The Sealink Travel Group Ltd (ASX: SLK) share price will be one to watch today after the travel company posted a mixed half-year result.
Here are the key takeaways from the first half:
- Revenue rose 42.6% on the prior corresponding period to $105.8 million
- Underlying earnings before interest, tax, depreciation, and amortisation rose 56.1% to $26.7 million.
- Underlying net profit after tax increased 42.4% to $13.1 million.
- Diluted earnings per share of 12.9 cents.
During the half SeaLink's South Australia segment posted a 4% increase in revenue to $33.3 million. This is all the more impressive when you consider that the company's popular Kangaroo Island cruises lost 15 days of trade to inclement weather.
Revenue in its Captain Cook Cruises segment jumped 46% on the previous corresponding period thanks largely to the first full half-year contribution from its Western Australia business. Furthermore, its Sydney dining cruises have been growing in popularity, with sales increasing 12.6%.
The SeaLink Queensland & NT segment posted a 4% increase in revenue to $8.8 million, driven by rising passenger numbers to Magnetic Island.
Finally, I was a little disappointed with the performance of its South East Queensland and Gladstone segment.
Last year the segment delivered earnings before interest and tax of $4.3 million for just a two-month trading period following its acquisition. In the most recent half-year the segment posted earnings before interest and tax of $9.6 million, which equates to an average of $3.2 million every two months.
As management has made no mention of whether earnings are weighted to a particular part of the half my assumption is that earnings are spread evenly during the half and that this can therefore be classed as a drop in profit.
This view is supported by management's forecast for the second half. It expects second-half EBIT in the segment to be lower than the prior corresponding period due to margin pressures.
Is it a buy?
I'm a little undecided on SeaLink following this result. Whilst the rest of the business remains strong, I am concerned by the performance of the South East Queensland and Gladstone segment. Especially as the segment is its largest contributor of revenue.
The tailwinds of the tourism boom should provide the company with plenty of growth over the next decade, but the next six months could be a little shaky for its share price if the South East Queensland and Gladstone segment struggles.
Because of this I would recommend investors hold off an investment at this stage and focus on other shares which provide exposure to the tourism boom. These include the likes of Mantra Group Ltd (ASX: MTR), Apollo Tourism & Leisure Ltd (ASX: ATL), and Event Hospitality and Entertainment Ltd (ASX: EVT).
