I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead.
Thank you, Ashley. Welcome, everyone, to the Web Travel Group First Half 2025 results presentation. Joining me today, I have our CFO, Tony Ristevski. Well, a lot's changed since our full-year results presentation in May. Most significantly, we have demerged, and as everyone will want to discuss, we have a change in revenue margin implication for our business going forward. Let's go into the demerger first. Next slide. As we announced in May, the intention was to split the company into two component businesses. That was successfully implemented on the 30th of September. Web Travel Group, which is the call that you're all on at the moment, runs the WebBeds business, and the Webjet Group runs the B2C business, which was the former OTA business, GoSee, and the Trip Ninja investment. So the demerger took effect during the H1 of 2025.
In our results, as you'll see in our financial statements, the B2C businesses are included as a discontinued business in the first half results. Our results and what we will talk about today have been restated to reflect the pro forma B2B business only. Let's go to the next slide and talk about how we performed over the first six months of the financial year. TTV continues unabated on our growth trajectory. TTV was up 25%. Margin was lower. This obviously impacted revenue and had an impact on our EBITDA results, which were both below our expectations. We're on track to deliver 5 billion TTV in FY 2025. Our revenue was up 1% on the previous compare, reflecting the lower margins.
There are some slides further into the deck in which I will talk about what we did as a management team that contributed to those declining revenues and how the market influenced those declining revenues. EBITDA was down 11% on the previous compare, reflecting that lower revenue. The cost, which we had always planned to include as we invest in our business, was up 14% on the previous compare period. In aggregating, so the net result of that is AUD 2.6 billion in TTV, revenue of touch over AUD 170 million, and EBITDA at AUD 77.5 million.
For the group, EBITDA is AUD 70 million. There's a pro forma allocation of corporate costs of AUD 7.5 million. Tony will talk in his section in a little bit more detail about what the implications are for our corporate costs in the second half. Underlying impact was AUD 52.5 million, and cash was AUD 510 million.
We'll talk again in Tony's presentation about the significant cash generation that we've been able to deliver yet again in this first six months. The capital management initiatives, there is one that we've undertaken up until now, and there's one that we'll talk about again before we summarize the guidance going forward. During the course of the six months, we invested another AUD 19 million into equity-linked financial assets, which have exposure to WEB shares, and we've now increased our own exposure to our own WEB shares up to AUD 8.4 million. Moving forward, two slides into the key metrics associated with the WebBeds business. As I mentioned, TTV is up 25%. We now delivered 4.3 million bookings during the six months, up from 3.49 million in the corresponding period last year. TTV is up to AUD 2.59 billion, up from AUD 2.08 billion in H1 2024.
Revenue is up 1% at AUD 170.4 million against AUD 168.8 million. And EBITDA is down from last year's AUD 87 million to AUD 77.5 million dollars. And obviously, the key driver of that is the increased expenses compared to the revenue, which we had planned. Getting a little bit more granular on the next slide, as you can see, bookings are up 23%. Average booking value has been circa flat, up 1%. TTV is up 25%. Revenue is up 1%. Expenses are up 14%. EBITDA is down 11%.
Most significantly, the revenue to TTV margin is down 150 basis points. And notwithstanding all the downward pressure that we've seen on the revenue side, our EBITDA margin is still truly world-class at 45.5%, albeit down 600 basis points compared to the H1 of 2024. The revenue being down, only up, sorry, 1% reflects the lower TTV margin at 6.6% for the half.
It's driven by a number of factors. As I mentioned earlier, there are some that we as a management team have contributed to, and there's some that are market forces. But in aggregate, the factors that influenced the result were a substantial increase in the customer financial incentive agreements, which we refer to internally as overrides, our response to the European summer trading, the incremental business that we're acquiring from various customers at lower margin due to a variety of factors, which include geography, customer mix, and supply mix, and in addition, as we spoke to the market last week, there was an accounting policy change which increased our margin from the underlying margin of 6.48% to 6.6%. Expenses were in line with what we were expecting at around 14%. We continue to invest in our technology. We continue to invest in global scale and reach.
Our headcount is circa 2,000 employees now in the business. And the second half expenses are expected to be similar to what we spent in the first half. Going forward, we expect our business to revert to the norm. We started this business in 2013, and it's been a consistent period of growth over that journey. Our expected outcomes for FY 2026 is that normal service will resume and revenue growth will be expected to exceed expenses growth, and EBITDA as a percentage or an absolute number will continue to increase. So going forward again, as we look to FY 2026, notwithstanding that revenue margins are going to be circa mid-sixes, we still will expect to deliver EBITDA margins of around about 50%, which is our longer-term target. So let's move to the next slide and talk about how did we get to the 25% increase in TTV.
At a high level, we're on track to deliver a billion in incremental TTV in FY 2025. There are three drivers to how we view that outperformance. There is the market or the system growth rate, which has slowed down on a global basis. If you look at all the published data for all the international hotel chains, you will see that growth rates have slowed down and average booking values haven't increased at the same rate. I already covered off that our average booking value this year is up barely 1% compared to FY 2024. So system growth is 3% versus what we described as system growth this time last year, when broader global travel markets were in a period of very strong growth, has declined from 7% to 3%. All right, that's three out of our circa 25 that's been accounted for.
The second element is what do we do to increase our reach, both with supply, which is getting more inventory on the shelves, and with new customers. As you'll see, we spent an increased amount of money on capital in the first half to deliver a point-of-sale product, which is an enhancement over what we had previously that's contributed to the outperformance in our Middle East business. And we've had substantial customer wins in both APAC and in Europe in this six-month period, which have contributed to circa 8% of the growth rate that we had in this half, and most importantly, and the key lever that will continue to take us on our path to 10 billion TTV in 2030 is the improvement in conversion.
That is getting increased volume based on broadening the scope of what we have available and increasing the level of penetration per search that each customer has with us. And that accounts for about 15% of the growth that we experienced in the first half. So in round terms, that accounts for nearly AUD 300 million of the increase in the half. So the business and the key drivers that have been in place continue to be in place, and the underlying thematic of what is our business model remains robust, and the ability for us to continue to outperform the market remains intact. And we have a high degree of confidence that that will continue into the second half and will continue into FY 2026. If we move to the next slide, I've had a long time to contemplate how I would present this particular slide to the market.
I could have been trite and made it as simple as possible by suggesting there was only one or two major factors that occurred in the 150 basis points decline in our margin. I'll put it into a slightly different context for you and then break it down into what contributed to it. As you can see, our well, as I'll tell you, our room night rate per booking on a global basis is circa 150 million sorry, EUR 150. 150 basis points on EUR 150 is a $2 reduction on EUR 150. For us, where we're selling a grossed-up product of a hotel room, a $2 reduction on our end equates to 150 margin points. The factors that we control that contributed to that decline are customer financial incentives and what we call overrides.
Since we first launched the business in 2013, and I remember it very well, to get our very first client, we gave them a financial incentive. And over the journey, that number has always been embedded into our revenue number. And it's never contributed a significant proportion of either our results up or down, which is why we've never felt the need to call it out previously. And in our current scenario, of our total of 4,000 plus end users or 40,000 end users who are using our inventory, we only have override agreements with less than 100 of our partners. So it doesn't equate to the most across our entire portfolio of customers, but it does impact a small number who have a disproportionate impact on our financial results.
In the half, we ended up paying AUD 7.5 million more than we'd budgeted, and this accounted for about 0.3% of our margin decline. We have spent, obviously, considerable time over the last seven or eight weeks going through those customer financial incentive agreements. The conclusion that we've reached is that they will still continue to be an important part of our business going forward. The similar number that we paid out in the first half as a percentage of sales will continue into the second half. While we've reviewed them and the processes, we have made ourselves comfortable that they are appropriate for our objective to continue to deliver the outperformance that we expect in our TTV going forward. The second element, which is our pricing response to the European summer trading, is a more convoluted story.
Trading for us in April and May, the first two months of the half, was very strong, and our margin was very strong and consistent with what we'd expected. And as we've called out previously, there was a major bankruptcy at FTI, a very large German tour operator. And the Olympics were on in Paris, and the Euros were on in Germany. And we could see immediately that there was a distortion in the market. We weren't selling much Paris as a consequence that the Olympic family had booked out all the hotel rooms. German outbound tourism was flat, or sorry, actually behind the same period last year. And there was an influx of inventory that occurred in the market. Our initial thoughts, which proved to be incorrect, was that once that inventory had flowed through the market, that there would be a reversion to normal margins.
But we never saw that. And then what we did in the months of August and September is to chase volume. And as a consequence of that, we gave away a little bit more margin than we should have, which contributed to the surprise between our AGM margin expectation and the margin that we actually delivered for the half. So that responsibility falls on us. And obviously, in a period in which there was intense management focus around the demerger, which is a complex undertaking and a time-consuming undertaking, there was significant management focus on the demerger itself, and the resources at the most senior level within the organization were focused on the demerger. At the same time, we did have some changes of personnel within the management team. So all of that is what the factors that were under our control that we contributed to the decline in margin.
On the other side of the table, there are other things that are going to continue to happen that are our expectation of the market going forward, and it's our expectation of how we will get to 10 billion in 2030 and how we will continue to grow as we have in this half, eight times the rate of the underlying market, and that was the geographic mix changes our margin. Europe, which is our highest margin region, had all the issues I described, but in addition, it will continue to grow at a lower rate than the rest of our market because of the high level of penetration that we have in the European market. Our other markets, in particular, Asia and the Americas, will continue to grow at a fast rate.
The consequence of that faster rate growth is that the average margin is lower, and by definition, the margin mix will be lower as a consequence. Supply mix has an impact. The very fundamental nature of why we are so successful at WebBeds is that we have a supply mix of directly contracted hotels, international hotel chain agreements, as well as third-party agreements. Our third-party supply mix comes at a lower revenue than our other two. And the consequence of that is that in this half, we saw an increased use of third-party supply, which again contributed to the decline in margin going forward. And as our customers grow, we also see that some of them that grow at a higher level have customer financial incentives, and sometimes we run campaigns with them. Those customer mix also has contributed to the decline in margins.
So 160 basis points of decline, half on half, can be circa broken up between these six disparate factors that have contributed, as I'll repeat, some of which are under our control and some of which are the market. Going forward, we expect the margins to stabilize at the rate that we currently reported for this half, and it still contributes to our ability to drive superior outcomes on TTV growth and in FY 2026, an EBITDA margin of circa 50% and a substantial uptick in the level of earnings associated with the business at that point in time. To go through that in just a tad more color, slide 10, next slide, shows how we performed over the course of the first half. Bookings up 23%, TTV up 25%. Phenomenal performance in the Middle East, increasing both bookings and TTV at circa 37%.
That's again a reflection of the CapEx where we invested in our point-of-sale system and an ability for that particular market to reengage on terms that are supplier-friendly to us. So we're delighted with the outcomes there. The Asian business, or APAC business, continues to be the standout performer in aggregate. It's now the largest, and it has been the largest business by booking volume. It's still not the largest by TTV. That's a consequence of we operate in many markets such as Indonesia and the Philippines, where the average booking value is significantly lower than it is from our aggregate across the board. But another great result, 32% increase in bookings, 29% increase in TTV. Europe, very, very strong in bookings and TTV, but unfortunately not as strong, and we had the most significant impact on the revenue margin, which I've covered on the previous slide.
America, having had two phenomenal years where it has had standout growth and been the outstanding performer across our portfolio. We saw more subdued growth, but most businesses in the world will be delighted with a 20% improvement in TTV and a 13% improvement in bookings. Overall, our geographic mix insulates us and provides us with a broad platform to continue to grow our business going forward. Next slide. To put this all into context, our business is highly scalable, and there's no greater comparison than what we've been able to achieve in this first half compared to calendar year 2019. Over that journey, in six months of first half 2025, we've achieved a 1% increase on bookings than we did in the entire 2019. TTV is flat, which again goes to the change in mix as we've grown geographically.
As anyone who travels knows, hotel prices have increased. We are, to some extent, a beneficiary of that, but in aggregate, we continue to press into markets and opportunities where we've got domestic inventory that we're selling, where we're moving into faster growth, American domestic inventory. We're moving into Asian markets where that growth rate is offset by lower average booking values, but the net of all of that is we've been able to deliver that volume. We're able to deliver that processing capability at a 29% reduction in expenses, which goes to the theme of what happened during COVID and the investment that the business made to enable it to become a true global player and enable it to have a 10-year time horizon of growth over that journey.
As you can see, our customer service facility has enabled us to process 175% more customer contacts in this period with only 9% increase in headcount. The 29% reduction in expenses is predicated on the fact that, obviously, our employee costs have gone up substantially over that period, and yet we've still been able to deliver that level of efficiency. Tony will talk a little bit about the implications of our SAP investment, but it continues to be a driver of significant value as we get better insights into our business and centralization of all the finance functions.
And most importantly, as I think about our business and I think about what we need to do to continue to compete, the insights that we now have through the consolidation of financial information and customer data gives us a unique insight into what's going on in the travel world and what our responses need to be going forward to deliver the TTV growth that we expect going forward. And if you see the pie chart on the right-hand side of the page, you'll see that the things in gray are finance, IT, HR, customer service. We've been able to drive great efficiency in that area. The red component, sales and contracting, we will continue to invest in.
They're the things that differentiate us and create value for our business and enable us to expand the level of supply that we get and the value that that supply gives to our customers and enables us to penetrate more deeply into all the markets that we operate. There still is a significant portion of untapped potential within the business model, and we'll invest appropriately to ensure that we deliver the best outcomes for you, our shareholders. So if we move to slide 12, we're on track. Our pathway to 10 billion of TTV growth is in place. The focus, notwithstanding everything I have said about the revenue margin, is on profitable growth. We haven't gone away from what we have done over the course of our entire history, which is we have delivered profitable growth. Every year, we have grown the top line, and we've grown the bottom line.
This year has been an exception. But we're on track to the AUD 5 billion of TTV for this year. We're on track to get back to 50% EBITDA margins in FY 2026, and we can deliver all of that at these reduced revenue to TTV margins of 6.5%. So with that, I'll now hand across to Tony, who will go through the financial highlights.
Thank you, John. Good morning, everyone. I'll turn your attention now to slide 14, which is the first half financial summary. Let me summarize this way. Web Travel Group, I'll refer to as B2B, and Webjet Group, I'll refer to as B2C, just to make it a bit easier in the language. The statutory results in continuing operations represents the B2B business. And what you have in front of you there is the pro forma position in FY 2024.
One thing you've got to recognize is that when we did the demerger, we reported the statutory results as if the B2B were standalone from day one, and that was applicable in the comparing 2024 and in the first half 2025. As a consequence of that, what you'll find in the first half of 2024 results is items that relate to revenue and expenses that don't relate to the underlying operations of the B2B business. So as we've always looked at our business through the lens of underlying operations to the right, that continues to be the case. The other thing to call out there in the revenue line is, obviously, John hinted or mentioned the AASB 9 application.
The consequence of reverting from AASB 137 to AASB 9 meant, consistent with what we said last week, and there's been no change there, that there has been a tailwind in revenue in this first half, but a headwind in last year's first half of around AUD 3 million there, which have been incorporated into the results. So when I go through the underlying operations that have been reported consistently for the B2B business, when you go down to the corporate overhead line, I'll talk about that a bit more in the next slide because there is a bit of information to process there as a consequence of the demerger accounting that we adopted in the demerger booklet. Going down to the underlying EBITDA line of 70 for the group versus last year's 76. The next line there to understand would be the depreciation amortization.
At an underlying level, the first half, which I show, is AUD 10 million. We expected for the year to be AUD 21 million, an increase of AUD 11 million in the second half. Going down to the next line at EBIT, interest costs there are positive for the first half. As a consequence of the demerger and the removal of AUD 135 million of cash, which normally would sit on deposit in the enlarged pre-demerger group, would no longer be there. So therefore, the way to think about interest in the second half is the removal of interest income attributable to AUD 135 million that would normally sit there earning interest on behalf of the group. Moving down the line to tax is the next item at an underlying level. It's come in at just shy of 14% for the half.
We expect that to revert to 16% for the full year, and that would be the way to think about our effective tax rate going forward, as I mentioned back in May. The only other thing to call out there is discontinuing operations is the B2C business, the impact there, along with the gain from the demerger, which has been well documented in the demerger booklet and equally inside section six of our financial tables. So on that point, I'll turn to the next slide, which is corporate costs. What you'll see there for the first half is AUD 7.5 million attributable to the B2B business versus last year's equivalent of AUD 11 million. The 11 comes from the demerger booklet, and what we assume there in the FY 2024 demerger process for both B2B and B2C is the actual corporate costs incurred overlaid with dis-synergies.
So in the first half of this year, we don't have redundancies incurred as yet. So what we've done is appropriately apportion the corporate costs between B2B and B2C in the same ratio, which gives you 7.5. When you compare it to last year, there is a reconciliation in the appendix where the last year does incorporate 50% of the AUD 5.5 million of redundancies, i.e., another AUD 2.8 million, and then you also add another AUD 0.9 million of Roomdex cost, which has since been removed and incorporated inside the WebBeds business. So the way to think about corporate costs into the second half, meaning a standalone basis, it would be AUD 11 million, give or take, and then from next year onwards, it would be about AUD 23 million is the way to forecast it.
Then I'll move down to non-operating gains and losses, and I'll probably have to explain a bit more as to why the 2024 column has a restatement above it, and I'll probably start by going back a step and talking to the point that John raised earlier. When we were in COVID, we were foreshadowing and identified the necessity to consolidate our booking engines, which was a critical factor for us to be a scalable business coming out of COVID. But what was a challenge for us was, obviously, we had four enterprise reporting platforms, which some were more than two decades old. So it was critical for us to undertake the SAP implementation, and that process started in 2021 and concluded in financial 2024.
And that process enabled us to process the volume of transactions we have more recently, but also support us in the journey towards 10 billion and above. That process was done over three different phases. We kicked it off in financial year 2023. We went live with all booking platform data in financial year 2024, and then most recently, we migrated across support companies that house many of our staff so we can complete the process. And then more importantly, in the last quarter of the first half, we did a critical enhancement as it relates to the payables process that gave us more clarity and insight into the error rates. Through that process, we identified that, unfortunately, we had two legacy issues that came across at that time.
The first one's reported in the first half 2024 restatement column, which represents a period of time when we went live with the implementation in April of 2023 through to May of 2023. We were frozen out, and that prevented us from making a normal claim-back process from one of the key suppliers. We missed the claim-back window, and that process is all one-off in nature as a consequence of the freeze. So we've reported that as a non-operating item there. The other larger item, and this is detailed in the appendix and explicitly detailed in section six of our financial statements, is we've also identified a high degree of migration balances that are debits in nature, meaning they're either payment errors, overpayments, or disputes.
So, go back to 2019, and that total amount is around AUD 28 million, and that probably represents across the journey circa four basis points of TTV for the same corresponding period. So, it's small in nature, but unfortunately and disappointingly, it's been embedded inside our data and wasn't evident until we actually had that key enhancement done to the environment of supplier accounting that then unearthed that debit challenge. So, we've recorded that in the appendix, but also called out explicitly and gone through the details in the section six of the accounts. Through that process, obviously, as we had the accounting reviewed, the lawyer obviously raised concerns, which are now well documented. We talked to you last week in the course. I don't plan to revisit that, but that's how we got to where we are.
So if I then turn to the next slide, which is the waterfall on cash position. Now, the first portion represents the group consolidation pre-demerger. We closed the account at AUD 653 million. As John mentioned, we undertook a further AUD 19 million of equity-linked financial asset investment. To date, we've invested AUD 52 million. So if you add that back to 653, we would have been about AUD 705 million in total cash on hand. When you compare that to pre-COVID, the most cash we ever had was around AUD 211 million. So it's been a substantial accumulation of cash as we come out of COVID. As you would see there, we've allocated AUD 135 million net to the B2C business to ensure that they're well capitalized and have every opportunity to drive the growth in the demerger outlook. And for us in the B2B business, we have a healthy AUD 510 million there.
Going to the next slide, which is the balance sheet. A couple of things to call out here is that we're obviously going to undertake further capital management initiatives, which John will talk to in the back half of the deck. The other key thing to call out there is a negative there as it relates to non-current liabilities. This represents the standalone B2B balance sheet for last financial year. There's a corresponding adjustment inside the B2C balance sheet. They eliminate consolidation. So that's the way to think about the minus AUD 42 million and why it goes up to AUD 35 million. The other thing to call out there is the current ratio is sitting at a healthy 1.4, greater than one time, which is a key threshold for myself in terms of ensuring adequate liquidity in our balance sheet.
And then lastly, as you can see from a capital efficiency perspective, through the journey pre-COVID of inorganic and organic opportunities that we've been able to merge and seem to grow, it has driven a very high return on equity and a return on invested capital for the group, which will continue to enhance us on our journey towards 10 billion. Going to the next slide, which is cash flow. The pro forma columns represent the B2B business, and the statutory represents the pre-demerger business. So the focus for us is on the pro forma columns, and you can see there that we have a healthy cash conversion of 139% for the first half down on this time last year. As I called out back in May, we do expect cash conversion for the year being around 80%, and that's as a consequence of two factors.
One being, we are seeing a contraction around creditor days across the group, and the other being that we had a bit of a benefit due to the Easter weekend back in March this year, where payments slipped into this year as opposed to the previous year. Going forward, the outlook is that we'll have a cash conversion circa 100% as we climb towards a 10 billion TTV target. And lastly, just on relation to dividends, there is no interim dividend being declared for the first half 2025. Going then to the last slide, which is CapEx. This is the CapEx for the B2B business only.
In the first half, we did do an intentional acceleration of investment to fast track the rollout of the new point-of-sale solution, which John covered off back in the March strategy deck, its criticality for our business, particularly in driving growth in the Middle East. The second half, we de-accelerate, not dissimilar to last year. The outlook going forward from 2026 and as such will be the growth will be closer to inflation. On that point, I'll hand over to John.
Thanks, Tony. We have a new announcement to make, and the business has undertaken some capital management initiatives, as we've covered off already. They were announced on the 4th of September 2023. We now intend to conduct, in addition, an on-market share buyback up to a maximum value of AUD 150 million.
It's in line, obviously, with our objectives to maximize shareholder value and potentially reduce any dilution that will occur as a consequence of the AUD 250 million convertible notes that are due in April of 2026. These shares will be bought using existing cash reserves. While, obviously, we still have flexibility to continue to invest in our business, we won't start for at least two weeks as part of the regulatory process. Our business model is remarkably robust. The multi-supply aggregation strategy, which I've described many times over the last 10-plus years, gives us a unique vantage and a unique opportunity to grow. In the past, we were able to successfully grow that at 8%.
We now expect that we will have that capacity to continue to grow at 6.5% for the medium term. Q2 of 2025 was a difficult period for our business, and we think it was the low point for our TTV margin. As you can imagine, when you see a margin drop-off of the significance that has occurred, there's been an incredible amount of analysis and deep dive into every element of our business, and we certainly feel that we have a much clearer understanding of what's going on with pricing, what our responses should be, and we can do that now by market as opposed to a more granular, more aggregated approach that we've had historically. Our business is scalable.
There's no better indication than the fact that we can do all the things that we've done in this half with 30% less cost than we did in the entirety of 2019. And going forward, our focus, now that we've got the key elements of that scalability in place, is to focus on the value-add contributors of customer-facing salespeople and customer-facing contracting people to expand our supply and create value for the group. So moving on to the final slide, FY 2025 outlook. So trading for the first seven weeks of this half is up 23% compared to the same period last year. TTV margin for October was 6.5%, consistent with our expectation going forward. And for the group, we expect FY 2025 underlying EBITDA to be between AUD 117 million and AUD 122 million. So with that, Ashley, we will take questions from the audience. Thank you.
If you wish to ask a question via the phone, you will need to press the star key, followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Tim Plumbe with UBS. Please go ahead.
Hi, guys. I'm sure there's loads of questions, so I'll just keep mine to two. The first one, John, just thinking about your guidance in terms of medium-term stabilizing at 6.5% and then thinking about the comments in terms of changing geographic mix and getting a bit of dilution there. Can you just give us a sense? When you're saying medium-term, what kind of timeframe are you thinking about?
Does that imply that FY 2026 could be above 6.5% and then it works its way down over the medium term?
Look, Tim, the way I think about that is, and I'll bifurcate the response. The first part, if you've gone from 8% to 6.5%, as we did in the half, I can understand anyone's degree of skepticism around what our margin is going to go forward. And I sort of summarized it just before I did the guidance slide. We've gone through incredible detail across every element of our business, from every override agreement to every supplier override agreement to all the third-party agreements, and to look at what's going on in the marketplace and what's going on with our customers and how we think that will play out.
What we are stating today is that going through the back half of this financial year into 2016 financial year, that we expect it to settle around the 6.5% number. Now, we're not making any comments that it's going to go higher or lower. We're being as explicit as we possibly can with all the variables that I've described previously to factor all of those in. We think that six and a half is the way that people should think about our business for at least the next three reporting periods.
Understood. The second question's just around the cost base. Can you remind us again how we should think fixed first variable for the B2B business? Just thinking about that in the context of pretty quick margin recovery towards 50% and thinking about the outer years of AUD 10 billion, I note that you're no longer putting in that additional comment about 50% EBITDA margins in the outer years.
No, I think there's no well. I didn't think about that, to be blunt. The 2026 FY 50% EBITDA margin is what we would expect. We're not planning to be less than 50% going forward. It's always going to be so at a 50%. That does factor in, and it'll be no different to what we've said at the previous strategy day, which will be our expectation is that revenue would grow faster than expenses and contribute to the EBITDA number. Now, there's been a clear step change in this last five months. The step change has occurred since June.
That step change is what we anticipate for the next 18 months. We're not saying we're not going to get 50%. We're just giving you insights into the next 18 months. I would anticipate that 50% margin is what we would expect, but we're focused, I think, more granularly and near-term than we have about long-term aspirations. But the next 18 months, that's the sort of expectation that we would have in the market.
Got it. And sorry, just in terms of fixed versus variable, can you remind us how we should think about that?
Look, Tim, I've said this before. We have a 75/25, and of the 25, 10 is semi-variable. So 15 is pure variable.
But what we'll be doing, obviously, is continuing to leverage the great component of what was in that slide around economies of scale inside our business and invest in the red component, which is sales and contracting. So as we think about the 50% margin, that becomes what will by default become our cost envelope as we do our outlook. And then we go back internally and ensure that we can continue to invest in the right areas whilst getting further efficiencies in those sort of back office areas.
Understood. That's helpful. Thanks, guys.
Your next question comes from Abraham Akra with Shaw and Partners. Please go ahead.
Hi, guys. So I guess having a hard time reconciling the revenue margin step down from circa 8% to 6.5% still. I may get a pretty detailed explanation.
I did a back-of-the-envelope calculation for TTV mix by region by comparing the two periods. They seem overall the same. I'm just wondering what's one-off and what's not one-off. So overrides, firstly. Do you propose to pay these overrides in perpetuity, number one? And number two, European revenue margins, has there been more competition in the region to maintain these lower revenue margins moving forward to grow TTV?
Thanks for the question, Abe. Well, I'll start with the first one, which is easy. Customer financial incentive agreements will continue at the same rate that they were in the first half. European summer trading is a little bit more nuanced. If our business was just this, if our business was sell the same stuff to the same clients as we have historically, there would be no margin degradation.
If our business is that we want to continue to grow the market, grow our position, and focus on getting to 10 billion of TTV, we're not going to sell at the higher margins that we have with our existing customers. So that's a more nuanced version of our business, and then there are a whole bunch of other factors that drive that. What we sell to them, when we sell them to them, for example, if I sell them something the day before travel, it's at a lower margin than something I sold 30 days before travel. So timing, in fact, impacts all of that. So the answer is in slide nine of the deck that each of them have contributed to where we've ended up, and those things are now in place and are in play.
Yeah, but just to clarify, all these factors there, they're permanent. They're not one-off?
No, they're permanent.
Permanent. Yeah. Thanks for that. Also, I've also noticed the USA TTV growth, I guess, slowed down quite a bit in the Middle East, picked up. Is the Middle East a function of your HTML, I guess, refresh? And is the USA market chasing more inventory, or is the low-hanging fruit, I guess, already out the door by your sales team?
Yeah. Look, well, they're exactly as you've just described. The HTML site has contributed to our success in the Middle East, and it's our performance. The Middle East has been a laggard in the recovery post-COVID. The USA has been, and the Americans, but predominantly the USA has been a phenomenal uptick, and it's just slowed down in this six-month period. There's nothing beyond that. Yep. One more, if I can. Customer mix impact.
Do you mind providing some insight to what your top three customers provide as a proportion of your overall bookings?
John, hit me by. 20 years. Top three customers.
What are we talking about?
5%?
Yeah, about that.
About 5%, Abe.
Awesome. No worries. Thanks for that. Thank you.
Your next question comes from Lisa Deng with Goldman Sachs. Please go ahead.
Hi. Thanks. I just wanted to still get a bit more color on the puts and takes to the 6.5 over the medium term. So the customer overrides we've talked about to continue. Geographic mix probably still driving some erosion. The management focus and pricing response for Europe potentially slightly better is what I'm getting. So then the supply mix and the customer mix, can we talk a little bit about that forward trajectory?
Is that supposed to be positive to the revenue margins for us to get to that 6.5%? What's the forward trajectory for these two?
That's a very apt summary, Lisa. I think where you've headed on those four points directionally correct. Supply mix, in very round terms, 50% of what we sell is directly contracted. Circa 15% is through international hotel chain agreements, and 35% is third parties. That would have been as we finished the end of 2014. We probably saw an erosion of 2% to 3% on the supply mix towards third parties and away from directly contracted hotels. That's a negative. We will endeavor to reverse that over the next six, 12 months. That's the supply mix one.
Customer mix is neutral in the following sense that there are some customers that are fairly large that have an outsized impact on margin, and then there's a plethora of smaller customers that have typically a larger margin than the larger guys. So that one is we view that as sort of neutral. As we continue to grow new customers, typically they're smaller, and therefore they should be higher margin.
Okay. So it's really the supply mix that we need to get better to be able to deliver that 6.5% of all the controllable factors that we have. Do I understand that correctly?
Yes. Well, no. I think we have control over the factors at this current point. We have an understanding of what drives all of the outcomes.
The expectation on our expected sales performance over the course of the next 18 months suggests that the things that we have insight and control over and the things that we can influence will enable us to get the 6.5%. If we can improve the supply mix and all other things remain stable, then that would see a slight uptick. But I'm not forecasting that. I'm not saying we're going to do that. I'm saying that there are, and it's the whole reason that I spent considerable time on slide nine in the presentation to give everyone a high degree of clarity about what drives our margin. And there are, as I said, a confluence of factors that influence it. If we improve supply mix, of course, if I sold 100% directly contracted hotels, our margins would be significantly higher than they are today.
Yeah. Got it. Second question is on page eight. I thought the breakdown of the driver of how we're outperforming the market is quite interesting, and so looking forward, do we maybe commentary on each part of the three drivers as well? The market, new customer supply, and then conversion uptick as well, please. What's the trajectory on these three?
The market is the market, so that'll be whatever the market grows at, and that's point one. Point two will be, depending on the success of the sales team. Point three, all the work that we're doing behind the scenes at the moment to improve conversion. All of this is embedded in our 10 billion TTV expectation. This is the 25% that we're getting next year. It'll be whatever next year's forecast is.
We haven't put a number out, but to get to if you go to slide 12, to get to 10 billion from 4 billion at 17% CAGR over the journey, if we do 25% at FY 2025, then that CAGR probably reduces down to 15%. So that'll contribute to the 15% CAGR required to get us to 10 billion. So the reason we call it out is the market grows or contracts, as we saw during COVID, but the market will grow at a rate. We want to call out our outperformance against the market growth rate, and points two and three are the things that we've invested in. So we've got a sales force that's banging on doors every day. They get new customers. We've got a contracting team that's getting new inventory.
We separate that out, and then we think of what do we do with our existing customers with our portfolio and how much more volume do we get from them, and that'll be the key factor that drives that 15% CAGR from 2025 onwards. Do you have a view of how the market might fare from the 3% that we're looking at now? Are we looking at an improved trajectory, or you don't think there's not much from here? I think it'll look, I take my steer from public disclosed statements of forward bookings that airlines put out. I take my steer from what hotel chains publish. The 3% is a representation of the market for the last six months. I think everyone's suggesting that's roughly what will happen for the next six months. There's high prices in market. Volumes are declining as a growth rate.
So most people, and from the various hotel groups that I spend time engaged with, most people are happy with their average booking value and are quite comfortable that modest volume growth will achieve their financial objectives. So the market will grow. We think the market will grow circa 3%, but all I'm doing stating that number is recycling other people's thoughts.
Very last one. What was the consideration behind the AUD 150 million buyback as opposed to buying the convertible notes? And then also the equity-linked financial instrument. What is that, and why are we doing that?
We've covered that previously, and there are other questions that I'll need to address.
So I'll take that offline with you, Lisa, and have a chat.
Okay. Yeah. Okay.
Your next question comes from John O'Shea with Ord Minnett. Please go ahead.
Morning, John and Tony. Can you hear me okay?
We can hear you, John.
Thank you very much. Thanks for taking my question. I had a couple of questions, but some have already been answered. I guess if I think about the business this way, in first half 2025, EBITDA to TTV ratio margin was kind of circa 3%. Your revenue margin was 6.6%, which obviously implies a cost-to-TTV ratio of 3.6%. How should we think about it? Let's assume that the 6.5% is permanent-ish. How should we think about that 3.5% number moving forward? So therefore, that would give us some sort of a guide as to where the EBITDA to TTV margin might go. And your sort of plans around that number and the initiatives you're putting in place as to where that's going and what you're doing.
Well, you've accurately summarised the key metrics within the business.
How you should think about it is next year, I can be no more explicit than I've been so far. If it's 6.5% revenue to TTV margin and a 50% EBITDA margin, then your expenses are going to be your OpEx is going to be 3.25%, and your margin's going to be 3.25%, and then you can see that we've got an expense line that's going to be roughly the same. First half, second half, you can multiply that out by a percentage increase in FY 2026, and then you can, you know, that unless something dramatic happens, our TTV momentum will continue, and I can tell you it will continue for the following reason. We've got annualization of all the clients that we've picked up previously that come into this year's results, there is annualization of the new clients that we've won in FY 2025 that will go into FY 2026 results.
And then I have literally hundreds of people focused on conversion within the organization, and how do we increase that? So the sales number will continue. The TTV growth rate will continue. And you can do the math better than I can, John, of working out what those will be. But directionally, I think we've been as explicit as we possibly can be, which is we expect circa 50% EBITDA margins next year. We still did a great job this year in EBITDA margins. I'm not suggesting we did a great job in revenue margin, but 44% EBITDA margin. If it wasn't for Web Travel Group delivering 44% EBITDA margin, we'd be top of the tree globally. But our 44 is down from our circa 50. So we know the gravity of what's occurred, and we understand it.
We're certainly doing everything we can to possibly rectify that going forward. I won't say we've retooled the business, but our business now has an acute insight into every layer of expense and every layer of revenue that comes into the business because of what's occurred. Our focus is on ensuring that our profitable growth on the back of increased sales in FY 2026 will deliver us a 50% EBITDA margin.
Yep. If we took that a step further, John, without putting words in your mouth, so let's just say that TTV number this year is circa 5. Obviously, you've done 2.6 in the first half. Let's say the year after is 6, which I think you've indicated previously. I'm not suggesting you're guiding to that. If one was to apply 3.25 to 6, then that would be the implied EBITDA for FY 2026. Is that too simplistic?
As a model, it's one. It's one of many. There are variable outcomes. I think if you were to do that modeling, John, there would be numbers below 6 that would still get you a 50% EBITDA margin. Yep, of course. Understand. But conceptually, that's within the realms of what you've effectively described to the market.
Correct. Conceptually. Thank you.
Thank you.
Your next question comes from Bob Chen with JP Morgan. Please go ahead.
Hey, morning, guys. Just two quick ones. One, just circling back on that margin guidance at 50%, that's for just the B2B business, excluding the 23 million of corporate costs for next year. Correct. Yep. Okay. Easy. Then just around the trading update, this seems to have implied a slight slowdown in the first seven weeks of trading. Anything we should be reading into that, or is it just seasonality playing through?
We're on track to do AUD 5 billion. Whether it's 2023, 2024, 2025, it's within a bull's roar of each other. I wouldn't read anything into it. We're just getting bigger. We're just getting bigger, and the numbers if you're banging out 25% on AUD 2 billion, it's a little bit easier than banging out 25% on AUD 4 billion. So we're just getting bigger.
Okay. Great. Thanks, guys.
Your next question comes from Ben Wilson with Wilsons Advisory. Please go ahead.
Thank you. Morning, gentlemen, and thanks for the detailed explanation of the movements in the margin. I just wanted to ask, I guess, a more sort of industry-wide high-level question on revenue margins.
I guess one directional reason for a fall in revenue margins recently has been the fact that occupancy has materially recovered since the initial pre-COVID reopening, which does imply an incrementally sort of lower need for the wholesale channel. But looking forward, there is a huge amount of new supply, new hotel supply coming on stream, in particular from the major chains. And that will need to be filled as it comes online, which sort of implies a refreshed need for the wholesale channel. I just wonder if you could comment on that, whether you do see that sort of underpinning a next layer of growth for the channel globally, or if it's really sort of other factors at play. Thank you.
Thank you, Ben. Fundamentally, without trying to be confrontational about the question, I fundamentally disagree that there's any decline in the need for wholesale inventory in the marketplace.
I can say without fear of contradiction on this call, I would speak to more hoteliers than any of you, and without exception, there is a need for global wholesale distribution. The alternative, and why I'm so emphatic about this point, because I've been in this industry for 20 years, and over the journey, there has always been an expectation that wholesale inventory would disappear from the marketplace. Yet there is no empirical evidence to support that assumption, so let me be really clear. When I worked at GTA back in 2006, say, we were the market leader, and our FIT business was worth EUR 1.2 billion. So AUD 2 billion, and we were the market leader in 2006. Now we're a distant number two, and we're on track to do EUR 5 billion, and the market is we will continue to grow.
I speak to hoteliers without exception, and they never say, "You know what I want to do? Have only all my sales go through online travel agencies. I'd like to be at the behest of two global behemoths, and have my exclusive distribution to be done through that." Everybody we speak to, without exception, know how they do it and what they price and how they give us inventory is more nuanced than what I've just suggested. There is an overwhelming sense that hotel wholesale distribution is here to stay. There are more than one platform that sells hotels than OTAs. We contribute to the facilitation of that ecosystem. For all of those reasons, we see wholesalers being important.
So much so that our internal benchmark and the way I think about it is for us to be relevant to a hotel, we need to be 1% of their total sales. We're not the largest. So that would suggest there are many multiples of that out in the market. We've suggested that in the overall distribution channel, this is a $100 billion marketplace. So for all of those reasons, the wholesale channel exists just as it did 20 years ago and will continue to exist in the next 20 years because there is no other more efficient way. If you just go down to the bare bones fundamental of economics, there is no more efficient way for a hotel supply to connect to a multitude of customers than through a pipe.
There cannot be a one-to-one relationship between every hotelier and every customer. It would crush their systems, and you'd have 10,000 hotels being popping up from disparate sources. We provide efficiency in the market. So for that reason, we're more than comfortable that we have a place in the world, not only a place today, we have a place for the next 10, 20 years. Every published data, whether it's from any of the reputable research houses, shows this will continue to grow. Don't even know if I answered your question, Ben.
No, no. That's really helpful. Thank you, John. Great to hear that. Just my second and final question, if I may. Just on rate parity, just wondering if you can give us a refresher on that.
I think you've said previously sort of the consolidation to a single platform has helped sort of WebBeds efforts to, I guess, police or control rate parity. And I think you've got your rate parity monitor tool. Just wondering if you can, I guess, give us an update on where you sit with that now, if you do still see some issues, whether in particular regions or not. Yeah, if you can just give us an update on that. Thank you.
Sure. One of the things the OTAs do really well is ensure that they sell pricing at the rates that the hoteliers want them to. And that's known, as you accurately described, as rate parity. One of the things that differentiates us as a wholesaler is we ensure rate parity as best as we possibly can.
Our business is predicated on the following basic assumption, and it was no different when I was running Webjet, and that you need to have active, positive engagement with your supply partners, and rate parity is a fundamental element of providing that in the hotel industry, and we continue to monitor and ensure that we are compliant with the hotel's distribution requirements, so that's predicated and fundamental to the ethos of the company, so that's in place. We continue to enhance it. There are lots of things that we're doing to ensure that our partners continue to partner with us, as evidenced by the fact that we keep selling more hotel rooms for them. They're delighted with what we're able to do and ensure rate parity arrangements are preserved going forward.
Okay. Thanks very much, John.
Your next question comes from Ben Gilbert with Jarden. Please go ahead.
Morning, John , Tony. Just on the, sorry, apologies, you asked another question. I know I've asked this many times, but just around the revenue margin, you sort of always sort of, I suppose, sort of plan for the worst, hope for the best. Just interested in terms of if there are opportunities to think about taking on inventory again. You've obviously got a really strong balance sheet. You get more control over product. You get high-margin products. You probably insulate, and I fully appreciate the previous answer question that the OTAs aren't something going to take over the space because you're needed, but you probably slow some of that shift in terms of mix within business. Do you rethink your willingness to take on inventory at this point in time to sort of build the moat of your business even more?
Look, that's obviously an interesting question, and it goes to the fundamental nature of how we compete. If you look at our business pre the margin reduction that we're seeing today, it was comparable to the largest player in the market's margin, and they had a substantial proportion of their inventory coming through pre-bought inventory and various other variations of it. So from our perspective, it's not something that is fundamental to our ability to execute and to drive the 10 billion we can do without having to go down that path. So we have a very great business.
We've had a shock to the business over the course of these last five months, but in that, we've refocused about what is it that we do exceptionally well and how can we continue to deliver great outcomes for our supply partners and how can we continue to be relevant to our customers, and we think that our focus remains on the multi-supply aggregation strategy that we have in place, the combination, again, without wanting to repeat myself, but I will, the directly contracted hotels, international hotel chains, and third parties. We think that's an optimal outcome for a low-cost, scalable business that will drive 50% EBITDA without having to engage into a more capital-heavy pre-bought inventory environment.
Just to conclude that sort of thing, you don't think that sort of this push by the OTAs can probably become less so customers, more so competitors and groups like SiteMinder, etc., launching these products means there's going to be a continued slow shift. I appreciate it's not going to take over the market, fully appreciate, and you've got a really strong front end. You're not going to see that sort of slow, gradual shift towards more towards third parties. You don't think that's the case?
I can be very explicit in answering this question. There is no OTA. There's no publicly disclosed OTA that's growing at the rate that we are at a sales rate. So the market is a market of plurality. I can't even speak anymore. It's a market that is not homogenous where it's a single point of distribution of inventory.
It's not a market where one player dominates the entire market. To the consumer market, there's two very, very, very strong players who have global presence and contribute to the story, but they're all growing sub 10% as consumer businesses. We're growing at 25%. We will continue to grow at a faster rate than the market. We'll continue to grow at a faster rate than they do. I don't feel I need to do anything other than focus on the things I can. My focus will be and will continue to be delivering margins around the 6.5%, growing our customer base, improving our supply mix, and ensuring that we maintain relevance to everybody at both ends of the spectrum. That's what we'll continue to do.
Thank you, Alvin. Very final quick one for Tony. Just on that cost split, you said it's around sort of 75 fixed. We should assume sort of a CPI type increase of fixed, and then we make our assumptions around the variable component relative to revenue and TTV.
Correct. Correct.
Thanks, guys. Appreciate it.
Thank you.
Your next question comes from Sam Seow with Citi. Please go ahead.
Morning, guys. Thanks for taking the question. Look, just want to talk about revenue margin just quickly. It looks like second quarter 2025 might have been a low point, but it's since improved to probably 6.5 in the Q3 there. You talked about overrides being the same. So just wanted to understand what's driven that sequential improvement. Thank you.
Good question, Sam. And self-flagellation isn't my strong suit, but what we did in response, and I spoke about this during the call, what we did in response to the European summer trading is when we didn't see the margin recover, we continued to price down and chasing volume. And it was an inappropriate response to what was going on. It's the peak period. It's the period with the lowest availability. And we were pricing down. And for the sales we probably would have got anyway, we were taking a buck off the price and sacrificing margin along the way, which was an inappropriate response. So yeah, it was lower than the 6.5 in that quarter. And that's a little bit, and I want to be as explicit as I can because obviously this is the potential burning platform for the business if it was to continue.
There was the reallocation or the customer financial incentives all falling into that quarter as well, not being smoothed out over the six months, so those two were the major contributors to the low point of Q2. Q3 is, as what we said, and I'll repeat myself, the expectation is that in the next three halves, next three reporting periods, that's what our expectation is based on everything that we can see about the business and where it's heading and what's going well and what we need to continue to focus on to improve.
Got it. That's really helpful, and then maybe just again in your prepared remarks, you mentioned an influx of inventory in recent months. Just wondering what you mean by that. Has there been material change in the competitive environment, or where's that inventory coming from?
Sorry, the inventory, I think this is the reference. It was FTI bankruptcy in June. That was the influx. That was circa AUD 2 billion hit the markets all at once as people were scrambling to rebook all of FTI's customers. That was the influx of previously booked inventory. It's not a change in supply mix. It was just a change at that particular juncture because a major player went bankrupt in the travel industry.
Okay. That's helpful. And then maybe just on that, maybe could you talk about the competitive environment then, if it has changed or not? And two, are you selling or powering your competitors at all by selling them inventory?
I'll answer the second part. The competitive environment hasn't changed dramatically in the last six months. The margin scenario has for us. If the competitive environment had changed, we wouldn't be growing at 25%. So yeah, we sell to everybody.
We sell to our competitors. We sell to—and our competitors, they're part of the third-party inventory that we sell. So yes, we are in a co-opetition model.
Okay. Thanks, guys. Appreciate it.
Your next question comes from Wei-Weng Chen with RBC. Please go ahead.
Hi guys. A couple of questions from me. So your business has gone through an incredible amount of disruption in the past six months. You've had a demerger, executive resignations, deteriorating financials. Can I ask about your sense of staff morale and engagement, and how much of a priority is that for you?
Delightful shift in question, Wei-Weng. So thank you for focusing on a slightly different topic. Of course, it's important. I've run this business for over 13 years. I'm talking about the Webjet business as well as this business, over 13 years.
We've had an incredibly stable management organization, which I think is a great positive. I take great comfort that I've got a reliable management team that has executed at an extremely high level over a long period of time. The key components of that still remain. Over the last two months, I have been to all of our major geographic centers where we employ people to get a sense of what's going on and understand how they feel about the business. There is, as you could imagine, limited things that I can say even to our people internally about forward-looking statements. There is a degree of concern when you see what's happened to our share price over the last four months. That's a topic.
And there's also a disconnect from their perspective in that they can see sales are going great, and yet the underlying value of the business has declined. So we have to step through that. I will do an all-employee call tomorrow night and go through it in a lot more color. But to go to the nub of your question, for the most senior people that I've had interaction with, there is complete buy-in to our processes. We are still notwithstanding the turmoil that we've been roiled with on the financial markets. We've got a senior leadership team that wants to be part of this organization and will contribute successfully for us over the next medium term, long term, however long that they're around. They're bought in.
Yeah. Okay. No, thanks for that. The actual management resignations, are they being used as a cost-out opportunity, or will all those positions be filled?
We're talking to people. It's not material.
Okay. Just a question that I've been asked, and I'm sure many of my peers have. If margins can go from 8% to 6.5%, why can't they go to 5%? I guess I don't have a great answer. Hoping you could give me one.
Yeah. Good question. There's no downward impediment. It's sort of like why investment banking rates can go from 3% to 1% or 1% to 0.1%. Market forces would dictate that efficiencies would need to be delivered. Sorry. Market forces would dictate that supply would need to be deliverable to a broad-based customer. These rates are now sub-OTA rates.
You think of our 6.5, and then you get a retailer adding a 7% margin on top of our 6.5, that's 13.5. That's sub an OTA rate. That's a lower cost of distribution for the hotel industry. So they want a broad-based supply. They don't want to be locked into two customers. So those two customers don't control circa more than 20-25% of the global market. So it's the other 80%, 75-80% that people need to sell into. So all of that is why we're relevant. Now, I can go to, as we have done, look at what our competitors are pricing, look at what their margins are, look at what ours are. I've done it not by a simple 6.5 across the board. I've done it by every market that we operate in.
I've done it from a market that's. I'll pick our lowest booking value market, something like the Philippines to something like Norway. And by market, we have gone through and looked at what our margins will be, what the incentives are in market, what is the supply mix that we're providing to those markets, and how are we going. And that's the only way I can answer it. It's like most things in life. It's a matter of faith.
Yeah. Okay. All right. Thanks so much.
Your next question comes from Sophie Mulligan with Macquarie. Please go ahead.
Hi guys. Thanks for taking my questions. Tony, just two for you quickly. The first, just on the corporate cost allocation for the first half. Could you just explain why that was probably lower than expected and why that will normalize from here?
Yeah.
Look, it's allocated consistent with the way we did the pro forma P&L in the demerger booklet. It assumes corporate costs, which myself, Shelley, and John are part of, are proportionally split between B2B and B2C. So if you look at the B2C results, they've got about AUD 6.1 million. Add the AUD 7.5 million is what we would have been collectively if we did not demerge, which is pretty much consistent with last year's sort of AUD 13.3 or AUD 13.5. But then going forward from the 1st of October, our cost, as an example, won't be separated. They'll be all sitting inside the B2B business. So on a run rate basis going forward, the actual standalone cost is closer to 11.
Yeah. That's helpful. And just second, sorry, just on CapEx. So you called out the expectations for CapEx from here. Can I just clarify, is that all for maintenance CapEx or is that growth CapEx?
Growth CapEx is here. So it's pretty much what drives the variability there. You can see that the ratio there or the first half second half split isn't inconsistent. We did intentionally accelerate for the reasons John outlined earlier on the point-of-sale solution, which had a benefit to the Middle East as demonstrated by their highest TTV growth across all the regions in this first half.
Great. Thanks, guys.
Your next question comes from Aryan Norozi with Barrenjoey. Please go ahead.
Hi guys. First one from me. Just on the net cash balance. So I mean, at the pro forma demerger docs for FY 2024, it was AUD 303 million of net cash, and first half is AUD 280 million.
Given the fact that you've obviously generated cash of 138% conversion, there hasn't been a lot more outflows below that apart from CapEx. Why does net cash step down from FY 2024 pro forma levels, please?
Also, we did the $20 million buyback thereabouts as the capital management initiative in that same timeframe. And equally, the working capital outflow was less as well as the contribution. So credit to date is contracted. Last year, we had a more material contribution from working capital. This year, we don't.
Yeah. But you're generating, you made $70 million of EBITDA and 138% cash conversion, and CapEx is $25 million of the equity incentives program, but it still doesn't reconcile why it's down by $20 million on FY 2024. Is there any other adjustment that you made on post-demerger that makes the FY 2024 pro forma number not comparable?
The only thing there is obviously intra-company cash.
There is an element there of intercompany loans between the two companies. So there is a contract of AUD 32 million sitting in the B2C business. You look at their cash flow and their pro forma. That's probably the only other item to call out there.
Okay. Okay. And the 6.5% revenue margin in October that you've called out. So can I just confirm, first of all, is October a sort of seasonally normal period? So there's no peaks and troughs there. And secondly, you fixed the European pricing issue in fact that you're not discounting basically no volume benefit. But then if you haven't improved that third-party mix, so is there upside to that 6.5? Or is the way you're thinking about it, if you improve the third-party mix, then you've still got geographical mix headwinds and you're giving yourselves a margin of safety?
Can you just talk through sort of the three sort of moving parts there?
Yeah. I think I covered it a little bit earlier on with some of the earlier questions. I forget who asked it, but we're guiding to 6.5%. In simple terms, if we improve supply mix, it'll be better than 6.5%. There are some other contrary things that are occurring with geographic mix that could make it lower, but we're very comfortable that in aggregate, with all the things that we can have clarity over and insight into what will happen down the track, we think that we're comfortable guiding to 6.5%, and I'd be concentrating on that. I know there are various elements that can go up and down, but we expect it to be over the medium term, 6.5%. And to go to your first part of the question, yeah, October's normal. 6.5% is normal.
It's a shoulder period. It's not the peak summer, Northern Hemisphere summer. It's not the November, December where it starts to slow down a little bit. Okay. So just to clarify, the 6.5. So within that guidance, you're factoring continued compression from obviously geographical mix because you know what you're sort of targeting. But then the upside obviously isn't supply mix. Okay. And the guidance of EBITDA for FY 2025, that only includes the AUD 2.5 million of AASB benefits. There's no assumption you're making your own AASB for second half. There's no upside to that number in the second half expected, and that's included in that number, correct.
Okay. Perfect. Thank you.
All right. We'll move to the last question. We're run out of time. It's 10:30 A.M. So last question.
Your final question is from John Campbell with Jefferies. Please go ahead.
Thanks, guys. I hung in there.
Good to get the opportunity. Look, just two quick ones. Firstly, John, is the wholesale market or the wholesale channel, is it growing per se, or is it sort of just holding its own?
I think it's growing at the rate the market's growing, John. That would be my assessment.
Yeah. So clearly, the top couple of players within the market, including yourself, are taking share effectively, taking significant share.
100%. 100%. The three of us collectively would be outperforming at a similar rate. Look, I can't speak for one of them, but obviously, Expedia has got public data. They're not growing as fast as us, but they're having a great, they're growing incredibly well. I don't know the other guys because it's not published, but I know they're doing well. So the three of us are massively outperforming the market.
It's, thankfully for us, consolidating towards the three of us, and that's a great outcome for our business in the medium term.
Yeah. And do you still see a long tail of sort of subscale competitors that are sort of eking out an existence but not really offering a great offering?
Yeah. Absolutely. I just came back. There's two major trade shows that we exhibit at, and one is World Travel Market, which is in the last week, sorry, first week of November, which means, unfortunately, every week I don't get to celebrate Cup Week. But the consequence is I always look around and I see many of the same tired, sad organizations that are doing nothing different to what they were doing five, 10 years ago. And there's occasionally a number of new entrants who come in who then disappear two, three years later.
So that cycle continued when I was at WTM, thinking about who wasn't there anymore and looking at some of the new guys who have replaced them. So it's still a dynamic marketplace. They're still attractive. It's massive in its scope. It's got incredible importance to the travel ecosystem. So for all those reasons, we'll be here long after I've left this mortal coil.
Yeah. Look, last question. Share-based payments, do you expect that they would continue at a similar rate to what we saw in H1?
Yes, in short. That would be the expectation going forward. We'll formalize it all post these results because the accounting's always predicated on the closing share prices, a bit of variability there until we close it off. But yeah, directionally, it's the best way to think about it.
Yeah. Great. Thank you, Tony, and thank you, John.
Thank you. Thank you, operator.
Sorry for those guys that we couldn't get to. I know there's more questions, but we've run out of time and got to go to our next meeting. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.