Consumer cyclical

Helloworld confirms guidance on back of travel sector’s recovery story

By Market Index
Tue 11 Oct 22, 11:39am (AEST)
People at airport
Source: iStock

Key Points

  • Helloworld reported a 352% increase total transaction value (TTV) in the September quarter
  • Management guided to FY23 underlying earnings (EBITDA) in the range of $22.0m to $26.0m
  • The company reported a return to profitability in the fourth quarter of FY22

Buoyed by an 87% return to pre-covid domestic passenger numbers in July, travel business Helloworld’s (ASX: HLO) September quarter update today reported a 352% increase total transaction value (TTV) to $561m, versus the previous quarter.

Earnings (EBITDA) for the September quarter were $5.3m compared with an earnings loss of $3.3m in the first quarter FY22, while revenue at $29.3m was up 174%.

Commenting on today’s update CEO Andrew Burnes told the market to expect a continued recovery in FY23 and guided to underlying earnings (EBITDA) in the range of $22.0m to $26.0m.

Other highlights within today’s September quarter update include:

  • Wholesale/inbound: TTV was up 200% on the same quarter in the prior year in Australia. The Australian destination management business is also up 829% on the previous period due to the reopening of international borders.

  • Retail A&NZ: With travellers taking advantage of the first northern hemisphere summer without border restrictions, TTV was up 395% for the quarter in Australia and 288% in NZ. Cruise is also expected to return strongly as more capacity arrives in Australian waters in the coming months.

  • Entertainment Logistix (formerly Show Travel): The concert, theatre and event logistics business has seen significant improvement since the removal of restrictions, with gross revenues up 38% on the previous period.

The group said the NZ and cruise tourism markets are recovering over the second half of 2022.

What happened at the full year?

The company reported a return to profitability in the fourth quarter of FY22, with a statutory FY22 profit of $90.5m after tax and a net loss of $28.8m.

Total revenue for Helloworld’s continuing operations grew by 20.5% to $63.3m, and its TTV rose 140% to $1.01bn.

The board declared a 10c final dividend.

With the exception of some minor bank guarantees, mainly to commercial landlords, at 30 June 2022 Helloworld had no external debt.


The company expects to benefit from a continued uptick in International and domestic travel as Travellers book with longer lead times.

While IATA notes that international passenger numbers were still only at 68% of pre-covid levels in July, domestic passenger numbers are expected to pass pre-covid levels in 2023.

Burnes also advised investors that Helloworld is now in an excellent position – with a strong balance sheet, no borrowing, cash reserves and substantial liquid assets - in relation to potential future acquisitions and/or possible distributions to shareholders through various mechanisms.

What brokers think

Helloworld’s share price is down around -30% over one year but has been on an uptrend since late September.

Consensus on the stock is Moderate Buy.

Based on Morningstar’s fair value of $3.30 the stock appears to be undervalued.

Based on the two brokers that cover Helloworld (as reported on by FN Arena) the stock is currently trading with 22% upside to the target price of $2.48.

FY23 earnings guidance by Helloworld far exceeded Ord Minnett's expectations, however after factoring in changed valuations the broker’s target price lowers to $2.15 from $2.45.

The Hold rating is unchanged, the broker forecasts a full year FY23 dividend of 4.00 cents and EPS of minus -0.90 cents.

Following Helloworld’s higher-than-expected FY23 earnings (EBITDA) guidance, Morgans concludes that the company is materially undervalued and retains its Add rating and raises the target to $2.82 from $2.72.

Neither broker has updated since 31/08/22.

Helloworld Travel's share price was up around 0.50% in late morning trade.


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