Wotif: Shares slump on lower profit guidance

Wotif becomes the latest victim of the slowing economy

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published May 1, 2012 1:38 pm AEST

Wotif.com Holdings Limited (ASX: WTF) today announced that it expects profit after tax for the 2012 financial year to be 9% to 13% above 2011's result. Net profit is expected to come in between the range of $55.5m to $57.5m. The online accommodation and flight booking company has based this forecast on management accounts for the 3 months January to March 2012, and April's trading.

In a sign that weak consumer sentiment is affecting Wotif's businesses, net profit after tax for the first half of 2012 rose 14%, so the company is expecting a much weaker second half.

The market didn't like the result much, with the share price slumping by more than 5 per cent at time of writing.

Jetset

Just last week, Jetset Travelworld Limited (ASX: JET) gave a trading update, stating that the economic environment continues to be challenging, and that the company was experiencing soft conditions, during what is usually a strong trading period. Jetset also announced that the company was likely to take a non-cash impairment hit to its intangible assets, particularly those attributable to the Travel Management segment, which total $11.8m. The company however declined to provide any earnings guidance, stating that May and June usually represent the busiest trading period for the business across all trading segments.

Jetset shares have fallen 18% in the last week, including over 4% today.

Implications

The above two reports have implications for other online booking sites and travel agents, including Flight Centre Limited (ASX: FLT) and Corporate Travel Management Limited (ASX: CTD). Flight Centre and Corporate Travel Management have not provided a recent market update, but may be prompted to in the coming weeks.

Webjet Limited (ASX: WEB) has already updated the market on 11th April, upgrading its profit guidance for the 2012 financial year to not less than $13m, a rise of 18% over the previous year.

Webjet's shares were up slightly today, while Flight Centre and Corporate Travel Management were both flat.

Foolish takeaway

These results show it's not just the retailing and media sectors that are struggling. More and more companies are banking on lower interest rates.

The ASX is already on the move in 2012, and Goldman Sachs experts recently said they reckon S&P/ASX 200 could top 5,000 next year. Read This Before The Coming Market Rally is a must-read for investors who don't want to miss out on the party. Click here now to request your free copy, before it's too late.

More reading

Motley Fool contributor Mike King owns shares in Flight Centre. Take Stock is The Motley Fool Australia's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).

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