Bullish outlook for Web Travel after difficult second quarter for newly demerged company

Newly demerged Web Travel has given investors something to smile about with a $150m share buyback on the back of a lower half-year profit.

A strong second-half outlook and $150m share buyback by the newly demerged Web Travel have helped investors look past the company’s first-half drop in net profit.

Web Travel shares soared 11 per cent following the announcement to the ASX and closed up 57c, or 13.5 per cent, at $4.80.

Underlying net profit for the six months to September 30 was $52.5m, down from $56m in the previous corresponding period.

Earnings before interest and tax were down 8 per cent at $70m, from $76m in the first half of 2024.

The results came less than eight weeks after the demerger that saw hotels wholesaler WebBeds carved off into Web Travel, leaving the online travel agency and motorhome rental company GoSee in the Webjet Group.

Given the demerger took effect during the first half, the results of Webjet and GoSee were included as a discontinued business, lifting profits to $228.1m.

Managing director John Guscic said the collapse of European tour operator FTI, the Paris Olympics and European football championships all impacted earnings in June and July, and margins did not recover in August.

Although FTI is an unrelated entity, the company’s failure meant the complete or partial cancellations of trips from June 4, with a knock-on effect to the WebBeds business.

“We underestimated this decline and the extent of changing market conditions and customer mix, and underlying margins did not recover in August as anticipated,” Mr Guscic said.

The second half was off to a more positive start with total transaction value up 23 per cent and margins at 6.5 per cent in October. “Based on current trading we expect full year earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $117m and $122m,” said Mr Guscic.

“In the universe of global publicly traded companies, WebBeds remains one of the fastest organically growing travel brands.”

He said WebBeds was on track to deliver $5bn of total transaction value for the full year to March 31, 2025, and they were confident of reaching their goal of $10bn TTV by 2030.

“The business is highly scalable and efficiencies now in place give us confidence we will return to our circa 50 per cent EBITDA margin target in the 2026 financial year,” Mr Guscic said.

An on-market share buyback of up to $150m was also announced, to “maximise shareholder value and reduce potential future dilution from the company’s $250m convertible notes due in 2026”.

Expected to start in December, shares would be bought back using existing cash reserves, at no more than 5 per cent above the volume-weighted average price over the five days prior to purchase. Citi analyst Samuel Seow said the buyback was “positive”.

Wilsons Advisory said it was a strong result versus its own revised and consensus estimates.

“EBITDA guidance for the full year implies upgrades to both Wilson estimates and consensus (both at $114m),” said equity analyst Ben Wilson.

He also flagged likely upgrades to 2026 guidance and beyond given the group’s bullish outlook.