THE online travel booking service Webjet has shrugged off the gloomy trading conditions besetting some sectors of the economy to predict it will boost profits by more than 10 per cent this financial year.
After a slight dip in earnings in the first half, Webjet's ability to win a bigger slice of the travel market in the past six months helped it notch up a 5 per cent rise in full-year profits to $11 million for the year to June.
Echoing recent comments from Flight Centre, Webjet said consumers were often treating overseas holidays as a necessity, not a discretionary item to cull in tougher times.
The upbeat guidance comes after Webjet posted a 17 per cent rise to $592 million in total transaction value - the price at which travel products and services are sold - for the year to June.
The bottom-line result includes an operating loss of about $700,000 from its new businesses in the US and Asia. Two-thirds of Webjet's business is domestic travel.
Webjet's managing director, John Guscic, said people's desire to travel had not waned despite the global economy's precarious state and huge gyrations in equity markets.
"People are willing to cut back on other parts of their discretionary spending. Maybe it is a fundamental shift in people's perception of travel," he said.
"Australians have always loved to travel and nothing in the last year has deterred them from that."
Mr Guscic, who replaced David Clarke in March, said Webjet had increased its share of the travel market, although he could not put a figure on its slice of the segment because of the fragmented nature of the industry and the lack of reliable data.
"The travel market is still growing and we are growing our share of it. The last four months have been the best four months that we have had," he said.
He believed the impact of the strong Australian dollar on encouraging people to travel overseas had been overstated. Consumers had still shown a willingness to visit countries whose currency had not declined as markedly against the Australian dollar as the US greenback had, he said.
Webjet will pay a final dividend of 6? a share on October 7, taking the payout for the year to 11?.
Shares in Webjet rose 4 per cent to $1.85 yesterday.
Webjet and other travel-related stocks such as Flight Centre and Wotif.com have also been the beneficiaries for some time of airlines discounting fares heavily to stimulate demand.
Frequently Asked Questions about this Article…
How did Webjet perform financially in the year to June?
Webjet reported a 5% rise in full‑year profits to $11 million for the year to June. Total transaction value — the price at which travel products and services are sold — rose 17% to $592 million, although the result included an operating loss of about $700,000 from new US and Asia businesses.
What guidance has Webjet given for the current financial year?
Webjet gave upbeat guidance, predicting it will boost profits by more than 10% in the current financial year, reflecting stronger trading in the second half after a slight first‑half dip.
Why does Webjet think travel demand remains strong despite tougher economic conditions?
Webjet’s managing director John Guscic said consumers are often treating overseas holidays as a necessity rather than a discretionary cut, with Australians still keen to travel. He also noted recent months were the company’s best and that people are trimming other discretionary spending to keep trips.
Has Webjet increased its travel market share?
Webjet’s management said the company has increased its share of the travel market, but declined to give a specific figure because the industry is fragmented and reliable market‑share data are limited.
What effect has the strong Australian dollar had on Webjet’s bookings?
Webjet’s CEO said the impact of the strong Australian dollar has likely been overstated; consumers have still shown willingness to travel overseas even when destination currencies haven’t declined as much against the Australian dollar as the US dollar has.
Is Webjet making international investments and are they profitable?
Webjet has been expanding with new businesses in the US and Asia. These new operations contributed an operating loss of about $700,000 in the reported year, according to the company.
What dividend did Webjet announce and when will it be paid?
The article reports Webjet will pay a final dividend of 6? a share on October 7, taking the total payout for the year to 11?. (The article text shows the dividend figures as '6?' and '11?'.)
How did investors react and how are other travel stocks faring?
Shares in Webjet rose about 4% to $1.85 after the update. The article also notes that other travel‑related stocks such as Flight Centre and Wotif.com have benefited, helped in part by airlines discounting fares to stimulate demand.
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