The Helloworld Travel Ltd (ASX: HLO) share price is wobbly today following the release of a trading update.
The Helloworld share price stumbled on opening this morning, dropping down to $1.69. However, shares in the travel company rallied back up to $1.75 in midday trade, down 2.78% at the time of writing.
Let's look at how Helloworld performed in the September quarter.
Business update
Helloworld reported a poor result for the period ending 30 September, as COVID-19 continued to severely impact the travel industry.
Total transaction value (TTV) plummeted to $176.8 million, representing a 90.6% decline on the previous corresponding period (pcp). However, the company highlighted a small recovery, which saw TTV increase from $51 million in July and August to $74.4 million in September.
Revenue sank to $12.4 million, an 86.8% fall from the same time from last year. The halt in travel booking effectively put a large number of its agency network in hibernation mode.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) saw a loss of $4.1 million. This was a slight improvement on the $6 million loss forecast by the business.
Helloworld recorded a cash balance of $105 million at the end of the quarter. However, a bank debt was prepaid for $20 million, reducing its free cash to $85 million. The repayment decreased the company's interest expenditure by $0.4 million per annum.
COVID-19 response
As international air travel dropped by 98% between March and October, Helloworld expects average TTV and revenues to remain low. The company has predicted that these levels will be around 10% to 15% below previous amounts until early 2021.
By responding quickly to the evolving COVID-19 crisis, Helloworld reduced personnel costs up to 75%, saving $9 million per month.
In addition, the company cut other key costs such as technology and communications, advertising and marketing, occupancy and non-personnel overheads.
Retail networks
Retail networks across Australia and New Zealand have been forced to adapt the fallout of travel bookings. A number of outlets have moved their operations to home or shared a premise with other agencies. The company said the liquidity runway for agents was getting shorter, especially without any specific federal government assistance.
Outlook for the Helloworld share price
With the re-opening of interstate borders, Helloworld is anticipating a recovery in the Australian domestic travel market. Furthermore, safe travel corridors established with COVID safe countries is scheduled to commence throughout 2021.
Based on current projections, Helloworld estimates an EBITDA loss of $1.5 million to $2 million per month until March 2021. In the latter of the year, the company advised it will move into a break-even position, conditional on travel bubbles.
Helloworld stated that it has enough liquidity to maintain operations until late 2022, and possibly longer from its current cash burn rate.
