SeaLink profit steady; bushfires, coronavirus hit to come
South Australian transport services company SeaLink has reported a steady net profit after tax but flagged a combined impact of the recent bushfires and coronavirus spread on its full year performance.
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SA-based SeaLink Travel Group has reported steady underlying results for the first half, while flagging a second-half hit from the combined impact of the bushfires and coronavirus.
The company reported underlying net profit of $13.6 million, up 3.9 per cent, on total revenues of $132.9 million.
The statutory net profit was $8.7 million, down 32.8 per cent, impacted by $4.9 million in one-off costs related to the acquisition of Transit Systems Group.
The company’s shares surged on the news, on a bad day for the broader market, closing more than 11 per cent stronger at $4.34.
The business completed its near-$700 million acquisition of Transit Systems in January, so Transit’s contribution to revenue or profit will be recorded in the results for the second half period, from January 1 to July 30.
SeaLink’s deal with Australia’s largest private operator of metropolitan public bus services and an established international bus operator in London and Singapore ensures 85 per cent of its income is now coming in from government contracts, reducing its dependency on tourism and ferry services.
“The timing for revenue and geographical diversification for SeaLink was impeccable,”
SeaLink chief executive Clint Feuerherdt told The Advertiser.
“Not only are we seeing a strong response to the #bookthemout and other tourism campaigns, the business also has a strong pipeline of transport projects coming up domestically as well as in Singapore.”
SeaLink estimates the combined impact of Australia’s summer bushfires and the global coronavirus crisis will be a reduction of about $5 million in earnings before interest, taxes, deductions and amortisation (EBITDA) for the second half.
SeaLink’s Vivonne Bay Lodge on Kangaroo Island was mostly destroyed by the fires in January.
The property is insured and the group intends to rebuild while operating its catering and tour operations on KI from alternative sites to offset any material impact from the loss of the lodge.
“We see a short term (6 months) degradation of the visitor market, which based on previous experience, should recover once winter arrives and the regeneration of the natural environment commences,” SeaLink said.
For the first half to December 31, revenues in KI rose slightly with growth in freight offsetting flat passenger numbers.
Its Murray Princess operation also had a challenging first half with revenue down more than four per cent on the prior year.
“Ongoing perceptions of lack of water in the Murray River due to media coverage around drought and the continuing increase in heavily discounted ocean cruise offers from Australian ports, including Adelaide has contributed to this result,” SeaLink said.
“Across the tourism and marine business, we are experiencing a more volatile business environment as a result of the recent devastating bushfires across Australia, in particular throughout NSW and Kangaroo Island and more recently from the novel coronavirus outbreak in China,” SeaLink said.
Of its tourism business, approximately 20 per cent of group sales are international visitors – Chinese visitors make up less than 1 per cent of them.
Annualised EBITDA for the combined group is now expected to come in at the lower end of its forecast $79 million to $86 million range due to service delays and costs.
This will limit (or remove) the earn-out payment of $63 million to SeaLink, which was contingent on hitting the higher end of forecasts.
In January, SeaLink announced a 6.5 cents per share fully franked first-half interim dividend for shareholders, payable on March 31.
The group has also commenced a search for a new chair following Andrew McEvoy’s resignation to take up an international executive role overseas.
Mr McEvoy will remain chair until June 30 to allow for an orderly search for a replacement and a smooth transition.
RBC Capital Markets’ analyst Tim Piper said the result was in line with expectations.
“The $5m EBITDA hit from bushfires/coronavirus is less than we anticipated, however the extent of the impact is difficult to quantify at the moment, and we do not rule out a more substantial impact depending on the length and severity of the virus.
“As noted by SLK, tourism now accounts for only ~15 per cent of group revenue.”
He was disappointed with Transit tracking to the low end of guidance, but said the large tender pipeline both domestically and offshore and a contract improvement in Sydney could deliver material earnings upside potential.
A 6.5c fully franked first-half dividend will be paid on March 31.