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Highlights:
- Web Travel's share price plunges 31.6%, closing at AUD 4.81.
- Revised earnings projections signal continued margin pressure.
- The company aims for AUD 10 billion in total transaction value by FY30.
In a shocking turn of events, shares of The Web Travel Group Ltd (ASX:WEB) experienced a dramatic fall on Monday, trading at AUD 4.81 after closing at AUD 7.03 on Friday, representing a staggering 31.6% decrease. This decline comes amidst a generally positive market, as the S&P/ASX 200 Index (ASX:XJO) nudged up 0.3% during the same trading period.
This sharp drop in share price can be traced back to the company’s preliminary financial update regarding its WebBeds business, which serves as a crucial link between hotels and travelers globally. Investors were particularly spooked by the reiterated negative impacts on total transaction value (TTV) and revenue margins, which were first flagged at the company's annual general meeting (AGM) on August 29.
Key factors contributing to the decline include the fallout from the collapse of German tour operator FTI Group and the anticipated effects of major events like the Paris Olympics and the European Football Championship. These developments have led to subdued European margins, prompting the management to revise their earlier forecasts. The company now expects TTV/revenue margins for 1H FY 2025 to hover around 6.4%, a decrease from the 7% forecasted at the AGM.
Adding to investor anxiety, Web Travel has lowered its preliminary underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins for the first half of FY 2025 to approximately 44%, down from the previously expected 52%. This downgrade reflects not only a reduction in revenue but also a substantial 15% increase in operating expenses year on year. Management has cautioned that operating expenses for the second half of the financial year are likely to remain consistent with those in the first half.
Despite these challenges, there are some silver linings. WebBeds reported a 26% increase in TTV compared to 1H FY 2024, while bookings surged by 22% year on year. These growth metrics provide some reassurance amid the storm of negative headlines.
Looking ahead, the company remains committed to ambitious targets, aiming for a total transaction value of AUD10 billion by FY30, alongside a target EBITDA margin of approximately 50%. However, the changing geographic and business mix is expected to stabilise TTV/revenue margins at around 6.5%, signaling that recovery will take time.
