Helloworld shuts stores, raises capital to ride out covid crisis

Around 125 travel agents will shut their doors, as Helloworld seeks $50m in fresh equity to ride out the coronavirus crisis.

Helloworld does not believe there will be an international travel recovery until the first half of the 2022 financial year. Picture: AFP

The grim spectre of at least two years worth of international travel restrictions, coupled with substantially reduced cash flows, has prompted about 5 per cent of Helloworld’s 2500 retail travel agents across Australia and New Zealand to close as the company announced a fully underwritten $50m equity raising on Thursday.

Helloworld Travel chief executive and managing director Andrew Burnes said the prolonged travel restrictions into at least 2021, coupled with total transaction values reduced to about 10 per cent of normal levels, had prompted the decision to raise equity.

“We do not anticipate a return to significant air capacity and travel until the first or second quarters of the 2022 financial year,” Helloworld told the ASX.

 

On completion of the raising, which is fully underwritten by Ord Minnett, Helloworld said it would have sufficient liquidity for operations and capital expenditure until the end of 2022.

Since COVID-19 struck Helloworld has reduced its operating costs to less than $2m per month and closed its offshore centres in Mumbai and Manila, making about 90 per cent of staff in those cities redundant. It also sold its US wholesale operation.

It expects bookings to remain at 10-12 per cent of previous levels until at least September this year and then to progressively increase as state borders and the potential trans-Tasman bubble opens.

On a brighter note, Mr Burnes said Helloworld’s corporate business, which comprises 70 per cent of domestic total transaction values, was increasing as borders open up.

Helloworld major shareholder Qantas will not participate in the raising but the company’s co-founders Andrew and Cinzia Burnes are expected to subscribe for $5m worth of new shares.

Helloworld does not believe there will be an international travel recovery until the first half of the 2022 financial year.

It anticipates an initial resumption of quarantine-free travel between Australia and New Zealand followed possibly by one or two Pacific Island countries.

Helloworld reckons the post-COVID-19 complexities of international travel will increase the importance of travel agents.

Following the equity raising Helloworld will have around $187m in cash and facilities. “Proceeds of the offer will be used to increase Helloworld’s balance sheet flexibility and provide liquidity to manage the business through a prolonged period of disruption to the global travel industry,” the company’s statement said.

Of Helloworld’s 1500 staff, 800 are working on reduced hours while 700 personnel remain stood down. Senior management are being paid 60 per cent of their previous salaries.

In a further update Mr Burnes said Helloworld was owed around $3.7m by Virgin Australia in commission overrides and marketing contributions, adding that it is unclear what recovery may be realised.

Helloworld said some of its suppliers, including airlines and cruise companies, were refusing to refund clients, and were insisting on bookings being paid for in full when it was unlikely the aircraft or cruise would depart before they would consider a refund.