I agree - the physical footprint of FLT is much leaner, however...

I agree - the physical footprint of FLT is much leaner, however the decision making process within FLT was highly flawed. Decisions to close branches were not solely based on TTV, but were based on underlying rental leases in a bid to stop the bleeding. This resulted in many top performers (I personally am aware of some) being "shoved out" of FLT, and some lower performers (I am aware of one on a "PIP", as an example) being retained, purely because the formula dictated it. The remnants of the physical footprint will take years to reorganise, so its not like they have cherry picked but more like they have applied a scorched-earth policy in the hope that survivors will be able to take up arms when the new chapter begins.

I think when world travel resumes it will be a very different place, and I think FLT will be a laggard in its field. FLT are behind on technology (compared to peers, who I can't mention here as it may be taken to be cross-selling), has decimated its brand, and is very, very top heavy (have a look at the numbers in the Annual Report 30.06.2020 versus 30.06.2019, and you will notice that almost nobody from the upper ranks of FLT was culled, despite the salesforce being more than halved in the past 12 months). Add to this, their debt to equity is very high (even compared to peers, and taking into consideration all that has happened) and dilution is rampant (if you take into account the convertibles, the numbers of shares has more than doubled in the past 12 months). Income stream has been beaten senseless, and even if domestic recovers their market share is guaranteed to be less and their margins are half what they used to be. And then there's international, which is a whole new game.

Even assuming you are right and worldwide demand jumps back to pre-COVID levels within the next 12 months or so (which may be wishful thinking, given what is happening in Europe and the US right now), it is very unlikely that FLT can regain the margins and TTV that they had before. And even if they did, their higher debt, greater dilution model far outweights the benefits of being "leaner" (by several multiples). Say, for example, their operating costs were halved - even then, dilution and debt servicing would outweigh any potential savings.

I disagree with you, though, on your comments about market and institutional shareholders understanding this. I think you will find that institutional holders are quite nervous, which goes part way in explaining why the recent issue (which netted $392 million in proceeds, and converted $100 million of debt into T2 equity) has to be done in the form of a convertible. There is zero bank appetite for FLT corporate debt, and even less appetite for straight equity (without a deep discount being applied), and this underlines the lack of risk appetite coming from the big end of town. If you doubt me, ask any corporate banker out there what the expected credit margin on FLT would be (for, say, a 3 year senior unsecured deal) and let me know what they say.

Don't forget some hard facts: They flogged their St Kilda Road Melbourne HQ (at a discount too), they have doubled the amount of shares on issue, they have tripled their debt to equity ratio, have decimated their "most valuable resource" (their staff), and have made no attempt to rein-in the top-heavy executive structure. Have a look also at some of the ratios in their Annual Report (quick ratio, etc.) and tell me that I am wrong. If this were any other company I guarantee you that the majority out there would be screaming "death spiral".

All opinion though. Happy for others to disagree, and would like to see some backing of their arguments via projections and hard numbers etc.

Many thanks.
Kit.