Online booking business Wotif (WTF) joined the growing downgrade club an hour before the market closed yesterday and escaped fairly lightly, despite revealing a slide of around 12% in estimated 2012-13 profit.
The company company told the ASX at 3.15pm that it was now expecting a profit of between $50.5 to $51.5 million for year to June 30, compared to the $58 million earned in 2011-12 (which was down 3.8% from the previous year).
The shares were up at day’s high of $4.83 in early trading, but sagged to close down 2c (0.4%) at $4.73. They are down from a recent high of $5.60 five weeks ago.
WTF TYD – Wotif to see second annual profit dip in a row
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The update tells us that the online business media (such as REA Group) and Wotif are facing many of the same pressures as their older, analogue competitors.
In Wotif’s case its weak returns and revenues (and higher costs) from its newish Asian operations offset strong revenue gains in the Australia and NZ accommodation business (the core of the company).
The company said in the update that for a number of reasons that revenues have stalled and for a number of reasons (increased spending, write-offs and rising costs) group earnings will be lower.
"This result includes significant “one-off” adjustments for asset write-downs. The underlying profit after tax excluding these adjustments is expected to be between $53.0 million and $54.0 million.
"This expectation is based upon unaudited management accounts at 31 May 2013 and takes into account indicative trading performance for June 2013. This guidance is subject to change on completion and audit of the Wotif Group final accounts," the company said yesterday.
Wotif said that total "Total Transaction Value for the Group is expected to be relatively flat with increases in Australian / New Zealand accommodation offset by continuing shortfalls in Asia and Rest of World (ROW), trends which have continued from the first half results;
"Total Group revenues are estimated to be marginally up with strong revenue gains in Australian / New Zealand accommodation partially offset by shortfalls in Asia and ROW which collectively are estimated to be down by $2.3 million YOY.
"In addition, interest and other income are estimated to be down $0.9 million YOY.
"Total Group expenses are estimated to increase by $5 million YOY. Incremental investment in marketing and information technology account for around 40% of this increase.
"The remaining YOY expense increase relates to foreign exchange expenses ($1.2m) and the comparable effect of the write-back of options expenses ($1.3m) in the second half of 2012.
"One-off adjustments for asset write-downs to be booked in June 2013 total $2.50 million. These write-downs include the value of selected Asia Web Direct (AWD) domain names ($1.74m) and an accelerated write-off of IT Development Costs ($0.76m).
"The write-down in the value of the AWD domain names relates solely to the assigned values of the lower-ranked domain names on the purchase of AWD in 2008.
"Due to algorithmic changes on Google, the traffic from those lower-ranked domains has declined dramatically and these links to the Group’s booking sites now also have a negative impact on overall Search Engine Optimisation rankings.
"As a result, the value of these domains has been written down to zero. Traffic from other “key” domains included in the AWD purchase continues to increase YOY and these increases also provide an opportunity to monetise traffic in the future," the company said.
The company also said that as a result of a strategic review, changes were being made in the way the company did business, with two new senior executives hired.
