Thank you for standing by, and welcome to the Flight Centre Travel Group Full-Year Results Conference Call. All participants are in the listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Haydn Long, Investor Relations Manager. Please go ahead.
Good morning, everyone. Thanks for joining us today for Flight Centre's Full-Year results presentation. This morning you'll hear from our CFO, Adam Campbell, who'll run you through the numbers for FY 2020. Then our corporate CEO, Chris Galanty, who's dialing in from the U.K. to tell you about the success we've continued to have in the corporate sector. Then you'll hear from Melanie Waters-Ryan, our Leisure CEO. Mel will give you an overview of the challenges we've faced in the Leisure sector and the strategy she's implementing to address them. And finally, Skroo. Skroo will also start things off with a few comments on the past year before returning at the end to share his thoughts on the outlook for the year ahead, FY 2021. I'll now hand over to Skroo.
Okay, thanks, Haydo. Well, as most of you probably know by now, it's been probably one of the most challenging years in our. Well, not one of the most, it has been by far the most. And this is going back to the Gulf War in 1991, the first one, September 11, 2001, and obviously the global recession in 2008-2009. So it's been worse than any of that, as we all know. We've had to make some really tough decisions over the last four or five months, and I think we've been very decisive and pretty effective at that. Luckily, we had a fairly strong balance sheet at the time, and with our capital raising and other debt facilities, we have a strong sense of strong liquidity at the moment.
Obviously, we don't know what's going to happen in the future because although our short-term objectives have generally been realized, we just don't understand and know exactly the time frames around government restrictions being lifted. And this is obviously not only Australia, New Zealand, but in most countries of the world. It's good to see some of the European countries starting to open up the intra-Europe, and I think a lot of the overseas countries will tend to come back a bit before we do. It's been shown clearly in Victoria that lockdowns don't work. We've seen that. We want borders to be open, not only here, but obviously in places like the States, India, South Africa, where domestic is open now, and intra-Europe is reasonably open. So we're starting to see some signs of life here.
And obviously, where we can, we're trying to have an influence on the political scene, and you will be seeing it. You've seen a fair bit of that in Australia, but this is also happening in places like New Zealand and the U.K. and other places. Just going on to our management team, we've got it there and it's a little bit. I used to be a vet, so that's quite handy now dealing with a pandemic or some of the consequences of it. Mel was a psychologist, I think. I don't know what Chris did. Adam, I'm not sure about him being an accountant. Did you do arts or accounting? I can't remember. But Steve Norris, who runs the EMEA, is quite an experienced astrophysicist, and he's been with Flight Centre for 18 years.
James Kavanagh has been the Australian MD for the last six months, and although he's Irish, he's done a great job, and as has Charlene, who runs North America. So we've got a very experienced team. Most of them come, everyone's been at Flight Centre for many years, 15 or 16 years generally, up to 32 years for Mel and more for myself. So if anyone can see us well through this, I think we've got the team to be able to do it. So perhaps, Adam, you might give a bit more detail on that.
Thanks, Skroo. Look, in line with our market update a couple of weeks ago, we're reporting an underlying loss before tax of AUD 510 million and a statutory loss of AUD 849 million. The difference between the underlying and statutory result arises due to a number of mostly non-cash items that have been outlined in both the investor presentation and financial statements, with key items being the impairment of our touring and hotel management businesses, our investment in Speed 1 one-off costs incurred to reduce our monthly operating cost base, and a provision for supplier exposure. Within the overall result, our corporate businesses have recorded an underlying profit for the year, with key clients being retained and record amounts of new business actually being won throughout these uncertain times.
While significant losses incurred in leisure were due to both its high cost base prior to the actions undertaken since March and the impact of revenue reversals for bookings made prior to March that are expected to be cancelled. Mel and Chris will talk to both leisure and corporate shortly. The first eight months of the year saw us achieve an underlying profit of around AUD 150 million and TTV growth in excess of 10% year -on- year. However, as governments acted to slow the spread of COVID during March, we saw domestic and international travel effectively come to a halt. This reduction in our TTV and revenue meant that we had to act quickly and decisively to implement a plan to reduce our operating cash outflows and extend our liquidity runway.
The first element of this was achieved by our AUD 700 million capital raise and AUD 200 million debt facility extension, with further liquidity then being achieved in July with the sale of our Melbourne head office and the partial drawdown of the U.K. government-backed debt facility. In addition to extending our available liquidity, we also set a target to reduce monthly operating cash outflows to AUD 65 million per month by July. Pleasingly, we've surpassed this target in July with a net operating outflow of AUD 53 million, or AUD 43 million after taking into account the net benefit from JobKeeper. This reduced net outflow has come about due to a significant reduction in costs as well as better-than-forecast revenues. Looking at costs, in reducing our cost base by an annualized AUD 1.9 billion, every team, every business, and every geography throughout the company has been impacted.
As you're aware, our largest cost category relates to our people, and therefore we've been faced with the need to stand down or make redundant approximately two-thirds of our workforce. In addition, we've put in place further actions in relation to employee costs, including the adoption of flexible working arrangements, initiatives to encourage taking leave, a broad recruitment freeze, and executive and board pay reductions. We've also focused on our rent costs through the closure of more than 50% of our global leisure shops and the renegotiation of lease agreements throughout the remainder of our network. And all other spend categories have also been heavily reduced, including sales and marketing. In addition, all non-essential capital expenditure has been deferred, although we continue to invest in CapEx for critical and strategically important items, which Chris and Mel will again talk to.
Overall, our incurred and expected one-off costs to achieve our reduced runway, our reduced AUD 65 million target, have been kept well below the anticipated AUD 210 million originally forecast. In terms of revenue, as noted earlier, we've also generated approximately AUD 17 million of net revenue in July. Generally, our corporate businesses, which are more weighted towards domestic and regional travel and which include government and essential service clients, have contributed the majority of this revenue. We've included a slide showing July's revenue in each of the countries that we operate in compared to the same month last year for both corporate and leisure, just to highlight what we are seeing over the last month or so. And finally, I'd like to acknowledge the various support packages that governments throughout the world have put in place during these extraordinary times.
For the period March to June 2020, we've recognized $145 million as other income in our P&L, the majority of which has a corresponding expense against it as it's paid through to stood-down or furloughed employees. The net benefit that the company recognized in the FY 2020 result was approximately $30 million, predominantly from Australia's JobKeeper program. And we expect to receive a further $30 million net benefit from JobKeeper from July to September, and under JobKeeper 2.0, approximately $40 to $50 million in total between October and March of next year. You'll see a slide we've put in again showing the liquidity runway that we have in place at the end of July.
All of the items that I've spoken about previously really led to an extended liquidity runway with AUD 1.9 billion of cash at 31 July and just over AUD 1.1 billion liquidity after taking into account our client creditors and other net working capital balances. From a financial perspective, I'll leave it there for the time being, and I'll hand over to Chris to talk through our corporate business.
Thank you, Adam. Well, I won't go through all the numbers as Adam's already done, so instead today I'll talk really about the strategy and how we've dealt with COVID. You can see on that first slide we are a truly global business generating turnover and revenue from across the world. The slide which shows here the size of the business travel market, the market pre-COVID was circa $1.5 trillion, and Flight Centre was approaching its corporate division just under AUD 10 billion, which shows that we have less than 1% market share. This is important because we believe the market is, well, currently much smaller than pre-COVID, obviously, but we believe it will remain smaller for the foreseeable future, and therefore we have a winning strategy to grow, and that's about increasing market share.
As you can see here, we are already in 10 of the top 16 countries as a full equity presence, and you may see that increase in the near future. And we are in 100 markets represented by either equity or partners, and where we do have partners, we control many of the functions for them, the critical functions, and they follow our system. So we're one of the few five players who can consider themselves a truly global TMC. This slide is important because as the market is going to be smaller, the only position that we see that leads to success is the ability to retain customers, but more importantly, to grow, to win market share by winning customers. The next slide you can see shows our unique position in the industry. We address the market with two brands, FCM and Corporate Traveller. This is unique.
We don't approach the market with one brand because we believe customers' hierarchy of needs are different. So we use FCM to target truly global customers, and again, there are only five companies in the world that can deal with truly global customers: there's Amex, CWT, BCD, ourselves, and Egencia, and we use FCM to go after those and win those large enterprise customers, also large government accounts and regional customers. We then use our Corporate Traveller business to win the startup to medium enterprise customers by bringing a unique product offering to market, and that has been the key to our success, is having specifically designed products and brands for the different parts of the marketplace. Our reaction to COVID, we had three immediate reactions you can see on this slide. The first one was to cut costs, as Adam touched upon, and we effectively reduced our costs very quickly.
The second was to move to what we called a global structure, which we were doing anyway, but it was definitely expedited due to COVID. And this means that all of the key global corporate functions, such as marketing, product, technology, implementation, systems, solution design, are globalized under myself as CEO, while retaining the customer experience managed locally by our regional managing director, who you saw on the slide earlier. All of whom have extensive corporate experience. And this is what our customers tell us is important, is they obviously appreciate the global capability, but they like the local decision-making as well. And we made sure that we kept critical activity going because many of our customers did travel throughout, and the others who didn't certainly wanted their programs reassessed. So we made sure critical activity carried on, including critically product research and development.
You can see on the next slide, so our position for recovery, the first thing is investing in customers. We were very clear that if we were to grow to win, if we were to win market share and come out of this remaining as a winning business, that we needed to invest in things like implementation. So we did not, unlike many of our competitors, stop implementing. We've carried on implementing throughout, and on the next slide, I'll show you the details of that. We also made sure we carried on investing in account management to really understand how our customers' hierarchy of needs is changing and doing lots of informal and, more importantly, formal customer research. And we also made the decision to redefine our suppliers as customers, so we are essentially a double-sided platform serving both the traveller and the supplier.
When we get the products and our platforms absolutely right for both, that's when our business model really flies. We carried on investing in technology. We kept the critical products going, such as data, duty of care, analytics. It was very important we kept those going because that's what our customers needed. More than that, we made the acquisition of WhereTo a few months ago, which has really enabled us to bring state-of-the-art market-leading technology and booking fully owned into the group, which we're very excited about. We'll be using as part of our product launches later this year. It will give us, for both FCM but particularly Corporate Traveller, some state-of-the-art technology that we can really use to win customers and retain our existing ones.
Working with TPConnects also to bring in the latest and widest choice of content, particularly on the air side. We made sure as well that we carried on investing in productivity using a lot of robotics, machine learning to make sure that we can really improve the productivity. We do have fewer staff working for us now, and we want to make sure that as we come back, that we are a much more productive business, and this investment will enable us to automate a lot of the functions in the business. So this slide shows really what Grow to Win is about. These are the numbers behind the strategy. In the first two months of the year, this is FCM alone, so this is our contracted business. It does not include the business we're winning in Corporate Traveller.
In FCM, we've won in the first two months of the year AUD 390 million of new business. You can see some of the customers below, and this is by far the largest number that we've ever won in these first two months of the year. We're currently implementing AUD 835 million. A few months ago, we got to the point where we were implementing AUD 500 million, so this is a great number, and these are customers who are, we've designed their solutions, we're implementing them. They're not yet showing in our numbers, but they will do in the coming weeks and months, and then we have a hot pipeline, which are typically customers who will be making a decision we estimate in the next 90 days or so.
And this is where we're down, the reason it's a hot pipeline, this is where we're down to the last two, and we believe we have a very good chance of winning the business. So this is what Grow to Win's all about. It's about not just cutting costs and waiting for the market to recover. It's about going out there, winning new business, implementing the business, and getting it trading. And importantly, obviously, we have a retention rate in FCM of over 97%, which means it is a growth strategy. So the next slide really touches on what makes FCM unique. And really, in summary, FCM is unique because the way we address the market is to have a flexible offering.
We have fantastic in-house proprietary technology, but our systems also enable us to work with customers who have a preferred vendor, whether it's Concur in the States or whether it's Cytric in Asia or Europe or Serko in Australia and New Zealand. We can blend the customer's choice of technology with our own, and that's very different from our competitors. So yes, we will be bringing WhereTo into the play with FCM, and we've got a very exciting product launch later this year, but we will always work with our close partners as well to give the customers the experience they want. The global nature, which I've touched on earlier, and really we've positioned FCM as the alternative TMC. So we are one of only five companies in the world that can deal with global customers, truly global customers, and we are the alternative.
We are the new kids on the block, and we're the ones who are winning the most organic market share. Now, the final slide is Corporate Traveller. So Corporate Traveller, which is our startup to medium enterprise business, what makes it unique, and we're very excited about this, is we are in a unique position in the market for SME. So on the one hand, you have the tech disruptors who've entered the market, typically in parts of Europe, North America, and China, who have brought new digital platforms to the marketplace. Well, we've done exactly the same.
So we'll be launching a new platform later this year, well, actually going to it in the next few weeks in the North America market, but then globally later this year, which is a combination of our own proprietary technology and our new proprietary technology with WhereTo, which really will give customers the best digital platform experience in the industry. But we also combine that with our people and what it is that our customers love about the dedicated account management, the dedicated approach to SME travel. So we find ourselves in the great position of having both disruptive technology and great people, which is completely unique in the marketplace. So in summary, that's our approach: to use the two brands to win market share, to yes, maintain costs, but to make sure our winning position is based on growth. And with that, I'll hand over to Mel.
Thanks, Chris, and good morning, everyone. I'm in this digital roadshow for the first time I've ever done one. First of all, I'm actually going to start with a couple of results for our leisure business last year, which was very heavily impacted in the last four months by this crisis. Our leisure results for the year 19/20 finished at around just over AUD 8 billion in turnover and an underlying loss in excess of AUD 500 million. The magnitude of this loss was driven by a few factors. A high-leisure cost base circa about AUD 145 million per month pre the crisis. This has since been reduced by over 70%. The sudden drop to essentially a no-revenue environment in those last few months of the year.
A reversal in revenue of circa around AUD 200 million, which Adam has already alluded to, due to practically the complete cancellation of nearly all bookings that we already had in place. And also, a migration period to hibernation, as consultants were and still are required due to the high refund volume we're processing, and the lease exit negotiation process does take time. So all in all, you could define it as not a good year, and as horribilis, I think, might have been used previously once before. The pack addresses the one-off impairments, so I'm not going to actually talk to those. You can also see from the TTV split on this side, our leisure business is also heavily geared to sales in Australia and New Zealand, representing two-thirds of our leisure sales.
These two countries have essentially ceased all international travel, and we've been subject to ongoing domestic border closures in Australia, causing very limited demand. Before outlining, though, our leisure strategies moving forward, I'd also just like to remind everyone on the next slide that leisure pre the crisis was already in a transformation process. In Australia and the Americas, we had targeted and planned for a reduction over some years, in fact, about three years, a reduction of our shop consultant networks, further brand rationalization, and operational and technology changes, which we had called Speed 1. Effectively, this three-year plan was condensed and executed over the last three months and spread globally. Our forward strategies and plans then revolved around what we called Speed 2, which was pivoting and rebalancing our models in line with market and customer trends and better economics.
In June, we, in fact, revisited all the prior research and planning that we'd done in the transformation process pre-COVID to validate and refine these strategies in a world of leisure travel expectations and projections and what might be the new normal or what people think might be the new normal. The next slide is, by the way, a summary, as per Chris's summary, of the immediate actions we took in leisure in response to the crisis. Of course, there was a major cost control approach across the key categories of property, people, technology, and marketing, and ongoing management of the enormous volumes of refunds as well, which is still in play, although suffice it to say we have now got that under control now and are refunding our customers either partially or in full within five days of receiving funds from the supplier.
We also set up a globalized nerve center and node structure focused on global speedy and consistent actions and communication to particularly our customers and our people, both those still with us and those stood down. As this crisis lengthens, though, we're also reviewing further cost structures to minimize ongoing losses while leisure travel is still severely restricted, ensuring our long-term cash runway but maintaining our assets so we can recover and grow in the future. The next slide's a quick snapshot of the retained brands and models in leisure globally, albeit a much smaller network than what we had. This retained but very reduced footprint of models and brands still ensures we have the required diversity to grow as travel recovers and returns with the appropriate brands and models to gain market share even in a smaller total available market.
You'll see a lot of the models have been consolidated actually under the Flight Centre brand, which is our leading brand in leisure. The next slide's a very high-level summary of the previous and once again reconfirmed choices to win in leisure travel. Firstly, the rejuvenation of the Flight Centre brand, both from a brand customer perspective and operating models, including e-commerce, a leading network of non-organic or B2B travel operators, and we also have a winning choice to become a premium divisional brand famous for seven-star service to frequent and discerning travelers. All these choices have been underpinned by a shared and core capability of customer insights, deep customer insights and understanding, product design, technology, and efficient support structures.
Specifically, with reference to the Flight Centre brand strategy, we intend to maintain and grow our number one market share position in Australia, New Zealand, and South Africa, while targeting more specialist segments in the U.S. and Canada with Flight Centre. Flight Centre brand is also rapidly being modernized and digitized to broaden its appeal, particularly to a younger audience, which even pre-crisis we knew we needed to attract. Flight Centre brand will also be known for more than just low airfares, and we are already actively promoting a suite of irresistible deals, if only we could go. With a much reduced shop network, we're also now setting up our call or sale centre centralized model using the Ignite template of the business that we fully purchased late last year. We were pre-COVID seeing excellent growth in e-commerce for Flight Centre brand as well.
I think you might remember in Australia it had been growing at greater than 40% per month and was on target to achieve AUD 500 million in TTV. During hibernation, we're accelerating our digital transformation for Flight Centre brand and expanding our offering beyond flights online to packages, club membership, and bringing the world onto a consistent product suite. Our assets are being further enhanced and social greatly expanded. When borders did momentarily start to open up in Australia, we saw an immediate growth in this channel for FCB, and digital and e-commerce will be critical for Flight Centre brand and its customers and will grow as a percentage of overall volume moving forward. Other digital players, BYO, our low-cost, low-price OTA, and Student Universe, our student and youth-focused OTA, were also doing well pre-COVID.
Again, we're maintaining investment here in hibernation to ensure we can win in these segments as travel recovers. Student Universe is currently actually around 35% pre-COVID volume, and with the unfortunate situation for STA, well poised to become the major global brand for student travel moving forward. B2B acquisitions we have made recently and start-ups over the last few years for FCTG were also again good in terms of positioning us to gain market share in the B2B segment as travel recovers. Our strong brand, technology currently being implemented, and our culture of entrepreneurialism position the group to be distinctive and offer a compelling proposition for independent agents and agencies. Our premium leisure business of Travel Associates, and we also have a small brand in Canada called Laurier du Vallon, which operates in the premium sector, again was a winning brand and model prior to COVID.
Frequent and discerning travelers like youth, we believe, will be the first to return to travel, and already in this segment, we're seeing large booking values even with only domestic options available. Many of our retained agents also have quite long experience and a solid customer base as such travelers and are well suited to expand this model. We'll also be ensuring we market a strong employer brand to attract quality displaced agents, which we know will be available moving forward, and finally, our travel group of at-destination businesses and our global product business. Certainly, COVID has reduced our aspirations to expand in touring hotels and DMC or expand with new models, like cost models such as a licensing one for our DMC brand, Discova. The external sales these businesses also service, however, is proving beneficial for leisure recovery profiles, and costs have been severely reduced to minimize cash outflows.
As per Chris and corporate, during hibernation, we've also taken the opportunity not just with brands and network rationalization, but to also fast-track some of our key technical and digital transformation. Helio, our new product platform, which had been in play for a couple of years, has been brought forward by nine months and will be fully globally deployed by February. Our digital transformation under the Propeller Program with Atlassian has also been fast-tracked, and we now have core technical product teams working in an agile manner to ensure, as the market recovers, we have better products and platforms for our customers and our consultants. Data, integration, connected channels, automation, and efficiency will be greatly enhanced during this hibernation period. This will ensure we deploy our strategies to grow, improve our customer offerings and experience, and are more efficient and cost-effective and grow market share even in a reduced market.
So we believe in leisure, we can not only survive, but we can win over the longer term and once again create a prosperous business for the Flight Centre Travel Group. So that's probably enough for the leisure summary. Over to you, Skroo.
Okay. Thank you, Mel. That was very interesting. Well, in terms of the outlook, I'm just going to finish on the outlook. We've obviously had our response to what's happened over the last five months with this COVID-19 virus, and it's obviously been a lot on preserving cash, cutting costs, and making sure we have the liquidity with some revenue generation to last for some years because we don't know exactly what government restrictions are going to do. But certainly, as the travel does come back, and it is already coming back in certain jurisdictions, up and down in Australia and New Zealand, but in Europe it's coming back, North America's coming back quite modestly so far. We're currently in 23 countries in leisure travel, corporate travel, and obviously the touring DMCs and hotel management, which is effectively in-destination travel.
And currently, pre-COVID, we're one of the most diverse and one of the larger travel companies in the world, and we want to come back and consolidate this position as travel comes back and as the virus, I suppose, as we learn to live and governments learn to live with the virus and ease those restrictions. And continuing on that outlook, we obviously have some conditions and issues within our control, and that's our cash runway, the costs that we can have an influence of, and obviously growing our revenue as travel comes back in all manner of fields. It's obviously not the coronavirus that's the big problem here. It's government restrictions, and governments have it within their power to ease the restrictions whenever they want to. And my belief is it's probably not going to be quite as long as some of the ones we think.
You will see all over the world, every government has a different view on this. It's quite conservative in Australia but less conservative overseas. As we learn to live with this virus, and obviously there's a reasonable chance of some sort of effective vaccine around Christmas or early next year, which will certainly help travel, and almost certainly travel will start coming back to some level of normality during the calendar year 2021. In the meantime, as borders open, not just here but in the States, in North America generally, domestic is now open in South Africa. They're generally flying in India. As it comes back in Australia, which most people would predict will be in the next few months to a greater or lesser extent, domestic will be a major focus.
It's quite important for corporate travel, not quite as important in most markets for domestic travel, but where domestic travel has come back, like in New Zealand, we have exceeded our previous revenue quite quickly in terms of what actual volume of travel we do. We see there's plenty of growth opportunities as this comes back. The prediction is probably back to pre-COVID normals, probably not until 2024, but with our lower cost base now, we believe we can get to a profitable situation probably during next year, but it's very much up in the air. Corporate will probably come earlier, perhaps in the latter part of this financial year, and leisure a little bit slower, perhaps in the second half of next calendar year. So we're pretty hopeful. As I said before, we've got a very competent and very senior management team with a lot of experience.
We're in 23 countries. We're in quite a diverse range of different travel from, as I said, leisure, corporate, and the in-destination travel, and we're looking forward to, well, we're not looking forward to everything about the next six months, but certainly we believe government restrictions are generally going to start coming off, and we're starting to see some evidence of living with the virus and with a vaccine as well. We see 2021 probably as a year when recovery really starts in earnest, so thank you very much, Haydn.
Yeah, we're now happy to take 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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Michael Simotas with Jefferies. Please go ahead.
On getting the business into the shape that you have very, very quickly. I've got some questions on the liquidity position. So the first one is just that the liquidity is a little bit lower at AUD 1.1 billion relative to the AUD 1.15 billion you disclosed in July. The quantum's not very big, but I just want to understand what drove the difference just so we can get some confidence in sort of where you stand going forward on that.
Yeah. Michael, it's Adam. One of the key differences there is really whether you factor into the calculation the JobKeeper amounts or not. Obviously, the 1.1 we've got there has nothing in there for JobKeeper. So you really need to either add that on to your total liquidity or otherwise, which is probably the way we're looking at it, is include that as part of the monthly cash outflow.
The cash burner. Yep. Okay. That makes sense. All right. And then the second one on that is how confident are you in collecting on your AUD 310 million of trade receivables as well as the override debtors?
Yeah. So good question. I think there's a couple of things in that, Michael. First of all, we've been seeing good collections coming through. So my first answer is we are very comfortable with that, and there's a couple of reasons. We are seeing good collections coming through. If you break that apart a little bit, there are a couple of things in there. There's about AUD 50 million, which is government wage subsidies. So that's just obviously money that has subsequently come in, so there's no risk attached to it. There was about 60-65 million of it is refunds coming back from suppliers. So basically, it's a point in time when we put the requests into suppliers. We subsequently got that back. So again, there's no risk attached to those per se. And we also have about AUD 45 million, which relates to Ignite.
What that is, is when people pay a deposit within Ignite for one of the packages, we take up a receivable for the remaining balance and then a payable for that same amount that we're going to pay through to suppliers. So again, if that's cancelled, we'll obviously reverse that receivable, but we'll also reverse the payable. So the only amount risk there is our commission portion, which we've actually taken up and provided for all of the revenue for those Ignite balances at year-end. So again, there's no risk attached to them. Of the remaining balance, which is pretty much our corporate receivable, we've got around AUD 45 million provided for, which is far more than we would typically put in place.
We've done a fairly detailed review of that, both on a line-by-line basis across all of our geographies and also looking and extrapolating out some broader conservative estimates on top. So when you really pick it apart, I'm pretty comfortable that that is going to be collectible with what we've got there.
Okay. Great. That's really helpful. And then on the cash that you're including in that liquidity calculation, so there's a bit over AUD 1.9 billion. That includes restricted cash of AUD 88 million. How much other customer cash is sitting in the business right now? So how many bookings have you got sitting in your bank account that you actually haven't refunded yet? I presume it's more than 88?
Yeah. So our client creditors' balance is about AUD 700 million at the end of July. So that'll be sitting in there. That's the cash effectively that sits in there. And we've included that in the working capital reversal when we've done our liquidity cuts.
Okay. So you've pulled out all of the client cash?
Correct. Yeah. And again, that's pretty conservative because we don't believe by any stretch that we would get down to a zero client cash balance, but we've stripped it out of the working capital cuts.
Yep. Okay. And then just the last one, the liquidity covenant that you need to maintain AUD 350 million, how are you thinking about that? Because the client cash does contribute to that covenant testing, doesn't it? So as long as your client cash stays above AUD 350 million, you effectively don't need to put it out of the calculation, but if it falls below, you do. Is that the right way to think about it?
That's exactly right, Michael. The covenant is total cash. So as long as we've got at least that amount in client cash, it doesn't come into the liquidity calculation. So that's exactly the way to think of it.
All right. That's wonderful. Thank you.
Awesome.
Your next question comes from Grant Saligari with Credit Suisse. Please go ahead.
Good morning, and thank you. Thanks for the additional disclosure as well on the leisure and corporate profitability. I think that's very helpful. My question is just around leisure cost base as we come out, hopefully, of this period. Can you give some indication based on this restructuring work you've done what the sustainable cost base would be under normal operations for the leisure business? So perhaps relative to where it was pre-COVID, please.
Hi, Grant. It's Mel. Good question. The cost base that we've got down to currently, which, as I mentioned, was a reduction of over 70%, we can actually sustain for a period if the revenue doesn't grow. So essentially, we can move the cost base as the market kind of grows. We believe we can probably cover up to about 30ish-40% of pre-COVID revenue levels on that cost base. Then we'll obviously have to start increasing in terms of the people, etc., and locations and marketing, etc., to be able to handle more. So we're pretty comfortable that we've got a fairly good formula in place that as revenue grows, yes, we're going to have to grow cost base over that 30%, but at a slower pace.
So particularly as we pivot to those newer low-cost models, we're very comfortable that that traditional legacy cost will be contained moving forward.
That 30%-40%, that would get you to a break-even position at PBT or at cash? Could you clarify that?
I'll start. Adam and I might both comment on that. It's not 30. It's over 40% of leisure pre-revenue would be required to get to a break-even position on a PBT basis. It differs by brand, but it's around that 40%-50% depending on the geography, but we would certainly start making profits at that point. The cash is a little different because that's the PBT based on the cost base. Remember, we're still getting various JobKeeper and wage subsidies as well. So the cash burn is still lower than the actual cost base. So depending on, and as you know, it's just been extended in the Australian marketplace till March. We've had a few extensions around the globe. Adam, do you want to comment any further on that?
No. The only thing I'm not sure, I think you might have said revenue there, but from a TTV perspective, I think it's more about a 45% or thereabouts TTV perspective rather than revenue, and that Grant assumes that the revenue margin will come off a little bit over the next 12-18 months, particularly when international's not really being included in there.
Yeah. We've taken that into account because revenue margins from particularly a back-end perspective, particularly air domestically, were and are always a bit lower.
Yeah. That's helpful. That perhaps just segues into a second question, if I could. Just on slide 13, I did just want to clarify whether you were talking revenue or TTV there because I think the 7% figure in the headline seems to be revenue, but I'm not sure whether the maps don't seem to average out the 7%, so I'm wondering whether they're TTV.
Yeah. The difference is, Grant, that is actually something we probably should have highlighted there. The amounts we're talking about in the map is TTV. The 7% represents, what we're trying to differentiate is in our hibernation cost base, we're not including any incremental costs such as commission we pay to our people for the generation of TTV. So that 7% is what we're including as part of our AUD 17 million revenue is the gross revenue we've received, which is about AUD 20 million, less some incremental costs that we've paid to our people to generate that under the wage model. So we didn't want to double-dip in the cost allocation. So gross TTV is more like 10% or just over 10% of previous levels. When you factor in the costs we're paying to our people to generate that, it's around 7%.
All right. That's very helpful. I'll let someone else ask some questions. Thanks.
Thanks, Grant.
Thanks, Grant.
Your next question comes from Brian Raymond with Citi. Please go ahead.
Okay. Thanks. And again, yeah, I also appreciate the disclosure in corporate versus leisure. Given how much these things are swinging around at the moment, can you talk of where the current monthly run rate of TTV would be for corporate and leisure? Even a range, a rough range, just so we can sort of try to pick out that profile coming back in over the next at least the next 12 months as to how that might trend?
Yeah. Brian, I think maybe I'll get Mel to talk to leisure, and then Chris might be asleep over in the U.K. at the moment. We might wake him up and get him to talk to corporate levels. But Mel, did you want to talk first?
Yeah. Brian, it's a good question. If I had a crystal ball, it would be interesting. As I said, we were buoyed a little bit when they announced some of the border openings in July, particularly in Australia. We started to see some demand increases and certainly things like our e-comm sales lifted. And then, of course, in the last week or so. Interestingly enough, it's a really mixed bag. So funnily enough, America is leading the charge at the moment for volume of leisure turnover in relation to pre-COVID levels. And there's a fair bit of groups long-range activity there. And then, as I said, I think I mentioned on the actual when we went through the PowerPoint, our e-comm businesses, particularly SU, is about 30%-35% again. So it's hard to give you a standard because it's differing by countries and differing by market segment, basically.
So we've got very, very conservative TTV and revenue forecasts moving forward, which I believe we will actually surpass. But for purposes of our liquidity and cash runway, we decided in leisure to take a very, very conservative view. But there's no pattern, essentially. The pattern is different per country and different per domestic and, sorry, per model.
Brian, slide 13, not sure if you had a chance to have a look at it yet, but it gives you a bit of a breakdown by geography on what we're seeing in terms of recovery as a percentage of last year, and when you look at that, places like France are doing quite well. Chris might want to add a little bit more about that. Also, China's come back a little bit. China, obviously, is all domestic at the moment, and New Zealand corporate's doing pretty well. Most of the corporate businesses are sort of 15%-20% and maybe a little bit more of prior TTV. Leisure a bit less, as Mel said, with the U.S. probably being one of the better performers in leisure at the moment. Chris, are you on a telephone?
Yeah. Yes. I'm awake. Thank you. Yes. Thanks for the question, Brian. Yeah. So look, I think hello, somebody out there. What we are seeing in general is when people can travel, they immediately start to travel. We obviously had a residual amount of travel from key customers throughout, even in the darkest days of the crisis. We are correctly seeing very strong recovery in places like domestic China where things are getting. Yeah, we're back to sort of 60% levels there. France has come back very strongly. The Western markets are the strongest comeback. We've seen Canada now pick up more strongly, which is good news. So I think from a recovery perspective, I think it's very reasonable to say that once people can travel, they will travel. We're expecting to get back to all markets in corporate 20% reasonably quickly.
I think the next couple of months will be interesting because the northern hemisphere markets of USA, Canada, UK, and Europe are getting out of the summer vacation period. I think we're expecting (and this is what customers are telling us, we do a lot of customer research on this) that they're expecting travel to pick up September, October.
Actually, I might add to that too, Brian. We've been doing the same customer research in leisure, generally asking if you could travel, would you, and asking about domestic and international, and again, the pent-up demand indicators are relatively good, so again, to Chris's point, we certainly see when you can travel, people will take up that opportunity, but unfortunately, at the moment, we can't in a lot of places.
Yeah. Thank you for that, Kava. What I was trying to get at with the question was more around sort of the PBT run rate, and I appreciate that you maybe don't want to give specific numbers, but perhaps around the level like if 40%-50% of pre-COVID TTV gets you back to break-even at the group level, what would that number be for corporate versus leisure? I'd imagine corporate, given lower wage costs, etc., and more automation, would be a bit of a lower number, but can you give us a feel for that?
That was actually, sorry, that was actually the leisure number, 40-50. Corporate is lower.
Okay. Sorry.
Yeah. Sorry, Brian. So on average, we think round about that 40% mark across the group, but as Mel said, about 45% or thereabouts for leisure. But corporate should be less than that. We'd expect somewhere around that sort of 30%-35% of TTV is where we should be able to cover that cost base.
Okay. Okay. Great. And then just the other, I guess, longer-term question is, I mean, you guys obviously taking the store base down by about half, and I appreciate activity will hopefully eventually recover, and at what point might be the right timeline? I don't think any of us are appreciable on that. But just thinking about the P&L for you guys as you progress to that point when you do get back to a normalized run rate, I would expect you would struggle to get back to your TTV levels at that point given the number of stores you've moved, but your cost will also be structurally lower. In that FY24 scenario that, Skroo, you mentioned earlier, do you think where would TTV and operating cost be relative to, say, FY19? Would it be both down, the PBT maybe comes back at a reasonable level?
If you could just outline sort of the broad framework we should be thinking about it.
Yeah. I think, Brian, I mean, we certainly would expect as the market comes back, and obviously, there's a fair bit of guesswork with the 2024, we'd certainly expect our TTV to come back to pre-COVID levels by then. In leisure, obviously, we'll have a smaller footprint, but we will have different models, as Mel mentioned before, that will get us back to that level. I think it was about AUD 10 billion or AUD 11 billion in leisure.
We were doing AUD 14 billion in 2019.
14.
Skroo is right. Even though the network's greatly reduced with shops, we will have higher occupation of the shops we've got. We've started call centers and obviously e-comm, but our B2B, which is our independent space, a lot of some of our exited agents have actually already joined that network in markets like South Africa, etc., and Canada, so don't necessarily take the shop as the only indication of the size of the network.
And also, Brian, and Chris might comment on this. We would like to think that leisure would come back to pre-COVID levels in different models globally, but certainly in corporate, if anything, we feel we should be able to come back by that. That is four years away, basically. So we would like to think that it would come back at a higher level than pre-COVID. But Chris, have you got a comment on that?
Yeah. Absolutely, Skroo. No, I completely agree. I think our intention is it's difficult to predict the exact year, but we intend to grow faster than the market. So there's a lot of speculation around what size the corporate travel market will be. All we're confirming is we believe it will be smaller for the next few years, but we believe we can get back to the same levels of TTV of 2019, certainly by 2024, but optimistically before then. And that's going to be by winning and implementing new customers, not relying on our existing customers to get back to 2019 levels.
Sure. Sure. Okay. And then final one for me is just on some of this consolidation opportunity within PA travel. Could you give us a feel for what you would estimate the overall market share that's kind of exiting the market that we know today? It's hard to get to the TTV for some of those guys that are going out of business. But have we seen much of that to date, or is that something that's still to come?
Brian, Mel was just about to say something, but I thought I'd get in early and speak over the top of her. There has been some industry stuff put out in Australia from AFTA, the trade body here. I think it's a little bit hard to know. You probably haven't seen a great amount of movement yet in Australia because of things like JobKeeper. Once JobKeeper starts to wind back and eventually be removed, that might make things a bit interesting. But you've also seen companies that have been around for a long time head into administration, STA being the most recent. Thomas Cook before that was obviously pre-COVID with that one. So there's been bits and pieces already, but I think probably in places like Australia, there's more to come.
I know, yeah, we've had a lot of agents sort of knocking on our doors in some other countries. It was what Mel was just about to say.
Yeah. No, I was basically about to say what Haydn said. I mean, if you look at someone like STA, I think about two years ago, they were doing about a billion in sales globally, which was probably, I'd say, a couple of hundred million here in Australia. They've just gone. There was an independent operator in South Africa who also went about two or three weeks ago. But we immediately actually, it's an opportunity for us to pick up those agents in our IC model. So at this stage, they're the only ones that I've known of that would be in a direct kind of market competitive position to us in our leisure markets. I don't think we've heard of any in corporate as yet. But Haydn's right.
We do expect in Australia post JobKeeper, you're probably going to see some because remember, there's a lot of small agents in the market here in Australia. Chris, what about you?
I'd say in corporate, the industry yeah, Mel, was already consolidating pre-COVID. So I think the world of the independent TMC was already getting a lot more difficult. There hasn't been any noticeable demises of TMCs around the world. But again, like Australia, most geographies have some sort of job protection scheme provided by the government. So they are starting to wind up. I know the U.K. one's winding up at the end of October. So things might become clearer then. But I think the consolidation trend, which is already there, will certainly continue. And it's very reasonable to expect it to increase in the next 12 months.
Okay. Great. Thanks, guys.
Thanks, Brian.
Your next question comes from John O'Shea with.
Morning.
Morning.
Morning. Sorry. Thanks for taking my question. Look, I just wanted to clarify something you've just said then before, Mel. And I'm just finding it hard to kind of understand how this is possible. But first of all, before, did I say that you said even with a 50% lower global store footprint, you don't believe that the TTV post-virus will be lower? Is that what you said?
No, no. We definitely think the market will be lower post the virus for a period of time, and our TTV will be lower. What I was trying to say is I wouldn't draw a direct correlation between a 50% lower physical shop footprint to our TTV because of the growth in those other channels and also a higher density per location and certainly even things like a call center. So no, no. We are expecting the market to be smaller. We're certainly going to, like corporate, pursue market share growth. And even just I mentioned some of the opportunities with the consolidation that was also happening in leisure, I think will be an opportunity for us with some of these models moving forward.
Now, it's literally just, I think, moving forward, we used to use shops and consultants as a kind of a predictor of our ability to grow TTV. That's really going to fundamentally shift as a result of this.
Are you not saying you're going to get back to the 14 billion?
No, not for a period, but we certainly would like to get back there. As Skroo mentioned, if the market recovers to what it was by 2024, when we should be able to get close to something like that by that period.
Really?
John, I think what we're saying is from a market share perspective, we're not looking to reduce our market share as a result of the reduction in physical footprint. We believe that through the other markets, and as Mel said, in utilizing the footprint we've got, we should be able to retain market share. So whether that market rebounds to the same level in the same timeframe or not is out of our control a little bit.
Yep. So it's really a market retention type thing rather than an absolute level of TTV per se.
Yeah, I think that's fair enough.
Yeah.
Now, thank you for that. Just on the corporate side, and I've noticed that clearly the focus of the company is now very much corporate, given that's the first time we've got disclosure around this, so thank you for that. In light of the fact that you're quite capital constrained at the moment, how do you pursue that market share opportunity in light of the constrained nature of the business? Can you kind of walk me through how that is likely to happen or possibly happen?
Sure. So we win market share through organic customer growth. We don't do it by buying up TMCs and rolling them up under a brand because we think it's a particularly inefficient way to grow. We do make, and we have made geographic tactical acquisitions. So recently, in the last couple of years, we've bought a business in France, Switzerland, and also in California. But most of our growth comes from winning customers. And we do that through having good marketing, excellent BDMs, so salespeople, and a very efficient global solution design and implementation process. And that's still running. We haven't stopped running that. So we don't think that that is a restriction on us growing. And in many markets, we don't run a debtor book for customers either. So we don't see that as a restriction on our ability to grow market share.
We can see that right now, as we showed in the slide. In the depths of the crisis the last few months, we are winning and implementing customers all around the world, and we intend to continue to do so. I think in addition to that, we have made sure over the last six months, and we were very clear when the crisis hit, we wanted to continue to invest with limited resources. We had lower resources than we had previously. We wanted to continue to invest in improving our product offering and bringing and shipping new products to market, and we're very pleased we've been able to do that, so we don't see this as being any constraint on our ability to increase market share.
So you don't think, Chris, that obviously your very much reduced marketing spend and the fact that the business has really cut costs significantly is an impediment at all to your growth?
No, not at all.
John, bear in mind that we do still have a AUD 70 million cost base per month, and they are investing in areas that will grow the business. And corporate BDMs and implementation, as Chris was saying, is one of the areas that hasn't been cut back. Mel's online platform in leisure hasn't been cut back. So we do still have AUD 70 million a month going out in costs, so we're not that constrained.
Sure. Thanks very much, guys. That's terrific. Thank you.
Hi, John. Just making it clear too, just before you go. Yeah, we're committed to a leisure and a destination as well as a corporate play. As I said before, we are quite a diversified travel company, and we work globally. And we certainly intend to come back in leisure as well as corporate in a similar way. And it's a bit uncertain exactly what size everyone will end up in, but we'd be pretty disappointed if by 2024 we didn't have a similar TTV in leisure and hopefully a larger TTV in corporate within that period of time.
Thanks very much, Skroo.
Thanks, Matt.
Your next question comes from Mark Wade with CLSA. Please go ahead.
Thank you, and good morning, team. The question was just trying to understand more around the longer-term relevance of travel agents to both your suppliers and the travelers. I can imagine in this period, on one hand, costs have been cut pretty hard from your customers' budgets. The suppliers are probably keen to try and regain market share pretty quickly as well. So putting all that kind of together, what do you think will be the relevance to the travel agents like yourselves in the future?
Skroo and I'll probably both have something to say on that one.
Mark, look, I think the thing Chris has talked a lot about managed travel. And I know just in Australia, for example, only about half the corporate travel at the moment is actually managed. But there are major benefits for managing travel in corporate. Obviously, savings and efficiencies are quite enormous there. And I suspect you're more talking about leisure. And I think one of the things that is interesting about leisure, that with this COVID-19 virus, what we're seeing is that people want advice on traveling, how to travel, what hotels are more COVID-safe, and what airlines to fly on. Now, obviously, there's not a lot of flying at the moment, but what we're seeing is that people do want advice, particularly in the leisure field, but also obviously corporate.
We're pretty confident that if anything, and obviously, Mel talked about pivoting the models to a certain extent, doing some more online call center as well as having our traditional bricks and mortar in leisure, but we're pretty confident that this market will come back pretty well and that people will want to talk to people, even though there might be a degree of automation in some of it. And from a supply point of view, it's also one of, it's also going to be very important for suppliers as they come back that we can, they want a distribution. They want a sales body like ours that can give them volume of supply. And so I think generally they'll be prepared to pay for it. We're expecting at least as good a margin, if not better margin in some areas. Some areas it might be lesser margin.
But I think we're reasonably confident that that's not, of all the issues we've got, that's not going to be one.
I'll add to that a bit too, Mark. We've been doing a lot of research and ongoing keeping up with what trends are expected to accelerate and so on and so forth. Certainly, there's no doubt that this crisis has accelerated greatly the digitization in terms of the global marketplace and travel. But to Skroo's point, I think there's also coming out a trend for a caring factor and an expert factor that people need to be helped navigate. I think what we have a really winning capability is to blend the element of self-service, doing it yourself, plus with that human caring expertise when you require it. Hence, I actually think we've got quite, funnily enough, I was reading something recently. The assets we've got put together actually enable us, I think, to provide everything that the consumer would want given their get-to-choose.
So again, yes, the travel agent's role we see is there, but it could be personal services, not necessarily delivered one-on-one by an agent sitting in a shop. That's certainly, and when we were trying Zoom meetings, all sorts of things or Zoom connections with customers. My point is, I think the expertise and care of having personal services available will actually be very attractive in a very unknown and confusing marketplace.
And Mark, from a corporate perspective, just to add, it's not just about making bookings. What we do as a business is we provide customers with duty of care, with approval systems. So we had an issue in the industry prior to COVID around leakage. So companies would sign us up as their TMC, and they'd direct their employees to use us to book travel. But there was a tolerance for leakage. If people wanted to go and do their own thing, there was a tolerance for it, and they could still claim reimbursement of expenses. What we're hearing from customers now is there is zero tolerance towards leakage. They want business to go through us. They need to know exactly where their staff are, where they've been, who they've met, where they've traveled to, the ability to check in via an app so they know where they are.
So I think, if anything, our role is going to improve and increase. And I think from the supply chain, they are very, very keen to reach those very hard-to-reach customers, which are the SME business travelers. So I think, if anything, our role is going to improve, and that's what customers are telling us. And that's certainly the conversations we're having with our supply customers as well as our travel customers today.
John, I'll add one final thing. Chris and I have sat with Skroo and everyone talking to a lot of our major suppliers, obviously, right throughout this crisis. Don't forget that a lot of them have had to cut back their staff as well. They actually, in some instances or many instances, see the ancillary service we can provide in terms of helping to navigate customers through their products. They don't intend to bring some of those people back, and we can help them do that. Yeah, I think the right combination will actually be a pretty winning formula for suppliers' and customers.
That was very comprehensive. Thank you. I look, I agree. I think the future's going to be relevant as any for your company. I think you're well positioned to moving on to the profitability of corporate. I mean, it's more than double what it was in leisure in FY19. And kind of the hints we're getting from the business or the steer was that it was about the same between corporate and leisure. So what's with that? I mean, was something restated, or is this always a real hidden gem within the business, the corporate profitability, and now you've only unleashed it today?
Yeah, Mark, it's probably a little bit of the latter. The reality is, when you look at last year, leisure result was well down on where it had been in previous years. So last year was not a good year. So the FY19 year was not a good year for the leisure business. So typically, we would have seen about 50% of profit coming from leisure and 50% from corporate. Certainly, FY19, corporate had a very good year, and I think it's very cool, particularly in North America. We had a very good year in corporate, and leisure wasn't performing well that year. So it was probably a bit more of a distortion given the year that we're in at that point in time.
Okay. And you think you'll maintain that new segment reporting?
Yes. We'll certainly maintain the reporting. I think it's certainly the feedback today. I think we've. Well, there's two elements. One is I think it's important for you all to understand it. The other thing is we did make a structural change at the start of January where Mel moved into her role of CEO of Leisure, and Chris moved into his role of CEO of Corporate. So we're actually running the business, the two businesses separately and as individual businesses now that previously we weren't doing. We were running them as individual businesses but within each geography.
Okay. Thanks, guys. All the best. I mean, obviously, it's a really tough year, but all the best for the future. Thank you.
Thank you.
Your next question comes from Ross Curran with Macquarie. Please go ahead.
Hi, team. Just two quick questions. The first is on working capital liabilities. I'm sitting at AUD 728 million. I think that's disclosed on slide in front of you. 728. That's on slide 15. The rundown from 29th of February at AUD 792 million. How should we expect that liability balance to run off from here? Should that run off fairly quickly from now, or is it fairly stable at this level?
I think it's fairly stable. I think you'll see a bit more of a run-off from it. It will continue to decrease. There's no doubt about that. But certainly, we're not expecting that to completely run off in the next three or four months, for example. We think it'll be relatively stable.
And then my second question was just around your comments in the outlook statement that you can break even at 40% of TTV. How should we think about the recovery to normal? Is it likely to run at very low, teen sort of levels of TTV and then pop immediately back to 80%-90%, or do you expect to be a more gradual recovery? What have you seen in previous pandemics that you've experienced? How quickly do things recover to normal?
I think Skroo was here for the Spanish flu in 1919, but.
Look, and Ross, I've been through various crises we've had, particularly if you look back over SARS or whatever, they were just nothing in comparison to the magnitude of the impact here. I mean, what we've always seen in any crisis is a very rapid recovery of demand. But this is very different, as Skroo said, because most of those were not severely impinged by the actual shutdown of borders. So to be honest, it's not just if it was just the consumer side of things or to Chris's point, corporate stability, sorry, sentiment to travel, but never have we seen the actual shutting down of the, "You can't travel. You cannot do anything in Australia at the moment in terms of international without the government approving it.
I'm not sure if Skroo agrees with me, but I think it's likely to be a fairly gradual thing, Ross. You get more countries opening up bubbles or corridors, some domestic restrictions being lifted, and that tends to help. So I think Chris mentioned earlier, you tend to see a bit of an uplift immediately when that happens. But I think unless there's a magic vaccine, borders aren't just going to all open at once. So as restrictions are eased gradually throughout the world, TTV starts to pick up.
One thing that we can do is chase the market. We can quickly market in leisure what is open, what isn't open, and we certainly do seem to get the responses. People do want to have holidays and do want to travel, but yeah, to Haydn's point, I think we're not expecting a miraculous 1 November. Everything comes back.
Ross, this is just my opinion, but I think you'll see over the next between now and Christmas, one presumes the domestic borders will be reasonably open by then. So you'll see a reasonable comeback of domestic, not only in Australia, of course. Intra-Europe's coming back now. By November, December, you'll probably see North America reasonably open. The States and Canada are both reasonably open for flights. It's just that there's still some infection around, particularly in the States. But it'll really probably to open up in a much quicker and in a fuller way, it'll probably need some sort of vaccine, which is possible around Christmas and the first few months of next year.
So that, like previous things, the yellow fever and that, where you do need to be vaccinated, the likely, if you believe what you read and what the studies are, the vaccines will probably be not 100% effective, but it will mean that they'll be effective enough that generally, I think, borders will open up for those who are vaccinated. And obviously, people who want to travel will have to be vaccinated. And I think the recovery could be quite reasonably quick under that. And that's why I think you'll see, well, Alan Joyce was saying the international by July will open up, start opening up seriously in July. But I think, and obviously, Qantas is banking on the domestic coming back well before that. But that's probably a reasonable assessment, I think.
Can I sneak in with one more? Just as we get to the end of the northern hemisphere summer, is there any risk of big customer refund claims coming through or anything like that from people who've had to cancel their summer holidays that we don't know about just yet?
No. Look, I think you'll see in that, yeah, and this is not only here, but particularly in leisure, there's not a lot of bookings happening. And so most of it's refunding old money. I don't think anything's going to change dramatically. There's not a lot of bookings into the next summer. And I don't think people will book until the borders are clearly open. Do you agree with that?
Yeah. Yeah. That's exactly right. Ross, we've taken a fairly conservative view of the world at 30 June when we pulled this together. So any of those bookings that we thought were at risk over in the UK, for example, we've actually taken up a provision for that if we believe there's an issue with those refunds. So we're not expecting anything.
Thank you.
Your next question comes from Wei-Weng Chen with J.P. Morgan. Please go ahead.
Hi guys. Thanks for taking my questions. Just a couple on my own. Just a very quick one off the bat. I appreciate the comments about leisure needing to recover to about 45% of TTV for profitability. What's the number for corporate?
It's around about 30%-35%.
30 to 35, was it?
Yeah.
Thanks. All right. Cool. And then another just very quick one. Corporate travel, you said, was 25% of TTV from essential services. Just wanted to clarify if that was current trading or historical 2019?
That's historical.
Okay.
So yeah, of our client base, Chris is probably the best placed person to answer, but we've got a really diverse client base. And when you look at the sectors, I think the biggest that we have is about 10 or 11%. But there's a lot that are sort of between, say, 4% and 10%. So when you add government, mining, health, pharma, you get to about it's around the 25%-26% mark. So some of the other TMCs will be much more heavily weighted towards government, which will obviously help them in the current climate. Our book. Chris and I were talking about this last night. Our book's pretty diverse, which is normally a strength. At a time like this, you'd probably like to be a little bit more government-weighted because things like health services continue to travel and have generally continued to travel throughout. Chris? Yeah.
I think that's right, Haydn. I think we've always seen it, and we still do see it in the medium to long term. There's a great strength that we are heavily diversified for all sectors. What we will be doing and are already doing is focusing our sales force, our marketing, and our product towards key services though because we believe we've got a big opportunity to win market share there, and I think you've seen the slide already. For the first time, we've won big government accounts in the U.K., and I think that will grow over the next couple of years. We've got the Foreign and Commonwealth Office coming on board first, and that's being implemented in the next few weeks, so there's an opportunity for us to focus more on those key services.
That's clearly where the recovery is going to be strongest in the next 12 months or so.
Okay. Great. And I guess that leads into my next question. I guess a number of your peers have reported results today, so you can make a couple of comparisons. I'm wondering if you could speak to the activity differentials between you and, say, CPD, where I guess their fourth-quarter activity was 55% in Europe, 32% in North America, and Flight Centre appeared to be at 9%. Is that just down to the essential services sort of comment?
Yeah. Sorry, Wei-Weng. I spoke to Charlene in the U.S. overnight. Some of that, if you look at CTM's result in America, it'll be different geographies and different sectors. They'll have a fair bit of mining through some of their businesses, which would have continued to travel. So it'll largely be the weighting. And bear in mind that what we're talking about there is a July number. It's probably not too far off the fourth quarter. But if you're comparing fourth quarter to July, there might be some subtle differences, but probably not material. Chris is probably a better place to talk definitely about the U.K. and probably better to talk about the Americas as well in addition to what I just said. Yeah. I think that's right. I think our assumption on seeing those numbers are it's sectors. So we are, again, a much more diversified business.
So we have some sectors which really aren't traveling very much at all. But a lot of the conversations we've had with them, different sectors are going to pick up at different speeds. So I think that does explain it. As a vastly more diversified business, we have some sectors virtually have not been traveling really at all in July. And we are already seeing some of that pick up in recent weeks, and we expect more of that to pick up September onwards.
Yeah.
All right. Awesome.
Our corporate businesses, I think, did AUD 2.1 billion in the second half, which is a fair bit more than a lot of the competitors did. So we're quite at our rhythm in dollar terms in a lot of those geographies that you're talking about.
All right. Cool. Thanks. And then just on to leisure, just wondering about rental agreements that have been renegotiated. Can you guys maybe speak to sort of the level of reductions that you guys have received on average? And then how should we think about the roll-off of these reductions? Will there be make-whole or sort of periods where you guys need to pay overs to make up for this current period of this downturn?
Look, I've had a bit to do with this in the different jurisdictions. And generally, we were going for well, generally, our outcomes were shops or locations that we were closing getting at least a 50% reduction of the one-off payment we did to get out of the lease. And I think generally, we averaged about 55% reduction on those. The locations we were keeping, generally, we came out with about a 25%-30% decrease. And sometimes we did have to extend the lease, but we generally tried to keep it at a three-year agreement simply because that's really when we needed the timing. We believe that that's the time we need the rent relief, and we would be happy to renegotiate after the three years when it comes up again. So that gives you the sort of thing.
Bear in mind, even just in Australia, I think we had something like 270 just with the shop closures. We had 270 different landlords. So it's been quite a process, and there's still a few to go. But generally, I think we've been reasonably happy with the outcomes here and overseas, Wei-Weng.
Yeah. Wei-Weng Chen is also coming. We didn't go for a kind of a reduction now with a payback later. We went for retained leases. It was more an ongoing cost reduction so that we knew what our cost base would be moving forward. So to your question about it, is it deferred? No. We've just gone for either closures of the lease or exit costs and then reductions moving forward over the period of the lease we agreed to.
Okay. That's very helpful. And then just last one. Just appreciate you guys are expecting to recapture TTV of the closed stores. But kind of ignoring that for a second, how much did the stores that you are closing contribute to FY 2019 profitability?
Well, it's actually an impossible question to answer because just so you know, we've actually, and I'll use Australia where obviously the network was the most extensive, but we applied a similar filter with South Africa and New Zealand where we had a bigger physical footprint. So we've still tried to ensure there was proximity and access in our new network. So our view is that, and we've moved the entirety of those customers' databases into the shop that was going to house them moving forward. So there was a very thorough process of communication and moving so that, if you like, each shop that was closed was given a, I'll just call it a babysitter, who would then pick up those customers.
So we think we can retain a lot of those customers. What was the other part of that?
So a lot of those shops, bear in mind, they were shops that were earmarked for closure over the next couple of years. So if 40% in Australia, it wouldn't have been 40% of TTV.
No, it wasn't. I'm sorry. Yeah.
It wouldn't have been like that of profitability.
All the transformation work we've done previously, we have been doing a huge amount of analysis and network planning on making sure we were located from an access perspective, and to Haydn's point, it certainly wouldn't have been anything like 40%. These were shops that probably had had the greatest decline, if you like, over a period, so no, it won't be anything like that.
Okay. Thanks so much.
Thank you.
Once again, if you have a question, please press star one on your telephone and wait for your name to be announced.
Okay. Do it.
The next question comes from Aryan Norozi with UBS. Please go ahead.
Hi . Hope you're well. Just a quick one for me, please. Just further that store closure comment. So can you give us an idea, please, around what portion of the closed stores are overlapping with other stores? So co-located? Because I do have a few stores within a small sort of proximity.
Look, I can't give you the exact numbers, but as you will realize, when we closed brands like Universal Traveller, but Escape Travel a few years ago, we had a lot of overlapping in shopping centers. In some shopping centers, we had three or four stores. So there's a reasonable amount of overlapping. There'll still be some shopping centers that still have a couple of stores because some of these are so big. But there's a lot of overlapping. I think with the footprint we have with all the brands of about 510 locations at the moment in Australia, for example, and it's a similar situation in New Zealand, South Africa, we'll have a pretty good catchment of—and I think as Mel said before. So yeah, there was a reasonable number of these were overlapping.
If you look at major country towns, obviously, we're trying to keep at least one location in the major country towns, depending on how big they are as well.
Remember, a lot of our inquiry was driven by e-commerce as an email inquiry, not just transacting and phones. So we've mapped out really where inquiry was coming from, existing. As I said, there were about nine different criteria that were judged. So the network that we have remaining is more than adequate coverage in terms of, as I said, that access from a visibility perspective. But certainly, we've seen over time things like e-inquiry, we're calling them e-customers, and phones were, again, we were just routing them based on they just want to have someone who knows what's, who can answer the call and is experienced to deal with it. And we certainly have that.
Perfect. And second one for me. To what extent does leisure subsidize corporate profits? So in terms of buying power, I mean, if leisure does end up being a slower recovery, how does that impact? How do we think about that in terms of impacting corporate profitability, please?
We still have a joint approach with the supply chain and product buying. Some things are different. Corporate have a different hotel program completely to the one, although a lot of the chains overlap. So we've always been, and I think Chris described, we see the supply chain as much as a customer as our customers. So we're very transparent with them about where our volumes come from. I actually think, I'm not sure you could look at it that the leisure volume subsidizes the corporate. It's more that we feel we're one doorway into different segments for the suppliers. So with us, they come on board. They get corporate. They get leisure. They get offline. They get online. They get premium. They get SME. I mean, even in Flight Centre, don't underestimate there's a small proportion of SME customers in an unmanaged base.
There always has been in that brand and even Travel Associates. So we feel that that is still a very important offering for us with our supply chain and possibly even more so in this situation because with one company, you get so many avenues for distribution. Chris, do you want to comment on that at all?
Yeah. I think that's true. I think we certainly position ourselves as supply customers as being able to fill the plane at both ends and with different customer demographics. But we're very open with them. So our suppliers know very clearly what revenue and customers are generated from corporate and what are generated from leisure. So it's a very open book relationship with them.
Perfect. And just final one for me, please. In terms of your cost base, I mean, pre-COVID, you were at AUD 230 million per month. If leisure does—if the business goes back to pre-COVID levels, how do we think about that structural cost base? I mean, is it going to be materially lower than what it was pre-COVID? Or can you just give us an idea around what that'll look like? And sorry if you've asked us this earlier. I'll answer this earlier.
So look, yeah, I mean, certainly, we would expect it to be significantly less. I mean, I'm not talking about half the previous cost, but we would like to be able to do the same sort of TTV overall as an organization on perhaps 80% or 85% of our previous cost base. So that's certainly what we would be looking for. And that's going to take a few years probably to get back to that level of cost as well as 100% of previous TTV.
And look, to add to that, I mean, in leisure, we certainly had a cost issue. I think we were certainly open and transparent about that over the last year or two, hence the transformation program. But that wasn't just about cost. That was also about shifting to new trends in terms of how customers wanted to deal with it. So to Skroo's point, if there's a silver lining, which is a hard thing to say about this crisis, that it's just accelerated the ability to be able to reduce those costs radically without the risk profile that we had previously, which was a drop in turnover. We've had the drop in turnover, so the risk some happened. So we've really taken to the cost base very heavily in leisure.
And I can assure you we have all sorts of controls and analysis and investment criteria about what costs we will bring back and when, but it will not be what it was previously. It just simply can't be. And some of that is shifting to these new models. As I said, it's for consumer demand, but also from the economic.
Perfect. I think same as corporate. We've become more productive over recent years, and we won't be bringing costs back to levels pre-COVID. We don't need to. We're really improving productivity continually, and we'll use this as an opportunity to do even more of that.
Thanks very much, guys.
Thanks, Ari.
Your next question comes from Alex McLean with Bell Potter Securities. Please go ahead.
Morning, guys. Yeah, my first question was about how have you gone taking structural costs out of the corporate business? You seem to have answered that in the last one, so that's good. You've given underlying PBT for both leisure and corporate. Can you split out the corporate line on a first half versus second half basis?
No, we're not splitting that out at the moment. We'll pull that together. And as I say, we're going to be showing the segment results going forward on a half-by-half basis. So suffice to say, clearly, as with leisure, corporate has had a significant impact in the last quarter or whilst we've had some revenue that hasn't flown through in leisure. It has been very, very low levels. And again, Chris and his team have been working to reduce their pre-COVID cost base well down. So certainly, there were losses incurred in the last quarter. There's no doubt that it's dragged back the half-year profit or the first eight months' profit for the year.
Yeah. Okay. Thanks. That's helpful. Appreciate it, guys.
Thanks.
There are no further questions at this time. I'll now hand it back over to Haydn Long for closing remarks.
Thanks, everyone, for your time this morning. We are around in sunny Brisbane. Chris is up 24/7, so if you want to speak to him, just give him a buzz anytime, day or night. But we'll be available for the rest of the day on and off, so let us know if there's anything else that you need. Otherwise, we'll talk to you soon. Thank you.
Thanks very much for dialing in, guys.
Thanks, everyone.
See you.
Bye.
Bye.
Thank you.
Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.