Helloworld share price drops 6% following business update

On Thursday, the Helloworld Travel Ltd (ASX: HLO) share price plunged by more than 8% following a business update by the company. At the time of writing, the Helloworld share price has lifted slightly to $1.92 per share, down 6.55% on yesterday’s close.

What was in the announcement

Today, Helloworld reported that it is going ahead with its previously announced capital raising. The offer opened to retail shareholders today with 1 for 9 shares offered at a price of $1.65 per share. Shareholders also had the option to apply for additional shares under the offer.

The company previously raised $41.6 million from institutional investors and plans to raise $8.4 million from retail shareholders to reach a total of $50 million. The funds will be used to provide liquidity and to improve balance sheet flexibility, as the company faces prolonged disruption to the travel industry in the midst of the ongoing coronavirus pandemic. 

The company advised it expects travel restrictions to remain in place for the remainder of 2020 and into 2021. As a result, total transaction value remained at around 10-12% of previous levels. According to the announcement, Helloworld’s equity raising would help to fund operating and capital expenditure through to the end of 2022, assuming ongoing disruption to the travel industry.

The company announced that net cash operating costs had been reduced to around $2 million per month since late March 2020, with variable discretionary spending being reduced to near zero since April 2020. It announced that cost reductions would be sustained over the remainder of 2020 with cost reductions from landlords and suppliers included.

Helloworld also notified investors that the company would write down its intangible assets and record restructuring-related provisions in its financial year 2020 results. 

The company announced that it has closed its centres in Mumbai and Manila and is also divesting its US wholesale operation. Helloworld also reported that 5% of its franchisees had elected to close. 

In terms of remuneration, 2 of Helloworld’s executive directors and 3 non-executive directors reduced their remuneration to zero from late March until June 2020. The company’s senior management have reduced remuneration to 60% of previous remuneration. The company has accessed government wage subsidies for 1,200 employees.

Helloworld expects an earnings before interest tax depreciation and amortisation loss of around $3.5 million for the June quarter, unaudited. The company advised it has a pro forma liquidity position after its capital raising of $187.1 million at 30 June 2020.

About the Helloworld share price

Helloworld is a travel agency company with operations Australia and New Zealand. The company has retail travel networks and provides corporate travel management, destination management, air ticket consolidation, wholesale travel services and online operations.

The Helloworld share price is up 185% from its 52-week low of $0.66 cents. It is down 60.7% since the beginning of the year and down 60.8% since this time last year.

More reading

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• Why Cann, Flight Centre, Helloworld, & Zip shares are dropping lower
• Helloworld Travel unveils $50 million capital raising

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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