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Should you buy Helloworld Travel shares after today’s half year results release?

The Helloworld Travel Ltd (ASX: HLO) share price could be on the move on Monday following the release of the integrated travel company’s half year results.

For the six months ended December 31, Helloworld grew its total transaction value (TTV) by 6.1% to $3,152.9 million, revenue by 7.7% to $182.2 million, EBITDA by 5.6% to $42 million, and net profit after tax by 5.4% to $21.9 million.

Earnings per share came in at 18.1 cents, up 2.8% on the prior corresponding period. The Helloworld board declared an 8 cents per share fully franked interim dividend, up 14.3% on the same period last year.

What were the drivers of the result?

Management advised that key drivers of its TTV and revenue growth were the acquisitions made in the second half of the prior year including Magellan Travel Group, Flight Systems Group and Asia Escape Holidays. On a like for like basis revenue was flat.

This was partially offset by the rationalisation of unprofitable TTV from certain overseas online travel agents as the company focuses on profitable revenue growth initiatives.

Furthermore, the company experienced softer second quarter trading in the Australian inbound business due to the timing of inbound customers travel and some movements in client requirements.

This ultimately led to the Australian segment generating TTV of $2,724.8 million, an increase of 7.9% on the prior corresponding period. The New Zealand segment generated TTV of $385.1 million, a decrease of 2.6%. Finally, the Rest of World segment generated TTV of $43 million, a decrease of 14.6%.

On the bottom line profits grew slower than revenue due partly to an 8.4% increase in operating costs to $141.2 million. This was the result of higher variable selling expenses and the inclusion of the fixed operating cost base from the FY 2018 business acquisitions.

In addition to this, the company increased its advertising and marketing expenditure with the launch of the Helloworld television program on the Australian free to air Nine Entertainment Co Holdings Ltd (ASX: NEC) network and a new strategic partnership with News Corporation (ASX: NWS).

Outlook.

Management expects that its focus on profitable revenue streams and cost control will lead to improvements in margins and profitability in future financial years.

In the near term this is expected to lead to full year EBITDA in the range of $76 million to $80 million, which is in line with its previous guidance and an increase of 16.5% to 22.7% on the $65.2 million achieved in FY 2018.

Should you invest?

I felt the company’s first half result was a touch underwhelming, but it is pleasing to see management reaffirm its full year guidance.

If it achieves this then I feel its shares are good value at 20x trailing earnings. Though, it certainly will need a strong second half to do so.

Overall, I think Helloworld is a good long-term option, along with Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB), and could be worth considering if its shares come under pressure today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Helloworld Limited. The Motley Fool Australia has recommended Webjet Ltd. 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 Scott Phillips.

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