Webjet returns to profitability, expects to top pre-covid bookings by October

The rebounding travel narrative is gathering momentum as Webjet (ASX: WEB) returns to positive cash flow and profitability in the second-half of FY22.

Webjet said that FY22 was so far generating roughly $4m per month on average in surplus cash compared to $5.5m per month average cash burn in FY21.

Total transaction volumes and revenue jumped 262% and 466% respectively for the 12 months to 31 March, compared to a year ago, whereas expenses rose just 7%. 

Webjet held a cash position of $434m as at 31 March, which is rather substantial relative to the company's $2.1bn market cap.

North America and domestic bookings were the main highlights, with Managing Director John Guscic saying:

“Our investment in North America is paying off with booking volumes for that business now already more than double what they were pre-pandemic, and all the work undertaken to drive efficiencies saw costs remain significantly below pre-pandemic levels.”

“Domestic bookings spiked as borders opened, reflecting Webjet OTA’s strength in servicing the domestic leisure market, however international bookings have been subdued with airline capacity still well below pre-pandemic levels.”

Outlook

There were several interesting takeaways from management's outlook commentary, including:

Travel industry investing in future capacity

“For example, Qantas, Virgin and Rex have all placed orders for new aircraft, and Bonza has announced its launch into the Australian domestic market.”

“We are also seeing major hotel and resort rebound with over US$68 billion in global hotel investment in CY2021, and an anticipated 2,805 hotels with 428,037 new rooms to open in 2022.”

Profit momentum

“April was our most profitable month since the pandemic began with all of our businesses delivering profits. May’s profitability is expected to significantly exceed that of April.”

Markets return to form, Asia lags 

“Fourteen of the Top 25 markets are now trading at or above pre-pandemic booking volumes, although some markets continue to have meaningful restrictions, particularly in Asia Pacific.”

Honing in on pre-covid levels

"Based on current bookings trajectory the Group remains on track of be back at pre-pandemic bookings volumes by 2H23 – October 2022 to March 2023."

On the fence for dividends

"While Webjet has significant cash reserves, we continue to watch cash, cash flow and debtor risk very closely ... We paid the deferred FY20 interim dividend during the year however given the inherent uncertainty that still remains, we have not declared a dividend for FY22.”

Broader market turmoil

The S&P/ASX 200 is down -1.3% in early trade, weighing on any upside for Webjet shares.

The US market plunged overnight, weighed by weak earnings from retail giants like Walmart and Target, surging inflation figures in the UK and stagflation concerns weighed.

Its interesting to note that airfares in the US rose 33.3% in April compared to last year, according to the US Bureau of Labour Statistics.

While travel is rebounding on the back of pent-up demand, can consumers weather surging prices and for how long?

Webjet 12-month price chart