Jetset looking to new horizons

The integrated travel company is undertaking a business transformation.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published August 28, 2013 2:17 pm AEST

Jetset Travelworld (ASX: JET) reported normalised earnings of $54.6 million for FY13, up 8.1% on last year. Overall, CEO Rob Gurney said the group benefited from an increased focus on cost reduction, margin management and emphasis on its restructuring initiative. Net profit was $16.5 million, up over 200% on the prior year.

Currently split into three divisions, Retail, Wholesale and Travel Management, the group struggled with a sharp fall in total transaction values in the first half of the year, amidst competitive pressures and declining demand from government and corporate clients.

The group is finalising a transformation plan to redefine its long-term strategic direction. The plan includes a whole new brand, Helloworld. The group wants to unite over 1,000 existing members and travel agent franchisees under the Helloworld brand, with a store and online rollout to start in the December quarter.

In FY13, non-recurring expenditure on the transformation project was $10.8 million, with a further $35-$40 million forecast for the project, which is due for completion in the next 12-18 months. Forecast earnings of $40-$45 million for FY14 are weighed down by the transformation costs.

The group announced a final dividend of 0.5 cent per share, fully franked. The share price is down sharply in trade today.

Foolish takeaway

Launching a completely new brand into the market is a significant gamble for Jetset. The group does not expect to see the benefits, in terms of improved market share and growth, to FY15. In a competitive market the share price has underwhelmed in recent years. It will do well to reverse this trend.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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