What zombies? Webjet confident of weathering viral blow

Mar 20, 2020 – 2.18pm

Battered travel firm Webjet says it can raise funds and weather the current tourism drought, following devastation across the sector from the coronavirus pandemic.“My experience ... when it’s at its worst, or near its worst, everybody thinks the zombies are going to run around the corner and eat you alive,” Webjet chairman Roger Sharp told AFR Weekend.

“Everyone thinks the world’s over. And then it recovers.”He said “people make a lot of money on the other side in these situations” and Webjet wanted to be in a situation to capitalise on any recovery.

Mr Sharp’s comments come as Melbourne-based Webjet remains in a trading halt to raise funds. Brisbane-based Corporate Travel Management announced on Friday that it was deferring dividend payments and cutting jobs, contrasting with its plans of one week earlier to hold on to staff.

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Webjet is now trying to raise capital with its share price at $3.76. The Australian Financial Review’s Street Talk column has detailed some angst among existing shareholders.

Mr Sharp said that while capital markets were difficult, Webjet could raise traditional equity if required and did not rule out debt-linked fundraising.“We’ve got multiple options on the table,” he said.“There are very deep pools of capital globally looking for franchises like Webjet that are great businesses that have come up against a temporary trading issue.”

He declined to specify the extent of the company’s sales decline or current operating cash burn. But Morgan Stanley analysts pointed to what appeared to be a modest headline gearing level at Webjet's half-year results of 0.35 times debt/EBITDA.

The analysts estimated that three potential virus reactions had triggered the capital raising: significant margin hits because of fixed costs, a potential material cash shortfall if sales declined 80 per cent and the risk of other businesses collapsing while owing money to Webjet.

Asked why money was being raised, Mr Sharp said: “If your core business stops and you maintain overheads, you will spend money.

“Any business has got a responsibility to be well capitalised in that sort of [climate].”Mr Sharp said the company was watching its debtors and no breach of its own covenants had occurred. He said indications of a recovery could be seen in areas such as Singapore. It had initially suffered from panic buying but he said people were returning to bars and restaurants.

He said the environment could remain subdued for between three and six months, leading to pent-up demand at the end. “People are going to be so sick of working from home, not seeing the world,” he said.Webjet’s last half-year results showed a 16 per cent fall in bottom-line profits to $9 million, including the impact of travel outfit Thomas Cook failing while owing money.

On Webjet’s preferred measure of underlying EBITDA, business had improved 43 per cent to $86.3 million.