Good morning and welcome to Webjet Limited Financial Year 2021 Full Year Results Briefing Conference Call. Today, we are joined by John Gossett. I'll now hand over the call to him. Please begin your meeting.
Thank you, operator, and good afternoon, everyone, and welcome to the Webjet FY 2021 results. The first that reflects our March 31 year end. Joining me on the call today, I have our CFO, Tony Risteski. So whilst we wait for markets to open, we have not stood still. We've taken the opportunity to transform our business to be ready for the recovery.
We've looked at ways to be more agile, lean and efficient across the entire business from service and quality to operating and marketing to capital strength and management restructuring. We've created a global platform that will reduce costs at scale by at least 20% and provide the structural support to focus on those markets that we will rebuild fastest, where competitors are weakest and we can target the number one position. We see a world of opportunity. We know people cannot wait to travel, to reunite with families and loved ones, to embark on adventures and to explore the world. Webjet has significant cash reserves.
We have a team that's always been agile and hungry to win And we are ready to go. Business is powered for recovery and we're already seeing that In the results in FY 2021, in every market that's opened up and has had material volumes, and I'm talking about The domestic flights market in Australia, the webbed North American market, we have increased our market share by at least 50% compared to pre COVID levels. We saw in FY 2021, the key highlight is the Webjet OTA return to profitability, And that's been driven by domestic leisure markets reopening, and we have continued to take significant share. On the Webex side, we've seen improved booking performance over the last few months, but many regions are still being impacted by lockdowns and travel The transformation initiatives that we will cover later on the presentation enable us to refocus our business Maintaining and extending our cost efficiency lead and improving ourselves when we get to scale. We started that business in 2013.
We targeted 8.5.3 percent, 8% revenue TTV margin, 5% cost, 3% EBITDA. We then shifted 2 years ago to 8.44%. Our new target is 8.35%. And we'll talk about how we're going to get there a little bit later on in the presentation. A strong capital position has us with pro form a cash $431,000,000 Our FY 2021 average cash burn was $5,500,000 a month And all our debt has moved out all the maturity of our long term debt has moved out from November 2022 to November 2023.
We are ready to capture demand when travel returns. Our global footprint remains intact. Our customer base is diverse and large. We have significant exposures to domestic leisure markets and where domestic leisure markets do it now open up, we're able to tap in With the new contracted hotel rates that we have for that business, we have improved efficiencies across all businesses, which you'll see a reflection about revised cost base for all of our businesses. And as markets reopen, we are starting to see bookings come through in all businesses.
Moving on to Slide 4. PTV and bookings growth are occurring as markets reopen. The standout performer for our business in FY 2021 was the Webjet OTA business, where we're seeing consistent growth Over the course of the full financial year, over the 9 months and as we roll into April of the start of new financial year, We're seeing that we are delivering 95% of pre COVID flight bookings for the corresponding April period of 2019. Online Republic has improved its performance during the course of The final quarter and that continues to step up in April. We actually made money in the month of April.
It's First time Online Republic has made money since the pandemic and we are through the combination of a better product mix for domestic markets, Lower cost base and revitalized management, we're continuing optimistic about the possibility, The outcomes probable for the Online Republic Business. The Webbed Business has been the most impacted by ongoing travel As markets open up, we are seeing bookings pick up. The best example is North America, which is now traveling at 83% of April 2019 numbers. To put that into context, the overall flight market in North America is less than 60% of its 2019 capacity. And if you reflect on our historic Webbeds business, it's been an international outbound business In a market like North America in which international outbound has been severely curtailed over the course of the last 12 months, That's a reflection of our market share is a pickup of our domestic led strategy in that particular market.
We are on our financial summary. Tony will go through this in more detail. The difficulty, obviously, is The first of our new financial year, it's a 9 month financial year that we've just completed. The EBITDA results doesn't make for an immediate compare. However, for the underlying operations for the business for the 9 months, we had a loss of $56,300,000 at an EBITDA level.
At a statutory level, the loss was $125,300,000 but it included $69,400,000 of non cash items. Cash position remains extremely strong. We started the Financial year was $210,000,000 And on a pro form a basis based on the convertible note being raised On the 1st April, we finished the year at 431,000,000 Clearly, it provides us with significant liquidity for any circumstances in the recovery as well as giving us the opportunity to look at M and A down the track. If we look at our cash burn rate, the 3rd quarter cash burn rate increased So $6,900,000 This was due to two factors. One is that we paid some finance Cost during the month of roughly $700,000 and the significant improvement in working capital driven by the improvement in our B2B Business plateaued during the quarter, so we didn't get the tailwind of improved working capital.
Overall, the business has done a good job in incorporating, getting everybody back to 100% salary and a reduction in significant government subsidies, all of which have been offset by the strong trading performance of the Webjet OTA Business. As we have explained many times over the years, as the our business grows, the working capital cycle is a positive to the production of cash for the business. And as markets open up during the balance Of FY of calendar 2021, we would expect to see a continued improved working capital position for the business. Moving on to a more detailed look at our respective business units, we'll move to webbeds. Our transformation strategy has been underway for 12 months now.
There are a significant number of initiatives The entire business has been focused on. As we can see, our cost base is down for the 9 month period of 42% on a compare basis. We are seeing, as I've already called out, bookings being impacted by when markets Open up and how markets have handled the vaccination process, but we are starting to see An improvement in the underlying business and we expect that to continue throughout the new financial year. Our business margins are expected to be similar at a TTV level to pre COVID margins, which will be around about the 9% number. The current margins are clearly impacted by skewing to our lower margin businesses, primarily in APAC and the USA.
As I just mentioned, the standout performer for us is the 1st market that's opened The business in the B2B side is North America and we're seeing an improvement That's quite material in against the underlying market. And we have a high degree of certainty That the North American market will exceed the pre pandemic results by the middle of this calendar year. So we're well positioned in markets that open up to outperform at a top line level, primarily because As the world has changed over the course of the last 12 months and supply arrangements have been modified and Consumer behavior has changed. We have skewed our sales efforts to 2 areas. 1 is On the supply side, getting domestic inventory across all of our markets and you already can see the success of that in the North American business.
And on the customer side, we are leveraging the relationships that we have with OTAs across the world. The consequence of having a more viable product offering for the OTA market sees that the overall B2B market that wet beds is addressing has actually expanded beyond the $70,000,000,000 market opportunity that we saw pre pandemic. The OTA business has continued to be the key driver of the Webbed business, and we think that will be Sustainable in the recovery, notwithstanding that we have a diverse customer base and diverse and a broad geographic mix, which incorporates not only ATAs, but super apps, which we expect to grow and wholesalers, which give us access So niche providers of sales of hotel room that we previously would not be able to tap, we think that will be the 3 drivers that We have an expectation that retail travel agents, corporate travel agents, tour operators will still exist and will still continue to have a viable place in the travel ecosystem. However, we also believe that they won't grow at the same rate as the aforementioned OTAs, super apps and wholesalers for our particular business. Moving on to Slide 10, our transformation strategy has been well underway for the last 12 months.
And the primary motivation behind the transformation strategy is to be the low cost provider In a business of scale that is the Webbed B2B business, in a business in which Competitive advantage is derived by being the low cost provider. We've taken and continue to undertake significant works that will enable us to take costs out of our business at scale and improve our ability to generate efficiencies at scale by reducing our cost base by at least 20%. There are a broad range of initiatives. We previously a couple of months ago gone through this quite extensively over a 1.5 hour presentation. The financial the information is still available on our website.
The people who want To explore to look at what we're doing and explore the initiatives underway and how we expect to drive the outcomes that we're focused on. The net results of that cost base improvement is that our Profitability target can now reflect with a high degree of confidence that we can get to a 5% EBITDA margin against our TTV. The net result is we expect on our targeted basis that our 844 can transform quite seamlessly at scale to an 835 model. And if we go to Slide 12, We have the opportunity of looking at how that has progressed over the journey of the Webex business. Our profitability pre COVID continued to improve at an EBITDA level.
And we started the business back in 2019 financial year 2013. And as I reflect back on our first sales of $14,000 in February of 13, we spoke about at scale trying to get to a target of 3% EBITDA on the back of 8% revenue to TTV Margins. As we made scalable acquisitions during our journey, primarily through Jack and DATW, our margins kept improving. And as we reduce the organic investment in our business, we saw those EBITDA margins get above The 853 target, we revised that target in the first half of financial year 2019 to 844. Pre COVID, First half of FY 2020, we got to a 45% EBITDA target, which was well on track to the 844 numbers and with the cost efficiency program that has been embedded.
The cost taken out of the business, the utilization of robotics, machine learning, AI across the entire portfolio, the streamlining of diversified regional structures into a consolidated centralized structure provides us with a high degree of confidence that we're able to deliver against the 835 target once the markets open up and we get to scale. Moving on to the Webjet OTA Business. Clearly, the standout performer at an EBITDA level For the last 3 months, we made $3,000,000 providing with a $4,100,000 full year result for the business. The improved profitability in the second half is down to high degree of consumer confidence in being able to travel domestically. And as domestic borders have opened, we're seeing significant improvement in underlying volumes across every state In Australia, the key driver that has always been the fulcrum that's delivered value for Webjet shareholders is the significant brand strength that we have.
And as a consequence of the quality of service that we have provided during the pandemic, We are seeing a significant uplift in our market share in the Australian marketplace. Our cost is now 74% across the 9 month Here is the key driver in the reduction of cost is the scalable cost base that's tied primarily to TTV and the biggest driver of that Improvement is marketing and other volume related expenses. We believe that in a market that continues to open up over the course of calendar years 2021 2022 that we will be able to drive a sustained above market performance without the significant marketing costs that we have had Historically, we're already seeing that as a reflection in our EBITDA margins already being back up above 30% for the second half of FY twenty twenty one. And we believe that EBITDA margin will continue to improve in the new financial year. And that level of our performance has continued at the start of the new financial year as reflected by April numbers showing us at 95% of April 2019 level in a market that is a long way from 95% domestic Availability in Australia.
If we move to Slide 15, historically, we have been the number one OTA with more than 50 The OTA flights market, we have picked up share and we would add more than 50% of the entire OTA flights market. Our business has historically been skewed primarily for leisure. We have been the beneficiary of the strong shift from offline Online, which has continued to enable us to outperform the market. There has been great demand for leisure travel as market We've opened and our ability to provide a unique booking platform to combine the 4 domestic carriers in Australia as they battle for market share and we give a unique Consumer insight into pricing and we get a unique consumer ability to combine fares Across the entire spectrum that gives us the competitive advantage that sees us deliver the results that we have seen. As per the graph on Slide 15, you do see an immediate impact as state premiers shut down borders, But an immediate rebound once those borders are locked.
We've been now profitable with the exception of the Christmas New Year period when there was the outbreak in New South Wales that we've been profitable since the start of November And that profitability continues to improve over the course of the last quarter of the financial year. We move to Slide 16. You can see that as a reflection of whatever metric You wish to compare us to demonstrate that we have increased market share over the journey of FY 2021 Against the total market as represented by Vitro Data, we have outperformed the market by the top Perhaps that you can see by 1.7 times and if we compare ourselves to anybody outside supply The airline direct, we have more than doubled our share across our traditional competitive set. That structural shift is continuing to accelerate. As you can see, it accelerated again into April, which is again our best performing month compared to our historic average of doing 5.5% of all GDS bookings.
And that doesn't capture the non GDS bookings in which we have been able to demonstrate Significant outperformance in particular with REX and Jetstar in the Australian marketplace. What we're seeing is a shift to our platform primarily because our mix and match capability is well suited to a changing and reduced airline schedule and as new entrants and Variable airfare enter the market. We're seeing lots of consumers take advantage of our incomparable Matrix display that gives people the ability to compare and book multiple carriers instantaneously. It's been a great success over the course of that and we have no doubt that in financial year 2022 that we will continue to see an improved performance from the Webjet ITA business. Moving on to Online Republic, A similar strategy and an ability to execute as per Webjet OTA.
However, the Online Republic Business is more levered to international travel. As soon as the Australia and New Zealand border opens, we became profitable In the Online Republic business in April, as I've mentioned, our focus in our recovery strategy is Take cost out of our business, the cost per the Online Republic business is down 43% on a comparable 9 month basis. We expect ongoing margins to normalize around the 9% to 10% level. We Have appointed a new CEO for that business. We will be launching a brand rejuvenation in the Q1 of FY 2022 for this business and continue to roll out as markets open up across the board.
What we are seeing and April's results are testament to that is that when the ability for people to Travel internationally opens up, it makes the motorhomes business a viable alternative and we saw an immediate rebound of that business in April as markets did open up. If we go to Slide 19, As per all of our businesses and the unifying elements of our strategy are as follows: Cost reduction to maintain the cost leadership position as well as an ability To focus on domestic marketplace offering, the Online Republic business is no different. We have captured demand that previously we weren't addressing and that's across the numbers that you're looking at on Page 19 And you demonstrate that those 2 weeks of profitability were enough to tip the entire month of April into a profitable outcome, which is a testimony to the cost reduction strategy that we've now got and the ability for the revised management team to energize the employee base in our New Zealand based business to outperform the overall market. So moving on to the financial summary, I'll hand across to Tony Ruchesi, our CFO.
Thank you, John, and good afternoon, everyone. I'll turn everyone's attention to Slide 21 and go through at a high level the Summary of the non operating expenses. There's probably 2 major call outs in the 3 months ending March, which despite the smaller numbers, The first half are worth mentioning. The first one being the fair value change in the better derivative for the convertible note. The way to think about it is that the $55,000,000 at the end is a combination of us determining what the intrinsic value was for that instrument, which aggregate So that $93,000,000 when we initially bifurcated that instrument back at the start of the settlement period was roughly about $38,000,000 was initial value.
And then the residual value of $55,000,000 incorporate the incentive fee of $33,000,000 and then the remaining amount of $22,000,000 is attributable to the ultimate fair value to the debt instrument. It is a complicated process and there is quite a bit of detail in our statutory accounting Section 2 point For those who are interested in understanding further the details and the policies that we've adopted there. The second major item worth raising for the audience is The write off of our ERP cost to date, there is again further detail in the CapEx session we'll go through. But in essence, There was a direction from the IfRic organization that looked at the application of IAS 38 And effectively the direction taken was any costs via configuration or customization of software where it's under a SaaS arrangement, I. E.
You're renting it, There are no ownership transfers across, so therefore, the consequence of cost incurred should be a quarterly expense. But look, I'll park this for the moment and go into a bit more detail when we get to CapEx. But there's probably the major two major call outs on this slide. I'll then turn to the next slide, which is corporate costs. Since we passed the inclusion of Caixab being life for like on a going forward basis, the quarter ended slightly down or slightly up, On a quarterly basis, at $3,600,000 we'll see that number grow going forward in FY 2022 to approximately $4,000,000 per quarter.
The growth is going to come from primarily from the increase in directors and officers insurance. Our process is to renew that every 31st March. So we've already seen a significant step up in that and that's been consistent with many ASIC to 100 companies in the main Unfortunately, but going forward, the way to think about is circa 4,000,000 per quarter as what we expect to spend for FY 2022. Moving to the next slide, being Slide 23. As John mentioned earlier, our pro form a cash sits at a healthy 431,000,000 At the time of raising the $250,000,000 of the convertible notes on the 31st March, we had $130,000,000 of term debt.
1 third was paid off as part of the raising of the $250,000,000 1 third was extended from November 23, so November 22 to November 3, And once that remained at November 2022, since then we've been working actively with our banking partners and we managed to extend the residual amounted November 2022 to November 2023. That effectively gives us close enough to 2.5 years of any sort of renewal Events occurring, which gives us plenty of time to actually look for the recovery to occur in due course. The other thing to mention here is, Despite the healthy cash balance and given the ongoing market uncertainties regarding travel resumption at this stage, we thought it would be best prudent To defer any decision regarding paying the last year's first half dividend at this stage until late this calendar year when we announced our results Late November of 2021 for the first half of FY twenty twenty two. Moving to the next slide on to balance sheet. Probably the biggest item to call out here is as a consequence of the convertible note being settled soon after year end, the existing euro 100,000,000 The embedded derivative, which was traditionally cash classified as non current has moved into current as a consequence of that.
But all things being equal, the balance sheet from where we were I'll then move on to the next slide being cash flow. As John mentioned earlier, working or be it our cash burn after working capital has remained or be it Been around $5,500,000 going forward. The key thing is to call out is obviously as trading improves, not only do we start to Turning to the Black Internet EBITDA level, but above and beyond that, we also get the benefit from working capital in particular to B2B. So when we look at last year as an example, our overall burn over the 12 months was roughly around $24,000,000 whereas its first 9 months We're down to about 5.5 years. So it's been a significant step down from the horrific last 12 months.
And then moving lastly to the CapEx slide, consistent with the first half results, we did see a step down in our spend in B2B. That's primarily on the back of efficiency being driven by the team. And that hasn't compromised Our ability to execute on the Project Darwin initiative that John's outlined in the BetaBeat Transformation. So that remains still on track to this calendar year under that transformation strategy Within the parameters of the existing CapEx program and including on the second thought point there, what we expect to spend in the next 12 months is sufficient to drive that transformation strategy. And separately, as mentioned earlier in the one off section, obviously, the Ifrit guidance Came out late March.
It's quite new as we try to understand the consequences to our organization and this will apply to every organization both here and abroad. It's not unique to Webjet, it's application. We'll spend the first half of the new financial year understanding what portion can be capitalized and what can't be. We thought it'd be prudent at this stage to take a more conservative approach and expense to spend in the At this point in time, and then we'll provide an update later this calendar year as we begin to understand its application and what portion can be capitalized. And the way to think about it is Software is rented.
We don't have the code. But to the extent we've got changes made to our booking platforms, to our web based data like and the like, Those items can be capitalized because that software that is owned and controlled by Webjet Group. So on that point, what I'll do then is hand back to John to talk about outlook.
Thank you,
Tony. The Webjet business is powered for travel recovery. We know there's strong pent up demand We see it in every market that opens up that there's an immediate influx of bookings. I can just give you anecdotally A great example from this week, the UK opened up to Portugal on Monday 17th And clearly, there were a substantial surge in bookings from that market. We are seeing The capacity for our business to plug into the existing infrastructure that it's had in regards to our global Our diverse customer base and that will enable us to capture that demand when and where borders do open.
The factors around the shift to online continues to accelerate all our businesses From the Webjet OTA, Online Republic and the Webbed Business are all well positioned to capture that demand. Our cost base, as I have mentioned earlier, is going to be materially lower going forward, providing us with substantial leverage opportunities and a substantial competitive advantage that enables us to aggressively pursue our corporate objectives. As Tony just covered, we have significant cash reserves And our underlying objectives continue to be leadership in the segments that we compete in. For Webbeds, that translates to being the global number 1 B2B provider, the Webbed OTA to increase our market share and Online Republic to drive improved underlying performance. As we look to FY 2022, The vaccine rollout are well underway on a global basis.
The 2 standout markets that have a material impact to the Webbed business are the USA And the U. K, we are now seeing Europe accelerate the vaccine rollout across their markets, which will enable a Northern Hemisphere summer to take place in which travel will be possible. Many of the Mediterranean markets are open for business and it will be a factor of those source markets Whether or not they're prepared to travel to those destinations, we know there is A number of markets that are already open and over the course of the last 3 weeks, we have seen a substantial improvement in the European business as we roll into May. And we would expect that to continue as we go to our historic peak period of the Northern Hemisphere Summer. Across other markets, as vaccines roll out, we believe that the reopening of those markets will occur.
There is great uncertainty around the timing of when those markets do reopen. Looking at our business and looking at the data rather than the hyperbole Around what we believe we can achieve, we do know that as markets open up that we are picking up share as a consequence The strategic initiatives that we have undertaken to drive a domestic output, the best example, which I've referenced is the United States, in which we're already at 83% of 2019 volumes. The transformation initiatives across our broader Webbed Business will enable us to outperform our historic base. No doubt that will occur. And that will be a factor of the differing competitive set, Reduced number of direct competitors in the B2B space, expansion of the B2B market by Providing a unique offering to the OTA market and the fact that we will be the low cost provider fills me with high confidence that when markets do rebound that our market share position will reflect the outperformance that we've already been able to achieve In conjunction with the fact that the domestic market opportunity in those large domestic markets like the U.
S. Will enable that to It's still a domestic booking market, a highly scalable cost base. The unique platform that we have in place makes us well positioned puts us in a strong position to ensure that market share will continue to improve. Online Republic, the breakeven number where Yes. The modest profit we made in April of 2021 is a reflection of the travel bubble opening.
And as more travel bubbles open, we believe the online public business We'll revert to being a significant contributor to our overall business. So we have obviously substantial capital strength to pursue our leadership ambitions, submitting cash reserves, the prudent actions that the Board has undertaken In providing the improved access to capital gives us Strategic options that very few travel companies have on a global basis, and we have the capacity to invest in our business, and we certainly will do that over the course of the next As I opened up the commentary, we see a world of opportunity ahead of us and the Webjet team is agile, energized and ready to go. And with that operator, I will take any questions.
Thank you so much, John. Yes, John, I'm able to hear you. Are you able to hear me, John?
Sorry, everyone. John's line just dropped out. He's redialing back in, so bear with us for a minute.
In the meantime, I would just like to remind everyone Be right with us. Thank you.
Hey, guys. It's John Gusek. Apparently, we are disconnected, and I believe we're in the middle of Q and A.
Okay. So we will be taking the first question. Your line is open. We will now take
the next question.
Operator, can you hear me?
Yes, I can hear you loud and clear, Joe.
Okay. Let's start the Q and A.
John, Tony, Quinn Pearson, Credit Suisse. Good afternoon. Thanks Thank you for taking time to answer some questions. Maybe just firstly, in terms of B2B market share, the Americas looks like a pretty clear story where you have emerged with a higher share of the hotel market, I guess outside of the Americas, do you feel that you've also, based on current data that You've emerged with a higher share of booking activity. I don't necessarily mean just within the bed bank industry, but I guess broader, do you think you've taken share?
Or Do you think that maybe, I guess, the closure of some of your distribution channels, I. E. Retail brick and mortar stores, that Potentially in the near term, you might have a lower share of the hotel booking activity. Any thoughts there would be appreciated.
Hi, Quinn. Thanks for the question. The at scale sorry, I'll rephrase. The markets when they do open up, we clearly see there's an opportunity to win Share and we have done that as demonstrated by the activity that we've undertaken to reposition the North American market that primarily was International outbound market to become a domestic focused market. That's a substantially larger opportunity than one that we are shown previously.
As I mentioned, we're starting off at a pretty good clip where we're at least 50% greater than the underlying market performance of North America as measured by flight Domestic flights in that particular marketplace. So that's that market. Now if I go to every other market where there's Still very low level of activity and most other markets don't have the same domestic Opportunity that North America provides us, I'd say it's impossible for us to give you a clear answer on that performance relative to the market. What I will say is that when we get to a market that's opened and Our customer base, which is more reflective of not immediate short term bookings and people have a high degree of confidence to make bookings, I am confident that we will outperform the market because of the superior supply We now have the broader supply arrangements we now have and the broader distribution offerings and the bigger Addressable market that we have. So for all of those reasons, when markets do open up, we will be able to tap into them.
But when the markets are operating on a book now, Travel tomorrow basis and there's not a high degree of confidence, I've got no way of reflecting that in my data at the moment.
That's helpful color. And secondly, related to the Americas in the U. S, can you help us, I guess, put in context How big or material that region can be for you? I guess I'm trying to understand in terms of your distribution capabilities, in terms of your Apply capabilities in that market, when the U. S.
Really gets to full steam over the summer and onwards, so the next 6 to 12 months, I'm just trying to put in context in terms of order of magnitude what the Americas could be for you compared to some of your other regions?
Sure. So structurally, what we have done during the 12 months is we've Called out the Americas as a separate division within our management structure. We have populated that with This is a local management experience, and that doesn't just extend to the United States, but also to South America. So we've got more people on the ground, high degree of Familiarity and expertise within those markets and as I've touched on, we've got a focus The contracting strategy for those markets to get the appropriate inventory that makes us saleable to the domestic marketplace, primarily in the U. S.
So the context of all of that is that instead of us operating as we have
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I'm not sure if you can hear me. I'm actually in our Dubai office doing this call and someone keeps calling me on this conference line. But To finish the answer, Quinn, the addressable market is greater than it was before. So previously, we were operating At 10% of the overall market's ability and clearly we've increased that size by tenfold, which means that The North American market has the capacity to be roughly 80% to 90% Of the entire European market and you've got our historic European numbers to look at as the benchmark pre COVID.
That's very helpful. And yes, I can hear you. And I guess 3rd and lastly from me, please is In terms of EBITDA margins, you've given us a very helpful target for the B2B division. Most of your cost The initiatives are focused primarily in the B2B division. But I look at the B2C division, you've already hit 30% EBITDA margin with about half of your Pre COVID bookings and you're talking to improve scalability in that business, with marketing seeming to be one line.
Can you maybe give us some idea in terms of what the potential margin capacity of that division is kind of at a full run rate Post a full reopening of travel. Thanks.
Yes. We consistently achieved EBITDA margins pre COVID in the 40s and we are clearly targeting that number going forward.
So access to that would be getting ahead of myself. So probably get back to in line, but not necessarily permanent cost efficiencies in that division?
There's an assumption that there's a compression on the revenue side, driven by a smaller product mix of international, which has historically been a higher margin offering for us. So we do have a more moderate revenue top line, but The overall EBITDA margins, we think, will be at least in line with what we've done historically.
That's helpful. Appreciate your time.
Thank you.
Thank you so much. We will now take our next question.
Hi, guys. This is Tim Plummer here from UBS. Just two questions from me, if possible, please. John, you mentioned within the Webjet OTA Business 95% of April 2019 levels For the domestic business and you guys are doing roughly 50% more market share. Does that imply that the overall Domestic market is still down kind of 45%, 50%.
And do you see a scenario whereby as that comes back, You guys are likely to go well over 100% of what you were previously doing in calendar year 2019?
Hi, Ken. How are you? I'll answer the second part of the question and then come back to the first. Yes, clearly, we'll see that we'll be well over 100% when markets get closer to the full pre COVID Capacity, so that's a given. As to where the market is, the data we did publish in the top half of the graph, The market share show dated till March, that's not accomplished yet for April.
So I Can't make a comment accurately, but we think that the market of available seats is around about 60% of utilization. It'd probably be a little bit less than that compared to the pre COVID operations. So if you our guess Well, sorry, the facts were the March data you have in front of you. April, we would guess we're at least 50% to 60% to 70 Ahead of those sorts of underlying available seat numbers, but there's no data yet published that we can reference to for that month.
Great. And just the other questions around the convertible, you mentioned opportunity for acquisitions. Are you able to touch At all in terms of what sort of businesses you'd be interested in looking at or what sort of verticals?
We have when we did our first convertible note And the message to the broader travel market is that we were available and open to acquisition ideas. And Having done the second, we're seeing, obviously, a ramp up of renewed vigor to people wanting to engage with us on that level. So we're We've got a look at opportunities that are presented to us and there are some things that we are definitely interested in. But it will be premature to call those out until what happens. But there are plenty of conversations being had in the background at the moment.
Great. I might just sneak one last one in if I can. Are you able to talk about the Asian market at all, what you're seeing coming out of
Yes. The Asian market Hasn't had the same rebound that we're now starting to see in Europe and starting and obviously, you've already seen in North America. The 2 markets that have been The least elastic over the last 3 months have been the Middle East and followed by Asia. We're seeing strong domestic market in China and very little interregional opportunity at the moment. So It's muted growth at the moment muted opportunity at the moment and we're still a long way from getting the growth objectives
Thank you so much. We will be taking our next question by Wei Wen Chen. Please go ahead. Your line is open.
Hi, John. Just wanted to start with maybe just a clarification around the Okay business and your expectation that you see margin Compression. So margins in FY 2021 were 9.6% and history was historical sort of been about 11%. I guess, I'm just wondering how margins might improve from here once you get back to selling a full complement of products, including international?
You're talking about the domestic, the OTA business, Re Wing?
Yes, that's right.
Look, I think the we had been In excess of 10% revenue CTV margins for the last couple of years pre COVID. We wouldn't expect those numbers to come back. It will be similar to the number that we've delivered In this over the last financial year.
Okay. All right. Thanks. And just historically, just on the B2B, you've talked about the value proposition that Webbeds offers hotel partners versus, say, OTAs Sort of providing long lead time, higher value, lower cancellation customers, how does this change when your customers start skewing more OTAs? Does price become your main value proposition?
Prices is always a key component of the value proposition we give to our travel partners and The ability to do what you just articulated around long lead time bookings, lower churn factors is a key driver in that value proposition. If our bookings are exclusively OTAs, yes, that would be We would reflect the ATA market in its absolute terms. However, the Whilst it is our fastest and it will be, I think, our biggest sector, it's not going to be 50% of what we sell. So it still applies to the majority of bookings that we make across the board.
All right, great. Thanks. And then just the last one for me. The other ASX listed Several names have indicatively provided breakeven timeframes. 2 of your 3 businesses are now breakeven.
What are your general thoughts on, firstly, when the group breaks even? And then secondly, when does B2B breaks even?
We do give you the breakeven levels that are required. I would be I'm Not in a position to know when markets are going to open up. It's highly variable and I'm not prepared to put a timeframe out there. What I do know is when markets open up and consumers have confidence to travel, We see an immediate rebound in our position. Now those markets opening up, It's an unknowable event.
So if it's an unknowable event, I'm not sure how I could reasonably be expected to predict an outcome.
Okay. Thank you. That's all for me.
Thank you so much. We will be taking our next question from Tim Piper of RBC Capital Markets. Your line is open. Please go ahead.
Hi, John and Tony. Just a quick one. You sort of talked to North America as an early sign, an early Market opening up, maybe Portugal is a good example, which you touched on as one of your core markets. When we kind of look at that slide On Slide 9, that pre COVID customer mix of B2B, so in the past couple of weeks, the bookings that you're seeing coming through from Portugal, how different is your channel mix? What proportion is OTA coming through?
And I guess the second part of that question is, what does the booking mix look like? How much of it is through your directly contracted hotels versus other wholesale and other supplied rooms? Thanks.
Tim, look, I'll start with the back part of that back end back half of that question and then come back to 1st, because I could be more definitive. The on the back end, the more than 50% continues to be directly contracted hotels. So that hasn't changed in what we do sell. So pre COVID, that was roughly 60% Of all our hotel sales were directly contracted. So it's a similar kind of number that exists.
I wouldn't want to go through the specifics of what the OTA channel versus the others look like other than to say, If we had substantial volumes at the half, I'd outline a new pie chart That would call out those numbers, but the OTA number on the current Volumes would be the largest of the half a dozen segments that comprise the pie chart on Page 9.
Okay, thanks. And I think maybe one headwind you've seen is short lead time bookings. What are you seeing more recently with borders opening up and particularly in Europe with a bit more certainty? Are you seeing that lead time on bookings push out more significantly?
Absolutely. So the best example is the U. K. Putting in the traffic light system on Monday this week, An immediate search in bookings across the board, but in particular to Portugal and we're not seeing I'll say the Scandinavian markets or the German markets where historically they book their summer holidays In the 2nd week of January, so we're certainly not seeing that level of lead time booking, but we are seeing A substantially improved booking window into the Northern Hemisphere summer from the U. K.
Source market this week. So we're looking out to June, July, August, September bookings.
And is there sufficient airline capacity to service a reasonable volume of holidaying in Europe over the summer period?
Airline capacity will be the least of the constraints that people have. The low cost carriers, Yes, the Easyjet, the Ryanair, etcetera, have substantial carrier capacity and the legacy carriers, The national carriers all have weathered the storm quite well over the course of the last 12 months and are open for business. So those guys will certainly ramp up very quickly. So utilization It's very low at the moment and there's plenty of aircraft to come on stream. So if the markets do pick up, it won't be a
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Goodbye.
Okay, great. Thanks for taking the questions.
Thanks, Tim.
Thank you so much. We will be going to our next question by Belinda Moore from Morgan. Please go ahead. Your line is open.
Hi, John and Tony. Can I just clarify, web based at scale that was TTV of €2,600,000,000 for memory? So if you apply a 5% margin, that's €130,000,000 of EBITDA. Are you sort of generally like other travel companies sort of thinking that's FY 2024? Or how should we think about that?
And also, Tony, the ERP cost of $10,000,000 in 2022, does that continue over a number of years, please?
The comment or the question asked from Weiwing, look, it's very difficult for us to put a time frame because it's contingent on factors well outside of our control. So I'm not putting a number of when that happens sorry, timeframe when that occurs. But clearly, we believe the following things to be fundamental to the transformative efforts that the business has undertaken So we can grow in excess of what we were pre COVID and we can deliver a better EBITDA margin that we had pre COVID. Now when that occurs, I genuinely don't know and I'm not brave enough to put a date out there. Tony, you want to deal with the CapEx question?
Yes. Look, the CapEx billion, the lion's share is next year. So you would see in the one offs we had 4 Incurred, which we've expensed 10 next financial year. And then the following year, we expect to spend probably about 2 on the shoulder of it being complete. So in totality ends up being sort of circa around 16 year as a total program of work.
Thanks very much. Bye.
Thank you
so much. We will be taking our next question from Mark Waid of BLSA. Your line is open. Please go ahead.
Yes. Thank you. Thanks, guys. The question just a way of clarification. The Page 4 of the press gives you that really helpful breakdown on your bookings or TTV by month.
I'm just trying to understand The discrepancy between the claim that the OTA business is back to 95% of April 2019. And when you kind of do the math on The pre COVID average for the entire year, it's usually a lot lower figure of about 66%. So it's just a fact that 2 years ago, April was really seasonally Low month and that's why you're now cycling at 95% of that corresponding period. Is that how to explain that?
John, I can jump in here.
Hey, Mark. Go for it.
Mark, it's $95,000,000 on domestic only. So the $131,000,000 is in the slide deck is inclusive of international.
Okay, okay. So it's just simple
as that. And Trans Tasman.
Yes, yes, yes. So it's the international portion that's Still missing. Got it. Got it. I thought there's something missing there.
And Trent Tasman, Mark, as well. So there's 3 components to our booking numbers.
Okay,
okay. Makes sense. Thank you. And any do you feel like there's any I mean the OTA business seems like it's coming back great. Do you feel like there's any Kind of compulsion to maybe drop the booking fee, reduce it down to the $35 given the level of Composition that it's potentially out there and at the same time the airfares have come down.
So as a percentage fee looks pretty chunky.
Short answer, no. We're outperforming the market. The Australian consumers have Bited with their wallets. They like the platform. They like everything at Toffler and they like the value proposition.
And That hasn't changed in the last 15 years. And we are comfortable with the The value that we provide to consumers and they're clearly happy to engage with us and click the buy button, which we're naturally delighted about.
Okay. All right. I'll leave it there. Thanks so much guys.
Thank you so much. That's all the time we have for questions.
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We look forward to engaging with you over the coming days. If you have any further questions, feel free to reach out to Tony or Doctor. Carolyn or myself. Cheers and goodbye.
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