7 questions at 2023 Flight Centre AGM

November 18, 2023

Below is the text of the 7 written questions lodged at the 2023 Flight Centre hybrid AGM held on November 15. Biggest protest was 7.3% against placement refresh. See webcast of 65 minute meeting plus this crack that founder CEO Graham Turner took at Transport Minister Catherine King over Qatar refusal. They also got with the program and disclosed voting outcome by shares and shareholders.

Q1. Flight Centre announced a $180 million placement at $14.60, a 7.8% discount to the previous close of $15.83 on January 31 this year to fund the Scott Dunn acquisition. This was followed by a $40 million SPP. The SPP was swamped by $350 million in applications from 19,304 of the eligible 104,719 shareholders so the board lifted the cap to $60 million and imposed a pro-rata scale back with everyone getting a minimum $511 worth of new shares. The stock is currently at $19.45 so did we really need to do this $240 million placement and SPP. In hindsight, wasn't it dilutive? Also, did we really need to pay Macquarie and UBS a 2% management fee or some $3.6 million when they were on-risk for less than 48 hours?

Answer: chair said no regrets and that the investment banks got a market fee - watch video of exchange via Twitter.

Q2. Flight Centre has a history of doing dilutive capital raisings and even the 3 founders suffered acutely during COVID when we raised $700 million including a $282 million placement at $7.20 which diluted all non-participants and a $418 million 1-for-1.72 non-renounceable entitlement offer at the same price, which was a 27.3% discount to the last traded price of $9.91. The three founders – CEO Graham Turner, Geoff Harris and Bill James – went into this crisis owning a combined 42% of the company and collectively only took up $25 million of their $175 million entitlement, badly diluting themselves as the total number of shares on issue almost doubled. The $138 million retail offer finished 23% short, attracting $106 million from 13,116 applicants, including $14 million through the needlessly constrained overs facility which was capped at just 25% of entitlement. It hindsight, does CEO and co-founder Graeme Turner have any regrets about this capital raising and would he have done anything differently?

Answer: see part 1 of answer and additional strong comments by CEO Graham Turner.

Q3. The placement only represented 6.2% of issued capital so why are we refreshing our placement capacity to the maximum 15% in a 12 month period when, based on current prices, we'd be free to do a $600 million placement by February next year anyway. Does this signal that we're thinking about doing another placement and why not raise capital pro-rata and treat all shareholders equally?

Answer: chair Gary Smith gave the usual "no plans but keeping our options open" response - watch video of exchange via Twitter.

Q4. Placement participants are not meant to vote on any following placement refresh resolution, so why have only 19 million proxy votes been abstained on this item? Surely some of the 98 million votes in favour of this item have come from institutions which participated in the $180 million placement. Also, there was a 7% protest against this item, presumably from shareholders who really didn't participate and got diluted without compensation. Did any of the proxy advisers recommend against this item?

Answer: chair deferred to company secretary who said everything was in order - see video of exchange via Twitter.

Q5. Thank you for disclosing the proxy voting data before the AGM along with the formal addresses since 2011. This is best practice. When disclosing the outcome of voting on all resolutions today, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and was a voluntary disclosure initiative adopted by the likes of Metcash, Altium, AUI, Dexus, Webjet, Tabcorp and Myer over the past two years. The ASX itself and Qantas both did it for the first time this season. You've got the data, so why not let the sun shine in.

Answer: chair Gary Smith happily agreed and company secretary David Smith said it could be done so here they are. Well done and thanks.

Q6. The 2019 annual report stated that we had about 22,000 shareholders and 4 years later the 2023 annual report says we have 92,428 shareholders. However, when announcing the SPP outcome in February we said there was 104,719 eligible shareholders. Which is correct and why are we seeing such as extraordinary growth in retail shareholder numbers. Is there a staff share scheme element, are there particular brokers promoting the stock or are customers so impressed with our service they keep buying shares in our company?

Answer: This generated multiple respondents and it sounds like broker recommendations and staff share schemes are both factors - watch video exchange via Twitter.

Q7. Why did the 3 founders terminate their pre-emptive rights agreement earlier this year?

Answer: chair Gary Smith wanted to bat this away as a private investment matter but will done to Skroo Turner for stepping and explaining that it should have happened years ago and had passed its use by date. See video of exchange via Twitter.