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21 July 2010

ANNUAL RESULTS TO 30 JUNE 2010

• TTV up 30% to $504 million
• NPBT up 35% to $14.5 million
• NPAT up 37% to $10.5 million

Webjet today announced the following results for the year ended 30 June 2010.

 
Commenting, Webjet Managing Director David Clarke said:

Webjet is delighted to announce a substantial growth of both TTV and profit growth compared with the year to 30 June 2009 with NPAT more than doubling its rate of growth compared to last year.

Dividends

Webjet’s total dividend for the year will be 10.5 cents fully franked, comprising the interim dividend of 5 cents and a final dividend of 5.5 cents. Payment date will be 8 October.
 
This represents a full year payout of 76% and a second half pay out of 80% which is in line with our earlier market guidance.
 

Operating results for 2010 by main indicator
 

• Strong TTV growth of 30% has been achieved despite a general drop in ticket prices, particularly in the six months to 30 June, and a general environment of major airlines reporting low single digit growth, Webjet has grown substantially in the general market.
• Operating margins of 7.4% (excluding interest) increased slightly relative to the last full year at 7.3% and the first half at 7.1%.
• Operating costs have increased by 26% including establishment costs relating to North America and preliminary costs relating to Asia.
• Marketing costs have been contained at 1.5% of TTV versus last year at 1.9% despite a reduction in relative ticket unit values.
• Flight transaction numbers recorded a substantial increase of 21% to a total of approximately 798,000.
• USA operations commenced in April with TTV totaling AUD6 million to 30 June. Webjet equity accounts for 50% of USA results with a better than expected loss of AUD50,000 for the first three months. An unrealized currency gain of AUD58,000 has been achieved as at 30 June 2010 and taken directly to equity account. We are very pleased with the early USA result.

 
Developments

1. Webjet has historically operated as merchant of record for the service fee component of transactions and most of the ticket values have been to the account of the airline principal. We are currently converting to a merchant platform where we expect approximately 75% of transactions to be paid directly to Webjet for cycle settlement to airlines. This will result in an increase in client trust funds and an associated increase in interest income and margins.
2. Stay and Pay continues to grow at better than forecast levels. Although still a small component of TTV, Stay and Pay is margin positive.
3.  Asia – as announced to ASX on 30 June Webjet has entered into a 50/50 Joint Venture agreement with Westminster Travel, a leading and profitable Asian operation, which will, in time lead to the commencement of Webjet online operations in Singapore and Hong Kong before the end of the calendar year 2010. This will include flights within Asia and from Asia to rest of world and ancillary value added products such as insurance, car hire and Stay and Pay.
   
   The operation will leverage from the substantial existing Westminster infrastructure and mitigate start up costs accordingly.
4. Webjet’s full iPhone application is scheduled for release in August and will follow the successful earlier launch of the iPhone itinerary review capability.
5.  A further review is being undertaken in relation to other possible areas of expansion subject to appropriate risk profile and business model compatibility.
6.  Webjet’s unique family of Deal Finders has been further extended into automatic Deal Alerts and now forms part of the latest series of brand advertising with the introduction of a sixty second Experience the Wonder campaign which highlights Deal Finder, Budget Breaker and Deal Alerts and further underlines Webjet’s position as an active marketer as distinct from an inert seller.
7. Taguchi has had a successful launch year and contributed an equity return of approximately 10% . The Taguchi platform is now fully operational in Webjet’s internal emailing facilities and continues to build its market footprint.

 
Strategy and Guidance 2010 – 2011
 

The Australian travel market remains acutely price sensitive and has exhibited at best low single digit growth (as reported by major airlines) and has also shown, particularly in the last six months, a drop in lead in prices domestically and internationally.
 
The macro outlook of economic activity remains unclear and although Australia has so far weathered macro conditions better than many major countries, interest rates have increased and there are signs of inflation pressures on utility costs, property and services.
 
We consider that these factors will alter demand demographics with the “mortgage belt” under some pressure with some compensatory increase in demand in both under-30s and over-50s, where we also expect to concurrently observe a continued expectation of bargain pricing.
 
It is in that context that we consider Webjet’s strategic emphasis on deal finding to be particularly relevant.
 
In the next six months to December 2010 Australia will have both a Federal and a Victorian state election. These factors are likely to add to short term caution by consumers.
 
Consistent with these general observations, we however consider maintenance of the last half year record profits to be achievable. It is clearly too early to assess the likely full 2010/11 profit expectations.