Surge in travel demand sees Webjet return to profit

Travel booking platform Webjet (ASX: WEB) is back in the black as travellers take advantage of eased COVID-19 restrictions and borders reopening, with the group recording cash surpluses of $4 million per month in the six months to 31 March.

This contrasts with a $5.5 million per month cash burn in FY21, driven by renewed profitability for its eponymous travel agency brand as well as accommodation booking service WebBeds - the latter now with its total transaction value (TTV) up on pre-COVID levels this month thanks to healthy consumer appetite in the US and Europe.

In an ASX trading update released today, the Melbourne-based group reported revenue surged by 258 per cent to $138 million in the full year.

While the group recorded a statutory loss of $85 million for the 12 months, it marked a considerable improvement from the previous deficit of $156.6 million.

The result comes almost eight months after Webjet managing director John Guscic said the company would become cash flow positive despite ongoing lockdowns in Australia and New Zealand.

“FY22 was a year of recovery. We are now cash flow positive, our two largest businesses ;Webjet OTA and WebBeds] returned to profitability and we are seeing markets rebound strongly as travel restrictions continue to ease,” Guscic said today.

“The demand for travel after two years of massive restrictions as the world grappled with the global pandemic is showing the resilience, flexibility and the essential nature of travel in everyone’s lives.

“The quest for exploration, the desire for adventure, and the longing to see friends and families has never been higher.”

The company reported all business units became profitable in April with the rebrand of car rental and campervan hire company GoSee, formerly One Republic, currently underway.

"Profitability for GoSee is highly linked to Australian and New Zealand international border openings and that business continued to be impacted by border closures for the majority of FY22, although we saw Cars TTV exceed pre-pandemic levels in March driven by domestic markets," Guscic said.

Booking volumes for Webjet OTA (online travel agents) surged to approximately 80 per cent of pre-pandemic levels as restrictions around COVID-19 eased and international tourism recommenced. Based on its current bookings trajectory, the group anticipates it will reach pre-pandemic levels by the second half of FY23.

"In addition to the strong signs of demand we see demonstrated through our daily customer search activity, we are also seeing demonstrable indicators of confidence in the recovery from our supply partners as they invest in capacity for the future," Guscic said.

"For example, Qantas, Virgin and Rex have all placed orders for new aircraft, and Bonza has announced its launch into the Australian domestic market.

"We are also seeing major hotel and resort rebound with over US$68 billion in global hotel investment in CY2021 and an anticipated 2,805 hotels with 428,037 new rooms to open in 2022. We continue to observe the progressive restoration of travel patterns as domestic and international borders open."

Today's result comes three months after the company announced it would purchase a 49 per cent stake in US-based hotel upsell software ROOMDEX for USD$10 million (AUD$14.3 million) in order to bolster its offering for its WebBeds clients.

Webjet bought Canada-based travel technology company Trip Ninja for an undisclosed amount after reporting its 1H22 results, which were buoyed by the recovery of the global travel space.

“We believe strategic investments in complementary adjacent businesses that help build out our core capabilities will be an important part of our strategy going forward,” Guscic said.

“Not only will they increase user satisfaction, these solutions will drive additional relevancy with our customers and partners.”

Webjet chair Roger Sharp also confirmed the positive cash flow would see shareholders receive their interim FY20 dividend, which was originally deferred in April 2020.

“Since COVID first impacted our business, we have built a strong capital base to ensure we are well-positioned for the recovery,” Sharp said.

“Although markets are recovering at different rates, our global reach means we have been able to leverage those markets recovering first and Webjet is once again generating positive cash.”

“We would like to thank all our shareholders for their support.”

Shares in WEB are down 3.28 per cent at $5.60 per share at 12:22 am AEST.