Web Travel Group Shares Plunge on Lowered Profit Margins

Highlights:

• Web Travel Group (ASX: WEB) shares plummeted by 33.99% at the time of writing, now trading at $4.64, following a disappointing financial update.
• 1H FY 2025 TTV/revenue margins were downgraded to 6.4%, down from the 7% forecast at the company's August AGM, due to market headwinds and rising costs.
• Operating expenses increased by 15% year on year, further pressuring profit margins, with EBITDA margins now expected to be 44%, down from prior guidance of 52%.

Web Travel Group Limited (ASX: WEB) is experiencing a sharp decline in its stock price today, with shares dropping by a staggering 33.99% at the time of writing, now trading at $4.64. This comes after the company issued a disappointing preliminary update on its financial performance for the first half of FY 2025.

Significant Decline in Share Price

Shares in the company, which focuses on its WebBeds business, closed at $7.03 on Friday. However, as of Monday morning, Web Travel’s shares have fallen to $4.64, reflecting a steep 33.99% drop. This sell-off is in stark contrast to the broader market, where the S&P/ASX 200 Index (ASX: XJO) is up 0.3% at the same time.

Financial Update: Lower Margins and Rising Costs

The collapse in Web Travel’s share price follows the release of its preliminary results for the first half of FY 2025. The company revealed that its WebBeds business faced several challenges, including the collapse of the German tour operator FTI Group and competitive pressures from major events like the Paris Olympics and European Football Championship.

As a result, Web Travel lowered its forecast for total transaction value (TTV) and revenue margins for WebBeds to 6.4%, down from the 7% expected during its August AGM. Additionally, underlying EBITDA margins are now expected to be 44%, a significant drop from the 52% previously forecast. The company attributed this to lower-than-expected revenues and a 15% increase in operating expenses year on year.

Future Outlook

Despite the near-term challenges, Web Travel’s management remains optimistic. The company expects its WebBeds TTV to grow by 26% from 1H FY 2024, and bookings are up 22% year-on-year. Web Travel is also sticking to its long-term target of achieving $10 billion in TTV by FY 2030 with an EBITDA margin of around 50%.

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