Webjet rises on WebBeds but coronavirus looms large

19 February 2020, Written by David Simmons

Webjet rises on WebBeds but coronavirus looms large

Were it not for the outbreak of the coronavirus Covid-19, Webjet (ASX: WEB) would be in a primo position to lift FY20 guidance today.

However, much to the company's relief the group is in a strong position to deal with a soft tourism sector at the end of 1H20.

Webjet saw its underlying EBITDA rise by 43 per cent to $86.3 million in the period, a record result for the company, off the back of its international WebBeds strategy.

Revenue grew by 24 per cent to $217.8 million and NPAT rose by 44 per cent to $55.1 million.

WebBeds, now the number two global player after just seven years of operation, witnessed an 81 per cent increased in EBITDA to $57.3 million.

Parent Webjet says its organic and acquisition-led international strategy meant the accommodation division contributed over 60 per cent of total group EBITDA for the period.

"Seven years ago we made a strategic decision to transform Webjet from a domestic Online Travel Agency into a global digital business," says Webjet managing director John Guscic.

"Through a disciplined and targeted approach to international expansion via a combination of organic growth and successful acquisitions, our WebBeds business has become the fastest growing and the second largest B2B accommodation provider in the world, while generating significant shareholder returns over the journey."

The main hit WebBeds received during the period was from the liquidation of UK customer Thomas Cook which led to a write-off of $44 million in outstanding receivables and reduced statutory EBITDA by 14 per cent.

For its Australian Webjet operations the business was impacted by weaker consumer sentiment and the bushfires but still saw flight bookings grow compared to FY19.

Webjet's FY20 EBITDA guidance is now expected to be in the range of $147 million and $165 million, but would have been higher if not for the impact of Covid-19.

"Based on our 1H20 performance and TTV growth in January 2020, we would have been upgrading our previous FY20 EBITDA guidance," says Guscic.

"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."

Specifically, Webjet expects WebBeds to be hit by a material slowdown of bookings in China and the Asia Pacific.

"In the current environment, it is very challenging to predict with certainty the expected impact on 2H20 EBITDA results," says Guscic.

"At this stage, our best estimate is a reduction in 2H20 EBITDA of between $7 to $15 million."

Shares in Webjet are up 5.09 per cent to $12.99 per share at 11.26am AEDT.

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Author: David Simmons

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