Web Travel Group Ltd (ASX: WEB) experienced a dramatic drop in share price, plummeting 31.6% from $7.03 to $4.81 during early trading on Monday. This decline comes despite a 0.3% increase in the S&P/ASX 200 Index at the same time.
The sharp fall followed the company’s preliminary update on its financial results for the first half of fiscal 2025 (1H FY25), specifically concerning its WebBeds business. Recently, Web Travel spun off its online travel agency, Webjet Group (ASX: WJL), which began trading independently on September 23.
Web Travel is now primarily focused on WebBeds, which connects hotels and other travel service providers with travelers globally. However, the company reiterated concerns regarding a squeeze in total transaction value (TTV) and revenue margins, first mentioned at its annual general meeting (AGM) on August 29.
Factors contributing to the downturn include the collapse of German tour operator FTI Group, as well as challenges linked to the upcoming Paris Olympics and the European Football Championships. Management noted that European margins remain low, and existing customer financial incentive agreements are currently under review.
As a result, the company forecasts a TTV/revenue margin of approximately 6.4% for the first half of FY2025, down from the 7% projected at the AGM. Additionally, Web Travel revised its preliminary underlying earnings before interest, tax, depreciation, and amortization (EBITDA) margin for WebBeds down to about 44%, compared to the previous expectation of 52%. This revision reflects lower revenue and a 15% year-on-year increase in operating expenses, which are expected to remain consistent through the second half of the fiscal year.
Despite these setbacks, WebBeds reported a 26% increase in TTV and a 22% rise in bookings compared to the first half of fiscal 2024.
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