Wotif Booms

By Glenn Dyer | More Articles by Glenn Dyer

Like jobs group, Seek, Wotif.com is showing just how profitable the internet business model can be for a company flogging what is essentially a service:in this case accommodation.

Compared to much bigger and more established companies, the numbers are small, but the profit margins are fat and like Seek, the gross margin actually rose at Wotif in the December half.

It’s not that Wotif is operating on its own (Seek’s space is becoming more competitive): the likes of Webjet and Flight Centre are trying to muscle in but the company, which only listed on the ASX last year, is more than holding its own.

The company had first half revenues of $31.04 million , with EBITDA of $18.75 million, or a gross margin of 60.4 per cent (or 60.4c in the dollar). That compared to the same period of 2006 when revenues were $20.899 million and EBITDA was $12.171 million, or a gross margin of 58.4 per cent.

The company is on track to beat forecasts in last year’s prospectus.

While revenues rose 49 per cent, EBITDA was up 54 per cent, a sign the company has good controls and is driving revenues faster than costs are growing.

And Wotif says its trading performance since the start of the second half of the 2007 year was still strong.

First half net earnings rose 58 per cent to $11.9 million (which is almost the EBITDA figure for the same period!).

“Trading performance in January remained strong, with room nights sold up approximately 34 per cent on January 2006,” Wotif managing director Graeme Wood said in yesterday’s statement to the ASX.

Wotif said its first-half result was driven by a 47 per cent increase in room nights sold across the 42 countries available on the Wotif.com website.

Mr Wood said that during the first half, a record 1.825 million room nights were sold on the website, up from 1.24 million in the prior corresponding period.

The company, which listed on the Australian Stock Exchange last year, declared an interim dividend of five cents a share, fully franked.

Wood said in yesterday’s statement that “This 47% growth in rooms sold shows the structural change in the way people book their accommodation is continuing to gain momentum. More and more consumers are realising that by booking their accommodation on Wotif.com they get access to great rates, a great range and the convenience of a 24/7 service.”

“This change in consumer behaviour has seen visits to our site increase significantly with monthly user traffic reaching 2.5 million sessions (up from 2 million sessions in June 2006). We aim to continue to expand this audience in the current year to give our 9,000 accommodation suppliers the greatest possible exposure.”

He said Wotif.com’s 58% increase in net profit after tax had been delivered notwithstanding a $633,000 expense relating to options granted to employees as foreshadowed in the Company’s Prospectus. This expense is expected to fall to $419,000 in the second half of the current financial year and $470,000 in the 2008 year.

Like Seek, the business model is simple and there’s not much to say. Rapidly rising revenues and earnings, so long as costs can be controlled.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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