Webjet has taken a significant hit to profit growth in the first half of the 2020 financial year, which it largely blames on the collapse of a key client.
The online travel giant posted a net profit after tax of $9 million – down a whopping 64 per cent from the same period last year.
Webjet’s earnings before interest, taxes, depreciation, and amortisation fell 14 per cent to $46.4 million.
On a more positive note, the company’s half-yearly revenue rose 24 per cent to $217.8 million, and total transaction value (TTV) grew 25 per cent to $2.3 billion.
Webjet managing director John Guscic said the “key disappointment” during the six months to 31 December 2019 was the collapse of Thomas Cook – a customer of the company’s WebBeds business – in September.
“At the time of its collapse, Thomas Cook owed the company $44 million in unpaid receivables,” he said.
“We wrote of this amount as a bad debt during the period, which impacted the statutory result.”
However, Guscic assured investors that it has had no material adverse impact on the company’s liquidity, thanks to its “strong” cash position and balance sheet.
The main driver of Webjet’s half-yearly earnings in the first half of FY20 was its WebBeds business, which achieved EBITDA growth of 81 per cent to $57.3 million.
WeBeds’ revenue jumped 50 per cent to $127.5 million, its TTV grew 42 per cent to $1.5 billion, and its bookings rose 53 per cent to 2.4 million.
Earnings for Webjet’s online travel agency business remained steady during the first half of FY20 at $28.8 million. Revenue grew one per cent to $74.8 million, TTV rose three per cent to $708 million and bookings increased by one per cent to 795,000.
The company noted that the Australian market “continues to be challenging, with reduced capacity, weaker consumer sentiment and the recent bushfires all impacting demand for travel”.
Webjet’s Kiwi business, One Republic, reported a nine per cent drop in half-yearly earnings to $6.6 million, with revenue falling four per cent to $15.6 million.
On the plus side, One Republic’s TTV climbed seven per cent to $156 million, and its bookings increased by five per cent to 253,000.
Webjet’s FY20 earnings guidance is now expected to be between $147 million and $165 million – up 14 per cent from FY19, but lower than first anticipated due to the coronavirus outbreak.
“Based on our 1H20 performance and TTV growth in January 2020, we would have been upgrading our previous FY20 EBITDA guidance,” Guscic said.
“However, we are seeing an impact on bookings and TTV across all our businesses as a result of the current COVID-19 outbreak, which will impact 2H20 EBITDA.”
Guscic said it was very difficult to predict the expected impact of the CVOD-19 outbreak on Webjet’s earnings in the second half of FY20, but the company has estimated it will be between $7 million and $15 million.
“We expect the impact of CVOD-19 to be one-off in nature, impacting earnings during the current period restricted travel and traveller uncertainty,” he said.
“Based on our experience with previous disruptions to travel, we expect our overall earnings profile to return quickly to prior expectations, taking into account rebooking of deferred travel and underlying earnings drivers.”