The WEB Travel Group Ltd (ASX: WEB) share price has plunged 33% after giving an FY25 update.
Web Travel Group describes itself as a global business-to-business (B2B) organisation servicing the travel industry. It connects hotels and other travel sellers to a diverse network of travel buyers all over the world through its digital travel marketplace brand called WebBeds.
This business recently demerged with Webjet, a consumer-focused company.
FY25 update
The company said its WebBeds total transaction value (TTV) and bookings are up “significantly” compared to HY24, with increases of 26% and 22%, respectively.
WEB Travel noted it told investors on 29 August 2024 that its revenue to TTV margin had been impacted by the collapse of FTI Group, the Paris Olympics and the European Football Championship.
After the AGM update, European margins remained “subdued”, while overall margins were “further impacted by customer financial incentive agreements in place, which are under review.”
As a result, the HY25 TTV to revenue margin is now expected to be approximately 6.4%, down from around 7% as indicated at the AGM.
WEB Travel also said its HY25 underlying EBITDA margin is expected to be approximately 44%, down from 52% in the first half of FY24, reflecting lower revenue and operating expenses being up 15% on the first half of FY24. Expenses for the second half of FY24 are expected to be in line with the FY25 first half.
Longer-term goals remain
The company is still committed to $10 billion TTV by FY30, with an EBITDA margin of approximately 50%.
WEB Travel said that a changing geographic and business mix means the TTV to revenue margin is expected to stabilise at approximately 6.5%. The FY26 EBITDA margin is expected to be in line with its 50% target.
Final thoughts on the WEB Travel share price
It is disappointing when profit margins are not quite as strong as expected, which then has a major flow-on effect to the overall net profit.
This could be a buying opportunity if its margins stabilise/rise in the coming years, I think. But, it will also need to keep growing TTV at a good pace to excite investors.
For now, there are other ASX growth shares I’d rather buy.