@MarsC Thank you for the thought provoking and detailed reply. I...

@MarsC

Thank you for the thought provoking and detailed reply.

I did not quite appreciate that the total cash consumption rate was as low as 30%. The strategy of investing in various smaller businesses (with growth potential) will hopefully bear fruit in the longer term if a few of them deliver on their growth potential.

Your reference to the very low margins prompted me to look at the Ebit/TTV margins for the various regions - as outlined in the table below. They are skinny indeed and clearly emphasise that FLT has a lot to do to to turn around a few specific regions. The language in the recent presentation around the Business Transformation Team suggests that they are serious about getting things into the black in the near future. A good result (turnaround) in the USA / Mexico region could have a big impact on the overall margin. I do appreciate that some of these regions are still in the ramp-up phase and perhaps not directly comparable to more mature regions on a Ebit/TTV basis.

The further reference to "No plans for widespread shop closures in Australia" suggests to me that some of the loss making ones may be in the firing line. It would be very interesting to know how many stores are running at a loss in Australia as I suspect there are quite a few.

	Column 1	Column 2	Column 3	Column 4
0	Ebit Margins 1H FY17
1		TTV ($M)	Ebit	Ebit / TTV
2	Canada	586	-1	-0.17%
3	USA / Mexico	1,300	-5.8	-0.45%
4	Europe	919	17.7	1.93%
5	UAE	42	0.5	1.19%
6	South Africa	251	4.9	1.95%
7	India	206	-1.2	-0.58%
8	SE Asia	96	1.3	1.35%
9	Australia	5,100	98.2	1.93%
10	Greater China	136	-0.42	-0.31%
11	New Zealand	511	0.4	0.08%

One aspect I find interesting (as someone who knows next to nothing about retailing) is the way that stores in the same centres cannibalise each others margins. I believe it is quite common for customers to get a quote from Flight Centre and then to pop over to Escape Travel for a price-beat offer (and vice versa). When business is slow agents (by the sounds of it) cut the commissions to the bone to simply get a sale done. It certainly appears (in some locations at least) that FLT has too many stores. One would imagine that Ms Waters-Ryan will be looking into these sorts of things.

I have a decent amount of exposure to FLT so hope the business transformation pays off and the growth materialises.

thanks again