Australia's Web Travel hits over 7-mth high on strong FY earnings, outlook

Web Travel Group (ASX:WEB) shares jumped to a seven-month high after reporting a 196% increase in full-year statutory net profit after tax to A$201.5 million, driven by discontinued operations and the Webjet Group demerger. Despite a 22% rise in total transaction value to A$4.87 billion, underlying NPAT fell 22% to A$79.2 million due to higher operating expenses and softer transaction margins. CEO John Guscic cited margin pressure but reaffirmed long-term targets of A$10 billion in TTV and 50% EBITDA margins by FY30.

Analysis

Web Travel Group (ASX:WEB) experienced a significant stock price appreciation, reaching a seven-month high, following the announcement of a 196% surge in full-year statutory net profit after tax (NPAT) to A$201.5 million for the year ended March 31, 2025. This substantial increase in reported profit was primarily driven by a A$190.4 million contribution from discontinued operations and a gain on the demerger of its B2C businesses, specifically the Webjet Group. However, on a continuing operations basis, the underlying NPAT saw a notable decline of 22% to A$79.2 million. This decrease occurred despite a 1% rise in revenue from continuing operations, as higher operating expenses and softer transaction margins impacted profitability. The company's core WebBeds B2B travel division did show strong performance in terms of volume, with total transaction value (TTV) increasing by 22% year-on-year to A$4.87 billion and bookings climbing 20% to 8.4 million. CEO John Guscic acknowledged the margin pressure stemming from geographic and supply mix changes but maintained confidence in achieving long-term targets, including A$10 billion in TTV and 50% EBITDA margins by FY30. The market reacted positively to the headline figures, with shares surging as much as 17%, indicating strong investor sentiment driven by the successful demerger and statutory profit growth, despite the weaker underlying operational performance.

Key Decisions for Investors

• Investors should scrutinize the divergence between the headline statutory NPAT, inflated by one-off demerger gains, and the 22% decline in underlying NPAT from continuing operations, which reflects core business profitability pressure.
• Consider the company's ability to manage rising operating expenses and improve softer transaction margins in its WebBeds B2B division to meet its ambitious FY30 targets of A$10 billion TTV and 50% EBITDA margins.
• Evaluate the current share price surge in the context of the underlying operational challenges, weighing the positive market sentiment against the fundamental performance of the ongoing business.