Margin Pressures and Capital Risks Shadow Web Travel Group’s $10bn TTV Ambition

Post-Demerger Performance and Financial Highlights

Web Travel Group Limited (ASX: WEB) has unveiled its FY25 results following the demerger from Webjet Group Limited, marking a significant milestone in its evolution as a focused B2B travel marketplace. The company reported a 22% increase in Total Transaction Value (TTV), reaching nearly $5 billion, underscoring strong demand and operational momentum. However, revenue growth was modest at 1%, constrained by lower TTV margins which stabilized at 6.7%, while EBITDA declined 14% to $138.8 million, reflecting higher operating costs and margin pressures.

The demerger, effective 30 September 2024, separated the B2C businesses into Webjet Group Limited, leaving Web Travel Group to concentrate on its WebBeds B2B platform. This strategic focus is evident in the restated FY24 pro-forma results and the company’s commitment to capital discipline, including a $150 million on-market share buy-back that has addressed approximately 88% of potential dilution from convertible notes due in 2026.

Growth Drivers and Geographic Expansion

WebBeds demonstrated robust growth with bookings up 20% and a 2% increase in average booking value, driven by strong performances across all regions, notably Asia Pacific and the Americas. The company’s multi-supply aggregation strategy, combining directly contracted hotels with global chain and third-party inventory, has expanded its portfolio and geographic reach. Asia Pacific and Americas now account for 53% of TTV, a significant shift from pre-pandemic levels, positioning WebBeds as a truly global player.

Investment in directly contracted inventory and increased hotel contracting headcount, particularly in growth regions, are strategic priorities aimed at optimizing supply mix and improving margins. These initiatives, alongside technology-led transformation efforts such as AI-driven competitive advantages and enhanced customer service platforms, are expected to yield meaningful revenue and EBITDA benefits from FY27 onwards.

Outlook and Strategic Priorities

Looking ahead to FY26, Web Travel Group projects TTV margins to stabilize around 6.5%, with EBITDA margins anticipated between 44% and 47% as new contracting teams become embedded. Operating expenses are expected to grow in the high single digits, reflecting ongoing investments in supply and technology. The company remains confident in its medium-term trajectory, targeting $10 billion TTV by FY30 with approximately 50% EBITDA margins.

Strategic priorities underpinning this growth include expanding the customer base, enhancing supply partnerships, advancing technology platforms, delivering frictionless customer service, and empowering employees. These pillars support WebBeds’ ambition to capture greater market share from regional and fragmented B2B providers, leveraging its scale and innovation to drive sustainable growth.

Capital Management and Financial Position

Web Travel Group maintains a strong cash position of $363.6 million post-demerger and capital management initiatives. The company has proactively managed potential dilution risks associated with convertible notes through share buy-backs and equity-linked derivatives. Additionally, it has upsized its revolving credit facility to $200 million to ensure ample liquidity amid market volatility and potential note redemptions.

Cash flow generation remains solid, supported by disciplined working capital management despite a temporary reduction in cash conversion due to shorter payable days. Capital expenditure continues to focus on operational and technology improvements to support long-term growth objectives.