I would now like to hand the conference over to Mr. Jamie Pherous, Executive Director, Managing Director. Please go ahead.
Thanks, Caroline, and good morning, everyone. My name is Jamie Pherous. I'm the CEO of CTM. I'm also joined today by James Spence, Global CFO, and we are pleased to deliver our 1H 2025 results. This presentation should take around 30 minutes, plus Q&A. So if we can go straight to slide four, please, the 1H 2025 highlights, and then if we can, we'll go straight to slide five. As we've said previously, we made three assertions. Firstly, that FY 2025 is going to be a transition year for CTM as Europe cycles off the one-off war-related projects that we did last year. Secondly, we also shared that this is the first year of our five-year strategy where our goal is to double EBITDA in five years.
Our third assertion was, given Europe is in transition FY 2025, we said the rest of the world, which represents over 80% of our group revenue, would best underscore effective strategy execution. As a result of this, we have separated rest of the world from Europe in coming slides to best highlight this underlying performance of the business. So let's get into the results on this slide. First, we're pleased to advise that our Group 1H EBITDA was AUD 77.4 million, better than we expected. In order to look through the one-off impacts of Europe last year, we presented on this slide the compound growth from FY 2023 to FY 2025. And I'm pleased to say we are on track to meet our long-term goals of doubling EPS over five years. You can see on this slide compound revenue growth over the last two years is 8%, and EBITDA is compounding at 24%.
Our 1H 2025 result is led by the rest of the world, particularly Australia, New Zealand, and North America, as you'll see on coming slides. Secondly, this result is underpinned by sound execution to our capital management strategy, which James Spence will talk to in a little bit more detail later in this presentation. We have no debt. We expect strong long-term cash conversion at historic rates of circa 80%-90% and have returned AUD 52.3 million to shareholders in the half through share buybacks and dividends, which will continue in the second half. Let's go to slide six, our strategic goals. I want to take this opportunity here on this slide to revisit the strategic goals and commitment we made to the market. Firstly, to rest of the world, where we said we would grow market share, increase revenue per transaction, and leverage our scale for productivity gains.
Secondly, in Europe, where we said FY 2025 would be a transition year as we cycle off those one-off war-related project work, we said we would have a strong focus on growing market share through leveraging our Lightning tool, which we believe is best in market. And by doing so, we would set up Europe for long-term growth into CY 2025 or calendar 2025 and FY 2026. And lastly, to our long-term goal of doubling FY 2024 EPS in five years, a key part of this plan was to establish a capital management program that optimized returns to shareholders to ensure we had an executive team in place that could best execute this plan. So throughout this presentation, James and I will clearly demonstrate that we are executing to this plan.
Because of our execution and the line of sight we have into future momentum, we will also outline our FY 2026 expectations later in this presentation. Let's go on to slide seven, rest of world performance. As I said earlier, the rest of world ex Europe best underscores effective execution, given Europe is in a transition year. As you can see here, we are executing to plan. 1H EBITDA is up 38% to AUD 66.7 million, and EBITDA margin has actually expanded 500 basis points from 18% last year to 23% in 1H 2025. Revenue is up 8% on the PCP. Importantly, this result is led by our largest regions of Australia, New Zealand, and North America, which we will highlight shortly.
Secondly, through a combination of momentum and the normal seasonal skew we get in this business, we expect both revenue growth to be higher than the 8% and profit margins to be higher than the 23% in the second half, as James will reinforce later when we talk about our FY 2025 metrics. So if we can go to slide eight, this is an important slide. Really, this will underpin what's driving our performance. So as we've said, you can see there in terms of the rest of the world in the first half, we had 86% conversion of incremental revenue to EBITDA, which is above our expectations of our five-year strategy to do around 50%. And this was achieved through two key initiatives of strategy that set us apart from our competitors.
Firstly, we have very high adoption of CTM's proprietary technology, and we'll talk about the advances we're getting in North America shortly. And secondly, we have a strong focus on automation, AI, and machine learning to leverage scale. So I've said before, and I'll say it again, both these initiatives are our competitive advantage in the marketplace. But importantly, this isn't to the detriment of our customers. In fact, customers win through this strategy and enjoy the benefits of our cost-based efficiency. It's our superior automation delivering a very competitive cost base that is driving our profit contribution, not the revenue we make or derive from customers. The revenue margin derived from customer TTV is, in fact, the lowest of all of our benchmark peers, being the big five TMCs. That's important to note.
Third up, high uptake and satisfaction with our technology and eliminating manual processes leading to high customer and staff satisfaction. Happy staff, of course, means happy clients. And the outcome is we are winning business at or above expectations, with $0.6 billion or $600 million of annualized clients won at 31 December, and we continue to retain clients at our long-term retention rate of 97%. It's also nice to note here you can see the wins as of last Friday have since climbed to $0.88 billion, a pleasing achievement by mid-February. And in fact, I can say today it's surpassed $900 million as of yesterday, and that's versus a full-year forecast of $1 billion. So we're tracking really well this year on the wins. If we can go to slide nine, Europe.
As stated previously, this is always going to be a year of transition as we cycle off the one-off war-related project work of FY 2024. So to best demonstrate the underlying business performance, we presented FY 2025 against FY 2023 metrics because FY 2023 was a similar period that had little to no project work in it. So as you can see on this slide, in 1H 2025, we achieved an EBITDA of AUD 21.8 million at a really healthy 38.6% EBITDA margin. This represents 13% compound annual EBITDA growth on FY 2023. But what was most pleasing was that this EBITDA result was achieved despite reduced government spend, as previously flagged at our AGM, and whilst carrying 80 staff transitioning from servicing that project work last year to be ready to service the record corporate wins that commenced in the second half that we've already flagged earlier in the year.
When you consider the cost of carrying this workforce in the first half, you can extrapolate a much larger profit compound annual growth rate from FY 2022 to FY 2025, which is more representative of the business and how it's going to look going forward. Further to this, we were appointed sole provider of Lot 1, being the U.K. government's TMC Travel Services framework from January, where previously we were a panel of three TMCs servicing that panel, that lot. At the time, it was difficult for us to assess the impact of the business, given the U.K. government indicated a reduction in travel spend. But now it is becoming apparent this will have a positive impact to the volume and scale of services we'll provide in the future.
and just again, to reinforce this incremental business that we've won by winning the whole TMC panel had no contribution in the first half result. So James Spence will talk to this impact of the momentum to 4Q25 and to FY 2026 guidance in coming slides. Now if we can go to slide 10, the executive team. Again, my commitment by the end of calendar 2024 was to establish the right team to execute our five-year strategy that could enhance the key initiatives of our strategy, namely, one, market share and revenue growth, two, productivity, and three, strong capital management. So you can see on that that James Spence came in as CFO to bring a much more disciplined, strong capital management behavior in our business, and that's working well. Secondly, on the right-hand side, you can see Eleanor Noonan.
She was uplifted to COO, and her focus is on productivity and project execution. You can see through this presentation, both those facets of our business are doing very well. So the last thing to round out this team was to shore up our long-term market share and revenue growth. And what you can see on this slide is that we've added a few people. So we welcome Ana Pedersen in a new role of Chief Commercial Officer who joined in October. And in January, we welcomed Darren Toohey, previously the Global Head of Sales and Account Management at CWT, and elevated Joe Bailey to the Global CTO role. The whole purpose is to underpin and sustain long-term revenue growth and long-term market share growth. So I'm really pleased with the team we've got moving forward.
Now if we can go on to slide 11 and then straight to slide 12, Australia and New Zealand. Let's get straight into the regions. Firstly, with Australia and New Zealand, we are just delighted with this performance in the region. 1H revenue was up 18% in what was a very flat corporate market to AUD 96.1 million, and EBITDA was up 53% to AUD 28.5 million, with 1H margin uplift up 700 basis points from 23%- 30%. Revenue growth is through a combination of winning clients and, as we flagged, clients returning to CTM and the ongoing success of Sleep Space, our proprietary accommodation content and aggregation tool. It's important to note that what you're seeing in these results, that Sleep Space is not yet rolled out anywhere except Australia. We expect Sleep Space to roll out the rest of CTM in the coming months.
The margin expansion is the leverage we have in the business through automation gains and the benefit of the Atlas project, which we completed to merge four regional back-office support areas into one, which again, James will touch on a little later. Onto slide 13, if we can, North America. We're also delighted with this result, and it's a testament to the new leadership team being led by Anita Salvatore. 1H EBITDA is up 49% to AUD 30.5 million. And again, what was a relatively flat market in North America with EBITDA margin uplift up 500 basis points from 14%- 19%. Similar to Australia, this is the result of the Atlas project and automation gains. But additionally, the margin expansion was attributed to the scale of the business, but also in North America, a rapid increase in ongoing online penetration of our proprietary booking tool Lightning.
While revenue is only up 6%, as you can appreciate, when we move clients through our OBT, two things happen. When they've come from offline to online, we get lower fees. It doesn't affect TTV, but it affects lower fees and revenue. And also, as we move off third party, we have lower fees, but we don't have the cost of the third party OBT fee. So when you look at that 6% revenue, this is why it's more than made up through efficiencies, elimination of third party OBT fees, and productivity, leading to a very strong margin expansion. But what's really important here is Lightning's really getting good traction, but it has a long runway to go yet. We expect Lightning uptake to continue strongly into CY 2025 and be on the same trajectory, which is a really good thing for this business.
This is also a reminder that North America has a historically strong skew to the second half due to seasonality. As a result of all the things I've said, we expect North America to have a strong second half, but also be a major contributor to both FY 2025 and FY 2026 performance. So now if we can go on to slide 14, Asia. As we previously flagged, Asia was impacted by material price deflation of 25%, particularly with our exposure to Greater China, which is really a remnant of COVID. This is a region where we are more reliant on supplier revenues and having ticket prices off 25% had a direct impact to supplier revenues and revenue per transaction. But because there's only 9% of group EBITDA, it had little impact to the group and the rest of the world result we outlined earlier.
But what is difficult to see in these numbers is the success in market share gains. Despite a 25% price deflation, revenue was only down 7% and EBITDA down 15%, an outcome of 11% transactional growth through continued market share wins in corporate. But importantly, post-half, ticket prices appear to have steadied. Supply revenue targets that we're setting for new contracts are a lot more realistic moving forward, and supply payments that weren't being paid are now returning in our contracts. If this remains, we expect a strong second half as a result. But to round out the regions, we have Europe on slide 15, which I've already talked to earlier on slide nine. So now I'll pass over to our CFO, James Spence, who will run through the financial highlights as well as FY 2025 target metrics and FY 2026 metrics.
If we can move to slide 17, and over to you, James.
Thanks, Jamie, and good morning, everyone. Slide 17 summarizes the group numbers versus the PCP. So the headline metrics are largely negative given that we're transitioning off the strong Europe numbers, which were driven by one-off war-related project work. I'm not going to run through the line items, but we'll highlight the following points while on this slide. Firstly, the effective tax rate, you can see, has dropped to 23.9% as the U.K. benefited from previously unrecognized tax losses. We expect a similar level at the full year. Secondly, in the transition cost table in the top right, you can see that costs, which relate almost entirely to Project Atlas, our standardization and efficiency project for back office and finance, are in line with the AUD 7 million we indicated back in August.
The transition is now largely complete, and we do not expect any further significant transition costs in FY 2025. Turning to the cash flow summary on slide 18, you can see net cash outflow in the period of around $ 60 million. Two key outflow items are the change in working capital and returns to shareholders. In terms of working capital, we had supplier payments in the final days of December across multiple regions, resulting in unfavorable timing of working capital moves. This is consistent with first-half moves in previous years and can be seen quite clearly in note seven of the accounts where client payables have dropped by almost $1 00 million versus June 2024. Also consistent with previous periods, we expect this to reverse sharply in H2 with full-year cash conversion forecast within our normal range of 80%-90%, implying very strong cash inflows in H2 FY 2025.
Since year-end, we've seen a build-up in our cash consistent with this forecast. You can also see on this slide the cash return to shareholders in 1H 2025 in the form of 19.2 million of dividends paid and $33.1 million of buyback, which I'll deal with further on the next slide. Note also that CapEx was $20 million in the half. As previously communicated, we've increased the focus on ROI discipline. Expect to see the full-year FY 2025 CapEx trend below the original guidance of $48 million, closer to $42 million overall. Looking now at capital management on slide 19, I'll highlight where we've got to on the buyback. In 1H 2025, we bought 2.7 million shares at an average price of $12.15 per share, totaling $33.1 million.
This brings our total cash spend on the buyback since inception in 2023 to $ 59.2 million and around 3% of total outstanding shares bought back. Our intention is to continue the buyback during 2H25, consistent with the plan announced in August 2024, to purchase up to $ 100 million over and above amounts purchased in the previous financial year. As we said, this is subject to board discretion and will depend on various factors, including trading performance and other potential uses of capital. Commitment to buyback shares reflects our view that the strategic value we see in the business is greater than the current market price. Overall, the balance sheet remains strong with net cash of $ 75 million and an undrawn facility of $ 100 million, which we intend to refinance in the coming months. So now moving to the FY 2025 target metric slide on page 21 of the presentation.
We have the same format in our market information, as we think this is the most helpful way to share the underlying drivers of the business and to highlight expected performance. As you've already heard from Jamie, we see rest of world ex-UK as underscoring the group strategy, noting that these three regions represent over 80% of group revenues. And we're confirming today the same FY 2025 metrics as we provided in August and October at the AGM for expected performance across these three regions, of revenue increases versus the prior year of around 10% and EBITDA margin at around 27.5%. The strong revenue growth metric is driven by customer wins and revenue uplift as a result of improved products and technology.
The EBITDA margin uplift is from cost discipline and efficiency, the scalability of revenue growth, and the contribution of new projects, particularly Atlas, which I referred to earlier on, our back-office improvement project. This implies 35% EBITDA growth on FY 2024 for the rest of world regions. As previously flagged, revenue growth is negative in Europe, where we transition off comps, which included significant project work. In October, at the time of the AGM, we highlighted that the expected revenue reduction was at risk due to U.K. government reviews of expenditure. Now we have greater clarity on U.K. government expenditure reductions. We estimate that the revenue change versus FY 2024 for Europe will be approximately negative 24%. We've been carrying around 80 staff to service the record new corporate wins expected to come on during 2H and into FY 2026.
EBITDA margin in Europe is expected to remain strong at around 43% overall for FY 2025, but lower than the previously indicated level due to the effect of reduced activity on a higher cost base during this transition period. We have said that FY 2025 is a transition year as we move from heavy government weighting to a more BAU balance between corporate and government. We expect to see an uplift in margin in 2H versus 1H, particularly in the last quarter due to two main factors. Firstly, we've won a record amount of corporate business in the EU. As these clients progressively onboard in 2H, we'll see greater utilization of the fixed cost base of 80 staff, providing strong leverage to EBITDA. And secondly, as we outlined at our AGM, we were appointed sole provider of the U.K. government TMC travel services framework from January, previously a panel of three TMCs.
At the time, it was difficult to assess the impact of the business given the U.K. government indicated a reduction in travel spend. It's now apparent that this will have a positive impact to the volume and scale of services we'll provide into the future. Moving on to group metrics, you can see that CapEx is trending lower than previously indicated at around 42 million, with the enhanced focus on ROI, a trend we expect to continue into FY 2026. We also see that group costs and non-recurring costs are in line with previous indications. Moving to growth metrics, the client TTV wins metric, as you heard earlier from Jamie, is tracking at $ 880 million as of last Friday versus our original indications of around $ 1 billion for the full year, and that's obviously pleasing to see. Customer retention remains at our long-term historic average of 97%.
Turning now to slide 22, where we're sharing indicative metrics for FY 2026. The reason for providing this now is that we've completed in January a bottom-up group forecast region by region, which is useful to inform a view on the growth metrics of the group following completion of the FY 2025 transition period in Europe, and to illustrate where we see the run rate of the business. We anticipate in FY 2026 that group revenue growth will be around 10%, following strong year-to-date sales wins we continue to see in FY 2025. This complements the initiatives we're rolling out this year and to support further revenue expansion such as Sleep Space. Europe is expected to be a significant contributor to growth in FY 2026, as we mentioned earlier.
Forecast group EBITDA margin of around 30%, which will be an uplift on FY 2025, with the benefit of efficiency and automation projects combined with a scale impact of new revenue growth. This implies around a 20% EBITDA growth on FY 2025. CapEx in FY 2026 is currently forecast at around $ 40 million, with the increased focus, as previously mentioned. In addition to the ROI focus, we're reviewing our tech delivery model and increasingly expect to use a global as opposed to a regional model to facilitate further efficiencies. We will, of course, continue to update these metrics as we move into FY 2026. With that, I will hand back to Jamie. Thank you.
Thanks, James. If we can move to slide 23. As we said before, we set our strategic goals, and in closing, we think we're demonstrating we're delivering the strategy.
Versus the rest of the world, we've demonstrated we're growing market share, increasing revenue per transaction, and leveraging our scale with productivity gains to better service customers. Rest of world, first-half revenue was up 8%, and 1H EBITDA was up 38%, with margin expansion up 500 basis points to 23%. Australia, New Zealand, and North America were the highlights, up 53% and 49% respectively on EBITDA. As James said earlier, on a full-year growth basis, rest of the world is going to grow at 35% EBITDA off FY 2024, which we believe is quite a way above our peers. Secondly, to Europe, as part of the transition, we've had record corporate client wins that have continued into the second half, and we've maintained margins all the way through this despite carrying the costs of automation.
As revenue increases against the fixed cost base, we expect a strong full FY 2025, improved margins, and a strong FY 2026 as we annualize this performance. Of course, we talked about the incremental gains we're going to get from the government contract as well. Lastly, to our strategy to double EPS in five years. James has highlighted the capital management strategy to enhance shareholder returns. Since the announcement of this strategy, we've bought back 59.2 million shares, paid out 77.2 million in dividends, and are achieving a better return on our CapEx investment. These initiatives will enhance future EPS growth. Additionally, we also point out we've built a team to execute the long-term strategy.
Lastly, it's important to share again the momentum we are seeing and the runway we are seeing gives us confidence to outline our FY 2026 indicative metrics, growing revenue by 10%, increasing EBITDA margin to 30% from circa 27.5%, and reducing CapEx to AUD 40 million from AUD 48 million in FY 2024. Again, this will add up to strong EPS growth that supports our five-year strategy. This goes to slide 24, again, just to leave you with the glossary of terms that we've shared in this presentation. But now, if we can move to slide 25, I'll now hand over back to Kaylee, our moderator, for any questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two.
If you're on a speakerphone, please pick up the handset to ask your question. In the interest of time, we ask that you please limit your questions to two per person and rejoin the queue if you have any further questions. Your first question comes from Tim Plumbe with UBS.
Hi, Jamie. Just two questions from me. First one, please. Can you discuss it? And apologies if I missed this. I joined a little bit late. But just how are you seeing the overall underlying health of the corporate travel markets, particularly in U.K. and the U.S., when you're talking to clients and discussing individual budgets or spend per client? How are you seeing that? And then the second question, when you're thinking about your FY 2026 number, it looks to be underpinned by strong new contract wins. You're currently sitting pretty comfortably at 880.
If you got more than a billion worth of new contract wins in FY 2025, would that give you more upside to FY 2026?
Okay. Thanks, Tim. First question. Activity. Demand's strong. It's positive across the board, and in FY 2026, the wins, just to put perspective on how wins usually work, it's a momentum gain. So last year, we were on AUD 980 million or so wins, and you're seeing that play out. You saw that momentum, particularly in Australia and North America. You can't see that in the UK because of what's going backwards in terms of coming off the project work, but like I said today, we've just passed through AUD 900 million. In fact, somebody was right on the borders of this morning. We're at AUD 930 million. So that's going really well, but what that suggests, it does underpin next year.
So if we're getting the results we want out of AUD 980 million, just to put perspective on it, we're doing well on the wins, right? I hope that that's really evident. Secondly, we haven't rolled out Sleep Space to the rest of the world. That's got an incremental play to it. And you can see the investment we've made in a Chief Commercial Officer. We've just got the Global Head of Sales and Account Management from CWT. That says much about our long-term investment. So it's too early to call. And we're putting out metrics today, but I think the fact that we are should suggest we have a conviction on next year.
But really, what we're trying to do, the market should be looking at our run rates for next year, not because of the we're going through this transition through Europe, and that's what we're trying to make clear.
Great. Thank you.
Your next question comes from Bob Chen with J.P. Morgan.
Hey, morning, guys. Just to follow up on the new client wins side, I mean, it sounds like the run rate's very impressive. And to me, it sounds like you're on track for well over a bill this year. Is there any sort of seasonality to how client wins happen, or are you expecting any slowdown in that momentum into the second half that we should be cautious of?
Yeah, thanks, Bob. I mean, I think it's not really about the season. It's about the pipeline.
So if we've got a really strong pipeline and discipline in the pipeline, we know that you can't cheat that. So how many meetings turn into wins? And that's sort of where with Ana coming on board, we've improved that significantly in terms of the discipline around that. We're chasing the right clients. We've certainly got so much time in a day per salesperson that when you combine that with the improved value proposition, we're just getting better results out of our sales team. And further, the technology right now, with all the changes, vendors seeing other things, is becoming a really big advantage, a really big advantage to have your own technology, and we're seeing that come through.
Yeah, no, fantastic. And just the final one.
There's obviously been a lot of news around the Amex GBT and CWT to merge, and they seem to have run into some sort of competition concerns. I mean, is that creating opportunities for you, just that uncertainty with that transaction there?
Well, we did talk about our new appointment, the transition sales global sales for CWT. I mean, I think it probably will. I mean, I think, as I saw the note today, is that CWT, it appears, is a much lesser business than what it was 12 months ago because of this transition. So we see it as a big opportunity. We know what happened to us when we acquired Helloworld, and we were held up with competition bodies and the impact of the business. So we're well aware of that.
But yeah, look, for us, we say this over and over, it's a $1.5 trillion U.S. market. We're still a small player in that with a huge runway. But as you can see with our wins, we're really pleased with what we're doing. And the investment we're making in that part of our business is to ensure that the market share wins, as we've outlined earlier, and we talked about our strategy, have to grow each year. And that's the purpose. So it's pretty simple, our value prop now in terms of our strategy. We want to win business, get more revenue, and keep using our automation AI/ML to make sure that our cost base is super efficient.
Fantastic. Thanks, guys.
Your next question comes from Mitch Sonogan with Macquarie.
Good morning, James and Jamie. Thanks for taking the question.
Just on the FY 2026 target, you've talked to Europe being a significant contributor to the growth. I think James talked to the second half EBITDA margin of 43%, so can you provide any color on what we should expect in FY 2026 in terms of an EBITDA margin or a range or what's implied in that FY 2026 target? Thank you.
I need to jump in again a bit there. I mean, we're putting out FY 2026 metrics across the whole group. I think a couple of points to make is that 43% for Europe is the full year, so it goes to show the momentum in that business. So I think we did, what did we say? 38.6% in the first half, so you can appreciate that the second half is coming home with a tailwind.
As James said before, it's because, as we said, we really have won a lot of business in Europe in corporate, so much so that we kept those 80 staff, right? That's clearly going to be soaked up as we get through to June on a full run rate next year. Of course, we've also talked about that incremental government business, which we've found become apparent that that's going to be pretty good for us as well. The idea of these run rates will set up pretty nice in FY 2026. That's what gives us two things, just the confidence and conviction in what we're putting out, but also just to give you guys in the market a bit more understanding of the momentum in the business. We're not going to talk to margins next year.
I mean, I think our philosophy now is we're trying to double EPS in five years. We're on plan to do that. We know what that's got to do in EBITDA. We can see the things we're doing to enhance EPS, whether that's share buyback, whether it's better capital management. We're getting much better return on our technology build without compromising our value prop. So we're doing a lot of things right. I think we'll talk to those things as when the time is right.
Very clear. Thanks, Jamie. I'll ask again in six months. Just a second one. On our incremental EBITDA conversion, that was pretty high in the first half. You had about 100% in North America and 70% in ANZ. Can you maybe just give us an update or a refresh on what we should be expecting over the next couple of years, FY 2026, FY 2027? Thanks, guys.
Yeah. I think our metrics sort of indicate that. So you can see, I mean, you can chart your own course, I guess, but we're making pretty clear 10% revenue. And I think we've given you three or four good reasons why we've got conviction on that. We've talked about margin being circa 30% next year, which is an uplift of 250 basis points. So when you look through that, obviously, those projects are continuing. I think we've made revenue really clear. At the cost side, if you look at Asia, clearly, Asia's underperformed, and we've talked about that getting better. And Europe's a different beast next year. So in terms of revenue per cost base, we're carrying a cost base. So I think when you sit down and do a little bit of work, extrapolate it, I think you can support what we're saying.
Yep. Perfect. Thanks.
That's all from me.
Thanks.
Your next question comes from John Campbell with Jefferies. Mr. Campbell, your line is open. We'll just move to the next questioner, John O'Shea with Ord Minnett.
Good morning, Jamie. Can you hear me okay?
I can. Hey, John.
Thanks very much. Thanks for taking the question. Just two things from me. Firstly, if you can give us an idea on the headcount, I noticed the employee benefits went down about AUD 5 million compared to the corresponding half. And secondly, the reduction in CapEx and your comment in the presentation or the announcement that the reduction has not compromised your technology output and customer service. And maybe if you can give us some further color on that as to how that's kind of possible when all your major competitors are actually doing the opposite.
Hey, thanks, John.
I'll hand over to James for this one, for both ones on the people and the CapEx.
Thanks, John, for the questions. Look, in terms of the people costs, the impact of Atlas, which was the project focus on our back office optimization and our finance administration standardization and optimization, that has resulted in a reduction in staff costs. And we previously referred to a AUD 10 million annual benefit from Atlas, and that's where you see it coming through the P&L and the staff costs line. Moving to your second question on CapEx, look, we've really focused. We've delivered in the last few years some critical technology projects. Obviously, Sleep Space, the upgrades to Lightning, other upgrades we've had, which have delivered excellent returns. And some of the growth metrics you're seeing are underpinned by that historic technology investment.
The focus now really is on the going forward projects and really applying a high level of discipline to how we look at the returns on those, and not just in terms of the returns themselves, but also how can we manage our costs as efficiently as possible to make sure that we are optimizing our spend. So it's been those two factors, both the ROI and looking at the tech delivery model that have enabled us to make our CapEx more efficient.
Thanks, guys.
Thanks, John.
Your next question is from John Campbell with Jefferies.
Thanks, guys. Sorry about those technical difficulties.
Just in terms of the IT rollout of Sleep Space and other sort of proven tech into the rest of the world, can you just give us a sort of rough timetable when that is going to be effectively or when the rest of the world will effectively be on the same IT platform as Australia?
It's the same IT platform, which is more integrating that content with our customers' content. That's all going to happen in coming months, to be honest with you. It's all going to happen in coming months on the basis that we've got a few when we've got to deal with third parties, it's a bit trickier. It's a lot easier with our own tech to integrate with all our stuff. But there's a real concern that that's just rolling out month by month now.
So we know, for example, North America is very, very close to go live, and so is Europe. So we expect it to come through this half. It's all starting to progressively roll out. So look, we don't necessarily think we're getting the same results that we said before as Australia, but there is no doubt it will add incremental revenue.
Great. Thanks, Jamie. Thanks, Jamie.
Your next question comes from Julian Mulcahy with E&P.
Jamie, just a couple of questions for me. Firstly, on working capital, the extra sort of payment for creditors, I mean, it's been coming down in terms of working days for a while now. Are we now at a sort of base level, or will it continue to sort of fall? And I noticed that in debtors, there's been quite an increase in the allowance for losses. That's the working capital.
The second question is on TTV. I mean, you call out sort of $600 million of wins. Just so we can put that in context, what's the sort of base TTV at the moment?
And to help you and James, I'll take the first question on working capital. Look, the way the industry payments work is they fall on specific days, and we have to meet those payments on the days. And what we saw in December specifically is in three regions, we saw substantial payments made in the last days of December. And the timing of those payments can significantly influence our year-end report or our period-end reported numbers.
And that's why we have forecast where we'll be at the end of June, where we can see where the payments will fall during the second half, and it gives us confidence that the 80%-90% is a good number. But Julian, look, because I understand this is a question that's going to come up, and analysts are going to focus on, I really want to draw your attention to note seven of the accounts because that really is the evidence that you can see in the numbers of how this has impacted our December balance. So client payables at the end of June, so that's six months ago, were $1 94 million. At the end of December, they were $ 103 million. So that's a reduction of $ 90 million in our payables. And that reflects the significant cash laid out in the first half of the year.
So we will see that reverse in 2H . And we're already in, obviously, we monitor the cash closely day to day. And the balance we're seeing build up is consistent with that forecast. So that gives us confidence. In terms of the ECL, look, we're pretty prudent in terms of our ECL. We've got certain specific balances that we have to provide for. There have been some well-publicized administrations we have to provide for. So you see some build-up there, but it's nothing other than ordinary course of business and making sure that we're providing where appropriate, where we know there's a risk. So over to you, Jamie, on the TTV point.
Yeah. Yeah, the TTV point, as we said in our strategy, we said to achieve 10% revenue growth, we're to win AUD 1 billion this year, AUD 1.1 billion next year, and going at 10% a year.
That will tell you pretty much what we need to do for revenue. And of course, we've got other things on top of that, like Sleep Space and other initiatives. So that's why we feel comfortable with 10% this year for the rest of the world and putting out 10% next year because it's a momentum gain of what we're doing. So what we win this year largely plays out into next year.
Given the changing mix in clients, is 600 TTV the same as 600 TTV two years ago?
Yeah, it's the same. Yeah, it's the same. Pretty much the same thing. It's just, well, when we look at T, it's revenue, right? I can't say that enough. I mean, at the end of the day, we know what revenue we make off that TTV.
I'll make it clear again, what we've said we have to win this year was AUD 1 billion of what we need to do to do 10%.
Cool. Thanks, guys.
Your next question comes from Ben Wilson with Wilsons Advisory.
Thank you. Morning, James. Two questions. First one, can you just give a bit more clarity on U.K. government travel spend? You've said, obviously, with the sort of move now to be the sole provider, there's growth potential going forward. But at the same time, you've sort of revised the negative impact, I guess, in the very near term. So can you just sort of reconcile those two things, please?
Yeah. So basically, as we said at the, I think I heard your question right. We said at the AGM that the change in government, they came out and flagged they want to reduce travel spend.
And we've seen that in the second quarter and the third, and we will see it in the third. However, that delay in spend seems to have normalized. But more importantly, through that, we just couldn't get a handle on what the extra business we won was worth because there was a change in government. They were going through these issues, so it was just difficult. But now that things have settled down, we have a much better understanding. And that understanding is leading us to say that we're going to have a very strong fourth quarter. We're going to have a very strong FY 2026 as a result of that. So in a sense, when I look at Europe in isolation, obviously, we were, just to recap, coming off a lot of war-related non-recurring project work, and that's gone. We kept the staff because we flagged it.
We really have won a lot of corporate business. I can't just say it enough. It's by far and away a record in that region. So that's why we had to keep 80 staff, which is a lot of staff. It sort of tells you what's coming if you extrapolate. So obviously, that also happened with a bit of reduction in government spend, which is tricky because you've got a fixed cost base. A small revenue will have a profit impact. But what we have won, we still think is pretty helpful for future years. So like I said, we put out FY 2026 metrics because we have conviction in what we're saying, number one. And number two is, from a point of view of analysts, you can't see the momentum. That's why we're doing it.
Yeah, thanks. I just thought, probably could have been a bit clearer. That's helpful.
I guess it's just more on the government spend side of things. It seems like you've sort of revised down a little bit the, I guess, the reduction perspective.
Yeah, yeah. It went down a little bit.
It's going to, but it's going to reverse, and government travel budgets will actually increase more than you expected going forward, or?
I don't know about the budget increase. It's that our volume of work, the scope and scale of the work has increased. And this is a late January start. So we're starting to see that. That's what gives us the confidence. We're just seeing new departments that haven't traded with us before, new work we haven't had before. So we're winning more and more of the things that we're getting all the departments and things we hadn't won before. That's what we're seeing.
And that is quite significant for us to have confidence in FY 2026 and the fourth quarter.
Thank you. Just my second question, if I can. And sorry, it is a two-part question. It's just on AI and, I guess, probably your Project Scout. Firstly, more in the here and now, can you just sort of comment on how much further opportunity you see going forward from an efficiency standpoint, machine learning, etc.? That's the first part.
You said that was earlier than everyone else?
Yeah, sorry. I'm sorry. Oh, yeah. And I guess the second part to it is just more sort of forward-looking, I guess, as customers rely on TMCs less for sort of just the core booking function and more for service delivery, duty of care, etc.
Is that sort of a threat to your more transaction fee-based model, or is it an opportunity to, say, augment your revenue model with sort of additional fees, etc.? Maybe you can sort of just give some color on that.
Yeah. Firstly, on AI, we've got a huge runway to go yet. We're only just starting. So we're largely a people business. And we've said over and over, we know how much of our transactions we do are non-revenue-facing, and they're significant. So we're working our way through that list. So there's a long runway there. And secondly, your view on TMCs, I disagree. I think what we're seeing with customers, because we're pretty advanced, is that all the initiatives we're doing make it easy for a customer to transact with us.
So for us, at the end of the day, our omnichannel solution is a customer can use chat, they can use our booking tool, and all our technology, they can use an app, or they can use human beings. What is really evident, because we've just come around the world from seeing all our key customers, the overwhelming feedback we get over and over is the importance of good service. For example, there's been a few plane disasters the last month or so. The fact that we had customers on all those planes, the fact that we could pinpoint that very quickly before the customer is very, very helpful as an example. Secondly, travel's still complex. People are doing things later and later and later. The idea of what we're doing with AI is some things are better serviced by the customer.
For example, you can be sitting at home and want to see a copy of your invoice or cancel a flight on your app while you're watching TV. That's a better service. At the same time, to free up our people to manage those really complex itineraries or when things go askew is what our customers value the most over and over, so I think our view is our omnichannel model and what we're doing, we think it's very compelling, and we think in terms of AI, because we own and with the customer in a private network, can have a view of their policies, their hotel choices, their behaviors, it's a closed network. We see it's really valuable, and look, it shouldn't be lost on you where you can see the acceleration in business we're winning. We're doing something right.
And I would suggest it's all the things I just said to you.
Yep, that's good color. Thanks, Jamie.
Your next question comes from Aashita Bharadwaj with Citi.
Hi, guys. Thanks for taking my question. I appreciate you've already talked about Europe a bit. So maybe I'll ask the question in the way that, do you see any headwinds to your performance in FY 2026? And really, what's driving the confidence in the region?
Also, that's answered the question. Look, there's always risk, right? We're not a regulated utility. So there's always positives and negatives. The confidence we get in what has been put out today is, on the revenue side, the strong pipeline that we're seeing in FY 2025, the wins that we've announced year to date give confidence on that revenue outlook that we've provided for FY 2026.
In terms of the margin, we can see the projects that we have delivering in terms of automation and efficiency driving that margin improvement. We can see, for example, the impact of Atlas and how it's delivered savings and margin improvement for next year. I don't want to sit here today and say that these numbers can only go one way. But equally, we see upside potential as much as we see risk in this. I would highlight the process we've gone through. So during January, we went through a detailed bottom-up forecast looking at the impact of what we know today on FY 2026. Using the run rate we see in the current business, our understanding of the transition that's occurring in Europe enabled us to forecast bottom-up where we see FY 2026. So what this isn't is Jamie and James producing a set of numbers on a spreadsheet.
This is the result of a group-wide integral forecast driven by our regional management teams. So that's what gives us confidence to put these numbers out. But equally, there will be things that come up over the next little bit of time. So we will keep the market informed at the appropriate time.
Thanks. And just a second quick one. Are you able to talk to transaction growth during the half? You can color on that.
Look, I think what we've put out, we've put out a lot of data points just for what it's worth compared to all of our peers. And I think if you step back from this and you take a five-year view, we're giving you metrics. We're giving you a lot of metrics. And those metrics drive our business. So really, you've got insight into how we operate internally now.
We're comfortable with what we're putting out. That's what we're going to put out. Like I said, there's a lot of metrics here. A lot of those metrics we're doing pretty well at. We'll see what happens next year as well. I think that's the way we're going to look. As you can see, hopefully, it's evident to you that what James talked about for this second half as we get through Europe and how we're looking next year, that's good compound growth. I think if you take a view on EPS over the longer term, you can see that the factors of the facets that make up EPS, they're more fixed to reducing versus a growing business. We feel pretty comfortable about that as well, which we'll talk about at later times as we go into next year.
But right now, I think from my point of view, we've got the right people running the right areas of our business that drive that strategy. I think we're executing really well for strategy. And I think the rest of the world best represents that. And whilst you can't see Europe in this transition year, you're going to see it in the fourth quarter because of the two things we said. So where we sit today, we feel good about executing.
Thanks, guys.
That concludes our question and answer session today. I'll hand back to Mr. Pherous for closing remarks.
Yeah. Thanks again to everyone. Just a couple of questions. Of course, we're a roadshow. We're Sydney, Melbourne this week, Brisbane Monday. If you want to catch up with us, just reach out to us, and we're happy to help.
If anyone that missed questions, I don't think we called everyone. But if we did, that'd be helpful. Okay. Thanks again. Bye.
That does conclude our conference for today. Thank you for participating. You may now disconnect.