Web Travel Group Unsp/Adr

Thank you for standing by and welcome to the Web Travel Group Limited first half FY26 results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. John Gusick, Managing Director. Please go ahead.

Thank you, Harmony. Good morning, everyone. Welcome to the Web Travel Group results Joining me today is our CFO, Tony Rusteski. Grab your ticket and your suitcase, thunder's rolling down the tracks. Web knows where it's going and we know we'll never go back. Investors, if you're weary, lay your head upon my chest. We'll take what we can carry and we'll leave the rest. Big web rolling through fields where sunlight streams. Meet me in the land of hope and dreams. Welcome guys. We said that we would deliver world-class growth in FY26 and we said that margins would stabilise and we've done both things. If you go to slide 3 you'll see that our TTV is up 22%, our margin is up is at 6.5%. We'll talk about how we get there and the construct in a second. EBITDA for the group is up 17. If we break it down to the underlying performance of webbeds, TTV of 3.2 billion, up 22% on the first half of 25. Revenue of 204.6 million, up 20%. EBITDA of 94 million, up 21% on the corresponding period. We've maintained market leading TTV growth rates while maintaining margins. Revenue is a reflection virtually identical of TTV and EBITDA is up almost exactly the same. We'll go through the construct of how that all transpired in a second. If we get to the overall group performance, underlying EBITDA is up 81.7 million after corporate costs of 12.3. MPAT is 48.6 million. and we continue to spew out cash at a rate well above our contemporaries, where we're up circa $120 million in the year. CapEx is in line with our expectation at $18.6 million, and our cash position is exceptionally strong, notwithstanding that we spent $150 million on buying back shares in the second half of the last financial year. What we have done is to provide greater flexibility is increased our undrawn revolver credit facility from $40 million to $200 million Australian dollars. Moving through to our key metrics, I've covered most of these, but bookings at $5.70 million, TTV at $3.17 million, In both cases, we're seeing strong organic growth in all regions, and our bookings and TTV combination reflects the expansion of the distribution network in which we participate in both various geographies and various channels that have all expanded during the first half of 26. Record revenue at $204.6 million, and record EBITDA at $94 million, obviously reflecting our revenue growth as well as our planned increase in operating expenses as we future proof our business to maintain the margin levels that we are currently delivering and expect to deliver for the foreseeable future. Let's go through the highlights. Bookings up 18% across all regions. TTV up 22, revenue 20, expenses up 19. That's reflecting CPI increases, the reintroduction of the bonus scheme, which we didn't get paid in FY25, as well as the previously flagged investment in hotel contracting. In functional currency, we expect expenses to go up in high single digits. We'll talk a little bit about the functional currency in a little while as we go through what has transpired. EBIT is up 21%. We said at the start of the year, we reaffirmed during the AGM that EBIT margins will be between 44% and 47% and we are at 45.9%. So let's get into a little bit more of the detail of what we're being able to deliver. As those who are familiar with the business are aware that we carve out our superior growth rate in three separate buckets. One is what does the market growth or system growth look like? What are we adding to the pile through new customers and through improved supply arrangements or entering into new markets? And the third is same store sales, which we call conversion. What are we doing to increase the sales that we make from our existing customer base? So if you look at systems growth, so if you're not growing at 5%, you're going backwards against the market. We think our estimates are the overall hotel supply and distribution market grew circa 5%. We looked at our business and what's different between the first half in specific inventory that we've sold and or specific clients that we're sold to. That accounted for about 5% of our growth and all the rest is the singular focus of an organisation of circa 1900 employees looking to ensure that we provide the right product at the right price at the right time for our customer base and enhancing the value of our supply partners by giving them global distribution. And again, we had another standout result where we improved our conversion by another 12% in the first half of 26. All right, let's get a little bit technical here and we're going to have to talk about the vagaries of the FX market and how that played out for us over the year and talk specifically about the regional performance of our respective markets and how that's been translated to our functional currency. So as you can see, in aggregate, globally, our bookings are up 18%, but in the functional Euro currency, we're only up 14%. This is an anomaly from this perspective. What we've seen in FY26, as we compare the exchange rates of the Euro in particular against FY25, is the Euro has appreciated considerably, in particular against the US dollar. The net effect of that is that at a functional currency level, we're only up 14%. At a bookings level, which is activity, we're up 18%. At the dollar level, we're up 22%. And 22% is circa normal. If you had a bookings growth rate of 18%, then you would expect average booking values to go up circa 3 to 4%. So 22 is the expected outcome of bookings of 18. How we got there is a little bit unusual. So let's go through the individual markets and call out what's actually happened. So America's had clearly a standout performance in the half, up 36%, a factor of, again, some great client wins and massive market share gains from existing clients driving a massive outperformance in that particular market. And yet when you translate that to euros, it's only up 27%. The vast majority of that delta is the previously mentioned exchange rate between the US dollar and euros. Let's go to Europe. Europe, very strong result at a bookings level, up 14%. In the most mature distribution market in the B2B landscape, that is a superior result. And perversely, TTV in Euros is down 12%. And that's because there are not just the Euro that we sell in Europe, we're selling GBP pounds, we're selling Scandinavian currencies, we're selling Eastern European currencies. The way we account, we've got Turkish lira in there, and all of those currencies have depreciated against the Euro, which shows the 14% bookings translating to 12% at a TTV level. Okay, let's go to APAC and strong growth, double-digit growth in APAC. and TTV growing faster than bookings. That's purely a function of average booking value increasing quite significantly in APAC because there was an FX drag on many of those currencies against the euro. So we saw ABV rates of circa 5% driving a 2% net TTV to euro improvement. And the starkest example is the Middle East, where solid bookings, 6%, they were up massively in April and May, as you will have at our full year highlight of FY25 when we called out our respective results. They were up significantly. There's been a significant softening in the Middle East market as a consequence of the war in Israel and Gaza. and the bombing in particular of Iran and Qatar saw a significant slowdown in region in market, and that resulted in the subdued growth. We have high conviction that our Middle East business will continue to grow at above market rates, and as we'll talk about in the forward-looking element of our presentation, as the FX exchange rate Delta ameliorates over time, that will translate to double digit TTV growth in the market. So overall, really strong performance. And that's how we landed in our respective marketplaces. Moving on to slide nine. Again, for those who have been honest for this particular journey, in particular in the post-COVID era, Well, you've seen a significantly streamlined business doing significantly more volume, significantly more profit with lower resources invested in that effort. So the timescale to the right shows you the history of our business. In particular, it's a proud moment for our entire organization to see that growth rate continuing at our expectation of delivering towards our $10 billion TTV target. We're on track for that particular effort. We spoke about our margin where we said that we would be, circa a year ago I said that we would be at least 6.5% over the next three half reporting periods, which is an 18 month period. continue to be on track to deliver 6.5, not only for FY26, but with all the things that we've done in our business for FY27, and I'll talk about those when we get to the forward-looking statements about our business. How we get to improve margins when clearly 6.5 is less than 6.6 is during the course of the year we sold our DMC business, which is a high-margin business, low-volume business, That counts for circa 20 basis points, and we actually improved our margin across the board to deliver 6.5%. So the most simple way of looking at it is we're on a run rate to circa $6 billion in TTV this year. We delivered circa $5 billion last year, and what we've done is deliver the exact same TTV plus the incremental circa billion over the full year. and we've maintained margins across the entire pool of business that we're sold to, which is in line with our overarching strategy over the last 12 months of ensuring that we solidify that margin and anchor it to the 6.5 and continue to deliver superior revenue and TTV growth as we deliver across the three piles that I talked about, systems growth, new customer supply markets, and improved conversion. Moving on to slide 10, we're expanding our customer base. I've had opportunities through various presentations internally over the last few weeks to reflect upon the journey that we've undertaken from a customer base. In essence, we started as a business where we sold Dubai is a destination to the Middle East. We made a small acquisition at Sun Hotels in which we sold Mediterranean beach holidays to Scandinavians and it was predominantly through a retail channel and predominantly through a narrow focus of customers. What we've done exceptionally well over the post-pandemic recovery period is broaden out that customer mix In particular looking at where are the fastest growing customers globally and how can we tap into meeting their needs as a wholesale bed bank provider and we've done that very well and you see the superior results in particular in the Americas where we're partnered with the most innovative OTAs in the region to maintain our superior growth rates. Our customer diversification extends to what I've just described in America versus the tour-operated business that we provide the same offering to and the same level of success in Europe, let alone the super apps in Asia or the corporate clients that we deal with in the Middle East. So we've got a really broad portfolio of customers that we continue to expand and we have a strong pipeline for the balance of FY26 and into FY27 The next element is our supply mix in which we have a renewed sense of focus over the course of the last 12 months and it's the most important operational focus of our business going forward. So we were unhappy with our performance in FY25 where there was the wrong inventory being sold at the wrong prices to some of our clients. We are addressing that in particular with our efforts to improve directly contracting sales in Americas in particular where we are significantly underweight. There's an enormous opportunity for us as we play out that particular strand of our tactical initiatives and that will continue into FY27. The second thing that has been again a credit to the hybrid business model we have of directly contracted inventory and partnering with the major third party suppliers is we've seen an increase in supply of last minute accommodation over the course of this half. Our average booking window has compressed by circa 5% which is material in someone who's been in this industry for 20 odd years. So it's the most significant compression of the booking window because of the broad range of supply that we have, we're able to tap into that particular compressed booking window and our percentage of last minute bookings is up significantly against the same period of last year. And as we continue to grow, we have increased our relevance and presence with the major hotel chains and we've got to the But we've got into now the consideration set of being a viable distribution partner on a semi-exclusive basis for some of the largest hotel chains in the world. And we couldn't make that claim two to three years ago. As we were a business of circa two to three billion, we're a long way from having the global reach and presence that we now do have. And that dialogue is changing and there will be some considerable changes success stories as we roll out our change strategy over the course of the next two to three years. Moving on to geographic mix, in a utopian world we think we'll have three equal regions of roughly 30% each between Europe, America and APAC. We're getting pretty close to that. Middle East will be circa 10% of our overall business. We will continue to grow in all regions. We're not under-investing in any. We have high-quality individuals who are running our sourcing and sales organisations in all those regions, and that's why we continue to outperform our competitors at both the TTV and EBITDA levels. One of the significant contributors, and those who have followed our story will know that Europe is our highest margin region. We have improved margins in our highest margin region, and as we've grown far for that TTV margin geographic mix that would have been down with pressure on us, and it's one of the reasons why we're so confident about delivering 6.5 for the balance of this year, but also into FY27. Finally, if we talk a little bit about scalability, the biggest hat tip I can give to the operational element of our organisation and the people responsible across the entire organisation, it's an incredible achievement that we're now delivering bookings at circa, you know, triple what we were doing per FTE pre-pandemic. We're up 174% and that number will continue to expand as we deliver the multitude of initiatives that we have within our organisation that enable us to leverage technology to become more relevant and embedded in our business and to drive greater efficiency. And that's as a set of credit to, in particular, the operations teams within our business, which are all in-house. If we move to AI, there are a number of things that we have done. In particular, we have delivered margin optimisation over the last number of years for a significant investment that we have made in that particular space. We think that we have market-leading solutions there. We also have a number of other AI initiatives undertaken within the business to improve how we surface inventory, the quality of the inventory we surface, and how we service that inventory once it's been sold. It's been a little bit of conversation about, most particularly in the last week or so, from industry commentary about the impact of what AI tools by some of the large language models will have on our business. The short answer is that will be another growth engine for us. The most recent example is Google announced their new travel initiative. And as I've shared previously with my colleagues on this particular call, There's only one time in the history of my 14 years I generally thought, apart from COVID, of course, but what I generally thought we faced an existential threat was when Google Flights was launched at the top of the funnel on all Google search to displace the existing Meta providers and take and capture demand before it fell to people like WebJet back in the day. The new Google, and if that had played out, you wouldn't see the success of the large OTAs globally and WebJet's continued success over that intervening 10-year period. Now, there are many reasons for that, because at the end of the day, this Google AI initiative and the various others that are coming down the track that we are aware of, what they all are is fixing a specific problem. And it's a problem that we have discussed many times internally when we were Webjet, is how do you improve the search experience for customers? And we now have the answer. AI makes it infinitely better than typing in a date range, number of packs, and a location, and hoping that the 1,000 properties in Paris come to in the sequence that you would like. So it's an incredible fillet for those businesses that have, that will, sorry, for consumers that will enable them to derive superior results faster and have it tracked and be able to keep a log of everything that you're looking at before you make your booking decision. But the booking decision will not be made by the AI. The booking decision, and this is straight from Google last week, the booking decision they will not be the merchant of record. They'll pass that through to their partners. They will not service the customer. They will not go through all the things that we go through to enable that to happen. And where we fit in, and why this is going to be a sustainable growth channel within our organisation, is we feed the people who are the consumer-facing levels. We feed the OTAs that are going to be partnering with them. We feed any of the other channels that they choose to partner with. So rather than being a displacement for us, we think this will continue to enable us to grow faster as we have because we have a very broad range of infantry as demonstrated by the fact that we're on track to sell 6 billion of it. And it's not going to become less attractive in an AA world What AI will do is deliver these incredible insights to get to our inventory faster. So we're very excited about that particular initiative. Finishing off the scalability, investment in contracting staff, we think will have a meaningful impact, in particular in America, where we believe our margins will go up on the back of that. And in light of the fact that five or six years ago, we were the only publicly listed company that had... publicly declared data about this industry, you'll see that with new people coming into the public markets, it still remains a significantly fragmented market which continues to create opportunities and we will look to take advantage of those opportunities over the course of this and the next financial year. So with that, I will now hand over to Tony to go through the finances.

Thank you, John. Good morning everyone. Can you turn to slide 12, which is our first financial summary, the P&L. Consistent now for the better part of seven years, we've presented the P&L in the statutory format, which is to the left, and the one that's more relevant, which is the underlying format to the right. John's already gone through the key operational results as it relates to revenue and EBITDA for the webbeds business. Corporate cost is the next item there in line and that is pretty much consistent to what I said six months ago where we're on track to do so for 24 million but I'll talk a bit more about that in the next slide. And our operating expenses which we do exclude from underlying of 5.5 million for the half is really predominantly a function of a mark to market to the equity instrument that is a function of share price. Now share price obviously at 30 September is lower than what it was at 31 March. and that resulted in a revaluation downwards which we do exclude from the result. The other key item there to call out is our effective tax rate at an underlying level. It is on track to be around 17% for the year but this time last year when we were part of the enlarged Webjet group, we had the benefit of Australian earnings to offset the corporate losses which were incurred in Australia which for this half, we don't get that benefit. So consistent with what I said six months ago, effective tax rate going forward would be in the vicinity of around 17%. The other key thing to call out on the slide is, as you can see there, an underlying MPAT level despite the record earnings for the half but at MPAT level we are down versus last year and that is really a function of the demerger which I'll take you to the next slide which is quite important. So if you then turn to slide 13, what our MPAT represents in the first half of 26 is really the standalone business in its post-emerger format. So if you then look to the left there of corporate expenses, being 12.3 million, if you go back six months ago, second half 25, the exit run rate for corporate costs was 11.1 million. So when you then look at it in the context of the 12.3, it's the natural progression as we stand into our individual corporate function post-emerger. Then if you then go to the Next item which is depreciation and amortisation. The compare is a function of the demerger allocation but then if you look at the second half of 2025 that was $13 million approximately in DNA and that did grow about 20% into the first half, into $15.5 million and on track to be around $31 million for the full year. And then if you then go to the right there with net interest and finance costs, 12 months ago at the half we were in a positive situation, $600,000. Then in the second half of 25, we went to a negative 4.3 million, resulting in a 3.7 for the full year of net expense. Obviously, in the first half, we're at 7.4 million of the net expense. And that's really a function of a couple of items there. Firstly, we did upsize our revolver, which does have a cost. Secondly, we did effectively reduce our cash balance by approximately $300 million, which we're getting the benefit for. Firstly, through the demerger, handing $143 over to Webjet and then in the second half, $150 million through the buyback. Obviously, as has been the case over the last seven or eight years, our option premium costs are pretty much growing along with our PTV numbers. So all in all, we can speak in there, finance costs have been over around $15 million for the fourth year. Going on to the next slide, which is our balance sheet. Strong healthy cash number, which John talked to earlier. Our working capital which is our debtors and creditors is consistent now as we normalised after last year where we did have a contraction around creditor days. Debtor days are sort of around 20 days going forward and creditor days are around the mid-30s going forward. So overall quite pleasing to see that both are stabilised and I'll talk about the cash consequences of that on the next slide. Turning to the next item of substance which is probably borrowing costs. You would see in our statutory accounts with the convertible note due to mature April of 26, the borrowing class has now been classified as current as opposed to non-current. But equally, as you would have seen six months ago during the April period of 25, we did upsize our revolver from $40 million to effectively $200 million. Plus we've got an unbroad facility of another $18 million. So all in all, we currently sit at around $700 million of liquidity. So to the extent that we'll be looking at a potential redemption event, We're well capitalized and have a well amount of liquidity to deal with that eventuality. Lastly on capital efficiency, the key thing there is it has grown materially from where we were this time last year. As our earnings grow organically through the generation of cash and earnings, it has now grown to almost 22% and when I look back over the previous slide, it is now sitting in record territory, the rowing. That line continues to expand as we organically grow our business. into the financial year. Then I'll turn to the next slide on slide 16 which talks about cash. As always, our cash comes from our profits and then the other key element to consider here is obviously working capital. We are working capital positive in the first half which is consistent with the trading over that summer shoulder period. You'll recall when we look at our TTV numbers being record levels across that August-September period, we do collect that cash. And then there's an unwind of payables that typically occurs across October and November. So what you'll see consistent with past years is in the second half we'll have need given working capital and that will result in approximately a cash conversion number of about circa 100%. Looking down at the next items there from a financing and dividend perspective, obviously we'll continue to invest in our business and the prospects around growth. So no dividends being declared. Talk about cash conversion being approximately 100%. And in terms of capital management, we talked about this six months ago. We obviously completed the buyback in the second half which did address 88% of the potential dilution that could come from the node. We outsized the revolver and coupled with the cash from operations, we are well equipped from a liquidity perspective to deal with whether it's conversion or redemption come April of 26. May of 26 will be a bit more explicit around how we think about capital management going forward once that event is behind us. So lastly on the last side being CapEx, no surprise there. We did detune spend half and half as a result of the point of sale solution being accelerated this time last year which is why we ended up being smaller in spending this half. Going forward we do see CapEx to be effectively life-alike in terms of underlying functional 26 versus 25. And then from an outlook perspective, we do see that it will grow in line with inflation. So on that note, I'll hand over to John. Thank you, Tony.