Ann: Macquarie Australia Conference Presentation, page-6

A very average fluffy presentation indeed - with only a single hard number quoted (which I almost missed as it was on the 1st slide - Expected FY17 PBT of $300-$330M).

Had a quick look at how that compares to recent results:

FY15 (full year) PBT = $366M
FY16 (full year) PBT = $352M (first half was $157M)
FY17 (first half) PBT = $109M
FY17 (full year projected = $300M - $330M)

A bit of a worrying trend emerging here - no wonder they are on an acquisition spree to try and plug these holes. FY15 to FY 16 delivered a 4% drop in PBT and they are projecting a further reduction of between 6% and 14% for FY17 (based on the guidance range).

If we use FY16 as a guide it indicates that the 1st half generated 45% of the full year PBT. If we compare that to FY17 it shows that they have so far only generated around 35% of the mid target range ($315M) by the end of the first half in FY17. They would therefore need an exceptional 2nd half to reach the target. Maybe a combination of fewer acquisitions and some of the recent ones making a contribution. Or perhaps a high probability of an earnings downgrade?

Having a family member which works as an agent for Flight Centre (and getting some feedback at the store level at least) also does not fill me with huge confidence. The store she works in has not made a profit in over 2 years and the calibre of store managers seem to be pretty low (admittedly based only on those I have personally met). The average agent in her store probably generates less than $5,000k / month in commissions for the company (of which they take around 15%). If you consider base salaries of $2,500, store rentals and other expenses it is hard to see how they will turn this around and make a profit. The company recently had to top of salaries for a large number of agents as they were not even making minimum wage when totalling the base salaries and commissions.

Even though I am currently a shareholder I will start thinking about an exit if the PBT slide is not arrested / turned around soon. FLT has been fairly resilient but I cannot see how the traditional agent model will not remain under pressure as younger generations all start doing their own online bookings. Perhaps the fact that FLT is investing directly in operators and tour companies suggests that they also expect margin pressure on the traditional business.