Hi. Not sure you actually answered the question as to how much the refunds are going to cost FLT.
I heard the other day that the estimated cost was in the region of $80 million (I think Scroo mentioned it in one of his media updates). FLT will have to refund proceeds from suppliers (once returned), along with commissions. You mentioned that you used to work there (hope you didn't drink the Koolaid too much) so assume you know the remuneration structure. As an example, for those who don't - If FLT sell a ticket for $100, chances are that there is about 15% commission in it, which means the supplier gets $85 and FLT retain the $15. Staff then get paid about 10% (depending on level) of that commission, with monthly commission hurdles required to be met or the staff are quickly put on a remediation "plan" which is effectively a "get better or move on" notice. So that $15 would be paid out $1.50 to the employee, and $13.5 to corporate earnings, which are in turn chewed-up by either operating costs or dividends (from net earnings). Some, of course, is retained into equity. But when FLT has to refund the $100 - if the ticket is cancelled - they will only get the $85 from the supplier, and then have to stump-up the $15 (as it is already "spent" and cannot be clawed back).
So assuming $80 million is the number, this would imply cancellations in the region of $533 million, which actually sounds about right (when you look at turnover, etc.). From a cash-burn situation, this shortens FLT's lifeline by about 2 months, so its not a huge deal in the big picture, but it certainly will have an impact on profits.
IMO - If FLT survives (if there isn't a second wave, and IF international travel opens up before June 2021), it will be at least two years before FLT pay a dividend. They will be keen to rebuild retained earnings, and I doubt that their dividend policy will be overly generous to shareholders. So you need to have a 3 to 5 year view on this one. Assuming NTA is in the $8-range (roughly), then you can build your yield-based valuation from there. Noone at this stage (noone at all) can realistically predict what the business volumes will be like in two years time, and what the commission models look like - so I think it is near-impossible to come up with an accurate valuation at this point in time.
Best of luck to all.
Kit
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