Managing Director's Report

The year ended June 30, 2000 saw the transition from Roper River Resources NL (a mining company) to Webjet Ltd, an internet based travel manager and marketer, and as such the year’s results include now discontinued mining activities, the transition of the company, and the last quarter operations as Webjet.

RESULT

The year's results are therefore comprised of:
                    Roper River mining activities loss $ 958,421
                    Webjet operating loss $ 539,869
                    Total loss $ 1,498,290

Of the Webjet operating loss of $539,869, brand building accounted for some $183,722, leaving a core operating loss of $356,147.

All development expenditure in the quarter ended June 30, 2000 including the total brand establishment costs and site development costs have been fully expensed and written off to the profit and loss account, so that the result is stated in the most conservative manner.

It should also be noted that due to a lead time between customer enquiry, quotation and booking, and ultimately final ticketing at which point revenue is brought to account, the period ended June 30, 2000 includes a large component of cost where revenue will be recognised in subsequent periods. It is estimated that the lead time ranges between 60 days and 90 days from point of initial enquiry and final ticketing.

Webjet Ltd finished the financial year June 30, 2000 with cash reserves of $5.27 million, which the Board considers sufficient to pursue its business plan in a manner which should enable your company to build a substantial ongoing revenue base and take advantage of development opportunities as they arise over the next few years.

WEBJET'S BUSINESS

Unlike a number of travel and internet operations which are a mixture of traditional street front travel agencies with websites, telephone call centres with websites, and other hybrid arrangements, Webjet is a pure internet marketer and manager of travel, and as a consequence has developed a business model with a fundamental cost base which we believe will enable us to deliver the consumer substantial price advantages and deliver our shareholders ongoing transaction profits

The result is that our semi-fixed cost structure in the year 2000-01 (excluding brand build cost) is expected to be approximately $1.6 million with an anticipated brand build cost in 2000-01 of approximately $800,000.

STRATEGY

These fundamental strategies of low cost distribution, outsourcing resulting in low fixed cost component, and the utilisation of the internet to obtain immediacy of offer communication is central to the ongoing developments of your company.

During the last six months a number of the world’s major carriers have publicly announced strategies of a similar type. These include British Airways, which is now on public record as stating that it intends to achieve 50% of its revenue from the internet over the next five years, and in the local market Qantas, which recently announced the intended establishment of a multi-airline internet platform. More recently it has been reinforced and validated by Impulse Airlines’ decision to effectively distribute and sell its products over the internet.

Already in North America all of the major carriers have established major internet distribution platforms, which for example in the case of South West Airlines, accounts for over 16% of the airline’s revenue base.

Webjet welcomes these developments. They will result in an increased consumer use of the internet for the facilitation of travel, increased consumer confidence in the internet as a medium to obtain the latest and best product offers and prices and will result in an acceleration of technological progress in areas such as booking engines, fare searches, and critically, customer service.

These developments represent a sound endorsement and validation of the fundamental Webjet business plan.

KEY INDICATORS

This report contains a number of key indicator graphs which cover the period from our effective commercial launch at the beginning of April to current date.

These include:

Graph One Which tabulates Webjet’s travel site rankings in the Australian industry and shows conclusively that our advertising brand build has been astonishingly successful to the extent that your company has achieved Number One site ranking on a number of occasions, placing it ahead of the national carrier Qantas and all of its commercial non-airline competitors on a consistent basis.
Graph Two The weekly quotations trend analysis shows an approximate 300% increase in weekly quotations as measured in the above period.
Graph Three The weekly site sessions graph shows a consistently high and progressively building level of general site activity.
Graph Four The gross revenue trend analysis, noting that there is a lead time between enquiry, quotation, booking, and revenue production, shows an over 400% increase on a weekly basis from the beginning of April to the middle of August (estimate in final week graphed).
Graph Five Quotations and Booking Trend Analysis shows a consistent trend between actual bookings and quotations, the underlying conversion increase from approximately 4% to approximately 6%.

The combination of these trend indicators give us a high degree of confidence that our business strategy and plan is soundly based and so far working according to schedule.

FORECASTS

As demonstrated above, all of our current key indicators are positive, and in some cases quite dramatic.

There are of course a number of uncertainties, risks, and lead time issues which are extremely difficult to quantify or predict. These include, amongst other things:
The Olympic Games period, which may distort travel patterns and bookings,
General economic activity post GST,
Airline price initiatives and market stimulation exercises,
The Australian dollar and its impact on outbound tourism and inbound tourism.

And underlying these macro issues, the lead time in the establishment of brand values and ultimate booking activity with an additional uncertainty relating to the exact timing of the e Commerce consumer explosion which is being predicted.

Given our early stage in development, it is therefore extremely difficult for your Board to undertake detailed commercial forecasts, but we nevertheless consider it appropriate to relate our current expectations to our prospectus forecast application of funds which envisaged a net application of funds in the year ended June 2001 of some $4.6 million.

Our current expectation is that net funds application in this period will be limited to approximately $2 million which is less than half the original estimates.

This is a product of:
Reduced but more effective advertising and marketing,
Tightly controlled operating expenditure,
Leveraged product and alliance marketing,
Better than expected revenue trends.

As already noted at the end of June 2000 your company has approximately $5.2 million cash reserves with no debt, and relative to these forecasts has sufficient financial capacity to appropriately pursue its business plan.


David Clarke
Managing Director