Selling Oct 2024 - Have grown uncomfortable with the governance of the company over the past month. Whilst I knew Jamie Pherous was a strong and entrepreneurial Founder CEO I had hoped the Board would offset and oversee that. Having seen the proposals at this AGM, especially the size of the Board fee pool increase and justification given, I am not sure we don't have a Board that's just "along for the ride". Given the blow ups playing out at WTC and MIN right now, who also have very strong Founder CEO's, it's a risk or hurdle that might now be too high. I could be wrong of course but it's foreseeable problem right now, so I am OK to swap for a better option. I will still prioritise Founder led businesses but their personalities and Boards are also part of that equation.

Updated Valuation in Aug 2024 based on 69.5 cents EPS for FY24 and 10% growth rate for next 10 years (less than half historical average) with PE of 18 (bottom decile of historical average).

Why do I own it?

# Top 5 global player in the travel industry focused on government and corporate clients. These customers are less likely to want to manage their own travel needs and often are on contracts. Business is nicely diversified with 50% in US, 25% ANZ, 20% EU and 5% Asia.

# Was badly impacted by Covid travel restrictions and sales/profits were smashed, which has caused negative sentiment over the past few years. Prior to Covid the business was compounding earnings at over 25% p.a. and has now returned to a higher EPS number in FY24 than pre Covid.

# Has a strong and entrepreneurial founder in Jamie Pheros running the business who owns 12% of the shares. Small Board and all have a little skin in the game too.

# Have somewhat of a trap door moat, as the hassles of switching providers and systems can be painful for governments and large corporates.

# Debt to equity ratio of only 3%. ROE / ROC is improving and should be back around 15% at the end of FY25. Net margins are now 14% and should be back at around 20% at the end of FY25.

# Big MOS at current price of $11.40 in Aug 2024 at less than half the historical growth rate. They have been buying back shares consistently in FY24, and announced up to $100 million in additional buybacks for FY25, indicating they believe there is significant upside.

# They can deliver double digit revenue and earnings growth for 5 + years so the return should exceed my 15%p.a. + target. They released a growth plan at the beginning of 2024 with the path to double earnings over the next 5 years.

What to watch

# Significant key person risk if something was to happen to Jamie Pheros - need to see who the possible successors are.

# Jamie can be "glass half full" with guidance, so need to follow actual results and not forecasts. He also has little time for analysts.

# They do "project" work at times for governments like war or asylum seeker transport etc which is high margin but very sporadic. This can cause some lumpiness in business from one year to the next. Need to follow the core business trends and take these project wins when they come as exceptions.

# Are vulnerable to black swan events that restrict global travel - want to see ongoing healthy balance sheets.

# Have acquired other travel players over the years - want to make sure they don't overpay or over extend with any future acquisitions.