 1,114 2.8% United States USD 1,143 1,052 8.6% Singapore SGD 1,120 856 30.9% New Zealand NZD 1,048 973 7.7% Canada CAD 807 748 7.9% United Kingdom GBP 575 542 6.1%

Strategic Acquisitions

• perations

FY17: Challenges

Airfare Deflation

• Impacted top & bottom-line results

Cost Growth

• Modest cost increase during FY17 but growth exceeded revenue growth in low-fare environment
• Cost increases inevitable, but strategies in place to slow future growth

FX Adversely Affected Result Translation

• 7% TTV increase at constant currency
• $8m impact on PBT
• UK profit up 9% in LC but down 10% in AUD

Underperformance in Some Countries & Businesses

• Asia, touring businesses

Political Uncertainty Early in 1H

• Elections, Brexit

Financial Results

Australia/NZ Result Overview

• Record TTV in both countries but profits down 7%
• Corporate growth in relatively flat market – driven

largely by account wins, successful focus on client retention

• $2.6b in corporate TTV in Australia & NZ
• Leisure profits down slightly in Australia, despite

record TTV & strong ticket volume growth

• All brands profitable in Australia, apart from MAT

(close to break-even) & emerging OTAs

• Income margin contraction brought about by

changing business mix (large corporate & rapid OTA growth)

Australia & New Zealand Segment PCP Mov't AUD $m FY17 FY16 % TTV 11,707 11,080 6% External Revenue 1,472 1,442 2% Underlying PBT 261 280 (7%) Sales Teams 1,752 1,760 (0%) Margins Revenue Margin 12.6% 13.0%

(40bps)

Underlying PBT Margin 2.2% 2.5%

(30bps)

Financial Results

EMEA Results Overview

• Region generated circa 20% of group profit &

record sales (up 12% in LC) but translation heavily impacted by FX

• Strong UK results in LC
• Significant expansion on Continental Europe

(acquisitions)

• Strong South Africa results & expansion into

Namibia

• Reduced profit contribution from UAE
• Productivity gains through business improvement

& new in-store systems in UK

EMEA Segment PCP Mov't AUD $m FY17 FY16 % TTV 2,682 2,760 (3%) External Revenue 358 386 (7%) PBT 62 65 (5%) Sales Teams 515 486 6% Margins Revenue Margin 13.3% 14.0%

(70bps)

PBT Margin 2.3% 2.3%

• Note: Profit Before Tax and Royalty

Financial Results

Americas Result Overview

• Region generated circa 10% of group profit
• Record profit & sales contribution underpinned by

strong corporate results, StudentUniverse & slight decrease in leisure & wholesale losses

• Strong turnaround in Canada
• $US1b in corporate TTV in the USA for 1st time
• Increased leisure & wholesale productivity
• GOGO wholesale business downsized
• Starting to reduce leisure footprint
• Opening lower cost micro-stores in key US malls &

centres

Americas Segment PCP Mov't AUD $m FY17 FY16 % TTV 4,304 4,227 2% External Revenue 503 484 4% Underlying PBT 33 22 50% Sales Teams 504 524 (4%) Margins Revenue Margin 11.7% 11.5%

20bps

Underlying PBT Margin 0.8% 0.5%

30bps

Financial Results

Asia Result Overview

• Solid TTV growth – topped $1b for 1st time - but

small overall loss

• Good Mainland China results offset by modest

losses in Hong Kong , Singapore (now restructured) & India

• Travel Tours acquisition
• Regional leadership team now in place for

Singapore, Malaysia & Greater China

• Stronger FY18 expected – consolidated Asia

structure, reduced leisure losses, some shops & ancillary businesses closed

Asia Segment PCP Mov't AUD $m FY17 FY16 % TTV 1,061 881 20% External Revenue 78 75 5% PBT (3) (3) 0% Sales Teams 189 138 37% Margins Revenue Margin 7.4% 8.5%

(110bps)

PBT Margin (0.3%) (0.4%)

10bps

Financial Results

Result Overview

• Includes FLT’s global businesses (TEN + others)
• TTV decrease largely due to FX
• Solid contribution from Buffalo Tours DMC (now

expanded)

• Significant negative swing in touring businesses’

profits (circa $10m) despite solid passenger number growth

• Brought about by operational issues (now

rectified) in Top Deck, translation & FEC losses

• Improvement expected
• FY18 Segment result will also include Olympus &

BHMA

Other Segment PCP Mov't AUD $m FY17 FY16 % TTV 355 358 (1%) External Revenue 266 255 5% Underlying PBT (22) (11) (98%) Sales Teams 6 6 0% Margins Revenue Margin 75.0% 71.1%

390bps

Underlying PBT Margin (6.3%) (3.1%)

(320bps)

Other Segment PCP Mov't AUD $m FY17 FY16 % TTV 355 358 (1%) Underlying External Revenue 266 244 9% Underlying PBT (22) (11) (98%) Sales Teams 6 6 0% Margins Underlying Revenue Margin 75.0% 68.0%

700bps

Underlying PBT Margin (6.3%) (3.1%)

(320bps)

Financial Results

Balance Sheet

30-Jun 30-Jun PCP Mov't AUD $m 2017 2016 % Assets Cash & cash equivalents 1,282 1,316 (3%) Trade & other receivables 762 672 13% Financial assets 200 205 (2%) Other current assets 94 70 33% Current assets 2,338 2,263 3% PPE 256 216 18% Intangibles 471 448 5% Other non-current assets 131 76 72% Non-current assets 858 740 16% Total assets 3,195 3,003 6% Liabilities Trade payables & other liabilities 1,579 1,490 6% Borrowings 56 77 (27%) Current liabilities 1,635 1,567 4% Trade payables & other liabilities 95 60 58% Provisions 37 31 21% Non-current liabilities 132 91 46% Total liabilities 1,767 1,657 7% Net assets 1,429 1,346 6% General cash 426 507 (16%) General investments 104 100 4% Client cash 856 809 6% Client investments 96 104 (8%) Total cash & investments 1,482 1,521 (3%) Positive net debt 474 530 (11%)

• Trade receivables increase due to turnover growth

& new corporate client wins on account

• Financial assets include external investments &

repurchase agreement entered into during FY16

• Other non-current assets increased by $25.5m due

to the Buffalo investment & $8m increase in related party loans to 3Mundi & Buffalo

• PPE & intangible increase due to network

enhancements, acquisitions & head office relocations

• Borrowings reduced by 27% due to decrease in

repurchase arrangements

• General cash of $426m + $104m in general

investments (externally managed funds)

• Strong positive net debt position - $474m

Financial Results

• $295m operating cash inflow recorded
• Year-on-year movement driven by timing of airline

payment cycle (BSP) & increased corporate travel debtors.

• Net cash impacts of FY17 acquisitions include:
• Buffalo ($24m)
• Ignite ($10m)
• Bibam ($9m)
• Europe Corporate business ($6m)
• Travel Tours ($3m)
• 3Mundi ($3m)
• Reduced cap-ex in 2H FY17 with completion of

new South Point HO in 1H FY17.

• FY18 cap-ex targeted to be below $100m
• $26m reduction in short-term borrowings used for

investment purposes.

Cash Flow Statement

AUD $m FY17 FY16 Operating activities Operating activities before interest and tax 399 467 Net interest and tax paid (103) (110) Cash flow from operating activities 295 357 Investing activities Acquisitions (57) (56) Sale of PPE

• 17

Purchases of PPE and intangibles (104) (121) Purchases of financial assets (1) (139) Other investing cash flows 1 8 Cash flow from investing activities (161) (290) Financing activities Financing activities before dividends (18) 48 Dividends paid (138) (158) Cash flow from financing activities (156) (110) Increase/(decrease) in cash held (22) (44) FX impact (12) (19) Cash and cash equivalents 1,282 1,315 General cash (excl. Investments) 426 507 Client cash 856 809 Bank overdraft

• (1)

Total cash 1,282 1,315

Program Launched March 2017

Business Transformation

3-5 Year Timeline Focus on Core Businesses & Vertical Integration TTV Growth & Cost Efficiencies Team of Senior Executives, Backed by External Resources When Required Medium-Term Goals in Place

Transformation Targets – Profitable, Scalable Growth

• Targeting 7% per annum growth on average in constant currency
• Equals $4.5b TTV growth over next 3 years

TTV Growth

• Every business & brand in every geography in material profit
• All current loss-making businesses pivoted & profitable or divested/closed within three years
• Lower cost growth – less than $100m in constant currency during FY18 (FY17: circa $130m

in constant currency)

Efficiency

• Targeting a return to 2% PBT as percentage of TTV within 3 to 5 years (subject to business

mix)

Net Margin

Medium-term transformation goals will be monitored and amended as FLT finetunes its strategies, as market conditions change and as business mix shifts. FLT will continue to provide separate annual guidance

• Digital Commerce

Growth

• Investment in Growth

Brands & Business Models in Leisure, Corporate & Travel Experience Network

• Globalisation – Air, Land

& IT

• Controlling Costs &

Improving Efficiency

Key Initiatives

DIGITAL

COMMERCE

Platforms & Tech Online Origination Online Completion Online Origination

$4B+

*

Online Completion

$1B

Digital Commerce Team

300+

Countries Served

10+

Digital Commerce

Record Online Leisure Sales

$1b+ in TTV During FY17

Student Universe flightcentre.com.au BYOjet & Aunt Betty Other

Targeting an additional 30% TTV growth during FY18

Multiproduct Platform Investing in scalable travel tech Conversion Rate Optimization Testing, UX/UI, rebuilding Mobile Services Responsive sites and native apps Marketing Involvement SEO, PPC, automation, brand Best Practice Sharing Internal consulting and synergies Enquiry Management Tech Matching, tracking, converting Surfacing Unique Content Hotels online and more Modern UX and UI Process Making it easier to buy from us

Progress Update

Platform

Flight Centre Escape Travel Student Flights OTHER ...

 Leverage work on one platform across multiple brands  Set up FLT for shared services with worldwide contribution  Improve our speed to market across portfolio  Reduce overall cost of development and associated risks

Building for Scale

Ensuring every brand in every geography is materially profitable

Growth Brands & Models

Rigorous market & business model analysis of every business in every geography Underperforming business models to pivot within 3 years or be divested/closed Investment to accelerate growth of successful business models Further investment in tech solutions to improve enquiry management & enhance conversion

Globalisation

• New air revenue streams & business models
• Centralised ticketing structure on the way (currently regionalised)

Air

• Global DMC, touring & hotel networks now being created
• Enhancing global procurement & distribution networks – wholesale & external

B2B sales

Land

• Strengthening the IT backbone – infrastructure, PCI
• Microsoft Dynamics global deployment (Australia roll-out to start FY18)
• New in-store systems now almost fully deployed – Australia roll-out underway
• Corporate system enhancements & further world class customer technology

(Sam:])

IT

Cost Reduction Strategies

Staffing

• Globalisation, off-

shoring & out- sourcing

• System

streamlining & automation

• Redundancies

(completed in Australia)

• Consultant

productivity enhancements Real Estate

• Better utilisation &

leasing efficiencies

• Slower growth

(people & teams) & reduced physical network

• Walk away from

leases where commercials are unacceptable Cap-ex

• Spending starting

to decrease, which will lead to lower future depreciation & amortisation expense Stronger Network Returns

• Focus on core

sectors

• Removal of loss-

making businesses

Progress Update

Costs Growth

• Modest FY17 growth – well below historic

averages ($150m per year between FY07 & FY16, $655m increase in 3 years between FY13 & FY16)

• Redundancy program – Australia & Global
• Travel Money USA closed
• Cruiseabout Canada closed
• Student Flights South Africa & NZ absorbed

into Flight Centre brand

• US wholesale & Canada leisure downsized
• Singapore & Hong Kong leisure pivot &

ancillary businesses closed (Singapore)

• Brand rationalisation & regionalisation in Asia

(leadership & support structures)

• Investment in low-cost & scalable leisure models,

including Independent Contractor model in Australia & NZ

• Ongoing e-commerce developments
• New corporate businesses acquired in NZ &

Canada, recent acquisitions being integrated

• 1st investment in accommodation sector (BHMA

acquisition)

• Further progress in strategy to create global DMC

– Olympus acquisition

• Voucher-based business model to compete in

growth sector – Get Luxe

Voucher Based Unique Product Model – Get Luxe

Strong growth sector globally

Independent Contractor/Home-Based Model

Lower cost model Access to new talent pool of highly experienced agents Greater flexibility & new career opportunities for FLT staff Added convenience & choice for customers New distribution channels for FLT's manufactured products

Positive Momentum: Stronger 2H results achieved after tough 1H

FY18 Outlook

Growth Expected: Targeting continued sales growth & return to profit growth Income Margin: Growth in lower margin sectors (online, multi-national corporate, FX) likely to drive modest short-term decline Too Early to Provide FY18 Guidance: Impossible to predict likely conditions after just one month of trading Specific FY18 Targets to Be Outlined After Q1: Guidance to be provided at AGM (November 2017) Focus on Core Business: Improvement prospects in Leisure, Corporate & In- destination travel experiences

• Modest expansion globally

during FY17 – 1.8% increase in sales teams, circa 1% increase in sales consultants

• Primary focus on network

enhancements & productivity improvement during FY18 – modest overall growth expected

• Some businesses being

pivoted or downsized (Asia & Americas), some shops being closed & teams relocated to better sites

• Ongoing growth in lower cost

models

• Sales staff numbers in

Australia to decrease during 1H as new in-store systems are embedded (fully deployed by January 2018)

Outlook: Network Growth

End of Presentation

Questions?

Appendix 1: Results By Country

TTV: $10.6b, up 5% AUD EBIT: $242.9m BUSINESSES: 1,547 Australia TTV: $1.1b, up 10% in AUD (up 7% in lc) AUD EBIT: $17.1m BUSINESSES: 205 New Zealand TTV: $571m, up 36% in AUD (up 40% in lc) AUD EBIT: $0.1m BUSINESSES: 128 India TTV: $281m, up 5% in AUD (up 8% in lc) AUD EBIT: $0.0m BUSINESSES: 42 Greater China TTV: $547m, up 11% in AUD (up 8% in lc) AUD EBIT: $12.9m BUSINESSES: 199 South Africa TTV: $209m, up 8% in AUD (up 13% in lc) AUD EBIT: ($1.8m) BUSINESSES: 19 South East Asia TTV: $1.2b, up 1% in AUD (up 4% in lc) AUD EBIT: $7.6m BUSINESSES: 223 Canada TTV: $3.1b, up 2% in AUD (up 6% in lc) AUD EBIT: $24.7m BUSINESSES: 281 USA & Mexico TTV: $170m, up 170% in AUD AUD EBIT: ($1.9m) BUSINESSES: 20 Europe TTV: $92m, down 12% in AUD (down 9% in lc) AUD EBIT: $1.0m BUSINESSES: 13 UAE TTV: $1.9b, down 11% in AUD (up 8% in lc) AUD EBIT: $44.8m BUSINESSES: 283 United Kingdom

Appendix 2: Historical Results

5 Year Summary

30-Jun 30-Jun 30-Jun 30-Jun 30-Jun AUD $m FY17 FY16 FY15 FY14 FY13 TTV $ 20,109 m $ 19,305 m $ 17,598 m $ 16,049 m $ 14,259 m Income margin 13.3% 13.7% 13.6% 14.0% 13.9% EBITDA $ 402.1 m $ 413.9 m $ 417.0 m $ 378.4 m $ 395.2 m PBT (actual) $ 325.4 m $ 345.0 m $ 366.3 m $ 323.8 m $ 349.2 m PBT (underlying) $ 329.5 m $ 352.4 m $ 366.3 m $ 376.5 m $ 343.1 m NPAT $ 230.8 m $ 244.6 m $ 256.6 m $ 206.9 m $ 246.1 m EPS 228.5 c 242.4 c 254.7 c 205.8 c 245.6 c DPS 139.0 c 152.0 c 152.0 c 152.0 c 137.0 c ROE 16.2% 18.2% 20.2% 18.8% 24.0% Cap-ex (Cash flow) $ 104.1 m $ 121.0 m $ 82.9 m $ 55.4 m $ 51.4 m Selling staff 15,118 14,760 14,433 13,575 12,701 General cash $ 425.9 m $ 506.7 m $ 564.7 m $ 476.0 m $ 433.8 m Client cash $ 855.8 m $ 809.3 m $ 813.3 m $ 785.6 m $ 793.2 m Cash and cash equivalents $ 1,281.6 m $ 1,316.0 m $ 1,378.0 m $ 1,261.6 m $ 1,227.0 m Financial Asset Investments $ 200.0 m $ 204.5 m $ 75.7 m $ 41.2 m $ 36.8 m Cash and investments $ 1,481.6 m $ 1,520.5 m $ 1,453.7 m $ 1,302.8 m $ 1,263.8 m

Appendix 3: Breaking News …

48 Hour Destination – New Travel Show New Marketing Initiatives 13-part travel show, featuring Flight Centre consultant Greer Gardiner First episode airs Sunday (August 27) on Channel 10

• r tenplay.com.au

High profile new ad campaign now underway.