Webjet earnings to take hit from Thomas Cook collapse
Digital travel business Webjet is set to feel the pinch of the collapse of British travel company Thomas Cook.
The online company, which manages the hotel bookings for Thomas Cook’s customers visiting Europe, said it will be impacted by a loss of total transaction value (TTV) in FY20 from Thomas Cook’s demise.
Webjet has advised that it expected TTV from Thomas Cook to be in the range of $150 million to $200 million (A$221.4 million to A$295.18 million) in FY 2020.
This is expected to reduce its earnings before interest, tax, depreciation and amortisation (EBITDA) growth this year. An additional $27 million to $33 million of EBITDA was expected in FY 2020, but the impact of Thomas Cook entering liquidation is expected to reduce this guidance by up to $7 million.
The online travel agent also said Thomas Cook owed it approximately $43.7 million.
Webjet said, however, that the impairment of any unpaid receivables will be treated as a one-off expense to the income statement and that there will be no material adverse impact on the company’s liquidity because any write-off will be absorbed by existing cash reserves which stood at $211.4 million as of June 30 plus its undrawn debt facilities.
The online retailer said there will be “no impact on the more than 3,000 hotel contracts Webjet acquired from Thomas Cook in August 2016, which are wholly owned by WebBeds and available for sale to all WebBeds customers.”
The company added the vast majority of these contracts are currently sold at full margin to non-Thomas Cook customers and have been a key driver of the profitable growth of their European business over the last three years.
The travel retailer also said there is no change expected to its other expected FY20 earnings drivers indicated in the FY19 results announcement.
The embattled travel company Thomas Cook has collapsed after last-minute negotiations aimed at saving the firm failed.
According to the UK Civil Aviation Authority, the 178-year-old travel firm had “ceased trading with immediate effect”.
This story originally ran on Inside Retail Australia.