Good morning, everyone. Thanks for dialing in today for our full-year results announcement. Shortly, you'll hear from Adam Campbell, our CFO and the CEO of our Global Business Services division, Chris Galanty, our Corporate CEO, James Kavanagh, our Leisure CEO, and of course, our MD, Skroo . Greg Parker will also join us for the Q&A that follows this call. Firstly, Adam will kick things off with an overview of the results. Adam.
Thank you, Haydn. As I think you know, we've highlighted previously a pretty consistent across the industry more broadly, it's been a fairly challenging environment over the course of the last year, including increased geopolitical tension, volatility following the U.S. elections earlier in the year, and the macroeconomic conditions experienced in most of our four markets. We do consider these conditions fairly cyclical and short-term in nature, and we've responded to them with targeted strategies to mitigate cost growth, increase productivity, and boost margins while they do play out. Importantly, we're continuing to invest in the future and see a positive outlook over the medium and longer term due to the scale and diversity of our successful leisure and corporate brands, our robust balance sheet, the general resilience of the sector overall, and also some promising signs starting to emerge in our key markets.
Whilst our overall TTV grew by 3%, that growth wasn't consistent across all of our brands and all of our regions. Underlying PBT last year fell to just under $290 million. Quarter one and quarter four in particular saw TPV impacted by macro conditions, which then led to lower overriding income for those quarters. In addition, we've seen underperformance in some specific regions and businesses. Both ANZ and the Americas saw solid profit growth, but this was offset by reduction in both EMEA and Asia. In Europe and the U.K., the downturn in travel on key transatlantic routes, Middle East tension, and the underperformance in our typically strong U.K. corporate travel brand all had an impact.
Our Asian issues are all now well-documented and include additional provisions taken up following the implementation of a regional mid-office platform, costs for additional resources to rectify the issues in place, downtrading, and broader operational underperformance in the region, and also us investing to ensure that the technology, infrastructure, resource, and processes we have are appropriate for a region of Asia's size and complexity moving forward. We do believe that both EMEA and Asia will see results return to a more appropriate level in 2026. As a result of the cyclical challenges we've been facing, we've implemented a number of targeted measures to offset the short-term volatility. These include a group-wide focus on productivity gains and cost reduction, with a recruitment freeze generally in place for non-customer-facing roles, and a focus on reducing discretionary spend globally.
Overall, our aim is to hold our underlying costs as flat as possible compared to FY 2025, compared to a 3% or around $70 million increase in those costs in the last 12 months. We acknowledge that this won't be easy given inflationary pressures on wages and services, particularly including technology service costs, but we are confident that we can make a meaningful difference in that space. We're also targeting a 15% - 20% reduction in CapEx during the current year by prioritizing our key projects and products and have actively closed or repositioned underperforming assets such as StudentUniverse, wholesale of The Travel Junction, and our loss-making Liberty Leisure business in the U.S. The introduction of the Global Business Services division to better support our frontline team is also seeing early success in areas such as non-travel procurement and a more strategic approach to our BPO models.
Further changes to standardize, simplify, and modernize the operating model for our enterprise technology, people and culture, and finance functions are now underway, and we should start to see the benefits of these changes from the second half. As I mentioned earlier, we're continuing to prioritize investment in those areas that will be important to us over the medium to longer term. These include diversifying the channels that we service our customers through, system and technology innovation, and embedding AI as an enabler of our business strategies. JK and Chris will talk further to some of these investments. Turning briefly to each of our divisional results for the last year, and once again, JK and Chris can discuss some of these, some of the drivers behind these results in more detail. Corporate, once again, saw top-line growth to $12.3 billion.
Obviously, given the flat global market, this was reasonably modest growth year- on- year . As mentioned earlier, Asia had a significant impact on the profitability for the division, and excluding that region, the division's PBT grew by 6% off like-for-like TTV growth of 3%, which does highlight that some of the productivity benefits are starting to be seen from the Productive Operations Initiative and the broader cost discipline in corporate. Our leisure division also saw TTV growth year- on- year , although this predominantly came from our lower margin brands in independent and Travel Money, as well as the Ignite business. Flight Centre's brand TTV only grew modestly for the year, as it was more heavily impacted by the macro-economic conditions that we experienced, although I will highlight that the lower volume was somewhat offset by an increased average basket size and components per booking.
Profit for the leisure segment fell year- on- year , largely due to soft trading conditions in both the first and fourth quarters, which in turn impacted override revenue. The other divisional segments finished flat year- on- year , with unallocated head office costs not increasing, our investment in TP Connects increasing by $7 million for us to fast-track airline content for our internal businesses, as well as implementing new revenue streams from airline direct connection. We also saw increased profit contributions from our operating businesses, and in particular, admin, touring, and pedal all saw profit increase, with Discover again also being profitable this year. Finally, I'm pleased to say that the balance sheet continues to be in a strong position.
In line with our capital management policy and underpinned by healthy cash generation, we've undertaken around $450 million in capital management initiatives over the last 12 months, including reducing convertible notes by $200 million, buying back issued capital of just under $60 million, repaying bank debt of $100 million, and the payment of $90 million in fully franked dividends. We intend to continue to proactively undertake capital management initiatives throughout the next 12 months and beyond. I'll now hand over to Chris.
Thanks, Adam. I'll now give a brief update on our corporate business performance and strategy. We continue to operate a portfolio of global winning brands, FCM Travel Solutions in the global category, one of now only three TMCs in the world that can truly serve the travel program of an enterprise customer, Corporate Traveler in that sweet spot SME space, Stage and Screen in the performance travel area, focusing on music, entertainment, and sports, and FCM Travel Solutions in the meetings and events category for our FCM customers and moving into 2026 for our Corporate Traveler customers as well. This means that we have a broad portfolio of brands, each of which focuses on their specific customer category, which means as a global TMC, we're able to be more customer-centric than our competitors, which gives us, we believe, a strong competitive advantage.
We are a global TMC with FCM Travel Solutions operating in almost 100 countries, Corporate Traveler in six, Stage and Screen now in five, and FCM meetings and events in 11 countries, though able to serve customers in more markets than that. This means we're a very diversified business from a customer segment perspective, a leadership perspective, and also a global capability perspective. I'm actually going to focus a bit more on Corporate Traveler now because normally I talk a lot about FCM Travel Solutions and our enterprise customers, but Corporate Traveler is a bit of a hidden gem within our group. This year, it's on track to become a $5 billion TTV business for the first time. It's a highly productive and profitable model, which now has enhanced digital capability of its Melon platform.
As I said before, it now incorporates its dedicated Stage and Screen specialization in five of its markets. It operates in our ideal customer profile with companies that spend between $200,000 and $2 million per year, which means they really benefit from the expertise and capability that Corporate Traveler brings, but they're not large enough to have their own dedicated supplier relationships, which means they really benefit from the savings that we can deliver them. It's a real win-win, better savings for them and better margins for us. We're growing in all markets, but we have a specific focus on our Northern Hemisphere markets with a particular focus on the USA market, which, as everyone knows, is the largest SME market in the world. You can see that year- on- year , we're outperforming the overall U.S. market yet again.
We've invested heavily in our proprietary digital platform, Melon, which is now by far the largest platform that we operate in the Northern Hemisphere in Corporate Travel er. Virtually all of our new customers go straight on to Melon as Melon customers. It's a modern cloud-based microservices platform, which means we can deliver new features faster than many of the legacy platforms out there. That can be new content, it can be better user experience, or it can be completely new features. This year, due to customer demand, we'll be launching Melon Payment and Expense, which will really give more of an all-in-one platform beyond travel management for our customers. A bit of a strategic update. I spoke about three things earlier this year, three priorities: continued organic sales growth, productivity gains, and margin improvement. We keep focusing on growing.
We are a growth business, and we focus on organic growth by retaining and winning new customers. We're focusing now on expanding our specialist businesses, meetings and events, and Stage and Screen . This won't just be through organic growth. We're also really keen to approach M&A to expand and expedite the growth of these specialist businesses. We continue to grow our addressable markets by focusing on new products and services such as consulting, which has done really well this year in FCM Travel Solutions, but also specialist travel like meetings and events. We continue to invest heavily in our sales and marketing machines to make sure our brands are out there in front of our customers and we have enough salespeople on the ground reaching those customers. We have seen TTV and revenue growth this year delivered with fewer staff than we had last year.
Those scale benefits haven't fully hit the bottom line yet. There's a few reasons for that that I haven't touched on. We have seen some downtrading from customers in what has been a tougher market condition, which led to some reduction in super override. We've also had some businesses, as we called out Asia and Europe, who have underperformed this year. I'm pleased to say Asia is back into profit, and we really feel it's going to have a much stronger year this year. We're addressing some of the challenges we have in our European businesses. I'm pleased to say that in a tough competitive environment, our margin actually improved. Our revenue margin improved slightly this year. That's not just about us keeping prices up. It's about making sure that we generate more revenue through new services such as consulting and software and expense.
You can see that we are seeing some benefits already flow from our Productive Operations Initiative. We've seen productivity, which we measure as TTV divided by full-time employee, improved by 13% over the last two years. We expect to see further productivity gains both this year and into the future every year. It's focusing on three main areas: the digitization of our operations, moving to a single global operating system, enabling customers to self-serve more so they can solve more problems themselves without the help of our people, and improve the streamlined access to content. It's not just about us making more profit through productivity. It's also about customer benefits: faster service, a more seamless experience, frictionless booking and payment, reduced issues, improved traveler satisfaction, greater customer loyalty.
I'm really proud and pleased to say we've seen improving metrics across the board in all of those areas in our FCM Travel Solutions business this year. Corporate Traveler will be experiencing the benefits of that as well going into this year. We spoke a lot about AI, and we really see AI as an ecosystem. We have invested heavily over the last two years to make sure that we've built AI to touch all of our software and platforms. It's not just about having chatbots. It's about having sophisticated AI intelligence there that really impacts our entire software and platform ecosystem. What does that mean? It means we can drive growth by new product launches. I'm pleased and proud to say we relaunched Sam as being far more AI-enabled at GPTA this year.
It means we have a more competitive, differentiated offering with Sam that has a much richer and deeper capability than just the normal chatbots that many of our competitors have released. It also enables growth productivity. Our entire consultant software ecosystem is fully AI-enabled. Productive Operations means that all of our consultants are using AI-enabled software, which means we can grow their productivity, remove some of the drudgery from their work, and make sure that they can deliver to our customers better. The outlook really, we're very confident about the future. We have a very diversified customer offering. We have a very diversified geographic offering and segment offering. We keep expanding our addressable markets by focusing on new investments in data quality approval, consultancy, content access, and specialist travel. We will be introducing new payment and expense solutions into corporate travel this year.
We're really going to make sure we double down and fast-track Corporate Traveler's growth in our key USA market. Mostly tight and evolved from a performance perspective, we are very confident to see material productivity benefits starting to flow through our Productive Operations strategy. We're also ready for a market rebound. We have a very strong pipeline, and we can see some good opportunities for us, particularly in FCM Travel Solutions, through some of the industry consolidation that we're seeing. We're actually already seeing a very strong level of RFPs coming through, and feedback from our customers is that they're expecting to spend more on business travel next year as conditions improve. Overall, a good year in many areas across the business and very confident as we move into our new financial year. On that note, I'll hand over to JK to give you an update on leisure.
Thank you, Chris. Hi, everybody. Today, I'll cover off on the leisure division and speak to how we'll drive value across three strategic moves, which is growing our core Flight Centre brand, scaling high-growth winners, and launching our loyalty throughout our platform. Starting off with where we play, we operate in an addressable market of approximately $1.1 trillion sales across seven countries, which you can see on the slide. These markets are growing at about 4%- 5%, depending on which geography you look at. Our share sits at about 1.2% of these countries' travel shares, which to me demonstrates it gives us a significant runway for growth. Australia, as Adam touched on, is performing well for us. New Zealand is back to growth, even though post-pandemic capacity has not really fully recovered with airline fees and more. The U.K. is a focused market for us. It's really accelerating.
The U.S. has been in fixed mode, which Adam also touched on, which is now turning around to growing share. On the next slide, you'll see our brand portfolio. We operate this diverse portfolio because it allows us to serve multiple needs of different customer groups, from mass market travelers through to luxury and so on. It also allows us to provide our supply partners with access to the most valuable customers. FY 2025 was challenging, particularly in the last quarter, but it also showed signs that our customer value proposition continues to have broad appeal as TTV grew 7% despite headwinds. A number of KPIs are trending positively, such as customer NPS, which is listed to 54 in the Flight Centre brand, and our luxury brand continues to achieve north of 80 in that KPI.
Productivity is also trending up positively, as is basket size growing, and components per booking has listed from 3 to over 3.3 in the Flight Centre brand. The big issue for us in the year that was really is linked to revenue margins, which have contracted largely due to a shift in destination, product choices, and volume, which has been impacted on key contracts, and all customers deferring some of their choices around cancelling travel, which ultimately has had a negative result on CBT growth. The brands that have been most affected here have been the Flight Centre brand and Travel Associates. Looking forward, we're focused on three big moves and the capability enablers that will drive growth. Move one is about growing our core Flight Centre brand, which represents about half of the leisure portfolio.
Here we want to really grow our competitive advantage, which comes down to choice and service channel. The areas of focus here include investing and lifting our capability in our digital assets, linked to our media screens and having media screens and digital screens across all stores. This gives us the ability to have real-time advertising and great deals across our store network, which really increases engagement, attracting customers, and pays with conversion. We've also launched and are in the process of developing a single booking card on FlightCentre.com. Our online sales are now growing over 10% year- on- year. We've seen a real uplift recently with new features of NDC. This new distribution capability allows us to deliver better pricing to our customers backed by a trusted brand.
As we look to the future in Flight Centre, we're adding more stores, which are still our most profitable channel, with 50% of customers walking in. You'll see us add more sales consultants to be able to support growth while we hold on support and staff as well to save costs. We're doubling down on our top 10 destinations to ensure that we remain famous for air travel as we package value with these flights to be able to actually showcase Flight Centre's own product range. If you look to the appendix, you'll see a range of different travel product slides that actually demonstrate why we're not just a travel agent, and we're showcasing packaged products, exclusive products, and so on. Move two is all about betting on future winners. We call these our Horizon 2 brands, which really are fast-growing brands and business models in defensible markets.
I want to take you through some of these just to give you some insight as to what's going on here, starting with luxury travel. First off, Scott Dunn is now growing top-line double-digit growth, although margins have actually been suppressed somewhat due to geopolitical challenges, selling more single-centre holidays as opposed to complex tailor-made experiences. Between Scott Dunn and Travel Associates, we're dialling off our focus on high-net-worth customers. Scott Dunn is sizing up expansion at the moment into Asia further, beyond Singapore into Hong Kong, where we've hired staff and we're ready to actually target that market. The next category is cruise, tourism, and packaged holidays. This really has been a standout performer for us, growing 20% year- on- year , with cruise and tours growing across all brands, but mainly focused around some of the uplifts that we've seen in Cruise about with the stores that we've opened in Australia.
Also, our newly acquired cruise club business in the U.K., which we've purchased really to scale the highly successful Ignite model, which has had another record year. A lot of these investments are expected to return value in FY 2027, largely due to revenue recognition. This includes the World Cruise Charter called Explorations that we announced at the last announcement, which is due to set sail in September 2026. Whilst the back of the big year last year, Travel Money, our foreign exchange business, will continue to grow to retail, click and collect services, and also our new wholesale channel, which is delivering over $300 million in TTV, which has been a record with plans to launch into Fiji. Finally, our B2B independent agent segment, this makes us getting closer to about 20% of our TTV.
It's been one of the fastest growing divisions in our group, with the Envoyage brand now deployed across five different geographies. This year coming, we'll see a major focus on growing efficiency and profitability after a record year. Big move three is all about launching and lifting customer loyalty. On top of our strong NPS board, we've made a bold move to launch a travel retail loyalty program this calendar year. We'll start with Flight Centre, Travel Associates, and Cruisea bout in Australia, followed by more brands and then expanding globally. This program really creates a new engine approach to Flight Centre Travel Group, and it will reward customers across their entire travel journey and give them access to the most accessible travel rewards store in the market.
It will also unlock great value for our suppliers with new levers to grow sales, and it will actually expand new strategic partnerships beyond travel while strengthening existing supply relationships. For the Flight Centre Travel Group, this really accelerates our data-driven personalisation with the launch of new loyalty management technology, a new CRM, and new customer apps that are designed to expand revenues and grow customers, all of which I'm confident will drive long-term shareholder returns. Finally, in closing, as Chris touched on, we're making a lot of moves with artificial intelligence. We've invested in a strategic partnership with Anthropic, which is enabling a redesign of our operational processes. It's accelerating decision-making and enabling us to have more strategic analysis and improving efficiencies in doing so. You'll see a slide at the back of the pack which touches on that.
You'll also see a slide here which demonstrates how we're thinking about unlocking value at every stage of the customer journey with AI. We call this our agentic travel framework, which really touches on a whole range of things from how we can actually see value pools from dreaming through to planning pre-trip right the way through to return. We've seeded investments here to simplify the trip planning process, to support our consultants more, to automate a range of different touchpoints, and to help us do a number of different initiatives, including upselling and turning data into meaningful action. Together, I'm pretty confident that all of these capabilities will deliver a much smarter, faster, and more personalised experience and ultimately unlock greater value into the future.
I look forward to answering any of your questions on this, and I want to say a huge thank you to all of our people for investing in the great work, developing a great business into the future. Now I'll hand over to Skroo.
Thank you, JK. Very interesting. Look, I'm just going to have a very brief couple of slides here which will explain a bit more on the outlook for this financial year 2026. In the first one, we talk about how we're positioned for growth. As you heard through Chris and JK, we're quite a diversified global travel business. We aim to be quite reasonably dominant in six or seven countries in both leisure and corporate, and that's basically being the top three or four providers or travel providers in those countries. We've come a long way. We're obviously in corporate in about 26 countries, and that is mainly in Europe and Asia, the different ones there. That diversified and dominant global travel business, we've already got a proven organic growth model in quite a resilient sector, as you see in the second column.
Although there's been some macro-economic events over the last 12 months, we're still getting some TTV growth, and we expect that to continue in this next financial year. Our balance sheet, as you heard from Adam , is still reasonably strong, and you will have heard some of the initiatives we're doing there. In the end, we want to become more productive, and you heard about the Productive Ops project in corporate, which is really gaining some great headway. We're very focused on a cost-out program, and this over the next 12 months is going to be quite important for us. You heard about our Global Business Services division, which will also help us with the efficiency in our overall support areas and the way it's supported the main frontline operational businesses. If we go to the next slide, this is about our current expectations.
As you've heard, the travel industry and the global travel industry in the last 12 months has been reasonably volatile, particularly coming out of the States with Donald Trump's tariffs and other things. It has meant that generally in corporate, corporates are generally trading down, particularly out of Canada into the States. There's been a lot of downtrading. This seems to be starting to come back, but we expect this first six months probably to be reasonably flat, I think, as Adam said on last year. There are some promising signs coming in terms of not only our volume growth but also some of the arrangements we've got with our suppliers. We believe in the second six months that assuming there's no major macro things happen in the world, things should come back reasonably well.
We've obviously got plenty of opportunities for improvement on this last year, particularly in places like Asia, parts of Europe, and some other businesses that, as you heard from Adam , we have closed. We're certainly looking forward to this 12 months. I think it'll be probably a challenging first half, but a much better second half assuming everything comes the way we think it will. We won't be providing profit guidance at the moment, but we will at our AGM, which I think is on November 16th, is it?
12th.
November 12th. Thank you very much, and we look forward to some questions.
Yeah, now ready for questions, everyone.
Thank you. If you wish to ask a question, please press star and one on your telephone. Wait for your name to be announced. If you wish to cancel your request, please press star and two. If you are on a speakerphone, we do ask that you please pick up the handset to ask your questions. Our first question today comes from Michael Simotas from Jefferies. Please go ahead with your question.
Good morning, everyone. The first question from me is on overrides. Can you give us any color on how much of a drag lower overrides were in FY 2025 and maybe some indication of how much you think the upside could be into 2026 if demand trends do improve? Maybe relating to that, whether you've renegotiated any of your hurdles down so that they're easier to achieve?
Michael, it's Adam. I'll start with that, and then I'll hand over to Greg to talk about the renege, et cetera. Look, we obviously, I think we spoke a bit about this after the first quarter as well. Obviously, the overrides have a fairly significant impact, particularly in the leisure business when TTV gets subdued in the way that it was first quarter and then again in the fourth quarter. It was a meaningful impact in that last quarter and the last couple of months of the year that came through, particularly in leisure, but does also impact in corporate as well. We shouldn't underestimate that. Yes, it's a meaningful amount that has impacted us. As you well know, volume and growth is important for us in terms of being able to achieve those overrides, and that was a direct impact that we saw given the conditions.
Greg, do you want to talk through just in terms of where we're at with some of the negotiations or any changes flowing through?
Yeah. Good day, Michael. Just a bit of color behind it. When we did our probably most recent update, we're sort of looking back on 2024, and particularly in the airspace, there was quite a bit of additional capacity, particularly from Australia to Europe, that was thrown into the market, which gave us the ability to aggressively sell into that, which means that you trigger sort of high override tiers in the agreements. As we went through into FY 2025, overall capacity only grew 4% globally. When you look at Australia combined with domestic and international, it was actually backwards 1%. The ability to sell high volume into a lot of those air contracts weren't there, which meant that we weren't achieving some of the higher tiers.
As we look at the remaining categories, cruise and tour remain very strong and very stable. Same from the insurance perspective. We've onboarded our new insurance partner, the Europe Assistance. PA, which was relatively flat now, is retained to a growth element, and we're getting some good attachment in the hotel space, both in leisure and corporate. If we start heading towards looking at outlook for FY 2026, there's no major fundamental contract changes that we see on the horizon. In terms of capacity in the airspace, it's probably going to grow similar to another 4% year- on- year as well. It's probably a similar scenario to where we're heading in the year just gone. We are heavily focused on recutting all our agreements, making sure if override tiers have not been achieved, there are opportunities to be able to put those back on the table and do some resets.
We are also looking at some very creative ways, as I've mentioned before, about accessing exclusive content, which generally comes at a margin differential between ourselves and our competitors. A lot of that's in that airspace through adoption of NDC. They're probably picking up on Adam 's points on where it was in 2025 and just a bit of a view on 2026.
Greg, correct me if I'm wrong, but I think, Michael, it's fair to say that most of the contracts have been adjusted to reflect where we finished off. To get the margins that we would want, we need to get growth again this year. You're still looking for growth this year, which is ultimately the key to hitting those super override tiers.
Okay, thank you. Just the second one from me, just whether you'd be able to make any comments on how you're thinking about the potential changes to payment surcharges that are being discussed in Australia. I guess travel's in a particularly difficult position because you're effectively collecting money on behalf of your suppliers from travellers. Has there been any sort of discussion on how you may be able to mitigate that if those changes do, in fact, come through?
Yeah. Hi, Michael. It's JK here. We have, across all of Australia, leisure and corporate, fully evaluated what the impact could be, but we've also got a range of options subject to what the final outcome looks like. Implementation, which is obviously submission papers were due yesterday, and there's a lot of consultation across the industry. ATIA has put a representation paper forward representing the entire industry. I think we've got a few different levers to pull subject to what the final outcome is. We're expecting to find more about that probably around December going into January, I think, is when we expect a bit more of a full decision to be handed down. Then we'll know what moves to play as we go into calendar year 2026.
Based on those sort of strategies, do you think you'll be able to mitigate the potential headwind?
Yeah, there's plenty of options on the table. We just have to assess which ones we pull, but the aim would be to make sure that it's a zero impact to us.
Got it. Thank you.
Your next question comes from James Lee from Goldman Sachs. Please go ahead with your question.
Hey, James. Thanks for taking my question. My question's probably more just to clarify the outlook commentary. For the first half 2026 profit, we've said that it's going to be fairly flat. The first question is around, is there a number in first half 2025 that that number is based to, just because we've had a few things that we've taken out of the underlying?
Yeah, James, we're expecting a like-for-like comparison there. Excluding anything that's been taken out in the underlying, we'd expect a like-for-like to be relatively flat year- on- year at this point, from a purely underlying trading perspective.
Thank you. Maybe just a follow-up there on Asia. I think we've talked of $30 million impact at the full year, and it was $8 million in the first half. That $8 million is not immaterial to first half 2026 profit. We've said that we won't see an impact in Asia. What are some of the things offsetting that $8 million that we saw in Asia in the first half 2025? I would have thought that would be an $8 million benefit that we'd potentially see in the first half 2026.
Yeah, that's a good point. Certainly, if I took a look at Asia by itself, and Chris has certainly talked to this as well, but Asia in its own right, we should see improvement in the first half. Certainly, over the course of the full year for Asia, we'd expect that to get to a moderate profit. We would be expecting to be up on the first half in Asia itself if we look at that specifically. Some of the areas that we're looking at when we look at it collectively, some of the downtrading that we saw through June obviously doesn't stop on June 30th. There's some impact of that coming through into the first couple of months of this year that we've highlighted, and that will have a bit of an impact in there as well.
The second quarter of last year, James, was actually a pretty strong quarter. We're also knowing that we're going to be comping against a pretty strong result in that quarter. When we've looked at it, our expectation at the moment, as I said, is that we will be relatively flat. That should see an improvement in Asia, but we do think there'll be a slight offset elsewhere to offset against that.
Great. Thank you very much.
Your next question comes from Mitchell Sonogan from Macquarie. Please go ahead with your question.
Yeah, good morning, guys. Thanks for taking the questions. Just a quick one on the other segment. There's about a $75 million loss. Adam, what should we be expecting for that looking into FY 2026? Thank you.
Yeah, thanks, Mitch. Look, a couple of. You break that into its components, first of all, TP Connect will be a similar position as this year. We're not expecting that investment to increase year- on- year as it did between FY 2024 and FY 2025. That should be held relatively flat going into next year. The head office costs that don't get allocated out, at this stage, I would say probably similar levels, although as we look at some of the cost initiatives, we should get some benefit coming through there. At this stage, relatively flat from a head office perspective being held in that segment. Where we do expect upside is the operating businesses, so Discover, Touring, AVMIN, our share of the Pedal Group. We'd expect those to improve. Off the base of those, I would hope to see a small improvement in that combined segment.
You might be looking at moving to around about a $70 million rather than a $75 million net position.
Yeah, very clear. I know you don't have guidance out there, but obviously, just in the corporate segment overall in FY 2025, the PBT margin was down 1.5% versus 1.7% in 2024. How should we be expecting that to trend over the full year with obviously productive ops benefits starting to come through and Asia not being so much of a headwind or returning to modest growth, as you said? Thank you.
Oh, hi Mitch, it was Chris here. I think we would expect to see that get back to previous levels this year because Asia itself was a very significant drag on that net margin last year. If we just normalize Asia alone, we actually saw PBT growth last year ahead of TTV, so our net margin would have improved. I'd certainly expect it to be back to at least where it was previous financial year.
Yeah, very clear. Just a final one, sticking on corporate over there in the U.S., like some good detail on the corporate travel business seems like it's doing really well. Can you maybe just provide a little bit more information about the broader growth strategy there and expectations for growth over that business in the medium term? Skroo mentioned you're starting to see a little bit of improvement from, I think, inbound volumes coming into the USA from Canada and Mexico, which were down anywhere from 5% -1 5% over the last fair few months. Just keen to understand how the corporate businesses are seeing that sort of impact there as well. Thanks, guys.
Sure. Yeah, look, the USA still remains our number one growth market globally, actually. We have two very strong businesses there, both in FCM and CT , but still very low market share. Things have normalized a bit more, particularly between Transborder Canada-U.S. I think a lot of the vitriol seemed to have dissipated in the last few months, and I think everything's kind of normalized there. I think both brands, we expect good growth. CT particularly, I think, has really found its feet in the last year. I think it's partly due to the Melon platform really being very fit for market now. We've done a lot of work on that in the last couple of years, and we're winning a lot of share there. FCM also, I think we have pretty good expectations for this year.
I should also call out what we call our two Horizon 2 brands, both Stage and Screen and Meetings & Events, both have got good growth opportunities in the USA in particular. We're actually pretty buoyant about the USA. I think there's always a macro thing, and you know, as we know this year, things have been pretty unstable. I get the impression talking to our customers, they've kind of just normalized that now. Tariffs on one month, off the next, and back on again. I think the panic's gone out of that now, and I think they're just treating it as business as usual.
Our next question comes from Tim Plumbe from UBS. Please go ahead with your question.
Hi, guys. Thanks for taking my question. JK, probably a question for you. Just how are you guys thinking about increasing the push into online in the leisure market for the next 12 months? I mean, if the consumer's feeling a little bit more cost-conscious, is that an opportunity to drive some of those Bali or Fiji flights and hotel packages from the online perspective? Over the medium term, maybe can you talk about how you're thinking about the leisure split? What's the right mix between kind of traditional online, independent, and luxury?
Firstly, on the online piece, we have, it's very much an important part of our distribution channels, particularly in Flight Centre and our business JetMax. We included some commentary there that we're starting to lift with a 10% growth. There's no doubt that the market is very price-conscious. We see this as a channel to really address the price hunter market, as we call them. We've been investing a lot with TP Connect, integrating more and more content into that channel, which gives us really good rates to be able to actually win in this segment. We're starting to see it come true now, actually. Just week on week, we're seeing more and more NDC content coming in, which enables us to be able to really position ourselves and compete at those lowest rates, particularly for that single point-to-point type bookings. Very much part of our strategy.
We probably see it sitting at about 15% - 20% of our overall volume as it continues to grow. The capability that we're building is positioning us well to be able to convert more customers through those channels. What was the second question around the split across the different categories, sir?
Yeah, just how you're thinking about the right split for the leisure business between independent, luxury, mass, complementary.
Yeah, the four pillars, we see Flight Centre Travel Group sitting at about half the portfolio, 50%. Luxury travel sits at about that 10%, but it gives us a lot more margins and profitability out of that category. If you look at the specialist division, this is really a high growth area for us. We expect to see high growth coming out of there, particularly with cruise and touring and the brands that we've been investing in. We expect to see that hit the bottom line more in FY 2027, which is largely due to revenue recognition of a lot of the products that we sell in that space. We're really seeing accelerated growth growing at about 20%. The independent business makes up about 18% of our portfolio now, but it has been growing rapidly. Key for us now is turning that into profitability.
Great. Thanks, guys.
Your next question comes from Ben Wilson from Wilsons Advisory. Please go ahead with your question.
Thank you. Morning, gentlemen. First question on the leisure side for JK. Just as part of the trading update, it was mentioned that you are seeing some stronger TTV in leisure as well as corporate in July. I presume that's still focused on the independent and specialist brands. Can you just confirm whether you are seeing any sort of indications of a pickup in booking patterns for longer haul trips, which typically are beneficial for override income?
Yeah. Hi Ben, you're pretty accurate in terms of the flow through as to understanding where the growth has been coming from. We haven't seen a major uplift in the early weeks, just leading into the new year. Largely, if you look at where consumers have shifted their travel patterns, we've seen a bit of a downturn in the last quarter coming out of the year. The U.S. has been impacted, the U.K. has been impacted, and they're more of our higher margin override-driven contracts. What we've seen is Japan has been incredibly popular, as has China, Vietnam, but it's not enough to be able to offset any losses from an override perspective just yet. However, we are optimistic with some of the tailwinds that will come through as the year goes ahead.
We're not expecting significant change in the first half, but as we go on into the following half, we're expecting things to lift even more, largely due to things like interest rate cuts and so on, which should actually start to see a lot more competition. We're expecting early birds to perform positively as the year goes on, and we'll see that trend better going into the new year.
Yeah, thanks, JK. Just a couple on corporate for Chris. Firstly, Corporate Traveler, yeah, really good to see the strong growth continuing in the U.S. there. Just wondering if you could actually just talk to how it's positioned, Corporate Traveler that is, in the U.K. and Europe, and whether you're still, whether you're seeing good growth there or whether that's an opportunity.
Sure, Ben. Corporate Traveler only operates in the U.K., so we don't have it in any other European countries. It's still a very profitable and good-performing brand, but it has struggled with growth over the last year or so. I think we've really seen that as internal problems rather than external. We've just changed the management team down there and really refocused that business on getting back to what it's really good at. I think actually the U.K. remains a very, very good opportunity for CT . It's a really good market. CT does really well when there's a skew towards international travel in particular. The U.K. SME market is very much a long-haul international market. We actually are very confident about that. We've made some really good improvements to the Melon platform. The U.K. was the last of the three northern hemisphere markets to release Melon.
It had some unique content challenges around things like rail, which don't exist very much in North America. We've really addressed that this year. We've got a great product. We've got a very, very good addressable market. We're actually very confident. I think although it's had a challenging year in terms of growth last year, I think we're feeling really good about things in the next couple of years.
Great. Thanks, Chris. Lastly, on productive ops, good to see the 13% increase in TTV productivity. I appreciate, as you call out, it's a balanced scorecard of benefits there. It's not just all about the cost efficiencies, but that's still a pretty significant underlying adjustment of cost investment into the program in FY 2025. Are there any further measurable targets in terms of TTV productivity or cost efficiency you do have going forward that we can?
Yeah, absolutely. We absolutely do. I think we see this as very much a long-term transformational project. It's not just a one-year thing. What we're expecting is obviously we're a growth business. For both brands, you've got to remember productive ops is for both brands globally, to keep putting more volume into the top of the business, to keep growing organic and retaining customers, winning new customers, therefore growing transaction numbers, but very much seeing incremental cumulative productivity gains year- on- year for the next few years. We certainly don't feel we're anywhere near the end of the game here. We've got a lot more opportunity to grow productivity every year, and we expect to see productivity growth again this year.
Excellent. Thanks, guys.
Your next question comes from John O'Shea from Ord Minnett. Please go ahead with your question.
Thanks, guys. I think my question's already been answered. I was going to ask about the supplier side on the overrides, et cetera, but I'm a bit far off the mark and getting into the queue. I'll pass and leave it to the next person. Thank you.
Thanks, mate.
Thanks, John.
Our next question comes from Sam Seow from Citi. Please go ahead with your question.
Morning all. Thanks for taking the question. Hey, just starting on the fourth quarter, you mentioned the first nine months in PBT was ahead, and then the year obviously at a down 10%. It just kind of implies that that fourth quarter might have been down maybe even 40%. Could you maybe unpack what the underlying business did excluding Asia? As we think about the second or FY 2026, does that full $30 million reverse or because it's a bad debt, you know that that earnings are lost forever? Thanks.
Yeah. Sam, it's Adam. Let me just sort of start maybe with quarter four. Certainly Asia did have an impact in quarter four. We did increase levels of provisions and the costs that were occurring to rectify the issues that we were seeing over there. Without a doubt, that Asia impact was weighted towards that fourth quarter.
Outside of that though, as we did highlight, TTV was impacted across both corporate and leisure generally in that fourth quarter. That had the flow and impact in terms of normal transaction fees, etc., given the volumes were down in corporate, but also significantly with overrides coming through as well. There was not just, as you say, Asia, there was broad significant softening that we saw particularly late in that quarter that had the impact flowing through. In terms of Asia into FY 2026, I'll get Chris to talk to that a little bit, but certainly my perspective would be we won't see a return to FY 2024 profitability in the current financial year, but we should be seeing that business get to a small, a moderate profit once again. Chris, is that aligned with your views on it?
Yeah, I think so. I think, look, the business is in a much better state. It really was a bit of a distraction, frankly, the changes we had. We're back to normal operations now, and we're back to what we were doing previously, which is getting back to growing. I think that there's still more productivity gains to come out of Asia. I think probably being conservative, as Adam has been to say, we're not expecting to get back to previous year profits, but certainly back to profitability this year.
Got it. And then just maybe a question on the first half of 2026. Corporate travel is basically over half your corporate segment's revenue, and it started the year kind of growing 20%, which should theoretically be a good base for your first half of 2026. I just want to understand where the cautiousness in the first half guide is. Is it downtrading in FCM, or do you think leisure is expected to climb, or maybe it's just seeming overly conservative? Just trying to unpack that cautiousness in the guide. Thanks.
Just to be clear, that 20% number you quoted is actually CT USA, so it wasn't CT overall.
Sure. That's half your corporate segment revenue though, is it not?
Corporate Traveler, yeah, is a bit over half the revenue for the segment, but the 20% you're referencing, Sam, is USA growth. It's not Corporate Traveler.
CT USA.
CT USA.
One.
Okay. Okay. So it's not that Corporate Traveler is not growing at that level globally. That's CT USA, which is obviously the big market.
I mean, having said that, I think that, you know, if things do carry on as they are, we had a reasonably good July. We do expect things to carry on improving. I mean, the macro stuff, which did hit us in Q4, and I think when we talk about Asia and corporate, that was the big impact, but there was also just a general downtrading across customers. Our customers are actually telling us now that they're more optimistic and expect travel spend to increase this year. As long as that carries on, we don't have any other big shocks, macro shocks. You know, potentially we could have a stronger first half than we're probably signaling now. I think we've got used to expecting the unexpected in the last six or nine months. We're probably cautiously optimistic, I would say.
Got it. Got it. Hey, and then just one more question on overrides. In the fourth quarter, did you actually, I mean, I appreciate you didn't earn that in your overrides, but did you write anything back in the fourth quarter from the full year? And then secondly, as we think about NDC, you mentioned that can boost your margins. Obviously, Qantas NDC went live last month, so I guess the full FY 2026 should be entirely incremental to FY 2025. Just maybe if you could step through that opportunity from the Qantas NDC going live, and yeah, if there was actually any right backs in the fourth quarter.
Yeah. Sam, I'll start. Adam here. I'll start. We didn't have any right backs per se or significant true-ups or any of that sort of stuff that we saw there.
We accrue for those on a monthly basis, and we track where we're going and how we're going with it based on volume that we're seeing in that month and usually at a reasonably conservative turn rate. We didn't need to do significant right backs if you like correcting for earlier in the year or anything like that. It was really just off the actual volumes that we were seeing come through in the quarter. Greg, did you want to talk to NDC?
Yeah, Sam. Just, yeah, obviously we went live with quite a few carriers over FY 2025. We've actually been selling Qantas NDC or QUP as they call it, probably since mid-2023. We've had it in market, but definitely accelerated on the 1st of July. You know, penetration rates are looking pretty good at the moment. We're sitting at roughly around sort of mid-30% in terms of adoption.
That varies when you look at the size of the addressable market, particularly with different proprietary corporate OBTs and ones that don't sit in our space. You know, quite encouraged with how that's going. Qantas is probably up there as our second carrier now, just behind Singapore Airlines, which is our number one carrier in terms of adoption with NDC. We're really looking forward to the next 12 months, particularly over FY 2026, just to see those rates grow. It does open some really good opportunities for us with unique content and just how do we get better pricing to customers, which flows into customer acquisitions.
Okay, thanks for the color, guys. Appreciate it.
Your next question comes from Damen Kloeckner from CLSA. Please go ahead with your question.
Good morning, guys. Thanks for taking the question. Just following up from what Sam just asked, how much of the $30 million Asia headwind is related specifically to the invoicing customer downtrading? Should we assume that the full amount just from that particular headwind is recovered in FY 2026?
Yeah, I mean, almost all of it is related to customer downtrading and the invoicing issue. I think that we should expect in this year the invoicing issue to have gone. The downtrading in Asia is still in effect. It depends how that comes back, really. The invoicing issue has been rectified, and we shouldn't expect a repeat of that this year.
I'm sorry, how much of the $30 million was specifically invoicing versus customer downtrading? That's more what I'm getting at.
It's Adam here. There was the invoicing issue, a couple of elements to it, if I can just unpack that. One is the provisioning that needed to come out of that, but we also needed to have the additional costs that we're investing in actually rectifying the issues over there as well. Of that, we had just under $10 million of provisioning, and we also had fairly reasonably significant costs incurred in the rectification. If you're looking to see what you'd specifically extract from FY 2026, if you like, to do with that, I would work on a number of around about a $15 million - $20 million impact in total from it, with the remaining element really being the downtrading component.
Okay. Thank you. That's helpful. With regards to the GBS cost base, obviously targeting reductions there, how should we think about what proportion of that cost base you are reviewing or targeting into FY 2026, or is there any other way that we could think about the quantum of reductions now?
Yeah, look, there's a couple of components to what we're looking at there. It really is honing in on the operating models that we've got around our technology, services, our people and culture, and our finance function, and how we support the business. In total, you're looking at a couple of thousand people in that business there supporting our front end. To be honest, doing a terrific job of doing that. What we're looking to do with it, though, is try and streamline those operations and do two things. One, create greater efficiency in the way that we operate. The other one is actually to improve those services. Ensuring that the technology that we've got for our front end is what's needed and being delivered in the way it's required, providing the people support that's needed for those businesses.
To be honest, a lot of the finance function, whether it's the backend transactional finance work or whether it's the modeling analysis that goes in to support our leaders. As we look at it, we'll give greater guidance on the opportunity there as we approach the AGM. Certainly, if you look at the cost base that we've got, we do see significant opportunity in terms of automation. We're utilizing, at the moment, a significant number of business process outsourcing providers. We're pulling those together into a smaller cohort that enables us to work with them and achieve better commercial outcomes for us, as well as better SLAs coming out of it. We're also investing, like the rest of the business, in the use of AI to enable our people to operate far more effectively and productively than they have up to this point as well.
We're not putting specific targets on that at the moment, but fair to say internally, we're working through those, and we'll be able to give some better color around those as we get to the AGM.
Just one final question very quickly. I noticed that the 2% PBT margin target only mentioned once. Has there been any change to how that's thought about internally or kind of timeline or emphasis that's being put on that? No,
Look, from my perspective, no, I think that, you know, there's a bit of a reality check that sometimes you need to take with these things. We're not near that at this point. I think, in our view, that's still a medium to longer-term goal for us. If you look at where the business has finished in FY 2025, we certainly don't expect to get there in the current financial year. Our focus, to be honest, is really on stabilizing those areas of the business, such as Asia, that we needed to, looking at productivity and efficiency opportunities that we've got, and then returning to a growth model in some of our core brands that we haven't seen that top-line growth at the levels we wanted it to. We think that all of those things are important steps towards that 2% target. It's a...
I'll maintain, again, that each of our divisions, our brand leaders, have all got a really clear understanding of what they need to contribute over the next few years for us to get there as a collective. It's certainly a longer-term, medium to longer-term target for us. As we sit here right now, I think it's one that we need to sort of almost park to the side while we start to focus more on incremental improvement in that underlying PBT margin.
Thank you. Your next question comes from Wei- Weng Chen from RBC Capital Markets. Please go ahead with your question.
Hi, guys. Just wanted to ask if there were any thoughts to kind of using this current softness in global travel to maybe make some, you know, strategic M&A moves potentially in some of the areas like luxury in which you're looking to grow?
Yeah, this is Skroo .
Yeah, look, we're generally, we prefer we're going to go organically. Certainly, in some of these specialist areas, and luxury could be one, in areas like cruising, you know, we will look at some specific M&A opportunities if they come up. The thing is that generally, we're finding that in those specialist areas, we're certainly generally doing reasonably well. They're not necessarily going to be great bargains. If it's the right quality of business, we'll certainly have a look at it. JK, what do you say?
Yeah, I think so. I mean, those categories specifically have got good tailwinds. They suit our business model, and with the right opportunity, we'll certainly take a deep look into them.
OK, thanks. Will the differential between your convertible convert price and where your share price is right now mean that ongoing liability management is probably going to be taking a back seat in 2026?
No, actually, we're going to continue with the capital management program that we've got in play. It's important for us to do that. If you look at the 28 CBs that we've got in place, there's a put on those coming up in early next year. We're going to proactively manage that. Our approach over the last few years, as you've seen, has been to really manage those as best we can. We see those as a debt instrument, a really effective debt instrument, too. We'll continue to be proactive in that space, actually.
OK, cool. Lastly, I guess a number of your listed travel peers have kind of had some run-ins with the auditors in the last 12 months. Not asking for a comment on any of that. I guess wondering at all if that's catalyzed kind of a review within your own business of your accounting treatments.
We love our auditors. They might be listening. No, look, I don't think so, to be honest. The reality is that, and you know, we won't talk about specific issues that have come up elsewhere. These things come up from time to time, there's no doubt. From our perspective and our accounting treatment, we're pretty confident. We go through a fairly thorough audit process. I can assure you, and my team can assure you, we go through a fairly thorough audit process. We're pretty confident that we've got a similar view as our audit firm on all of those areas. We don't see any sort of issues coming from that at all.
OK, that's all for me.
There are no further questions at this time. I'll now hand the call back over to Mr. Turner for closing remarks.
OK, thanks, everyone, who's still on the call. One of the things I didn't mention that I did mean to is that we started off with Topdeck Travel in 1973. It's going through a major revamp at the moment. It's worth keeping your eyes out for this. It's pretty interesting. I think that younger market, the 18s- 30s, has certainly changed a bit over the years. I think the new Topdeck model is going to cater for that very well. Thank you. Anything else, Haydn?
No, that's it, everyone. Thank you. Catch up with a lot of you, I think, over the next few days. See you soon. Thank you very much. Talk to some of you later in the day, no doubt.
That does conclude our conference for today. We thank you for participating. You may now disconnect your line.