Helloworld Travel has launched a fully underwritten equity raising of approximately $50 million to help it manage the prolonged period of disruption to the global travel industry due to the COVID-19 pandemic.
The equity raising comprises an institutional placement and an entitlement offer, which will result in the issue of 30.303 million new fully-paid ordinary shares in Helloworld, representing approximately 24.3 per cent of existing shares on issue.
Each new share issued under the placement and the entitlement offer will rank equally with existing shares on issue, according to the company.
With travel restrictions still in place domestically and internationally, Helloworld expects these to last through the remainder of 2020 and into 2021.
As a result, the company expects total transaction value (TTV) to remain at 10 to 12 per cent of previous levels until September 2020, and then progressively increase as state borders and potential trans-Tasman travel ‘bubbles’ open.
Helloworld noted that its mix of domestic and international leisure travel, corporate travel and wholesale travel businesses were positioned to benefit from a recovery in 2021 and 2022.
“The company is already seeing an increase in domestic air and land bookings, aligned to planned capacity increases by the domestic carriers,” it said in an update to shareholders.
“The company’s corporate business, which comprises 70 per cent domestic TTV, is increasing week by week as borders restrictions have eased.”
Following completion of the equity raising, the company said it will have sufficient liquidity for operating and capital expenditure through to the end of 2022 assuming ongoing disruption caused by COVID-19.
Helloworld revealed that its net cash operating costs progressively reduced to roughly $2 million per month (net of JobKeeper in Australia and the Wage Subsidy in New Zealand) from late March 2020, and discretionary variable expenditure reduced to near nil from April.
“Material cost reductions, including those from landlords and suppliers, will be sustained over the balance of 2020,” it said.
The company recently closed its offices in Manila and Mumbai and offloaded its US wholesale operation to Down Under Answers, a well-established travel wholesaler based in Seattle.
Helloworld said it was also assisting retail travel agents and brokers in its Australian and New Zealand to “manage their way through this challenging period until demand returns”, including suspending all franchise and marketing fees from 1 April 2020 to 31 March 2021.
“We are working with the retail networks to promote available destinations with a wide range of domestic products now in market,” the company added.
“To date, approximately five per cent of franchisees have elected to close.”