Webjet Upgrades Profit Guidance

By Glenn Dyer | More Articles by Glenn Dyer

Online travel service provider, Webjet (WEB) today updated for the second time its profit guidance for fiscal 2008 “based on its best understanding of the likely trading conditions for the quarter of April to June”.

Webjet upgraded its net profit guidance to $6.4 million, from the previous guidance of $5.9 million.

Managing director David Clarke said a number of factors still remain which cannot be fully quantified at this time, such as interest rates and mortgage repayments, bowser petrol prices and a drop in consumer confidence.

In a statement to the stock exchange, the company said:

“These potential negatives were highlighted in our half year release and although they have not yet become evident in demand for travel in the quarter ended 31 March , it is unlikely that they will not have some negative impact in the April to June quarter.”

While it is sensitive to petrol prices, travel prices and consumer confidence, these factors are to some degree counterbalanced by various positive macro economic factors such as continued full employment, wage growth and airline competition.

In February, Webjet upgraded its net profit guidance in February to $5.9 million from $5.2 million.

More than likely, the strength of the Australian dollar is leading to an increase in overseas travel, benefiting companies like Webjet.

“We remain of the view that on balance this mix of pluses and minuses will mean that the market will be more price sensitive over the next 6 months than was the case in the preceding 6 months, but we also consider that it is likely that competition will continue to intensify at a supply level and that consumers will become more value conscious, and that as a result those values will be sought through airline aggregation sites.”

In October, Webjet launched a takeover bid for travel.com.au.

However, this was superseded by a superior offer from rival online travel agent Wotif.

Webjet rose 4% or 6 cents to $1.54.

Glenn Dyer

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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