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Why the SeaLink share price is falling on its profit report

This morning Sealink Travel Group Ltd (ASX: SLK) reported its half-year results for the period ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half.

  • Total income (revenue) of $130.4 million, up $37.1 million, or 32.1%
  • Net adjusted profit of $13.1 million, up $1.7 million, or 15%
  • Underlying EBITDA up 8% to $25.7 million
  • Basic earnings per share of 12.8 cents, up 14.3%
  • Interim dividend of 6.5 cents per share, flat on prior period, representing payout of 50.7% of after tax net profit
  • Net debt reduced by $12.5 million or 11.8%
  • Forecast for improved trading profit over the second half of the fiscal year

SeaLink is a provider of travel and tourism services and management has more doubled its share price from $2 to $4 over just the past 4 years thanks to an acquisitive and organic growth strategy.

It operates the Captain Cook cruises on Sydney Harbour, Fraser Island ferries and others in Queensland, and the Kangaroo Island ferries in SA.

Therefore it’s leveraged to the strength of tourism numbers around the country and management expects slightly “more subdued tourism” activity over the second half of the fiscal year.

It also benefits as the Australian dollar falls as this makes Australia a cheaper destination for overseas visitors (to help SeaLink’s profit margins), while domestic tourism can also increase as Australians are put off holidaying abroad.

Also, as a leisure and commuter ferry operator one of its biggest costs is diesel fuel so as oil (energy) prices rise or fall so do its profit margins.

Others in the tourism sector to consider include the struggling Queensland-tourism-focused Experience Co Ltd (ASX: EXP) and cinemas and hotels business Event Hospitality & Entertainment Ltd (ASX: EVT).

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Event Hospitality & Entertainment. The Motley Fool Australia owns shares of EXPERNCECO FPO. 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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