Helloworld is on track for a profitable FY15 to the tune of $7 million before tax, but is expected to incur a non-cash impairment charge of $205 million arising from legacy transactions.
The travel agency updated its trading to the ASX today, and based on unaudited trading results for the year ending 30 June 2015, it is expecting adjusted EBITDAI to be in the range of $27-$28 million, delivering profit before tax of approximately $7 million when it produces audited results on August 28.
“We’ve had strong operating results and are coming into line with market guidance,” ceo Elizabeth Gaines told Travel Weekly.
“We’ve turned around the bottom line and that’s a very pleasing outcome.”
Gaines told TW that helloworld has proven a “strong competitor” in the market, and that “a combination of a few things” was behind the good results, including the strong franchisee model, growing brand awareness and the recent QBT acquisition of all government travel.
“Brand awareness is definitely something we want to continue to track,” Gaines told TW.
“We have total brand carrying members of 700, 300 of which are fully branded, and 400 who are members of,” she added.
HLO said its balance sheet includes a number of intangible assets, including goodwill carried from legacy transactions from the 2010 merger of Stella Travel Services and Jetset Travelworld, as well as an injection of cashflow from recent trading of large parcels of shares, which will be included in its assessment of full year results.
In light of these considerations, the Board said it would be “prudent” to write down the goodwill balance and incur a non-cash impairment charge of $205 million.
“The goodwill write down is a non-cash charge which will be recognised in the statutory results with no impact on Helloworld’s cashflows or ongoing operations. The company has a strong balance sheet and is positioned for long-term sustainable growth,” HLO stated.
At 30 June, HLO held a cash balance of $176.1 million, comprised of general cash of $27.4 million and client cash of $148.7 million.
HLO’s business arm QBT has completed the transition to become the sole provider of travel management services to the Whole of the Australian Government, a 3-year contract said to be worth around $500 million for the group.
Earlier this year, UBS Australia Holdings and Europe Voyager each sold 15.5 million shares to an entity associated with AOT Group, bringing its shares from 3% to 10%. Consolidated Travel maintains its 20% ownership of the business and Qantas flagged it will keep its 28% share in the group.
The trading update comes at a time when the agency group is on the search for a new chief executive officer, following the resignation in June of ceo Elizabeth Gaines who is expected to leave the group in December or earlier if a successor is found.
When asked about the reasons behind her sudden resignation in June, Gaines told TW it was “time for me to pursue other interests,” however wouldn’t comment on what those interests were.
“We’re very pleased with the momentum, and having turned around to operating profit,” she said.