Webjet’s diversification strategy has started paying dividends with a record AUD19.1 million net profit for the 13/14 financial year.
It was tipped into record territory by first-time contributions from Zuji – an Asian OTA that until now has done nothing but lose money – and B2B accommodation wholesaler Lots of Hotels.
Even Zuji’s past losses worked for Webjet this time around, reducing its tax rate to just 9% for the year.
CEO John Guscic is claiming an AUD8m turnaround with Zuji, a contentious purchase which appears to have finally kicked into gear due to a number of measures including:
- sacking 40% of staff
- closing Sydney office
- moving to cheaper offices in Singapore
- elimination of unprofitable business streams
- 30% reduction in operating costs
Zuji’s past poor performance also allowed Webjet to “carry forward tax losses (and previously unrecognised tax losses) to reduce (Webjet’s) average tax rate to just 9.3% for the financial year.”
The tax rate going forward is likely to be 20-25%.
There was also a substantial cost saving on tech with IT spend across the Webjet business in 13/14 AUD2.5m less than the previous year.
Total Turnover Volume (TTV) was up 9.4% but growth slowed during the second half following the sale of Webjet US and elimination of “unprofitable” sales.
Revenue margins increased from 8.5% to 10.2% as the business grew accommodation sales.
In the financial summary, Mr Guscic said the Webjet OTA business “was essentially flat” and that performance was “in line with overall domestic travel market”.
This suggests that Webjet is still making its money out of selling domestic flights in Australia.
However, it’s not capitalising on the boom in international travel by Australians that has propelled the result of Flight Centre.
JP Morgan reported that Webjet’s Australian booking numbers are “declining slightly”.
In conclusion Mr Guscic said the company TTV and pre-tax profit is running ahead of last year.