Webjet profits to feel the pinch from Thomas Cook downfall

Webjet profits to feel the pinch from Thomas Cook downfall

One of the world's largest tour operators Thomas Cook has entered compulsory liquidation after it failed to reach a recapitalisation deal to stay afloat, reportedly putting 9,000 jobs at risk in the UK and leaving 600,000 travellers in the lurch worldwide.

Here in Australia, one of the country's leading tourism services aggregators Webjet (ASX: WEB) is also set to feel the ripple effects of the British giant's collapse, which may cut EBITDA guidance by up to $7 million.

Webjet's WebBeds B2B business lists Thomas Cook as one of its customers, and had previously indicated it would generate $150 to $200 million in total transactional value (TTV) in FY20.

The Australian company also claims as at 23 September it was owed approximately 27 million euros (AUD$44 million) in outstanding receivables.

"The impairment of any unpaid receivables will be treated as a one-off expense to the income statement," Webjet clarified.

"There will be no material adverse impact on Webjet's liquidity as any write-off will be absorbed by existing cash reserves (211.4 million as at 30 June 2019) and undrawn facilities.

On 22 August Webjet announced that on top of strong organic growth it expected the WebBeds business to earn an additional $27 to $33 million of EBITDA in FY20.

"There is no change to the other expected FY20 earnings drivers indicated in the FY19 results announcement and Webjet will be providing FY20 EBITDA guidance at its AGM on 20 November 2019," Webjet said.

"WebBeds is the #2 global B2B provider with a diversified customer portfolio across a wide range of geographies, generating over $2.1 billion in TTV in FY19. We continue to be the fastest growing B2B provider in the world and expand our customer base across all geographies.

"Excluding Thomas Cook, for the 10 weeks of trading for FY20 year to date, WebBeds TTV continues to be up more than 50% over the prior corresponding period."

The Melbourne-based group also explained there would be no impact on the more than 3,000 hotel contracts Webjet acquired from Thomas Cook in August 2016, which are wholly owned by WebBeds and available for sale to all WebBeds customers. 

"The vast majority of these contracts are currently sold at full margin to non-Thomas Cook customers and have been a key driver of the profitable growth of our European business over the last three years," the company said.

In an announcement about the liquidation today, Thomas Cook chief executive Peter Fankhauser said it was a matter of profound regret that negotiations to secure the future of the company's employees, customers and suppliers were not successful.

"Although a deal had been largely agreed, an additional facility requested in the last few days of negotiations presented a challenge that ultimately proved insurmountable," Fankhauser said.

"Generations of customers entrusted their family holiday to Thomas Cook because our people kept our customers at the heart of the business and maintained our founder's spirit of innovation.

"This marks a deeply sad day for the company which pioneered package holidays and made travel possible for millions of people around the world."

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