Zip Co Ltd (ASX: Z1P) shareholders could be in for a ride this week amid talk of a potential capital raise.

The Zip share price is currently at $2.195, a fall of 7.38% on yesterday’s close. For perspective, the S&P/ASX 200 Index (ASX: XJO) is down 1.04% at the time of writing.

Let’s take a look at what could be in store for this buy now, pay later (BNPL) share.

Capital raise rumours

Zip could be conducting a capital raise as soon as this week, according to reports in The Australian. This could happen in the lead up to its merger with Sezzle Inc (ASX: SZL).

Zip revealed to the market yesterday it is in ongoing talks with Sezzle about a potential acquisition. In a statement to the market, Zip said:

There is no certainty that the discussions will result in a transaction of any kind and Zip will keep the market updated in accordance with its continuous disclosure obligations.

The Zip Board remains committed to ensuring any transaction delivers value to shareholders and will always be disciplined in its assessment of potential opportunities.

As my Foolish colleague James reported, the Zip share price slumped yesterday on the back of an update from the company.

Zip is expecting to report a cash EBTDA loss of $108.1 million in its H1 FY22 financial results. The company also expects to report a record $302.2 million in revenue. However, Zip shares closed 7.78% lower on Monday.

The company will reveal the full details of its financial results on Thursday.

The Australian also reported fellow ASX BNPL share Humm Group Ltd (ASX: HUM) may also be planning an equity raise ahead of Latitude Group Holdings Ltd (ASX: LFS) taking over its instalment and credit card operations. A deal on the acquisition was struck between the companies last week.

Zip share price snap shot

The Zip share price has fallen nearly 49% year to date and 82% over the past 12 months.

In the past week alone, Zip shares have slipped 19%.

For perspective, the benchmark ASX index has returned around 5% over the past year.

The post Own Zip (ASX:Z1P) shares? Rumours are circulating the company may be set for a capital raise appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended ZIPCOLTD FPO. The Motley Fool Australia has recommended Humm Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Motley Fool Australia Chief Investment Officer Scott Phillips joined Nine’s Late News on Monday night to discuss a better-than-expected day for the ASX, the AGL Energy Limited (ASX: AGL) takeover bid, and travel companies returning to the skies.

The post AGL gets an offer and Australians return to the skies. Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Helloworld Limited. The Motley Fool Australia owns and has recommended Helloworld Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in Cochlear Limited (ASX: COH) are on the move today after the company released its interim report and financial results for the half-year ended 31 December 2021.

At the time of writing, the Cochlear share price is trading 5.77% higher at $201.22 apiece.

Cochlear share price lunges higher on strong earnings growth

Key takeouts from the company’s earnings results today include:

• Sales revenue increased 10% (12% in CC) to $815 million
• Cochlear implant units increased 7% to 18,598
• Statutory net profit of $169 million includes $12 million in innovation fund gains after‐tax
• Underlying net profit (excluding one-off and non-recurring items) increased 26% to $158 million
• Interim dividend increased 35% to $1.55 per share, representing a payout of 65% of underlying net
  profit
• FY22 underlying net profit guidance range maintained at $265‐285 million

What else happened during the half for Cochlear?

The company’s sales mix was unevenly split between emerging and developed markets. For instance, Cochlear says its sales revenue increased 2% to $457.9 million in 1H “with a mix shift to the emerging markets”.

Whereas in these zones unit volumes increased by 30%, in developed markets, unit volumes decreased by 2%.

The biggest decline was seen in the US, Cochlear says. Sales there were “characterised by many operating theatres running below capacity throughout the half”, which ultimately compressed patient turnover.

This was initially due to the impact of Delta variant hospitalisations, whilst hospital staffing shortages were then compounded by the response to the Omicron variant in the second quarter.

Even still, acoustics revenue lunged 40% higher to a record $100.9 million and this carried through to underlying net profit of $158 million, a 26% year on year gain.

Keep in mind that ‘underlying’ net profit allows companies to remove one‐off and non‐recurring items like unrealised gains investments and gain on minority interests.

So when including these items in statutory net profit, Cochlear actually recognised $169 million at the bottom line. This result was underpinned by the “combination of strong sales growth and improved gross margin, with some benefit from lower‐than‐expected operating expenses”.

What’s next for Cochlear

Cochlear notes that for FY22, its underlying net profit guidance range has been maintained at $265‐285 million. This range signifies a 13‐22% increase on underlying net profit for FY21.

The guidance now incorporates “cloud computing expenses and anticipates continuing COVID impacts for the balance of the year”, Cochlear says.

Second half trading to date is tracking in line with the first half, the company says, “with continuing intermittent COVID‐related hospital or region‐specific elective surgery restrictions”.

In addition, guidance now factors in $18‐20 million of cloud investment (pre tax) as a result of the change in accounting treatment from capex to opex. Capex expectations have reduced to factor in this change, declining to around $70 million for FY22. As a result, we expect the net profit margin (inclusive of cloud costs) to remain a little below our longer‐term target of 18% for FY22 and FY23.

Cochlear share price

In the last 12 months, the Cochlear share price has slipped more than 9% and is down another 7% this year to date. Although, during the past month it has regained steam and has spiked 4%.

The post Cochlear (ASX:COH) share price 6% higher on juicy 35% dividend spike appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Seven Group Holdings Ltd (ASX: SVW) share price is slipping in early trade, down 4.25%.

Seven Group shares closed yesterday trading for $22.36 and are currently at $21.41.

It’s not just the Seven Group share price under pressure today though. The S&P/ASX 200 Index (ASX: XJO) is down 1.1% as well.

Below we look at the highlights from the diversified investment group’s half-year financial results (1H FY22).

Seven Group share price slides despite profit lift

• Group revenue of $4.84 billion, up 105.3% year-on-year
• Underlying net profit after taxes (NPAT) lifted 21.5% to $302 million
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $749 million, up 42.3% from $527 million in the prior corresponding period
• Interim dividend of 23 cents, fully franked, equal to what was paid in 1H FY22.

What else happened during the half-year?

Atop the impressive 21.5% increase in underlying NPAT, Seven Group reported an even more impressive 235.6% boost in statutory NPAT, which came in at $1.22 billion. This figure includes a gain of $757 million relating to the Group’s acquisition of Boral Limited (ASX: BLD) during the half-year.

The group’s diverse holdings ­– including Seven West Media Ltd (ASX: SWM), 38.9% owned – continued to deliver growth during the period, with energy a particularly strong performer.

Seven Group holds a 30% interest in Beach Energy Ltd (ASX: BPT). Despite a drop in production during the half-year, due to natural field decline and maintenance in the Cooper Basin JV and Western Flank, Beach’s EBIT contribution of $66.7 million was up 82.2% year-on-year. Higher energy prices also helped boost sales revenue 11.5% to $786 million.

The company’s operating cash flow was down from the prior corresponding period to $221.5 million. This was primarily due to investment in working capital in WesTrac, helping support growth amid supply chain disruptions.

What did management say?

Commenting on the results, Seven Group CEO Ryan Stokes said:

Today’s result demonstrates the benefits of our strategy to own a diversified portfolio of high-quality businesses across varied segments of the economy.

We like to assess our performance on a like-for-like, continuing operations basis, but I do note that in this period we consolidated Boral following our acquisition of a 69.6% stake during 2021. We are excited by the opportunity Boral presents. With the company having successfully pivoted back to Australia, we are supporting management to drive financial performance and deliver margins that are commensurate with Boral’s industry-leading position.

Importantly for SGH, we made a commitment to repay the transaction bridge facility of $2.97 billion within the financial year and are pleased to confirm that, following the Boral capital return, the bridge has been substantially reduced and will be fully repaid in March.

What’s next?

Looking ahead, Seven Group offered guidance saying it expects pro-forma EBIT for FY22 from continuing operations (excluding property) to increase between 8% and 10%.

It stated the businesses it has invested in are “well placed to capitalise on the expansion in mining production, infrastructure investment, media and energy markets”.

Seven Group share price snapshot

Over the past 12 months, the Seven Group share price is down 4%, trailing the 5% gains posted by the ASX 200 in that same period.

So far in 2022, Seven Group shares are down 2.7%, outperforming the 6% loss on the ASX 200.

The post Soaring profits fail to lift Seven Group (ASX:SVW) share price today appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The ARB Corporation Limited (ASX: ARB) share price is sliding lower on Tuesday morning following the release of the 4×4 parts manufacturer’s half year results.

At the time of writing, the ARB share price is down 5% to $40.16.

ARB share price slides despite strong growth

• Sales revenue up 26.5% over the prior corresponding period to $359.2 million
• Profit before tax up 27.6% to $92 million
• Profit after tax up 27.6% to $68.9 million
• Fully franked interim dividend up 34.5% to 39 cents per share

What happened during the first half?

For the six months ended 31 December, ARB reported a 26.5% increase in sales to $359.2 million. This was driven by growth across the business, with Australian Aftermarket sales up 15.6%, Exports up 39.9%, and Original Equipment sales up 50.6%.

In respect to Australian Aftermarket sales, the company notes that its sales growth of 15.6% outpaced the 1.7% growth in sales of new vehicles in ARB’s target market. Management believes this reflects the strength of its distribution network, the continuing trend towards local touring, stock availability, and a growing market.

ARB’s Export sales grew by 39.9% and now contribute 38.4% of the total sales. This is up from 34.7% in the prior corresponding period. ARB’s Export sales were boosted by the addition of Auto Styling Truckman in the UK, which was acquired in March 2021 and therefore was not part of the prior corresponding period’s figures. Outside this, the segment benefited from sales growth in the USA, the UK, and the Czech Republic.

Finally, Original Equipment sales increased 50.6% over the prior corresponding period thanks to OEMs stocking up in preparation for new vehicle model launches and the addition of new business. However, this strong form is not expected to continue, with sales to OEMs expected to soften during the second half.

Outlook

No guidance has been given for the full year due to COVID uncertainty, but management has provided the market with an idea of what it expects.

It explained: “The Company maintains a positive outlook based on a strong customer order book, improved inventory levels and new products that are yet to be released to market. However, the flow on impacts of COVID19, including disruptions to supply chains, shipping networks, retail operations and customer fulfilment, requires ARB to remain focused on managing customer expectations and supply chain pressures.”

“Notwithstanding the uncertainty in the current global economic and political environment, ARB continues to develop and pursue its exciting long term growth opportunities, including further growth in Australia and in export markets, new products, improved distribution and increased manufacturing capacity. The Board believes ARB is well positioned to achieve on-going success with strong brands around the world, loyal customers, very capable senior management and staff, a strong balance sheet and growth strategies in place,” it concludes.

The post Strong profit and sales growth can’t stop the ARB (ASX:ARB) share price from sinking today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Swoop Holdings Ltd (ASX: SWP) share price is up 4.1% in early trade on Tuesday morning after the market digested the company’s results for the first half of the 2022 financial year.

What did the company report?

• 2022 half-year revenue soars 62% from 2021 first half
• Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) up 130%
• Underlying net loss after tax reduced by 26.7%
• 47% increase in subscriber numbers

What else happened in the first half?

Swoop completed 3 acquisitions during the first half, and another 2 in the current half-year.

The company raised $45 million of capital to enable the takeover of Speedweb, Countrytell and VoiceHub. 

What did management say?

“We had a fantastic half year which was capped off by another capital raise and a number of successful acquisitions which will facilitate further organic growth into new markets with new services,” said chief executive Alex West.

“Along with the board, the executive team and I are well on track to creating the next national Australian telco.”

What’s next?

West said that Swoop is “on track for an equally successful second-half of 2022”.

The second-half revenue is expected to be somewhere between $50 and $53 million, with underlying EBITDA to fall between $12 and $12.5 million.

This compares to first-half revenue of $23.9 million and underlying EBITDA of $5.3 million.    

Swoop share price snapshot

Swoop listed in May after an initial public offer that sold shares at 50 cents.

The stock has been as high as $2.46 in the past 12 months, but the telco has been caught up in the general market sell-off this year. The valuation has shrunk almost 32% since the start of 2022. 

However, with the stock starting Tuesday at $1.22, it’s still a nice 144% return in just 9 months for those lucky enough to own the business from its listing.

The post This ASX telco just reported 62% revenue growth appeared first on The Motley Fool Australia.

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The Costa Group Holdings Ltd (ASX: CGC) share price is soaring this morning after the release of the company’s earnings for 2021.

At the time of writing, the Costa Group share price is $3.25, 8.33% higher than its previous close.

Here are the highlights of the horticultural company’s full-year results for the 2021 calendar year:

Costa Group share price launches on boosted international sales

• Around $1.22 billion of revenue – up from $1.16 billion in 2020
• Total sales of around $1.66 billion
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $218.2 million ­– 10.6% higher than 2020
• Net profit after tax (NPAT) before material items of $64 million – 16.2% more than in 2020
• However, NPAT attributable to shareholders fell to $41.4 million ­– a 31% drop
• A 5 cent fully-franked final dividend – equal to that of 2020

2021 was seemingly a strong year for the grower, packer, and marketer of fresh fruit and vegetables.

Over the 12 months ended 26 December, the company’s international segment saw its revenue surge 30%. Now, international customers make up 27% of the company’s sales.

The international segment brought in $177.7 million in 2021. Its EBITDA came to $77 million – a 33% increase.

The company’s produce segment recorded $929.5 million of revenue and EBITDA of $126.6 million ­– relatively flat with 2020.

Finally, its farms and logistics segment saw $159.4 million of revenue – a 6% improvement on that of 2020. However, its EBITDA fell 1.3% to $14.6 million.

Costa Group ended the period with net debt of $299.2 million and $61.9 million in cash and equivalents.

What else happened in the half?

Costa Group’s earnings and sales from berries was strong in 2021. Its premium Arana blueberry variety delivered a 20% price premium while its Tasmanian crop has produced higher than expected volume.

The avocado market, however, saw an increase in supply and was hampered by COVID-19-induced hospitality shutdowns and low price points.

Mushroom production was up 11% in the second half of 2021 and pricing was maintained.

Costa Group’s July acquisition of Queensland-based citrus grower 2PH Farms – costing the company around $200 million, much of which it secured through a capital raise – was completed with 100% customer retention.

The business’ growing season went as expected and 77% of its product was exported.

However, some citrus regions struggled against cool weather in the second half of 2021, causing issues with grown fruit.

Though, the second half was a better time for tomatoes with a 10% improvement in production volumes compared to the first half. Pricing also improved in the second half.

Internationally, China’s berry volumes increased 40% on the prior year, helping to boost revenue by 48%. Morocco’s berry volumes also increased 21% in 2021.

The company’s emerging regions didn’t perform as well. Revenue dropped slightly after delayed crop timing in the United States.

Though, the company provided a 52-week supply of African-grown blueberries to Europe for the first time.

Additionally, many of the company’s segments were impacted by COVID-19-related supply chain issues and labour shortages in 2021.

What did management say?

Costa Group CEO Sean Hallahan commented on the company’s results for 2021, saying:

It was a record year for Costa’s international segment with 30% revenue growth. This supports our investment strategy to expand our production and supply footprint through utilising our world leading blueberry genetics.

The current and projected growth of the middle class in China, the per capita growth in European berry consumption and the opportunities presented by emerging regions, such as India, means Costa is well positioned to benefit as we further invest in growing our international operations.

What’s next?

Looking to what 2022 might bring, Hallahan noted early-season China yield and demand are still above expectations.

Its Moroccan berry harvest is also set to benefit from strong demand.

In Australia, berries and tomato yields had a strong start to 2022, while mushroom production volumes have improved significantly.

In 2022, the company’s return on invested capital (ROIC) will be driven by the beginning of harvesting its new 50-hectare berry farm in China, a full-year contribution from PH2 Farms, 10 new hectares of tomato glasshouse, high volumes of blueberry varieties, and an expected rebound in the company’s Sunraysia grape volumes.

However, avocado production is expected to be below that of 2021 but could be boosted by the return of food service markets.

It’s also a citrus ‘off’-year and COVID-19 impacts will likely continue to impact labour sourcing and supply chains.

Costa Group share price snapshot

Today’s gains have boosted the Costa Group share price back into the green year-to-date.

It is now 7.6% higher than it was at the start of 2022. Though, it’s still around 26% lower than it was this time last year.

The post Fruitful earnings: Costa Group (ASX:CGC) share price surges 8% on full-year results appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The HUB24 Ltd (ASX: HUB) share price is on the move this morning. At the time of writing, shares are up 5.8% to $24.91.

This follows the release of the financial platform company’s half-year results today.

HUB24 share price jumps on outstanding result

• Group revenue up 72% over prior corresponding period to $81.6 million
• Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 80% to $29.7 million
• Total funds under administration (FUA) increased by 118% to $68.3 billion
• Record platform net inflows of $6.7 billion, up 116%
• Statutory net profit after tax (NPAT) up 38% to $8.4 million
• Declared fully franked interim dividend of 7.5 cents per share, up 67%

What happened during the first half?

Today’s first-half results are broadly in line with figures shared by the company in its second-quarter update. Surprisingly, the quarterly update provided little excitement for the HUB24 share price. However, investors are getting some additional details.

Notably, HUB24 achieved substantial growth across all of its key metrics. A key driver for the solid performance was the more than doubling in funds under administration. Part of this was the contribution of HUB24’s Xplore acquisition.

While the company mustered up double-digit earnings growth, it also experienced a significant increase in expenses. Specifically, operational expenses rose 68% to $61.3 million. According to the release, this was attributable to growth in employee count.

Management commentary

In light of the result fuelling the HUB24 share price today, CEO and managing director Andrew Alcock said:

We’ve delivered record net inflows and strong financial results including an increase of 80% in group underlying EBITDA, whilst continuing to deliver on our strategic objectives and ensuring we are well-positioned to capitalise on emerging opportunities. We are very excited about the recent acquisition of Class and how together we can lead change in the wealth industry and enhance value for our customers and shareholders.

What’s next?

Interestingly, HUB24 did not provide any guidance for the second half. However, the company did share its ambitions to reach between $83 billion and $92 billion in platform FUA in FY24.

On the dividends front, the board announced it will be targeting a payout ratio of between 40% and 60% of underlying NPAT. The interim dividend announced today reflects a payout ratio of 42%.

Investors should be aware the ex-date for HUB24’s dividend is set for 18 March. From there, shareholders on the register will be paid their dividend on 18 April.

HUB24 share price snapshot

The HUB24 share price has had a rough run in 2022 so far. Since the beginning of the year, shares in the company have tumbled 12%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has trended around 4% lower.

On a one-year time horizon, ASX-listed HUB24 is up around 6%.

The post HUB24 (ASX:HUB) share price lifts 6% amid record platform inflows appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Nanosonics Ltd (ASX: NAN) share price is sinking on Tuesday morning.

At the time of writing, the infection prevention company’s shares are down 6% to $4.45 following the release of its half year results.

Nanosonics share price sinks amid softening performance

• Revenue up 41% over the prior corresponding period to $60.6 million
• Global installed base up 12% to 28,160 units
• Operating profit before tax up from $0.2 million to $3.3 million
• Profit after tax up 160% to $3.9 million
• Profit down 45% half on half

What happened during the first half?

For the six months ended 31 December, Nanosonics reported a 41% increase in revenue to $60.6 million. This comprises a 102% increase in capital revenue to $19 million and a 23% lift in consumables and service revenue to $41.6 million.

However, due to COVID impacting the prior corresponding period, a better reflection of the company’s performance is achieved comparing it to the second half of FY 2021. Management revealed that revenue was up 1% compared to the prior half, with capital revenue up 10% but consumables and services revenue down 3%. This reflects some disruption on ultrasound procedure volumes associated with increasing infections rates from the Delta and Omicron variants of COVID-19 including hospital staff shortages in particular in North America.

It was a similar story for Nanosonics’ earnings. While they were up strongly over the prior corresponding period, they were down sharply half on half.

The company reported profit after tax of $3.9 million. This was up 160% over the prior corresponding period but down 45% over the second half of FY 2021. This was driven by an increase in all aspects of its operating costs. This reflects increased spending directed towards expanding capability across all regions, as well as an increase in research and development expenditure.

Management commentary

Nanosonics’ Chief Executive Officer and President, Michael Kavanagh, commented: “The first half of the 2022 financial year has seen strong growth compared with the first half the 2021 financial year, which was materially impacted by COVID-19.”

“Despite the significant and rapid increase in infections in the first half of FY22 associated with the Delta and more recently the Omicron variants and the associated impacts on hospital staff shortages and procedure volumes, the Company maintained the positive momentum achieved in the second half of FY21,” he added.

Outlook

As previously announced, Nanosonics expects to be impacted by the revision to its sales model in North America. However, it is still expecting to deliver double digit sales growth for the year.

It explained: “The impact is expected to be in the range of $13.0 million to $16.0 million and primarily associated with GE transitioning from a stocking distributor to the new pass-through sales model.”

“Assuming the positive market recovery trends experienced in the second quarter of FY22, which have continued in January, in particular in North America and Europe for new installed base growth and consumables usage, we maintain double digit revenue growth expectations despite the FY22 H2 North American revenue impact of the revised North American sales model.”

However, this growth is unlikely to flow to the bottom line, with management predicting a further increase in its operating expenses during the second half.

It advised: “Operating expenses for the first half were $42.7 million and with the addition of the extra resources in North America associated with the revised sales model, total operating expenses are now likely to be approximately $93.0 million.”

This compares to operating expenses of $70.8 million in FY 2021, which represents an increase of 31.3%.

The post Nanosonics (ASX:NAN) share price sinks amid 45% half on half profit decline appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Nanosonics Limited. The Motley Fool Australia owns and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Helloworld Travel Ltd (ASX: HLO) share price closed the day in the red on Monday after the company released its interim report and financial results for the half-year ended 31 December 2021.

Helloworld shares finished the day 4% down at $2.44 apiece as investors responded poorly to the company’s earnings results on Monday.

Helloworld share price tanks amid earnings growth

Key takeouts from the company’s earnings results included:

• Half-year statutory loss after tax fell to $14.0 million compared to $15.1 million in 1H21
• Travel-related revenue grew $12.5 million on the prior corresponding period (pcp), operating costs declined, and short-term net operating cash outflows remained tightly managed
• Total transaction value (TTV) grew 60.4% on the pcp contributing to a 45.2% increase in travel-related revenues
• Margins remained steady at 6%
• Non-corporate and entertainment travel TTV grew 86.6% on pcp
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss of $5.2 million, down 10.8% or $0.6 million on the pcp
• Net loss before tax was $19.6 million, a decline of $1.9 million on the pcp of $21.5 million
• As at 31 December 2021, the group held cash balances of $87.6 million
• Subsequent to period-end, $7.5 million in previously paid company tax was received
• External borrowings at 31 December totalled $70.8 million after repayment of $10 million in December 2021

What else happened this half for Helloworld?

During the period Helloworld agreed to sell (subject to conditions) the corporate and entertainment travel businesses in Australia and New Zealand to Corporate Travel Management Ltd (ASX: CTD), for an enterprise value of A$175 million.

The company also notes its retail agency networks in Australia and New Zealand “remain steadfastly resilient with a strong presence to capture expected growth in travel demand in 2022 and beyond”.

On the back of strong forward bookings, that have continued to climb, significant leisure bookings are now held for travel through until the end of 2023, Helloworld said.

The group expects demand for inbound travel arrivals heading to Australia, New Zealand, and Fiji to gradually normalise in 2022.

“If travel demand continues to grow on its current trajectory, [the company] should achieve a breakeven position or slightly better in the June quarter of FY22 and return to modest profitability throughout FY23,” it said.

Aside from that, travel-related revenue grew $12.5 million year on year whereas operating costs declined. In addition, TTV grew over 60% on the previous year, “contributing to a 45.2% increase in travel-related revenues”.

“With current liquidity levels and cash burn, HLO has sufficient liquidity to maintain operations and continue to benefit from the recovery of the travel and tourism market and to see that through to full recovery,” Helloworld remarked.

Management commentary

In his address, Helloworld chief executive Andrew Burnes said:

Over the last two years, we have reviewed all parts of our business to ensure we are providing all critical services to our agency, corporate and direct customers while keeping costs to a sustainable level.

As part of this review we identified the opportunity to consider divesting our corporate division and on 15 December 2021, HLO announced it had entered into a binding agreement to sell its corporate and entertainment travel businesses in Australia and New Zealand to Corporate Travel Management for an enterprise value of A$175 million. We believe this transaction is at a compelling valuation to maximise HLO shareholder value and will allow HLO to focus on operations which, pre COVID-19, represented 80% of our TTV. Subject to certain conditions being met, completion is expected to occur during the third quarter of FY22.

What’s next for Helloworld?

The company gave an overview of its company expectations for the coming periods. In the near term, Helloworld notes that “pent up demand for travel is extremely strong and when the impacts of the COVID-19 pandemic on travel finally subside, we anticipate travel will ramp up rapidly, with significant growth in the next 24 months”.

If that were the case then demand for travel services from both retail leisure agents and corporate travel management companies will also soar “in a world where professional and personalised travel advice and management will be critical to travellers’ sense of security and comfort”.

Helloworld says it will continue to incur cash losses of approximately $1–$1.5 million per month for the next three months, based on its current expectations.

According to the company, it has a sufficient cash runway to last “beyond the end of calendar 2022 on current liquidity levels and cash burn rate”.

Subject to satisfaction of the conditions and transaction completion, HLO will receive A$100 million in cash and CTM shares of A$75 million (escrowed 12 months from completion) towards the end of the March 2022 quarter. The cash consideration received will be used to repay debt, provide additional liquidity, capital management and to support growth opportunities in HLO’s retail and leisure travel businesses as activity rebounds following COVID-19 disruption.

Helloworld share price snapshot

In the last 12 months, the Helloworld share price has climbed 8%. However, it is down around 3% this year to date. In the past month, it has gained 9%.

The post ‘Losses minimised’ but Helloworld (ASX:HLO) shares can’t hide from the havoc appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Helloworld Limited. The Motley Fool Australia owns and has recommended Helloworld Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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