David Clarke, Webjet

David Clarke, Webjet

ONLINE retailer Webjet, which now has $30m in the bank and no debt, has posted a 15% increase in net profit for the year ending June 30, 2009, boosting transaction numbers by 21% to a record 657,000.

Managing Director David Clarke said Webjet had benefitted from airline discounting with consumers heading to aggregator sites to find the best deal.

Lower airfares had little impact with Webjet making most of its money from industry-high transaction fees rather than commissions. Clarke said Webjet would continue to market aggressively in a bid to increase share. He also said Webjet is investigating international expansion. 

WEBJET PRESS RELEASE

Webjet today announced the following results for the year ended 30 June 2009: 

 

2009

$m (rounded)

2008

$m (rounded)

+%

approx

TTV

388

330

17

Income (excl interest)

28.3

23.5

20

Interest

1.8

1.6

9

Total Revenue

30.1

25.1

20

EBITDA

9.3

8.1

15

EBIT

9.0

7.8

15

NPBT

10.8

9.4

14

Tax

(3.1)

(2.7)

15

NPAT*

7.7

6.7*

15

EPS (basic)*

10.24

8.92*

15

EPS (diluted)*

10.24

8.87*

15

*2008 operational NPAT of $6.7 million excludes a one-off tax credit of $2.7 million reflecting the establishment of a deferred tax asset in relation to the copyright benefit in the TSA licence which is Webjet’s core software asset. The headline reported NPAT for 2008 was $9.4 million.

Commenting, Webjet Managing Director David Clarke said:

Webjet has defied the comprehensively media-reported downturn in the travel industry to deliver a 15% increase in NPAT.

Dividends

Webjet’s total dividend for the year will be 6.5 cents, fully franked, a 30% increase on last year. The final dividend will be 3.5 cents a share, including a special dividend of half a cent, all fully franked. Payment date will be 9 October. This final payment is in addition to the interim dividend, paid in April of 3 cents including a special dividend of 0.5 cents a share which was also fully franked.

Operational results for 2009 by main indicator :

  • Strong TTV growth of 17% was achieved despite a significant reduction in unit values of air fares which resulted from substantial airline price discounting. 
  • Transaction numbers recorded a substantial increase of 21% to a total of approximately 657,000. 
  • Operating margins increased. Income, excluding interest, of $28.3 million was 20% up versus 2008. The margin to TTV of 7.3% increased from 7.1% in 2008 despite an extremely competitive environment. 
  • Cash reserves including fixed and floating rate note investments, totalled $30.9 million, up from $28 million last year. The company has no debt. 
  • Total costs of $19.3 million increased by 23% on last year reflecting a substantial investment in quality initiatives and customer guarantees including the development of a net promoter score system, with associated technology and incentive arrangements, where all staff are measured and rewarded according to a sophisticated quality index. 
  • Marketing costs have been contained at 1.9% of TTV compared with the control band of 2%.

 Strategy and Guidance 2009/2010

“As indicated in our full year report for 2008 the general and macro environment for 2008/09 was significantly restrained, relative to 2007/08, with major industry participants including airlines reporting substantial and sustained downturns in traffic demand and pricing.

 “This resulted in continuous price discounting by airlines across all segments of the market. Despite this general downturn and price discounting Webjet delivered profit growth through increased market share and substantial increases in both transaction numbers and TTV.

“As has been comprehensively reported in the general media, economic indicators suggest that Australia may not have suffered as significantly as its overseas counterparts during the global financial crisis. Indeed there are segments of media commentary which are currently suggesting that the worst may be over and that there are very tentative signs of the beginnings of a recovery. However, as the Prime Minister indicated recently, there are significant questions remaining as to whether this recovery is sustainable and many of the indicators e.g. unemployment levels, are yet to crystalise.

“The comments contained in our release dated 6 August 2008 in relation to the reduced demand, the likely reduction in the unit value of travel, the probability of consumers aggressively hunting bargains, and the probability of aggregation sites such as Webjet gaining market share, have proven to be accurate.

“Having said that, we are yet to see any evidence of a sustained increase in airline pricing. Available capacity operated by carriers both domestically within Australia and internationally from Australia has been rationalised and adjusted for the lower demand profile but overall capacity is still substantially in excess of demand.

“Consequently we do not expect to see a sustained improvement in market conditions, certainly in the six months to December 2009 and, arguably, not until well into calendar year 2010.

Against this background our strategy is:

  •  With media buying opportunities at extremely attractive levels we intend to devote all efforts to gaining additional market share. As part of this initiative it was announced to the Stock Exchange on 23 July that we will be extending our general media activities into regional Australia which accounts for approximately a third of the traveling population. We believe the regional markets contain substantial headroom for market share gains. In addition we will be increasing the penetration at a capital city level with some particular targeting of business travel which will result in a short term increase in marketing spend, relative to TTV, of approximately 0.5% in the six months to December 31 2009. 
  • Operating costs will be closely monitored and, as indicated in the remuneration report, all staff have agreed to participate in a salary freeze for 2009/10 at a base salary level with opportunity for increases only through continuing improvements in our quality service index and profit target achievement. We consider that quality of service in the intensely competitive environment, which has developed as a consequence of the global financial crisis, has been a key ingredient to our success in the last 12 months and will be even more significant in the following year. It is part of our fundamental brand values. 

In 2009/10 Webjet will be releasing a number of highly significant product initiatives, specifically:

  • Budget Breaker – this new and unique product is specifically designed to provide customers with the opportunity of selecting from a large range of automatically and dynamically presented product choices relative to a specified budget. It is consistent with consumers hunting for bargains. 
  • A major new hotel initiative Stay and Pay will be released to the market at the end of August. Unlike the majority of hotel offerings available online, Stay and Pay, which has been developed in conjunction with Travelport provides over 70,000 hotels worldwide, year round inventory not just left over at the last second, and uniquely regardless of date of stay or price of stay, an upfront payment of only $10 to secure the booking with the balance paid at the time of staying at the hotel. Effectively it will say to our customers, Why pay before you stay? It will be supported by substantial media coverage on National 7 Network and provide a substantial point of product difference relative to established competitors in online hotel selling. It will incorporate enhanced graphics and user interface protocols to make it easier and simpler for customers to compare different hotel products, locate hotels in a more intelligent manner as a result make an informed selection resulting in budgeting and cash flow management opportunities by only paying a $10 fee upfront. The full final price of the accommodation arrangements will be provided to customers at the time of booking in both local and overseas currencies to be settled at the hotel at the time of stay by credit card.

“In addition to the specific product initiatives, we have undertaken a detailed examination of a number of offshore market opportunities where we consider the profile of the markets to be compatible with our product offerings, strategically in synchronisation with our key airline associations, and where the risk profile is small and manageable.

“A number of opportunities have been dismissed because they fail to meet these criteria.

“We are at advanced stages of consideration in one of these international regions and expect to make advancement in the next few months.

“In the meantime, our New Zealand operation has been substantially upgraded along with a full conversion to local New Zealand currency and the introduction of international fares from the New Zealand region scheduled to occur progressively over the next two months.

“Marketing processes and initiatives on the internet are undergoing rapid change. As part of a deliberate strategic policy Webjet’s reliance on paid search and affiliate marketing is being progressively reduced. As our brand footprint expands and product content widens with consequential upgrading of natural search results we have been able from 1 July to eliminate affiliate marketing which we consider, given the maturity of our brand position, to be margin dilutionary and unnecessary.

“As part of these evolving processes, as was reported to the ASX on Monday 27 July, we have subscribed for a 20% interest in TaguchiMarketing Pty Ltd. This is not a speculative technology investment. It is an investment in an operating marketing company which has developed very sophisticated real time email management processes.

 “The alignment of the STW Group, Catalyst and ourselves, as investors in Taguchi, brings together an identity of interests where traditional marketing initiatives can be welded together seamlessly with sophisticated internet operations to an extent that we consider that the management of email processes in real time will in the near future become of equal significant to traditional paid search activities.

 “It is a means of ensuring our customer database receives appropriate targeted and relevant offers at an extremely economic cost.

 “In conclusion, and relative to these macro-economic factors and marketing initiatives, we would be disappointed if 2009/10 does not result in another profit increase.”

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