Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Beaten-down travel businesses seeing blue sky
With the country seemingly now well past Covid and its lockdowns (although the omicron variant could change things), the Australian government is finalising plans to safely reopen Australia’s international border next month. Once 80% of the population is double vaccinated, current overseas travel restrictions related to Covid-19 will be removed, allowing Australians to travel overseas.
That takes us to the travel sector and two ASX listed travel companies that have posted their results this week – Webjet (ASX:WEB) and Serko (ASX:SKO).
Webjet – Posted an impressive 1H result amid a business turn around, the company is cashflow-positive for 1H22. Numbers include:
- Total transaction value (TTV) of $663 million
- Revenue of $55.4 million
- Operating expenses of $71.2 million
- Underlying EBITDA loss of $15.9 million
- Statutory EBITDA loss of $38.2 million
- Underlying net loss of $43.8 million
- Statutory loss after tax of $61.8 million
- Cash balance of $446 million at the end of September
- Deferred interim FY 2020 dividend of 9 cents to be paid in December
The business has turned its fortunes around, boosted primarily by changing market dynamics. Competition has decreased as financial pressures impact and Webjet has manage to take a greater share of a larger market opportunity.
The bulk of its profitability was highly correlated to domestic border openings and lockdowns and border closures impacted 2Q22. This will all change as soon as key borders open; profitability will start to rise.
For the six months to 30 September, the business was not profitable, posting a loss of $15.9 million and statutory EBITDA loss of $114.4. Underlying earnings of $22.6 million did shift with a dividend of 9c to be paid in December. Goldman Sachs was forecasting TTV of $668.6 million, revenue of $52.5 million, and an EBITDA loss of $13.4 million. This means Webjet has missed on TTV, beaten on revenue, and missed on EBITDA.
Webjet said the third quarter of FY22 is currently tracking ahead of the second quarter. The company said it expects to be back at pre-Covid booking volumes by the second half of FY23.
It’s not too late to jump on board before borders open and Australian’s to travel overseas.
Serko (ASX:SKO)
In the same way as Webjet, Serko has delivered an impressive set of results despite enduring a challenging 2021. The company is a leader in travel and expense management for business. Its results are for the half year to 30 September 2021, as travel markets recover from COVID-19. Total travel bookings rose 157% on the Serko platform from the pcp. Here are the numbers:
- Total operating revenue increased 81% to $9.2 million from $5.1 million, while total income increased 16% to $9.9 million from $8.5 million.
- Total travel booking volumes rose 157% to 1.3 million from 0.5 million, lifted by limited lockdowns in Australia and New Zealand during the first quarter, and new Booking.com for Business transactions.
- Net losses after tax increased by 50% to $15.2 million from $10.1 million reflecting the planned increase in expenditure to capitalise on the significant opportunities for Serko’s expansion into international markets.
- EBITDA losses increased 76% to $11.8 million from $6.7 million.
- Net cash burn averaged $2.9 million per month for the half year, within the $2 million to $4 million guidance range.
- Cash and short-term deposits on 30 September 2021 totalled $62.3 million, down from $79.9 million on 31 March 2021.
The result is in sharp contrast to a year ago when Covid-19 disruptions were at their peak and Australia was under heavy lockdown. Despite the ongoing disruption that is being seen in international travel markets, Serko is quite confident things will in the return to business travel over time. It has issued guidance for a target of reaching $100 million revenue in the mid-term.
Both Webjet and Serko are in a good position to grow out of this pandemic and scale the business to seize opportunities that lie ahead.
