Helloworld lifts earnings guidance by $10m as travel demand picks up speed

Listed travel agent Helloworld (ASX: HLO) has increased its underlying earnings guidance for FY23 by $10 million amidst improvement in both its own profit margins and demand across the broader travel industry.

After reporting a 150 per cent rise in total transaction volume (TTV) for the March quarter today, the Melbourne-headquartered group announced underlying EBITDA guidance of $38-42 million for the full financial year, up 36 per cent and 31 per cent at the lower and upper ends of the range respectively.

The company reports leisure travel demand continues to hold up strongly despite challenging economic conditions, improving both domestically and internationally with a trend towards longer trips and longer lead times to overcome global supply constraints.

Helloworld notes inbound arrivals to Australia and New Zealand continue to improve from western markets, while demand across traditional Asian markets remains slow.

The upgraded guidance also stems from a significant increase in cruise capacity with cruise bookings now being taken through to the end of 2024 and early 2025.

Helloworld's encouraging forecast lifted its shares by 4.46 per cent this morning to $2.81, and follows forecasts made by an expert panel of travel executives that pre-COVID conditions for the industry will likely return by 2025 with supply constraints as the main impediment.

Graham 'Skroo' Turner of Helloworld's much larger rival Flight Centre (ASX: FLT) estimated the industry would return to normal by Christmas or early 2024.

Helloworld recently completed the acquisition of a 34 per cent stake in Oslo-based Australiareiser, the largest specialist travel wholesaler from Scandinavia to Australia, New Zealand and the South Pacific.

The group reports underlying EBITDA for the March quarter stood at $14.2 million, compared to an underlying EBITDA loss of $4.9 million in the prior corresponding period. The lion's share of earnings for the quarter came from Australia at $10.5 million, followed by New Zealand with $3.1 million and the remainder coming from the rest of the world (ROW) business.

Earnings margins have also improved, hitting 30.4 per cent in the third quarter and averaging out a 24.8 per cent level for the year to date.

Helloworld reported an EBITDA loss of $7 million in FY22.

Having sold its business and entertainment arm to Corporate Travel Management (ASX: CTD) in December 2021 for $175 million, the extent of Helloworld's operations now employ around 650 staff based in Australia, New Zealand, Fiji and Greece, while the group works with more than 2,000 members of its travel agency networks in Australasia.