What you need to know about the Webjet Limited profit result

Credit: Jaan

After its shares closed the day up by almost 6% on Wednesday, it appears as though the market was clearly expecting some great results today when Webjet Limited (ASX: WEB) reported its first-half results.

Well Webjet has just announced its results and appears to have delivered on this. The results were:

  • Revenue – $ 73.8 million (26.8% increase year over year)
  • EBITDA – $ 18.2 million (26.4% increase year over year)
  • Net Profit After Tax – $ 10.7 million (17.5% increase year over year)
  • Earnings per share – 13.2 cents (14.8% increase year over year)

In November the company had forecast strong profit growth for the next five years, offering earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance of $33.5 million for the full year.

Traditionally the first half of the year is the weaker half, accounting for approximately 44% of its earnings. If the company can continue this level of performance I would expect the company to beat the $33.5 million EBITDA guidance they previously offered. Though, it is worth noting that management has been conservative and not increased its guidance for the full-year, choosing to stick to its prior guidance.

I believe Webjet’s future does look promising as management is confident the travel booking business will continue to shift from bricks and mortar to online in the future. The company will no doubt be hoping to steal market share away from Flight Centre Travel Group Ltd (ASX: FLT).

This shift could well be shown in the growth of its bookings. Bookings were up 28% on the same period last year with notably strong growth from its Sunhotels segment. However, EBITDA in the segment dropped 21% due to impacts from investments to take advantage of FY17 growth opportunities. I see this as a little short-term pain for long-term gain. Management now expects full-year bookings to increase by 40% year on year.

Finally, the company has also raised its interim dividend from 6.25 cents to 6.5 cents per share. I would expect the same level of growth to occur in the second half of the year giving a 14 cent full-year dividend. Which at the last close price yields a, usually fully-franked, dividend of 2.7%.

Currently the shares are down 1.15% in pre-market trading, possibly hinting that the market was expecting even greater increases in profit for this earnings release. Equally, the reluctance of management to increase its guidance could have caused some jitters.

Foolish takeaway

I do feel that Webjet shares are a great long-term investment. Any sell-off today could be a good opportunity to load up. Priced at 18 times earnings means they don’t come cheap, but with such strong growth prospects they could be worth paying a premium for. Should the oil price spike, or a global economic slowdown occur, growth could be slowed, so do bear this in mind.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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