Why the Webjet share price rocketed 10% higher today

The Webjet Limited (ASX:WEB) share price has been on fire on Wednesday. Here's why it is racing higher on the day of its AGM…

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The Webjet Limited (ASX: WEB) share price has been amongst the best performers on the ASX 200 on Wednesday.

In morning trade the online travel agent's shares raced as much as 10% higher to $13.70.

They have since pulled back a touch but are still up 7% to $13.30 at the time of writing.

Why is the Webjet share price on fire today?

Investors have been buying Webjet's shares following the release of its annual general meeting presentation ahead of its event in Melbourne.

As well as breakdown on its FY 2019 performance, the presentation included a trading update and its expectations for the full year.

How is Webjet performing in FY 2020?

Webjet's managing director, John Guscic, revealed that the company has started FY 2020 in a positive fashion.

Financial year-to-date, excluding any Thomas Cook prior or current year contribution, the key WebBeds business continues to grow TTV, revenue, and EBITDA in all regions.

Elsehwere, although it is facing challenging trading conditions, the Webjet OTA business is performing well and continues to outperform market flight bookings growth.

Things are not quite as positive for the New Zealand-based Online Republic business. While Cars and Motorhomes are both performing well and continue to grow, the Cruise vertical continues to be impacted by reduced capacity and loss of share.

A turnaround strategy has been initiated, but management expects first half Online Republic EBITDA to be lower year on year. A stronger second half is forecast, leading to flat segment EBITDA for the year.

Margin improvements.

Thanks to the growth of the WebBeds business, the company is seeing significant improvements in EBITDA margins across its business.

In light of this, it remains on track to deliver its profitability target of 8/4/4 by FY 2022.

Mr Guscic explained: "This will mean 8% Revenue/TTV margin and 4% costs/TTV margin, will deliver a 4% EBITDA/TTV margin, which translates to a 50% EBITDA margin."

The Rezchain blockchain solution is also playing a key role in helping deliver this target by driving efficiencies across the business and helping reduce costs.

Guidance.

First half underlying EBITDA is expected to be at least $80 million, up from $58 million for the same period last year. This represents an increase of more than 37%.

And for the full year, management expects FY 2020 underlying EBITDA, which excludes one-off revenues and costs and the impact of AASB16, to be between $157 million and $167 million.

This represents growth of approximately 26% to 34% over FY 2019. It also represents 16% to 23% organic EBITDA growth after adjusting for the additional 5-month contribution from the DOTW business.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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