The Webjet Limited (ASX: WEB) share price is down after reporting that its FY21 first half profit fell heavily.
What happened in the Webjet FY21 half-year result?
Webjet announced that its total transaction value (TTV) decreased by 89% to $267 million and revenue dropped 90% to $22.6 million.
The company was fairly successful at reducing its expenses, with underlying expenses falling 52% to $62.7 million.
This combination of a heavy revenue decline and a good reduction of expenses led to underlying EBITDA (EBITDA explained) falling 146% to a loss of $40.1 million.
Webjet’s underlying net profit after tax (NPAT) declined by 240% to a loss of $60.5 million and statutory NPAT plunged to a loss $132.2 million. The statutory result includes $74.3 million of non-cash items, including $59.1 million relating to the fair value change in the convertible note.
Are things getting better for Webjet?
The travel industry has obviously been smashed because of COVID-19, however Webjet was able to tell investors that the Webjet online travel agency (OTA) business returned to profitability during the period as domestic borders started to reopen.
Online Republic benefited from domestic leisure markets reopening in Australia and New Zealand, although key international markets continue to be impacted.
WebBeds saw improved TTV activity during the period, however ongoing restrictions continue to impact travel activity in most regions. WebBeds is expected to be at least 20% more cost efficient when at scale.
Webjet continues to focus on managing its cash burn and cost reduction activities. The monthly cash burn is down to $4.8 million, the company has $283 million of cash left. The remaining business to business debtor risk has now been mitigated. Bank waivers have been extended through to 31 March 2022.
Outlook
The domestic leisure market is a big focus at the moment for a return to profit for Webjet. The company’s global footprint and diverse customer base will allow the company to capture the demand when borders reopen, whilst leveraging the shift from offline to online.
Around 85% of the Webjet OTA flight bookings are domestic and it largely serves the leisure market, so this could be the most important division for the foreseeable future.
Trading for the rest of FY21 is expected to be in line with the first half of FY21. However, WebBeds still has a long-term goal of becoming the number one business to business (B2B) player in the world.
I think that Webjet has a good chance of taking more market share over time. If global travel returns sooner rather than later then Webjet shares could be a long term opportunity. But it just depends on how quickly a material amount of global travel returns. It could take longer than some investors are expecting.
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