Webjet Diversifies as Sales Grow

ONLINE retailer Webjet is starting to diversify income by placing its airline booking engine – which already generates most of the company’s revenue – on three new websites within the next two months.

Managing Director David Clarke said the booking engine will soon feature on the Travelmate and Need It Now consumer sites, in addition to the Creative Holidays trade site.

The booking engine is part of the Travel Service Aggregator technology platform Webjet developed in conjunction with Galileo and Microsoft.

It can process up to 1000 transactions a minute and has been a key reason for the recent strong business performance of Webjet, which recently announced a net profit for the six months to December 31, 2004, of A$254,484.

Further profit announcements are expected with sales continuing to surge.

February, with just 28 days, was a record month with A$8.1 million in sales (11% up on January) driven by 22,000 bookings covering 30,000 passengers.

“Just wait until you see March,” Clarke said.

He added that TSA, which is able to aggregate and display product from disparate suppliers, has allowed Webjet to increase sales while controlling staffing costs.

“Most of the incremental growth goes straight to the bottom line,” he said.

“At Webjet we have 16 full-time staff,” he said. “The throughput of the best run traditional travel agencies is around $1 million a year per staff member – we can do A$6 million per person.”

Clarke said Webjet operates on a gross margin of 7% before costs – 6% is fixed while the remaining 1% goes to marketing, generally evenly split between online and offline.

“I believe you’ve got to be a visible presence in the real world – it’s no good just being a cyber space identity.”

While Clarke was reluctant to forecast because of ASX rules, he said “if the model holds true I believe our net margin can fall within the 1.5% to 2% range by the end of the year based on current trends.”

Current rampant growth rates will be difficult to maintain, he said, although the company is aiming to double existing (low-commission) airline traffic, which currently dominates income at 60%.

Another 20% comes from car, hotels, and insurance, while the remaining 20% comprises services fees.

Webjet charges a A$6.95 service fee for every transaction, no matter what volume or amount.

“It’s been in place for more than a year and we have had absolutely no resistance,” he said.

Meanwhile, whatever resistance there was to investing in Webjet has evaporated.

Over the past seven months Webjet shares have increased from three cents to a high of 22 cents (check) and are currently trading at around 16 cents.

Daily trading volumes regularly exceed one million shares, resulting in major paper profits for some of the biggest names in Australian travel.

Significant investors who bought in or struck options deals when the stock was scraping the bottom of its range include Harvey World Travel (19%), Cendant (9%) and Australian Outback Travel (3.5%), which owns Need It Now and Travelmate.

Both Cendant (GDS, hotels and car – Avis, Budget) and Australian Outback Travel (Australia and NZ hotels) are also using Webjet to distribute its products, while the HWT alliance provides it with buying power.

The frenetic stock activity has inevitably led to speculation and rumour.

But Clarke said there has been little or no recent change in the Top 20 shareholders.

“We are not sitting here trying to organise a buyout or takeover,” Mr Clarke said.

“If someone makes an offer, we’ll consider it but it’s not in the business plan or strategy.”

Ends/ 22 March, 2005

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