FY24 underlying EBITDA around mid-point of guidance. Operating cash flow very strong.Philip Pepe | Senior Analyst Event
HLO delivered an FY24 underlying EBITDA around the mid-point of its guidance and itsoperating cash flow was very strong. The share price reacted negatively perhaps in part dueto the lack of numerical guidance combined with escalated tensions in the Middle East andthe Ukraine creating some risk to travel demand in the near term. In our opinion, this is notnew news and travellers will continue to travel to safe destinations and change plans wherenecessary. We believe that at 8.7x FY25 PER, subdued travel demand is already priced in.We retain our BUY rating with a price target reduced from $3.80/s to $3.50/s.
Highlights
• FY24 Financial Results: Total Transaction Value (TTV) of $4.17b (FY23: $2.57b);representing an 62.5% increase. Shaw forecast was $4.46b. Revenue growth of 37.5%year-on-year to $228.2m in FY24. Shaw forecast was $236.6m. FactSet consensus was233.9m. Underlying EBITDA of $67.5m; compared to $44.1m underlying EBITDA in theprior year (+52.9%). Shaw forecast was $72.0m. FactSet consensus was $67.4m.Guidance was $64m-$72m. Net profit after tax increased to $30.7m, up 60.2% or$11.5m year-on-year. Shaw forecast was $37.6m. FactSet consensus was $36.6m.Operating cash flow of $63.5m up 136% versus PCP. Shaw forecast was $31.8m (+100%).Basic earnings of 19.2 cents per share, an increase of 6.8 cents per share or 54.8%compared with the prior year. Shaw forecast was 23.6 cents. FactSet consensus was 23.0cents. Final dividend of 6.0 cents per share, fully franked. Shaw forecast was 6 cps. Allgeographic segments were profitable with Australia and New Zealand reporting stronggrowth in underlying EBITDA compared with the prior year. Strong balance sheet,following full year cash generation of $63.5m, zero bank debt and 1.4m in CTM shares asat 30 June 2024.•
FY24 Business Highlights: Retail: Continues to perform strongly in Australia and NewZealand due to the ongoing high demand for the services and expertise of a professionaltravel advisor in making travel arrangements. Wholesale: Viva Holidays celebrates its50th year and received the National Tourism Industry Award (NTIA) for the MostOutstanding Wholesaler in 2023 and is a finalist for the same award in 2024. Cruiseco isalso a finalist for the 2024 awards in the same category. Inbound: With clients in 50countries around the world the Company’s inbound brands have continued their strongrecovery post COVID and have recorded significant growth for the financial year.Consolidation: Air Tickets continues to lead the industry in technology automation andinnovation with additions to the SmartSuite of technologies including SmartNDC andSmartRefunds. Logistics: Continued capital investment in fleet and warehouseinfrastructure. Express Travel Group (ETG): Integration substantially complete withefficiencies achieved across both businesses with integration of technologies and corefunctions.
• FY25 Outlook: At the end of FY24 travel numbers in and out of Australia are at 90-100%of FY19 levels, and just slightly lower in New Zealand at 85-95% of FY19 levels. Theoutlook for Helloworld is positive. The Company’s diversified business model allows it toremain focused on growing TTV at profitable margins while carefully controlling costs.Helloworld management is looking forward to continuing the successful journey for theCompany in the years ahead.
• Shaw Forecasts: We have reduced our EBITDA forecasts for FY25/FY26/FY27 by 9% andour EPS forecasts by circa 14% to take into account the run-rates in the FY24 financialresults and a more cautious outlook. However, our cash flow forecasts (operating cashflow + capex) have only reduced by 3-5%. Our DCF valuation has reducedfrom $3.80 per share to $3.50 per share.
Recommendation
HLO is trading on an FY25 PER of 8.7x and well below our $3.50 per share price target.Accordingly, we retain our BUY rating.
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