Media Release
Webjet Meets Market Guidance
9th February 2011
HALF YEAR RESULTS TO 31 DECEMBER 2010
- TTV up 15%
- TOTAL REVENUE UP 17%
- TRADING PROFIT (after tax) $5.3m
- NET PROFIT (after tax, after $250k due diligence) $5m
- INTERIM DIVIDEND 5c fully franked
Webjet today announced a trading profit after tax for the six months to 31 December 2010 of $5.3 million, and a net profit after tax, after expensing $250,000 due diligence cost previously advised to the market on 16 November, of $5.0 million.
The key components are:
- Gross profit margins are essentially unchanged at 7.2% versus 7.1% for the same period last year.
- Operating costs increased substantially due to preliminary expenses relating to the set up of Asian operations and the pilot program for the Service Centre outsourcing to Manila and larger costs in the delivery of the Seat Price Guarantee along with the ramp up of USA operations including Canada and our Spanish language site. They also included the conversion to “merchant of record” project.
- Marketing costs are essentially unchanged at 1.6% of TTV versus 1.5% last year.
Commenting Webjet’s Managing Director said:
The six months ended 31 December 2010 have included a wide range of development activities highlighted in our market release of 16 November and subsequently updated on 18 January.
These development projects have included very significant strategic initiatives which we expect to substantially extend our global operations, both in terms of product range and geography during 2011, including:
- The conversion of Australian operations to “merchant of record” which we expect to underpin and improve future margins.
- The completion of a pilot outsourcing of Service Centre operations which will take effect in full by April 2011 and subsequently reduce like for like operating costs by approximately $1.1 million on a full year basis.
- The finalisation of a hotel supply contract which will substantially expand our global hotel offering and provide a hotel product platform for all markets. No ongoing operating costs will be incurred apart from marketing expenses. The Australian hotel product (in addition to Stay And Pay) will be released in early March.
- All set up work was completed for both Hong Kong and Singapore which are now in full operation with their respective marketing programs scheduled to commence on 1 February and 1 March.
- As advised Webjet has entered into a joint venture agreement to provide a European base of operation which will result in the entry into various emerging European markets progressively over the next six months.
It is significant to note that we have been able to absorb the substantial development activities and maintain our operating profit guidance.
Development strategy
To support this range of product and geographic activities we have substantially upgraded our management resources as advised on 18 January.
These changes, which are expected to cost approximately $1 million per annum (net) in a full year, include:
- The appointment of John Guscic as Managing Director
- The senior appointment of Shelley Beasley as Chief Operating Officer
- Special external contract resources for the hotel project
- A reorganisation of Richard Noon’s responsibilities to provide for the effective ongoing global IT development and group financial management
Outlook
Clearly, the next six months will be a period of substantial development where the resultant TTV and income will take some time to reach optimum levels. As the markets are new, it is difficult to accurately predict the ramp up periods.
The Australian market is being impacted by a range of uncertainties, including:
- Queensland and Victorian floods, the North Queensland cyclone, an apparently dropping level of consumer confidence, which in turn is at least in part a consequence of massive utility cost increases across Australia. This has been commented on in particular by Virgin Blue and Webjet notes that it made a similar observation in July 2010.
- Discretionary spending has also been impacted by high interest costs with their future levels delicately balanced between inflationary pressures and GDP.
Whilst Australian employment levels are close to maximum we consider consumers will remain cautious, conservative and in terms of travel, likely to remain acutely bargain sensitive. Webjet’s television advertising and associated product offering has been appropriately adjusted in line with this assumption and our national television commencing this week includes a particular emphasis on Budget Breakers.
Growth in both New Zealand and the USA (which commenced operations in April 2010) appears strong and not affected by these factors.
Although we note that January net profit is substantially better than last year (approximately +30%), given that it is very early in the New Year, we do not believe it is prudent or possible to provide definitive full year guidance at this time.
However our best estimate, given the above variables, is that we can maintain the last half year levels of profit through to 30 June 2011.
When the full impact of the Queensland and Victorian floods becomes clearer we will appropriately update the market.