Web Travel warns investors of earnings impact following FTI Group collapse and Paris Olympics

The travel group has been hammered by investors with the value of shares falling by more than a third after warning revenue margins were lower than expected, in an announcement that has puzzled analysts.

Web Travel CEO John Guscic has cautioned of a margin impact worse than previously expected. Picture: Supplied.

Web Travel Group has warned investors of a worse than expected hit to its revenue margins as it feels the pinch from the collapse of FTI Group and lacklustre demand for major sporting events over the European summer.

The company on Monday told investors preliminary total transaction value (TTV) and revenue margins for the six months to September will be 6.4 per cent compared to the 7 per cent it had indicated at its annual meeting in August.

The downgrade comes two weeks after the group, formerly known as Webjet, spun off its business to consumer assets as a separately listed company.

Its flagship WebBeds brands, which has been championed as a wunderkind by Web Travel, also said preliminary underlying earnings before interest, taxes, depreciation, and amortisation margins would fall from 52 per cent a year ago to 44 per cent, reflecting lower revenue and operating expenses.

First half TTV margins were now 60 basis points worse than expected, according to RBC Capital Markets analyst Wei Weng-Chen, while EBITDA margins were lower by 600 basis points than what the company had guided in late August.

The combination of the two factors means that implied first half EBITDA is 22 per cent lower than consensus expectations.

The deterioration sparked a hefty selloff from investors with shares losing more than a third of their value to close down by 35.6 per cent to a two-year low of $4.53.

Web Travel controls WebBeds and B2B travel distribution assets, while the newly created Webjet oversees consumer products including Webjet OTA, GoSee and Trip Ninja.

It came after shareholders voted in September to split the company from its business to consumer products which are now housed in a new Webjet entity. Web Travel is led by John Guscic who was the previous chief executive of the old Webjet.

FTI Group, an unrelated entity, was Europe’s third largest tour operator and filed for bankruptcy in June. It resulted in the complete or partial cancellation of all trips from June 4.

Citi analyst Samuel Seow said it was a shock update from Web Travel given that the impacts were already foreshadowed before its AGM in August could have changed materially since then.

“While we expect FTI, Olympics, Euros caused some disruptions – we note these aren’t new news, and similarly it’s hard to imagine geographic mix changed materially since the AGM,” he said.

“Additionally, our understanding is hotel overrides aren’t accrued like air and shouldn’t be subject to an end of period adjustment.”

Mr Seow said that the positive difference between TTV and bookings suggested ADRs/Mix are still strong, and the European market is in robust shape. Citi maintained its target price of $8.25.

Web Travel had indicated previously poor European trading in June and July after the collapse of FTI Group resulted in about $2bn worth of hotel inventory distorting the market and affecting margins.

WebBeds remains committed to its $10bn TTV the 2030 fiscal year and 50 per cent EBITDA margin targets. It said changing geographic and business mix means TTV/Revenue margins are expected to stabilise at 6.5 per cent, while FY26 EBITDA margins would meet its 50 per cent target.

Macquarie analysts maintained confidence that Web Travel will be able to successfully scale going forward, but questioned its ability to maintain underlying EBITDA margins of 50 per cent given continued pressure on revenue margins and expected OPEX growth.

“We currently forecast outer year OPEX growth of circa 10 per cent per annum. This is in line with WEB’s prior guidance; however we expect updated cost guidance should be provided at its upcoming result,” brokers said.

Web Travel has 391 million shares on issue after the split, and $60m of Australian available debt, with a market capitalisation post merger of $2.79bn.

Web Travel will release its annual results on November 20.

Originally published as Web Travel warns investors of earnings impact following FTI Group collapse and Paris Olympics