Webjet First Half Operating And Financial Metrics Ahead of Pre-Pandemic Levels

Webjet Limited (Webjet, the Group, ASX:WEB) is a global digital travel business operating in both consumer (B2C) and wholesale (B2B) markets that has been listed on the ASX since November 1997. Today the Group is a global digital travel business operating in both consumer (B2C) and wholesale (B2B) markets. The Group’s business model enables customers to compare, combine and book online the best domestic and international travel flight deals, hotel accommodation, car hire and travel insurance worldwide.

Operating and financial metrics ahead of pre-pandemic levels

The 6 months to September 2023 have seen all financial and operating metrics at record levels as the demand for global travel resumes to pre-pandemic levels.

Compared to the previous corresponding period, Group travel booking numbers are at 4.4 million (up 27 percent), Total Transaction Value (TTV) is $2.9 billion (up 35 percent) and Revenue is $244.5 million, an increase of 39 percent.

Statutory Net Profit After Tax (NPAT) was $47.3 million and NPAT before Acquisition Amortisation of $19 million, was $66.3 million. This compares to $20.5 million NPAT (before AA) earned in the previous corresponding half-year.

The Group is a significant cash generator with $144 million cash in the first half-year, representing surplus cash of $24 million a month for the September 2023 half-year.

Cash and cash equivalents increased from March 2023, aided by improved working capital management, with B2B TTV working capital sales days in debtors down 30 percent from pre-pandemic levels. This improvement translates to $74 million in the half-year and means that Webjet is collecting more efficiently on outstanding travel payments owed to the Group by other businesses. Cash and cash equivalents at 30 September 2023 stood at an impressive $662 million.

Convertible Note

The Group has no bank debt. Borrowings comprise $243 million in unsecured Convertible Notes issued in March 2021 and due April 2026. The Notes have an effective interest rate of 6.2 percent, given the ‘in-the-money’ conversion price of $6.35 and coupon of 0.75 percent pa.

The Notes were issued to ensure adequate liquidity and working capital capacity to capture the significant B2B market opportunity and the anticipated bookings growth in WEB’s B2C businesses as the business entered the recovery phase of the global pandemic. The decision and timing of the Convertible Note issue proved to be well-founded.

No first half-year dividend declared

The decision to not pay a shareholder dividend despite the strong cash flow and cash position is disappointing, but justifiable.

The Convertible Note terms include a 3-year investor put option exercisable at the discretion of Noteholders on 12 April 2024. Accordingly, Noteholders have the option to ‘put’ (redeem) the $243 million Convertible Note on 12 April next year. This explains why this potential obligation has been classified as a current liability on the balance sheet. The likelihood is the Convertible Note will run its full course and be redeemed at the end of the original term in April 2026.

A decision on the dividend outlook will follow the full-year 2024 results release scheduled for May 2024, at which time the potential obligation of Webjet to redeem the Notes in cash would have passed. It is logical to assume that Webjet will resume paying shareholder dividends at that time.

2024 financial year outlook

Webjet anticipates a record FY24 result.

Full year 2024 EBITDA is expected to be in the range between $180 to $190 million, which is about 14 percent ahead of pre-pandemic levels recorded in calendar year 2019.

According to the Group, the global economy remains uncertain in the face of heightened geo-political risks, but global demand for travel remains resilient.

The prospect of dividends resuming from the second half of the 2024 financial year and the conservative balance sheet and resilient demand for international travel, should support positive shareholder returns in the medium term.