I would like to advise all participants that this call is being recorded. Thank you. I would now like to welcome Haydn Long, Investor Relations Manager, to begin the conference. Haydn, over to you.
Good morning, everyone. Thanks for joining us for our full-year result announcement. As you will know from our previous announcements this year, it was not a game of two halves, this one. It was a story of three strong quarters followed by one quarter of pretty significant disruption. Today we are joined by the usual crowd. We have Adam, the CFO and CEO of GBS, Chris Galanty, the Corporate CEO, James Kavanagh or J.K., the Leisure CEO, and Skroo, our CEO and MD. Greg Parker, our Supply CEO, is also here in the room and will join us for the Q&A. I will now hand over to Adam.
Thank you, Haydn. Welcome to everyone who has joined us on the call this morning. Actually, could I just start by saying that whilst our underlying profit for the year was obviously a disappointing result, there is actually a lot to like about the year that we have just completed. TTV, statutory PBT, underlying EBITDA, profit after tax, earnings per share, overall cost reductions through the second half, and record NPS for our brands were all positive metrics. As Skroo will talk to later on the call, we have had a reasonably good start to FY 2027, particularly in leisure. Throughout the year, we have also continued to deploy initiatives to create shareholder value across capital management, portfolio optimization, and a number of operational strategic initiatives. Since March, all of our businesses have, however, been impacted by the war in the Middle East.
Primarily our leisure brands, but our corporate and touring brands were also affected. Before we delve further into those areas, I would like to spend a couple of minutes just reinforcing the company's unique strengths and defensible moat. The nature of our large, diversified company is a truly unique and valuable asset. As you will see on slide five, our size and structure allows us to combine the economies of scale of a global enterprise with the customer intimacy of focused expert brands. We believe that combination is not just rare, but also extremely difficult, if not impossible, for our competitors to replicate. What that means in practical terms is that we can navigate complexity and provide expertise for our customers where it truly adds value, that we can reach those customers that our supply partners struggle to access, but who they do value very highly.
It also means that our brand and geographic diversity provide a natural hedge in times of crisis or market disruption. It means that we can utilize our global business services platform to support top-line growth without a proportionate increase in cost. Something that we saw in the second half, with underlying costs decreasing year-on-year whilst TTV continued to grow. Hopefully, many of you will know that our purpose is to open up the world for those who want to see. Again, practically, what this means for our customers is that we can provide expert-led end-to-end travel that turns complexity and anxiety into confidence for them. We can see this in our NPS results. For our people, it means that we can provide them with a career that spans brands, disciplines, and geographies. It is somewhere to build a life and not just a job.
Again, we can see this in the longevity of our teams. For our supply partners, we can provide access to highly valued customers, global buying power, and a trusted long-term partner. Once again, we can see this evidenced particularly in times such as we have seen over the last few months. Our view is that if we look after our customers, our people, and our partners, then our shareholders will undoubtedly be the beneficiaries. Building off all of that, on slide seven, you will see the core elements of what we consider to be our defensible moat. Our supplier relationships, the human expertise to navigate through complexity, backed by differentiated proprietary travel and tech platforms and product ranges. Brand equity and trust that has been built over decades in the industry. Finally, customer loyalty and proprietary data.
All of these elements are powerful in their own right, but collectively, they form a strong and effective defensible moat for the company. I will just highlight that on slide eight, we have got a summary of some of the key strategic initiatives that we are focused on as a company. I will let Chris talk to Productive Operations, our investments in rapidly growing Corporate Traveller in our key markets, and the corporate product suite, and J.K. to talk to World360 Rewards and our investments in the cruise and luxury sectors. We continue to invest in TPConnects to be able to secure a wider range of airfares for our customers and our consultants through aggregated GDS, LCC, and NDC content. The benefits of this investment are certainly being seen in the corporate and leisure brands.
Obviously, as a company, we also continue to strategically invest in and utilize AI to enhance our customer experience, to increase productivity and efficiencies, and to generate new revenue growth opportunities. As mentioned earlier, our results have been heavily impacted by the war in the Middle East, and on slide 10, you can see this impact fairly clearly. In the third quarter, and in particular January and February, we really started to see profit and margin trends pick up, and at the end of March, we considered that we were comfortably on track for the upper end of guidance. We saw around AUD 60 million in FY 2026 profit impact in our leisure brands alone from the Middle East war as well as significant impact to our touring brands, as you can see in the HQ segment results in Appendix 5.
Our corporate brands were also impacted, but the impact has been masked somewhat by the productivity improvements seen in the business and the recovery in the Asia region. As you can see on slide 11, year-to-year profit comparisons are also negatively impacted by AUD 5 million FX on translation and the exclusion of the Pedal profit share in the current year, although the prior year includes a AUD 3 million contribution. Even with the impact of the war, underlying EBITDA increased by 4% year- on- year, which is a great result. But this growth didn't flow through to underlying PBT, given the AUD 16 million increase in net interest expense. Before handing over to Chris, I'll just highlight the work done on capital management this year with the buyback of AUD 200 million or just over 7% of our share capital and a new up to AUD 200 million buyback announced.
The proactive management of our convertible note balances and increased dividend payments. These all reflect the strength of our balance sheet and our belief in the business. At the same time, as noted on slide 14, we proactively managed our portfolio of brands with a divestment of Cross Hotels and our share of the Pedal Group, the acquisition of Iglu and Fresh, the investment in Blockskye, and organic expansion across loyalty, touring, luxury, Travel Money, and digital commerce. We've got a close eye on our short-term results and shareholder returns, but this is balanced with a longer-term view that will ensure that we continue to meet and exceed our customer, people, and supply partner expectations in an ever-changing market. I'll now hand over to Chris.
Thanks, Adam. I'm pleased to say we delivered some very good results in our corporate business last year. In line with our long-term strategy of Grow to Win, we delivered record TTV and revenue. Our TTV in constant currency was up 5%, though slightly lower in Australian dollars due to the exchange rate. Revenue growth exceeded that and pleasingly, due to very good productivity gains we've been working on for a number of years, underlying PBT was up 28% to AUD 240 million. This was despite various headwinds in the market, the Middle East conflict obviously being the most notable and impacting many of our businesses, particularly those in Asia, the Middle East, Africa, and some of our European businesses as well. We had some very strong wins in FCM, which were heavily second half weighted, and we're in the process of implementing these customers now.
The pipeline in FCM is very strong at the moment, with lots of RFPs coming out across many of our core markets. I'm pleased to say we had a very strong performance in our U.S. markets, with corporate TTV exceeding $2 billion for the first time, up 10% in local currency. And this is the world's largest travel market where despite our strong growth, we have a very small market share and a very large runway for further growth. Also, our global Corporate Traveller business achieved its target of reaching AUD 5 billion TTV for the first time. And congratulations to our Australian and New Zealand business, which had a record year in TTV and profit, further entrenching our number one position in the market. A lot of this growth in profitability has come through gains in productivity.
We have used the term Productive Operations to describe a transformation of our business over the last couple of years. Pleasingly, if you look at the measure of TTV per travel consultant, it is up 34% since 2023. This is due to transforming our operating systems and progress towards our single global operating model, which has driven greater automation, greater levels of productivity by integrating our proprietary customer digital platforms with our consultant platforms to give a much more seamless experience. We have empowered our customers to self-serve far more than they could before, meaning faster responses, more personalized service, and lower human intervention when it does not add value. However, what is really important when we talk about productivity gains is that our customer experience improvements have moved in lockstep. We have actually seen record SLA, record NPS, and record CSAT scores across our business this year.
Productivity for us is about improving the customer experience alongside improving our operating performance. I also want to stress that these gains are structural, not one-off. As we grow and add more customers around the world, we expect these gains to continue. Importantly, the cost of Productive Operations is now simply part of our normal cost base. I do want to call out Corporate Traveller this year, as I think they were the star of the show. CT is our SME offering, and its customer proposition is simple. It is the only global TMC entirely built around and dedicated to the SME customer. We have a unique position in the market combining fantastic proprietary, specially designed product called Melon with a dedicated travel consultant per customer. This means customers do not need to compromise.
They get the best modern technology with dedicated personal service via our online and offline channels, and they get the widest access to content and savings, thanks to Flight Centre's buying power. We are also introducing a payment solution, Melon Pay or CT Pay in the Southern Hemisphere, and a meetings and events solution which have both been requested by our customers. We continue to focus on organic growth in Corporate Traveller. CT delivered 8% growth in AUD, which is actually 13% in constant currency. Again, the Aussie dollar strengthening reduces the percentage growth since most of our CT business now comes from outside Australia. I am particularly pleased with the growth in North America, both Canada and the U.S. Huge markets where we have a small market share and a great opportunity for growth, and where the combination of Melon and our consultants is winning.
We will be investing more in growing key locations such as New York, London, Toronto, Montreal, as well as many other large cities across North America and the U.K. We are also accelerating into new verticals within the brand, meetings and events, energy and marine, performance travel, and VIP. This is about taking our personalized technology and our personalized offline model and specializing ourselves and marketing to these verticals. These are demanding verticals which generate higher margins and areas we are already very good at serving. The productivity gains I described earlier have been very important to CT's profit success. CT TTV is now 50% higher than pre-COVID, with 35% fewer consultants and record NPS scores. It is a really good business transformation story.
Our Melon booking product launched a few years ago in the Northern Hemisphere now makes up virtually all of our new business and is by far our largest product in these markets. We will see more volume migrate onto Melon from longstanding customers this year. Something I have spoken about before and want to reiterate today, we are consolidating three previously fragmented areas of our offering into one modern, seamless digital experience for customers. This is about solving more problems for customers and therefore generating more revenue for our business. The three areas are travel management, meetings and events, and professional services. Meetings and events and professional services now make up 11% of our revenue, up 2 percentage points year- on- year, and we intend to grow that meaningfully over the next few years. There are three key benefits in this strategy. First, better personalization.
The more customers use our products and services, the deeper and richer our data, meaning we can give customers a better, more personalized experience because we understand them better. Second, deep integration makes the customer relationship stickier and makes us harder to replace because we provide an end-to-end solution and solve more problems for the customer, reducing their need to look elsewhere. This is especially valuable for SME customers who often do not have a dedicated executive for meetings, events, travel management, or professional services. We become their all-in-one solution. Third, the more the customers use us, the more they save, and the greater our commercial return. CT and FCM are in a very good sweet spot in the market, competing with the digital disruptors on product, while differentiating through the combination of great technology, great people, and an end-to-end solution across travel management, meetings, events, and professional services.
Our real opportunity in corporate now is growth. We have invested a lot of time and money last year on productivity, transforming our business, and we now need to focus more on aggressively taking this fantastic new proposition to market and winning more customers. The starting point is our proprietary digital experience using our own products, FCM Booking and Melon, to give a best-in-market unique experience to customers, and integrating AI with both our products and our people. We call our AI intelligence layer Sam in FCM and Mel in Corporate Traveller. They enable us to give customers a more personalized, more automated experience while streamlining our cost base through greater automation and making our people more productive. I am genuinely excited about what we are doing with AI. A lot of it is industry-leading, and that is what we are hearing from our customers.
It is important to note that although we have two brands and specialized businesses within those brands, we operate under a clear philosophy in corporate. Build once, use at scale. Everything we now build, our data and reporting, our proprietary product, our AI solutions, et cetera, is built once at corporate level and used across both brands in all markets. That gives us real economies of scale. In summary, a good year, but we now need to focus more on growth. We need to bring our products and services to a wider range of customers. I want to be very clear, we will be investing more this year and the year after in growth, in sales, in marketing, in being present and talking to customers than we ever have before.
To finish, I would like to thank all of our customers and our fantastic people. Now I will hand over to J.K. to give an update on our leisure business.
Thanks, Chris, and hi to everybody. I will briefly cover the leisure results, including what changed in the fourth quarter, how our people responded, and where we see value ahead. Through the first nine months, leisure was performing relatively strong, and at the end of March, underlying PBT was AUD 136 million, which is ahead of the same point in the prior year. We entered the fourth quarter, and we were on track to exceed our previous TTV high and deliver a record result. But ultimately, the year closed at 7.4% up to AUD 12.6 billion in TTV. Iglu was acquired in December 2025 and contributed approximately half of this growth, about AUD 500 million, while organic growth was up around 3%. The final underlying profit before tax was AUD 139 million, and the difference between our trajectory and this was one highly abnormal quarter.
On the next slide, you can see Q4 is where the year really changed. It is normally the largest profit quarter for leisure, and in FY 2025, it contributed approximately AUD 45 million of underlying PBT, whereas quarter four in FY 2026 was approximately AUD 2 million in profit, with April and June delivering losses, our first unprofitable months since the pandemic in 2022. The Middle East war disrupted major aviation hubs, slowed bookings, and triggered approximately AUD 250 million in refunds, and we estimate that the total impact on leisure was approximately AUD 60 million, which includes a range of repatriation costs and other affected numbers at that point. Without it, we would have delivered around AUD 200 million of underlying PBT. But encouragingly, as we start the new financial year, July has started reasonably well.
What we saw was inquiry was certainly coming through, but we started to see a lot of conversion occur in the month of July. In that month, we have delivered a record TTV month, starting the year well. The next slide, we talk about our three big moves. This disruption has certainly not changed our strategy, where we are focused on three big moves across, number one, growing the core, which restores customer growth and productivity across Flight Centre. Betting on winners, scale to businesses that can diversify our earnings, and embed and enlisting loyalty increases customer frequency and creates new partner-funded revenue. AI accelerates all three, and we recently launched an AI accelerator that will help our people convert more inquiries, serve customers faster, and operate more productively.
You will see a slide included in the pack that will show how we are building up an agentic customer journey experience across the entire customer journey. On the next slide, we look at growing the core, and Flight Centre remains our largest leisure business and our largest earnings opportunity. Last year, we added consultants and store capacity ahead of the growth we expected. When the war removed quarter four volume, we did not really receive the operating leverage from that investment. However, we still remain set up to do so. The customer value proposition is very strong, and it is strengthening. Adam touched on record NPS, but we saw on the Flight Centre brand, NPS increased 14 points to a record 63. This is really exceptional when you consider that anything above 50 is really an excellent result.
Growth in Flight Centre is coming from multiple channels, and flightcentre.com.au grew 8% TTV, and it is nearing AUD 1 billion in TTV, with online profitability improving sharply. Our focus in this area remains win more customers, capture more of the trip, and increase productivity across the network to deliver underlying growth in earnings. Next slide talks a lot about betting on winners. Leisure is no longer dependent on one earnings engine. We now have scaled platforms across luxury, cruise, foreign exchange, independents, and digital. I will just call out a few key areas here that have really actually performed in the year that was. Scott Dunn, an acquisition we made a number of years ago, increased PBT by 20%, with the U.S. business performing particularly strongly following our recent investment.
The cruise category is now approaching AUD 1.8 billion of annualized TTV, and it is expected to exceed AUD 2 billion in FY 2027. Our assets across wholesale, digital, retail, and packaging position us as one of the world's leaders in this space, and we are now dominant in two of the top four markets. On to Travel Money. Travel Money grew 31% to approximately AUD 1.6 billion. Wholesale, a new category or a new channel that we launched a couple of years ago, has really been a major contributor, albeit off lower margins. When we look at digital TTV, we grew about 17% to AUD 1.8 billion, and this continues to be a large focus and investment area for our group. Independents grew about 36% across Australia, New Zealand, and South Africa in profits. However, this was offset by our emerging markets in the U.S. and Canadian operations.
Our opportunity here is really to convert this scale that we have built across these platforms into stronger, more diversified earnings. On the next slide, we will talk about embedding and lifting loyalty. World360 Rewards customer loyalty program launched at the end of November with free and paid tiers. Customers can earn points through our travel brands on all travel, which is quite unique in the travel industry. Along with earning points with everyday shopping partners in food, fuel, health, and 350 retail brands, plus five financial partners, which we now have five banks live along with a home lending service proposition. With this solution, you can redeem travel across any travel product that is available through three participating Flight Centre brands. Our customers can also accelerate and earn more bonus points with a range of selected travel partners who pay to participate in the program.
What is really unique about this is that customers can actually fly any airline at all in the industry, earn points, stack rewards, double-dip, triple-dip, which is quite unique. We are now up around 600,000 members, and approximately 66% of sign-ups are either new or actually re-engaging with the Flight Centre Travel Group. We are actually engaging and interacting with members who are young or young at heart, ranging across all different demographics. For our company, what is really exciting about this, it actually reaches new customer access, greater frequency, new partner-funded revenue, and rich data to be able to actually interact more with our customers. It is a new program. It is still early days, but it is scaling rapidly, and we expect big things to come. In closing, our focus now is on converting to recovery and scaling our growing customer ecosystem into stronger earnings.
I am really proud of how our people have responded through a very difficult Q4, and I would like to take this opportunity to say thank you to everybody that actually navigated these turbulent times, but also congrats on a great month to start off the new financial year. Over to you, Skroo.
Thank you. Thank you very much. Good morning, everyone, and thanks for joining us. Today, I will walk through where we stand heading into 2027, the trading momentum we are seeing, how we are navigating the disruption in the Middle East, and the structural growth drivers that underpin our confidence in the years ahead. In terms of current trading, leisure momentum is building, as you just heard. We posted a record July TTV that surpassed our 2019 peak and our best profit result for July since 2015. I think this is a signal that we are returning to the healthy TTV and profit growth we were delivering during the third quarter of last year. Early in the new financial year, our key growth drivers include Flight Centre brand, the Link Travel Group, Ignite Travel Group, Luxury Travel Collection, Scott Dunn, and Cruiseabout.
Each of these brands is contributing meaningfully to the recovery. We are also seeing a rebound in two of our most important outbound markets from Australia. After the prolonged tariff and immigration-related downturn, U.S. sales have now returned to year-on-year growth for two straight months, both in June and July, which is the first time we have seen that since FY 2025. Thank you, Donald Trump, for that. Sales to the U.K. moved back above prior year levels in July, a positive lead indicator ahead of our upcoming early bird airfare sales and the return of our Travel Expo program in Australia, which comes in this October. At the same time, airfare pressure between Australia and the U.K. and Europe is stabilizing with premium Middle Eastern carriers sitting around the AUD 2,500-AUD 2,600 in return fares in August and September departures, and that is based on late July pricing.
On the corporate side, TTV trends remain consistent with last year's fourth quarter, with the business delivering solid growth on a constant currency basis in July 2026. Though Middle East instability continues obviously to affect businesses located within the region, which is mainly FCM UAE or the ones with heavy links to it, which is Asia, Europe, and the Middle East. Corporate results this year are expected to be second half weighted, with first half profits likely to be below prior year comparatives. This reflects front-loaded investment in Corporate Traveller's Northern Hemisphere expansion. Secondly, productive operations employee costs moving above the line into trading results and current FX headwinds on profit translation. Also the timing of recently won accounts that are starting to trade now.
The business also has a large RFP pipeline globally, potentially unlocking further TTV growth late in the year and into the 2028 financial year. Importantly, our corporate customer base remains resilient. Around 80% of respondents to our State of the Market survey, which was run in July and August, expect to increase or maintain their travel budgets. Our SME customers through Corporate Traveller are even more upbeat, with about 83% planning to increase or at least hold their budgets. Elsewhere in the business, Flight Centre Travel Group's headquarter segment is likely to continue to be impacted by increased net interest, but this should be offset by ongoing cost control and a return to normal profitability levels for operating businesses within that segment, particularly in the peak fourth quarter trading period, which is obviously at the end of this financial year.
On the financial framework, we will provide formal financial year 2027 guidance at our AGM in November, consistent with our normal practice. In the meantime, I would note that the gap between statutory and underlying profit continues to narrow as productive operations and World360 Rewards move back into business as usual. Response to the Middle East unrest has largely been built around five key actions. First, cost discipline. We are building on the momentum we established in 2026 financial year, halting discretionary spends, freezing support roles, and prioritizing our investment in CapEx. We are generally keeping costs fairly flat, which is a challenge in an inflationary environment. Secondly, we are looking to increase market share.
During the peak period of unrest, we heavily promoted short- to mid-haul international travel and domestic itineraries, reinforcing our value proposition during a turbulent period with a renewed focus on U.K. and Europe as conditions stabilize on key transit routes. Thirdly, leveraging our supplier relationships to secure preferential content, better pricing tiers, and capacity commitments, all of which translate directly into stronger unit economics. We are working very closely with the Middle Eastern carriers as they resume normal service. Fourthly, maintain balance sheet strength. We are well-placed to capitalize on opportunities as the market moves into recovery. Fifth, preparing for a rebound in demand as conditions stabilize. This would be in line with traditional trends and would underline just how resilient the outbound travel sector has proven to be.
Now, alongside these five priorities, we continue to monitor the Middle Eastern volatility and any flow on macroeconomic impacts on both our leisure and corporate travel businesses. Some of our growth drivers. Stepping back from the near-term picture, I want to spend a moment on why we remain confident in the underlying growth story, and it is because TTV growth is what ultimately converts into disciplined profit growth. On the TTV side, we benefit from ongoing market growth. IATA, for example, expects 3.1% CAGR in global passenger traffic between 2024 and 2050. We are also expanding rapidly in key sectors. In leisure, that is cruise, tours, foreign exchange, and luxury. In corporates, it is meetings and events. In the U.K. and the U.S.A., SME businesses. We are growing our non-intermediary own product businesses too.
These businesses include our tour operators, Back-Roads Touring and Topdeck, our destination management business Discova, and our bike touring business Grasshopper . I expect that they are going to become a much larger part of our story in the future, both through organic growth and through various acquisitions that we are looking at. We are expanding our addressable markets altogether, moving into new sectors, including payments, oil and gas, Software as a Service, loyalty, and wholesale FX, as you have heard. On the profit side, we are focused on network and business optimization, strengthening, adding discipline, and driving turnaround where needed. Our cost discipline is already showing results. We achieved a record low-cost margin of 9.5% in 2026 financial year, driven predominantly by cost initiatives in Global Business Services as well as supply. We are capturing efficiency and productivity gains as scale benefits flow through Productive Operations in both our corporate and business-as-usual initiatives.
We are investing in AI, embedding it into every role, every day, to create supercharged consultants across the business. In closing, to sum up, leisure momentum is building. Travel to the U.S. and U.K. appear to be rebounding. Corporate Traveller remains resilient, even as results skew to the second half. Our five-point plan gives us a playbook for navigating the Middle East disruption without losing sight of our long-term growth opportunities. We do, however, recognize there are also potential headwinds, particularly the simmering geopolitical tensions. Conditions remain volatile in the Middle East as well as in Ukraine, and we are now seeing the rise in U.S.A./Canada trade tensions. This means we have to be agile and ready to respond to any challenges that arise. We will have a clearer picture of the world at our AGM in November, and we will provide financial year 2027 guidance then as usual.
With that, I will now hand over to questions. Thank you.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from Michael Simotas with Jefferies. Your line is open.
Morning, everyone. First question from me is on leisure. I think slide 10 paints a very interesting picture, particularly when we look at your comments on July and the strength of both TTV and profitability in leisure. Based on what you are seeing now, customer inquiries, the results you have already got in the bank, if we do not have a deterioration in the geopolitical environment, is there any reason you will not claw back the majority of that AUD 60 million headwind that you had in the FY 2026 year?
Michael, it is J.K. here. We are reasonably optimistic about it, so long as we have, as you say, no geopolitical events that happen. It is attributable to all of the investment that has been made in leisure over the last few years, including Scott Dunn, Iglu, Cruise, and then Flight Centre performance is lifting as well. So it is reasonably promising around that inquiry is starting to convert as we enter July. Also, August has performed reasonably well too. But remember, we are two months in.
Yep. That is fair. Then the second question, probably one for you, Chris, on corporate. The corporate business is not one that I have tended to worry about in the past, but I just want to understand the comments around the first half headwinds, and if you could help us pick them apart. It looks like FX might be an AUD 5 million or AUD 6 million headwind at the PBT level for the business. Maybe you could give us a little bit more color around productive operations costs that come above the line. Are you confident that you will see growth on a full year basis in that business?
Hi, Michael. Yeah, look, I think the first half is a few things. One is FX, as you say. The other is the Productive Operations costs are now above the line. What we mean by that is that all the people who have been working on that project for the last couple of years, we are now absorbing those costs on a monthly basis. However, the work they are doing and the work they have done means as we grow and add top-line volume with new customer wins, we get much better returns on that volume because of productivity gains. I think really also the wins that we had, I think we released earlier, that we had a very strong Q4 for wins. All that in FCM, all that volume will be implemented over the next few months and will really significantly hit our second half.
We have also had the strongest start to a new financial year in FCM over the last seven weeks in terms of wins. Again, all of that volume will really hit the second half. So we are expecting an increase in top line over the second half. Because of the work we have done with Productive Operations, that will flow through much more strongly in the second half. So we are certainly not feeling down about the first half, but we think we will be much more second-half weighted.
CT as well, Chris.
Based on that-
From an investment
Based on that volume you can see, is that going to be enough to more than offset the full year of costs in Productive Operations that come into the business?
Yeah, we think so at this stage. As Adam just mentioned, sorry, I forgot to mention that we are also heavily investing in growth, particularly in Corporate Traveller. So we are investing more in salespeople, in marketing, because that model is going really well. They had a record year last year, and our team has sort of taken the view that whilst things are looking really good in terms of product to market fit for CT, we want to double down on growth investment. Whereas probably, we have really focused on investing in productivity. We now want to invest in growth. So we will be spending a lot more, and are spending a lot more already on marketing and sales.
Okay. Thank you.
Your next question comes from Ben Gilbert with Jarden. Your line is open.
Just on costs. You guys obviously did a great job through COVID consolidating and driving productivity, but it seems we are just not, and I understand the Middle East disruption, it just does not seem like we are getting any benefit of that. Then to the point before, there is just more costs going back into the business. Do you think you are actually getting these productivity gains? Because we are just not seeing it in the numbers. Then you get AUD 1 million a month, whatever it is, above the line for Productive Operations. I would have thought it should be taking costs out, not adding more costs in. How are you thinking about it? Are you judging if you are getting a return on this investment, and if you are actually driving productivity gains for the business? It is just not evident when we look at it through the P&L at the moment.
Ben, it is Adam. I might start with that, and then I will hand over to Chris and J.K. to talk specifically about the productivity benefits that they see in their businesses. As you say, we did take a lot of costs out through the COVID period. A lot of that was what I would call generic cost of operating and running the business. We are continuing to do that. So if you look at a lot of our underlying cost metrics in the second half, we saw quite a reduction, in the growth rates. They were almost flat, I think, from memory in the second half versus the first, even with the reduction that we saw in that top line. So I think we are actually seeing, and bearing in mind, there is a lot of inflationary pressures, particularly in technology at the moment.
So I think we are actually doing a pretty good job from managing those costs. What we are doing, though, is we are investing more and more now compared to pre-COVID, on specific areas such as technology, enhancing our customer experience and enhancing the consultant experience, et cetera. So there is a lot more that we are investing. So we are taking a lot of the benefits that we have taken out of the, if you like, historic cost base of the business, and we are now targeting that into specific investments like the Productive Operations initiative that Chris was looking at. Like a lot of the digital initiatives and tech initiatives in leisure that we are focusing on as well. But Chris, did you want to talk from a productive ops perspective on the investment that we are making there and the returns that you are expecting?
Sure. We are certainly seeing productivity gains. I think what we called out was typically we used to grow by adding travel consultants. We no longer need to do that. Our travel consultant productivity is up over 30% in the last three years alone. A lot of that is down to the fact we have automated our business. What this means moving forward after Productive Operations is that we can add a lot more volume in moving forward without adding personnel costs. Obviously, we need to add some people in some cases, but as a standard, we are a much more productive business. That means we can pay our people better because there is inflationary pressures, and there has been in recent years to retain talent. We do not need to add anywhere near as many people as we scale up.
I think the last three years has all been about investing in future capability, and that is why we are now talking about investing more in growth. We are a more productive business. We need to add more volume in, and that is certainly how we view corporate.
Chris, did not you say you are just adding a whole bunch more consultants into the business because the demand has come up? That is the point. I thought you had done all the stuff around your online platform to digitized leisure. You would expect the platform model or the third-party model to scale. I just thought you could scale much more quickly, but it sounds like you have not put a whole bunch of costs in now because your TTV is getting better with all the wins.
Sorry, I think you were cutting in and out, Ben, but I think it was around the, you referred to the costs that are coming in above the line. They are not concerns. What we are doing with those costs is we have got the people there that are really doing a lot of the development and-y es, they're mainly technology people.
Yeah.
I'm really struggling to capture the question because you've broken up on our line. But the costs that are coming above the line are not the digital travel costs at all. They're technology people. Most of our investment over the last three years has gone into tech, whether it's AI or information as a business for new platforms.
All right. No, that's helpful. Thanks, guys. Then just around leisure, you've obviously had a really strong start to the year for leisure, which is great. Appreciate you've got that AUD 60 million impact in Q4. You've guided to your corporate potentially being down CapEx in the first half. Do you think you can still grow your leisure in the first half given the strong start you've had and the gains that you're getting through the business?
Yeah, we're expecting some growth in the first half this year, and so far it started reasonably strong, Ben. So we'll see how it goes as we progress throughout the next few months. But unless there's any kind of major shocks coming our way, we don't expect to have any major impacts to it because things are looking reasonably promising so far.
Fantastic. Thanks, guys. Appreciate it.
Your next question comes from Tim Plumbe with UBS. Your line is open.
Hi, guys. My question's a bit of a follow-on from Ben. In terms of the activity that you're seeing to date in the leisure business, obviously there's going to be people rebooking previous stuff. When you break that out and you just look at the underlying new customer bookings, can you talk a little bit about what you're seeing there, from a volume perspective, but then maybe also any changes in terms of consumer, not so much, going via Asia rather than via the Middle East because that's an obvious one, but in terms of end destinations?
Yeah. Hi, Tim. Well, firstly, there was a shift in destinations, first and foremost, and we've seen that a lot of customers have been traveling closer to home. The other trend that we're seeing is that customers are more comfortable to book 12 - 18 months further out. We've got a lot of packages that we sell in that space that are geared up, and they've performed really well in that space. What has been impacted is that late last-minute booking where we see long-haul to Europe and so on. That certainly has been disrupted. We're also seeing a lot of premium customers return a lot faster. Anytime there's a major event, that's typically the cycle where you start to see premium customers return first, and then mass market follows thereafter. That's some of the insights right now.
But what we have seen on a year-on-year basis now when we look at travel to places like the U.S. and Europe, we are starting to see growth in that space pretty much from June through to July. But remember, it is off a lower base in the corresponding period because that was somewhat disrupted as we began the new financial year last year.
Got it. Thanks, guys.
Your next question comes from Sam Seow with Citi. Your line is open.
Thank you. Morning, all. Appreciate you taking the questions. J.K., maybe just for you, just want to pick up on some of your comments you have just made there on you are expecting first half 2027 growth in leisure. Is that at the PBT line, firstly? And then when I think about the AUD 60 million impact, could you perhaps parse that out, what was refund related versus negative operating leverage or lost overrides? Just trying to get a feel of that impact. Thanks.
Yeah. We do expect both top-line and bottom-line growth in the first half this year, if things continue tracking with the momentum that we've started with. Then when we look at the Q4 impact, I called out that there were refunds to the tune of about AUD 250 million related to air sales. We didn't detail the full amount of everything else that was impacted from cruise and other product lines, but it was material. It's also important to note that in some of our markets, particularly like the U.K., because of local regulations there, we are required as the agent to repatriate a lot of customers when they are disrupted. So there's a material impact there as well that hit brands like Iglu during the month of April.
In that quarter, effectively, all of those things consolidated resulted in two of those months being unprofitable, which is highly unusual for us, and we really haven't had that since the pandemic. But that's a broad overview of where it comes from. A combination of refunds, repatriation costs, and a variety of other things that hit us, including the type of travel that we sold was on lower margin products.
Thank you. That's really helpful. Then maybe as we think about a more normal year, just thinking with that nine-month result and the extrapolated AUD 200 million that you put out there, do you think that's a reasonable assumption of what a normal year could look like for leisure? Thanks.
Yeah. Look, I definitely think that that's achievable. It's also important to note that we had some loyalty investment costs last year that were taken below the line. They'll be in our results this year. But that investment will start to pay off as we see returns from all the uplift KPIs that we expect to come through, and they will come down the line. But remember, there's been a lot of effort put into rebuilding and reinvesting in the leisure portfolio. So we see it as a business that's very capable of achieving the numbers that we've outlined.
Thank you. Appreciate the call.
Your next question comes from Mitch Sonogan with Macquarie. Your line is open.
Yeah, good morning, guys. Thanks for taking my questions. Just a quick one on corporate with Productive Operations and rollout of the AI platforms. Can you provide how much further upside you think there is in productivity in terms of maybe the TTV over FTE where you're seeing a 20% improvement? Following on from that, do you have a target for PBT margins of where corporate could get to in the coming years? Thank you.
Yeah. As I said earlier, thanks for the question. I think that our productivity transformation is structural, so we don't see that this is going to tail off. So there's two areas to this. One is the customer self-serving, and whether that's using AI to bring our technology more into our customers' technology themselves, so it's much easier for them to self-serve. That means they don't need to engage with our people unless our people are adding value. Release enhancements to that experience. We've got more customers using that now, and that really enables us to tailor to help our productivity as well as improve their experience. And in our operating systems, which is what a lot of operations is, we're seeing a lot more automation through our entire end-to-end business.
I think as we add volume, which obviously we are, so our wins were very strong towards the end of last year and the start of this year. We would expect to see more of that revenue converting into the bottom line into profit. As long as we keep growing this top line, our business in that setup is a transformed business. It is set up to better convert revenue to profit.
Yeah. Thank you. Maybe just a quick comment on the Canada pipeline. You have obviously talked about the AUD 1.6 billion run in FY 2026 with, I think, almost half of that in the fourth quarter. Can you always talk to how you are seeing that overall RFP pipeline? Are your win rates stable? Then just a quick follow on with all the tech investment that you are making, is it actually getting easier for you to onboard large customers in FCM?
Good wins over the next year.
Your next question comes from Wei-Weng Chen with RBC Capital Markets. Your line is open.
Hi again. I guess there's been a bit of industry consolidation in the corporate space with Amex and CWT. Wondering whether there's any opportunity for you guys to scale in corporate through M&A too. Have you or are you considering buying CTM?
No is the short answer to that. Look, there is opportunities for M&A. The market is consolidating, and I think something I've said over the last couple of years is that as we move to a single operating model, which we're well through and well along that path now. It's much easier for us to actually acquire businesses and integrate them much faster and get much better economies of scale. So we are always looking, and things come across our desk all the time. It's just got to make sense. And I think if we do acquire volume via TMCs, it will be in one of our core markets. So yeah, we're open to it, and I think it's all about the right acquisition at the right price, but we're in a much better position to acquire businesses now because of our single operating model.
Cool. Thanks. That's all for me.
Your next question comes from Alex McLean with Evans & Partners. Your line is open.
Morning, team. Two questions on the corporate business. Can you just confirm you expect the profits for that division to grow across the full year, despite being down in the first half?
Look, I think it's difficult to say at this stage. I think what the council is saying at this stage is that our profit result will be second half weighted. We are expecting top line growth throughout the whole year, but we think the second half is when we will deliver profit growth. At this stage, I think it's difficult to say exactly whether we will see profit growth for the full year, but we will update you as the year progresses.
I may have missed it earlier on the call, but have you called out what is the Productive Operations number you are shifting from below the line to above the line in the corporate business, just to give us a sense of what the delta is there?
Yeah, it's around AUD 12 million.
Okay. Thanks, Chris. Then just final one, still on the corporate business, just that top line, constant currency grew 5% this year. How should we be thinking about that over the next 12 months, noting that you are calling out accelerated onboarding in the second half, and I guess an increasingly favorable competitive dynamic over the next 12 months, particularly in the ANZ market?
Yeah, sure. Obviously, with the ANZ market, FX makes no difference.
Sure
We are looking at good single-digit top-line growth going into next year, throughout this year. Look, if we get good tailwinds in certain markets, I think the higher that single digit is will depend on how quickly we can implement an onboard business. We are feeling very good about growth. I think CT had a very strong year last year in constant currency. That continues as we speak. It is really getting FCM to match that now. As I said, we are in a very busy implementation period at the moment, implementing the wins we have already got. So we are optimistic. How high that number will be, I think again, we will probably give you more color as the year progresses.
Yeah, that is helpful. Then just one on leisure, maybe for J.K. You called out, at this point, you are expecting profit growth in the first half of that division. Do you think that business can grow profit at an underlying level, excluding the Iglu benefit? Or how should I think about that benefit?
Yeah. Iglu does contribute, but we also have expectations for other brands to also deliver as part of. It's not just Iglu weighted. There will be other brands contributing.
Underlying growth ex Iglu is the way to think about it?
Yes.
Okay, cool. That's helpful. Thanks, James.
Your next question comes from James Lee, private investor. Your line is open.
Hey, guys. Thanks for taking my question. Maybe just to follow up on the last question there, on the positive. We have called out positive momentum in leisure, and referenced it to Q3. Just clarity, in Q3, we are talking about double-digit growth. Is that what we are talking about? Or back to positive?
Are you referring to Q3 coming off in the year ahead? Or was that-
No. Sorry, in 2026 we called.
Yeah, that is right. So Q3, we turned the corner and I think we shared the news at the half year as well about, we had an excellent January. We were trading up around 4% at one stage. So it was actually Q3 itself was a really good story for the leisure business. The momentum was continuing, which gave us confidence for a solid Q4, and then the rest is history.
Yeah, James, just to clarify. Obviously, the Q3 is prolonged. Throughout the third quarter, we had good results, whereas July has been good, but it is really just one month. So J.K. is happy, but he is not patting himself on the back too much just yet.
That is great. Maybe we have got a few moving parts in the HQ costs.
Yeah
Including net interest, then we have called out cost controls. How should we think about that directionally on a year-over-year basis?
Yeah. The HQ costs, you really need to break it down into really the four separate areas there. You have got costs themselves, which are not distributed out. They were pretty flat year- on- year, which I think was a great outcome. We expect that to continue. The cost control we have got in place there is going very well. So head office costs themselves should be relatively flat. Net interest expense, I think for the first couple of months, probably the first quarter, I am still expecting that to be up a little bit year- on- year, just because we started to see that ramp up as the year progressed in FY 2026. But as we get closer through this half, we should see that start to level out.
So all in all, that net interest is probably going to be similar to this year, maybe a touch higher, but similar to this year. TPConnects will be similar, if not a little bit less of an investment in that segment in FY 2027. The operating businesses, though, if you look at the deck we have, the slide we have in the deck, in FY 2025, they contributed nearly AUD 10 million between them. Last year it was a loss of AUD 1 million. So it was about an AUD 10 million or AUD 11 million swing. So AUD 3 million of that is Ignite Travel Group, which obviously we invested during the year. But the rest of that AUD 7 million was largely impacted in our touring businesses in particular, but also through Discova from the Middle East conflict. So we would expect those businesses to start trading up.
All things being equal, particularly as we get to their stronger trading months toward the end of this financial year, we should be seeing them move back into positive territory. For HQ, we would expect to see an improvement on where we finished this year.
Great. Thank you.
Your next question comes from Belinda Moore of Morgans. Your line is open.
Thank you. Can I just check, what are the loyalty costs we are expecting in the leisure result in 2027? Can I just clarify, they are going to be purely in the leisure result? The tax rate has been high for the last few years. Where are you seeing the underlying tax rate in 2027, please? Skroo, I think you might have alluded to maybe some acquisitions. How are we thinking about versus the buyback? Is the buyback going to resume effectively tomorrow? Thanks, team.
Belinda, yeah. In terms of M&A, and it has come up before, but we are generally looking at specialist areas. I think generally in most our major businesses, we can grow organically pretty well. But it is when we need specialist capability, for example, in the meetings and events in some of the countries of corporate, some of the specialist areas that you have seen in leisure. Adam might say more on this, but in terms of the buybacks, we are certainly looking at what opportunities might be in the M&A, as well as the buybacks to make sure that our cash position, we have got it under control for the next couple of years in terms of what we think we will probably likely do in terms of the buybacks and the M&A.
Generally, I think our guys, and generally as an organization, we are pretty aware of what cash needs are going to be, particularly in those two areas. Did you want to talk about the tax issue?
Yeah, I will. Belinda, yes, we will be recommencing that buyback in the next couple of days now that we have released the results to market. As Skroo said, I think it has got a really good balance there at the moment between investment in M&A and having funds available for that versus the buyback. Also keeping one eye on our convertible notes as well. I think the team is doing a great job managing through that at the moment. We have got that in pretty good order. The effective tax rate, as you say, it has been reasonably high. Last year, FY 2025 was extraordinarily high, and there were some deferred tax asset movements which impacted that. Our tax rate for FY 2026 was about 30%, and underlying, I think it was about 33%. Our blended statutory rate, from memory, is about 29%.
All in all, I'd expect our effective rate over the next year or two will be still relatively high, somewhere around about that 29% or 30%. J.K., did you want to talk about loyalty?
Yeah. Hi, Belinda. Just on the loyalty results, we called out a number that went below the line of around AUD 34 million. If you look at the year ahead, we are projecting up to a maximum of half of that that will show up in the results. That's a target rate, but we obviously would like to see that come down a bit. We also will expect to see some of the returns come through from that investment, too.
Thank you.
Again, if you have a question, it is star one. Your next question is a follow-up from Sam Seow of Citi. Your line is open.
Thanks, guys. Appreciate you taking the follow-up. I just had a quick question on leisure again. Short-haul travel net-net looks like it is going to be a mixed headwind, with Bali and Japan only accelerating. Gulf carrier capacity is still massively down year-on-year, and now you are taking loyalty costs above the line. I am just trying to understand where that strength is coming from and where you expect the growth. Thanks.
Yeah. Sam, the portfolio is reasonably balanced. If you look at a number of the brands within the portfolio that we expect to grow, the Ignite business with My Holiday, My Cruises, My Touring, you might remember that we took out a charter, it is a Norwegian Cruise Line that is going to start sailing this September. We will start to recognize some of the revenue of that coming through as well. That is one part. Also, our luxury business is performing well, and that is out of the Northern Hemisphere as well. Different segments being a more diversified portfolio means that the opportunity to grow is there. What was the other part of the question?
No, that is about it. Just trying to understand, I guess the traditional parts of your business still have headwinds, long-haul travel, et cetera. Just trying to understand what is driving that expected growth in first half 2027.
Yeah. Hey, Sam, it is Greg here. Just to talk on capacity. Yeah, that was obviously a pretty big impact in that last quarter. The Middle East and the top three carriers are down 34% in capacity out of Australia and 13% globally. What that actually meant was a lot of the carriers were looking at different source markets. They were looking at point of sale out of the U.S. and a few different things. The encouraging thing now is that capacity is coming back. It is still slightly down on where it was pre the Middle East crisis, but the Middle East carriers, those top three, are expected towards the tail end of the first half to get back to 100% capacity as well. Their load factors are looking really strong at this point.
They are maintaining their fare pricing at the same time as well. There is definitely a lot of capacity uplift in there as well from a capacity perspective.
One to call out is Qatar Airways.
Yep.
They will be a bigger carrier-
Yeah
out of this part of the world in Australia by Christmas time.
Yeah. We have transformed the Qatar relationship as well. It was a combination of a lot of regional deals leading into this, and now we are actually a true global partner of Qatar. We have stood by them, obviously, during the Middle East crisis as they sort of looked after us during the pandemic as well, with uplifting customers to come back into certain source markets. The relationship with Qatar and the other Middle Eastern guys are super strong.
Thanks, guys. That is really good. Hey, do you mind if I squeeze in a question on corporate? I think clearly airfares are going up with fuel, et cetera. How are you thinking about the volumes, particularly towards the end of the year as budgets start to run out? Is there any kind of inherent assumption on volumes you are making or baking into this guide that you have given us? Thanks.
Yeah. We did a survey, which we published recently, FCM did it, on propensity to travel next year, and most customers are saying they are factoring in an increase in travel next year. Airfare prices, as you know, have been pretty high for the last few years, and actually corporate travel has proved pretty resilient. So we are not too worried about that. The main growth we see really in both brands is just adding volume by winning new customers and getting them implemented. So I think there may be some customers who, due to budget constraints at the end of the year, do reduce travel. But on the other hand, others see growth. We would normally expect them to net themselves out. So we are not too worried about that.
Got it. Thanks, guys. Appreciate the opportunity.
This concludes the question and answer session. I will turn the call to Graham Turner for closing remarks.
Thanks, everyone, for coming on and listening to us. Adam can take the blame if you thought it was too long and uninteresting. He did a lot of it. We will be seeing some of you, I know, in the next couple of days. Thanks for coming on board. Adam, do you want to finish us off?
Just like to thank Skroo for his kind words. Might not be seeing you guys much longer by the sound of things. Thanks, everyone.
Thanks, all.
Thanks, guys.
This concludes today's conference call. Thank you for joining. You may now disconnect.