FLIGHT CENTRE TRAVEL GROUP LIMITED TRAVEL CENTRE FLIGHT FLT ANNUAL REPORT 2020 ANNUAL REPORT 2020 REPORT ANNUAL For personal use only 17/9/20 6:26 am COMPANY VISION, PURPOSE AND PHILOSOPHIES For our company to survive, grow and prosper for the next 100 years and beyond, we must clearly define and live by our vision, purpose and philosophies. We must protect and further develop our company culture and philosophies. Our culture must be robust and independent, with the ability to outlive our current and future leaders. OUR VISION OUR PURPOSE ‘To become the world’s most exciting and profitable ‘To open up the world for those who want to see.’ travel retailer, personally delivering amazing experiences to our people, our customers and our partners.’ OUR VALUES OUR BUSINESS MODEL 1 OUR PEOPLE 1 OWNERSHIP Our company is our people. We care for our We believe each individual in our company should have colleagues’ health and wellbeing, their personal the opportunity to share in the company’s success and professional development and their financial through outcome-based incentives, profit share, BOS security. We believe that work should be challenging (franchises) and Employee and Leadership Share and fun for everyone and through work we contribute Schemes. It is important that business leaders and to our community. business team members see the business they run as their business. 2 OUR CUSTOMER We recognise that our customers always have a choice. 2 INCENTIVES We care about personally delivering amazing travel Incentives are based on measurable and reliable experiences. This is provided with honesty, integrity outcome-based KPIs. We believe that ‘what gets and a great attitude. It is the key to our company’s rewarded, gets done’. A reward for producing the success. The key measure of whether we really are needed outcome. If the right outcomes are rewarded, personally providing our customers with an amazing our company and our people will prosper. experience, an amazing product and a very caring service is they will return again and again. 3 OUR STANDARD SYSTEMS – ONE BEST WAY In our business there is always ‘one best way’ to 3 BRIGHTNESS OF FUTURE operate. These are standard systems employed We believe our people have the right to belong to universally until a better way is shown. This improved a Team (family), a Village, an Area (tribe) and Nation way becomes the ‘one best way system’. We value (hierarchy) that will provide them with an exciting common sense over conventional wisdom. future and a supportive working community. They also have the right to see a clear pathway to achieving 4 FAMILY, VILLAGE, TRIBE their career goals. Promotion and transfers from within will always be our first choice. Our structure is simple, lean, flat and transparent, with accessible leaders. Our business model is being one of the world’s best and biggest small business operators. 4 TAKING RESPONSIBILITY There is a maximum of 4 and sometimes We take full responsibility for our own successes or 5 layers. The village is an unfunded, self-help support failures. We do not externalise. We accept that we group that forms an integral part of our structure. have total ownership and responsibility, but not always control. As a company we recognise and • Family (Teams – min 3, max 7 members) celebrate our individual and collective successes. Villages (min 3, max 7 teams). • Tribe (Areas – min 10, max 20 teams). 5 EGALITARIANISM AND UNITY • Nations/Brands (min 8, max 15 areas). • Regions/States/Countries. In our company, we believe that each individual • Board and senior leadership team. should have equal privileges and rights. In all our countries and all our businesses there should be 5 PROFIT no ‘them and us’. A fair margin resulting in a business profit is the key measure of whether we really are providing our For personal use only customers with an amazing experience, an amazing product and a very caring service – an experience they genuinely value and will pay us for. FCTG Annual Report 2020 Cover.indd 4-6 CONTENTS FLIGHT CENTRE TRAVEL GROUP LIMITED (FLT) Corporate directory 1 CORPORATE DIRECTORY Chairman's message 2 Directors G.F. Turner Directors’ report 4 G.W. Smith FY20 results & overview 5 J.A. Eales Corporate update 7 R.A. Baker Leisure update 8 C.M. Garnsey Outlook 9 Secretary D.C. Smith Auditor’s independence declaration 33 Principal registered office and place Statement of profit or loss 34 of business in Australia Statement of other comprehensive income 35 275 Grey Street, South Brisbane QLD 4101 Statement of cash flows 36 +61 7 3083 0088 Balance sheet 37 ABN 25 003 377 188 Share register Statement of changes in equity 38 Computershare Investor Services Pty Ltd Notes to the financial statements 39 200 Mary Street, Brisbane QLD 4000 Significant Matters 40 +61 7 3237 2100 A Financial overview 42 Auditor Ernst & Young B Cash management 62 111 Eagle Street Brisbane QLD 4000 C Financial risk management 71 Stock exchange D Reward and recognition 80 FLT shares are listed on the Australian E Related parties 88 Securities Exchange. F Other information 92 Web address G Group structure 112 www.fctgl.com H Unrecognised items 117 I Summary of accounting policies 118 KEY DATES 2020/21 Directors’ Declaration 131 August 27, 2020 Independent Auditor’s Report 132 2019/20 full year results released Shareholder information 140 September 17, 2020 Tax transparency report (unaudited) 142 Director nomination deadline November 5, 2020 Annual General Meeting February 25*, 2021 2020/21 half year results released *Dates are subject to change and the payment of any dividend is subject to the Board's discretion This annual report covers the consolidated financial statements for the consolidated entity consisting of FLT and its subsidiaries. The annual report is presented in Australian currency. FLT is a company limited by shares, incorporated and domiciled in Australia. A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and activities in the directors’ report. The financial report was authorised for issue by the directors on 27 August 2020. The directors have the For personal use only power to amend and reissue the financial report. FLT endorses the ASX's Corporate Governance Principles and Recommendations and complies in all areas, apart from amalgamating the Remuneration and the Nomination Committee. Further information on FLT's compliance with the Corporate Governance Principles and Recommendations, including FLT’s Corporate Governance Statement, can be found on the company's website, http://www.fctgl.com/investors/governance/ corporate-governance-statement-2/ FCTG Annual Report 2020 for print.indd 1 17/9/20 4:51 pm Welcome to your company’s annual report for the 2020 fiscal year (FY20). Unquestionably, the 12 months to June 30, 2020 have been the most eventful and challenging trading period we have encountered. The challenges, which included the COVID-19 pandemic and the bushfires that tore through Australia earlier in the year, were generally unforeseen and have had tragic and wide ranging impacts on the entire travel and tourism sectors and on society as a whole. COVID-19 has, of course, posed the greatest threat and its ongoing impacts have been well documented, both CHAIRMAN'S MESSAGE externally and in other columns within this report. While we have understood and supported initiatives that GARY SMITH have prioritised public health and safety, we have also been deeply affected by the government policies that have been implemented to contain the virus’s spread. The impacts have also been felt by our stakeholders, including: • Our customers, whose travel plans have been severely disrupted • Our people. Thousands have lost their jobs either permanently or temporarily through no fault of their own and as a result of our products being taken off the shelves by governments throughout the world • Our suppliers, who have been forced to hibernate or downsize their businesses; and • Our shareholders, who have seen lower returns on their investments in our company I would like to take this opportunity to thank our customers and our shareholders for their patience and understanding during this extraordinary period. I’d also like to pay tribute to our people, who have worked tirelessly to help customers, and to our leaders throughout the world, who have worked together to help us overcome the short-term challenges and chart a path to eventual recovery. In terms of trading performance, losses were within the ranges we outlined in our preliminary result announcement on August 13 and were incurred entirely during the March- June period as we worked to lower our cost base to its hibernation level in what quickly became a zero or very low revenue environment. As heavy travel restrictions were applied, we took decisive action to slow our cash burn and extend our liquidity runway. In early April, we raised $900million via a $700million capital raising and a $200million increase in our debt facilities. At the same time, we outlined comprehensive cost reduction and cash preservation strategies and unveiled a short-term target of a $65million net operating cash outflow For personal use only by July 31 2020, which was successfully achieved. Then, in July 2020, we completed the sale of our Melbourne head office property and secured a government-backed loan in the United Kingdom to extend our cash and liquidity runway. In all, we had a $1.9billion cash balance at July 31, 2020, including circa $1.1billion in liquidity (pre current bank covenants). FCTG Annual Report 2020 for print.indd 2 17/9/20 4:51 pm OPERATIONAL HIGHLIGHTS CONCLUSION Highlights at an operational level during the year included: While trading conditions are uncertain at the start of the new fiscal year, we are well equipped to meet the • Solid first half growth in both leisure and corporate challenges we expect to face in the near-term and to travel, with TTV up 11.2% globally during the period prosper in the longer term.