Decent Profit But Turnover and Revenue Not So Flash at Helloworld (where the buoyant inbound story strangely takes a back seat)

No mention of booming Chinese market in HLO results…

Australia’s #2 retailer Helloworld Travel has posted a good pre-tax half-year profit of $26 million, up 39% over the previous year, but the main driver appears have been cost cutting rather than turnover or sales growth – which could be a concern.

Total transaction value was up 2.7% (major rival Flight Centre’s turnover grew 8.7% over the same period) while revenue declined 3.7%, “reflecting the continued lower airfare prices and mix changes across the business units and products,” the company said.

“Operating costs are significantly below the prior comparative period across all segments.”

The Helloworld retail network in Australian  and New Zealand grew by 50 members to 2065 in the half-year to Dec 31, “mainly due to the increase in the independent network, My Travel Group.”

Of those 50 new members, 47 came from New Zealand (where there are now 347 total members).

In other words there were just three new stores added in Australia – representing network growth of just 0.14% in six months.

Outside ANZ, Helloworld struggled.

Turnover for its ‘Rest of the World’ segment fell 12.7% to $50.4m and its profit contribution was $100,000.

“Whilst the profit contribution is small, it is a significant improvement on the prior comparative period loss of  $0.6m”

Helloworld says Rest of World is of “significant future importance to the Group” however failed to provide clarity on how this will happen, speaking only in general rather than specific terms.

Looking ahead, the company promised more of the same, emphasising that the cost base “continues to reduce”.

So once again the HLO story is two things: cost-cutting and bricks and mortar retailer selling increased numbers of airfares at reduced rates.

As a company narrative, it is uninspiring, as is the lack of investment in new opportunities.

It also curious that Helloworld is not hitching its wagon to the inbound tourism growth story, despite owning the country’s three largest inbound tourism operators – AOT Inbound, ATS Pacific and Experience Australia Tours.

Helloworld mentioned none of them by name in the results announcement (it never does), while there was just one bland sentence covering this key business segment:

“The inbound business is experiencing strong demand from overseas partners for the improved product offerings into the Australia, New Zealand and Fiji markets.”

Helloworld CFO Michael Burnett later commented: “The Inbound business continues its strong contribution to the results of HLO.

“Both its year on year revenue and EBITDA performance has improved from the prior year.”

The last time inbound was broken out (though combined with wholesale) was in the FY16 full year results.

At that point TTV grew strongly to $801.8m, with EBITDA at $16.6m however “after the allocation of shared service net costs, the segment net loss amounted to $4.1 million”.

“We continue to inform our investors of the importance of the Inbound business,” Burnett said.

“As it not public facing, external focus is often on the known consumer brands.”

True that, but you can’t help wondering what’s happening behind closed doors.

If it’s a good story, why not tell it?

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