The Helloworld Travel Ltd (ASX: HLO) share price closed the day in the red on Monday after the company released its interim report and financial results for the half year ended 31 December 2021.
Helloworld shares finished the day 4% down at $2.44 apiece as investors responded poorly to the company's earnings results on Monday.
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Helloworld share price tanks amid earnings growth
Key takeouts from the company's earnings results included:
- Half year statutory loss after tax fell to $14 million compared to $15.1 million in 1H21
- Travel-related revenue grew $12.5 million on the prior corresponding period (pcp), operating costs declined, and short-term net operating cash outflows remained tightly managed
- Total transaction value (TTV) grew 60.4% on the pcp contributing to a 45.2% increase in travel-related revenues
- Margins remained steady at 6%
- Non-corporate and entertainment travel TTV grew 86.6% on pcp
- Earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss of $5.2 million, down 10.8% or $0.6 million on the pcp
- Net loss before tax was $19.6 million, a decline of $1.9 million on the pcp of $21.5 million
- As at 31 December 2021, the group held cash balances of $87.6 million
- Subsequent to period-end, $7.5 million in previously paid company tax was received
- External borrowings at 31 December totalled $70.8 million after repayment of $10 million in December 2021
What else happened this half for Helloworld?
During the period Helloworld agreed to sell (subject to conditions) the corporate and entertainment travel businesses in Australia and New Zealand to Corporate Travel Management Ltd (ASX: CTD), for an enterprise value of A$175 million.
The company also notes its retail agency networks in Australia and New Zealand "remain steadfastly resilient with a strong presence to capture expected growth in travel demand in 2022 and beyond".
On the back of strong forward bookings, that have continued to climb, significant leisure bookings are now held for travel through until the end of 2023, Helloworld said.
The group expects demand for inbound travel arrivals heading to Australia, New Zealand, and Fiji to gradually normalise in 2022.
"If travel demand continues to grow on its current trajectory, [the company] should achieve a breakeven position or slightly better in the June quarter of FY22 and return to modest profitability throughout FY23," it said.
Aside from that, travel-related revenue grew $12.5 million year on year whereas operating costs declined. In addition, TTV grew over 60% on the previous year, "contributing to a 45.2% increase in travel-related revenues".
"With current liquidity levels and cash burn, HLO has sufficient liquidity to maintain operations and continue to benefit from the recovery of the travel and tourism market and to see that through to full recovery," Helloworld remarked.
Management commentary
In his address, Helloworld chief executive Andrew Burnes said:
Over the last two years, we have reviewed all parts of our business to ensure we are providing all critical services to our agency, corporate and direct customers while keeping costs to a sustainable level.
As part of this review we identified the opportunity to consider divesting our corporate division and on 15 December 2021, HLO announced it had entered into a binding agreement to sell its corporate and entertainment travel businesses in Australia and New Zealand to Corporate Travel Management for an enterprise value of A$175 million. We believe this transaction is at a compelling valuation to maximise HLO shareholder value and will allow HLO to focus on operations which, pre COVID-19, represented 80% of our TTV. Subject to certain conditions being met, completion is expected to occur during the third quarter of FY22.
What's next for Helloworld?
The company gave an overview of its company expectations for the coming periods. In the near term, Helloworld notes that "pent up demand for travel is extremely strong and when the impacts of the COVID-19 pandemic on travel finally subside, we anticipate travel will ramp up rapidly, with significant growth in the next 24 months".
If that were the case then demand for travel services from both retail leisure agents and corporate travel management companies will also soar "in a world where professional and personalised travel advice and management will be critical to travellers' sense of security and comfort".
Helloworld says it will continue to incur cash losses of approximately $1–$1.5 million per month for the next three months, based on its current expectations.
According to the company, it has a sufficient cash runway to last "beyond the end of calendar 2022 on current liquidity levels and cash burn rate".
Subject to satisfaction of the conditions and transaction completion, HLO will receive A$100 million in cash and CTM shares of A$75 million (escrowed 12 months from completion) towards the end of the March 2022 quarter. The cash consideration received will be used to repay debt, provide additional liquidity, capital management and to support growth opportunities in HLO's retail and leisure travel businesses as activity rebounds following COVID-19 disruption.
Helloworld share price snapshot
In the last 12 months, the Helloworld share price has climbed 8%. However, it is down around 3% this year to date. In the past month, it has gained 9%.
