With Flight Centre announcing the closure of another 90 stores, blaming the ongoing closure of state and national borders, Helloworld shares were embarrassingly suspended on the ASX this week due to what the struggling travel group called a “technical oversight” with its accounts.
Flight Centre has already made around 4,000 Australian staff redundant, but now will also close another 90 stores, leaving it with around 3,000 Aussie staff, with the ongoing domestic and international border closures had “led to billions of dollars in future travel bookings being cancelled”.
The company also said it was shifting its leisure business towards call-centres and online, and the additional closures would “reduce the overlap between shops in higher density areas”, with 95% of its clients still living within 5 kilometres of a retail store
While nobody can disagree with the company’s explanation that the past six months have been the most challenging period in their almost 40 years in business, the question has to be asked that even bearing in mind the massive decline in business, whether this ongoing decline in bricks and mortar, order taking style agencies like Flight Centre, herald the ongoing changing face of doing retail travel business, for which the larger chains may not have been prepared.
In the eglobaltravelmedia.com.au aviation webinar last week, “What Might The Future of Aviation Look Like” during and post COVID-19, [Click Here to Watch] the changing role of travel agents was discussed, with the discussion encompassing that the days of agents just being order takers, which as a result of Flight Centre’s commission structure, many consider Flight Centre agents to be, are over.
The discussion also included that travel agents needed to change their names and role to become “travel consultants” or “travel advisors” rather than “agents” as they are clearly not the “agents” of the client but of the airline or other product provider and where they can make most commission.
In addition, there was discussion that “travel consultants” or “travel advisors” should value their services better and charge a substantial fee for their services, some of which might be deducted from any booking they made, with the home travel consultant or advisor model being the one for the future.
The fee for service model also makes more sense as travel providers and in particular airlines are squeezing commission to agents with in some cases no commission, with the net profit of many agencies less than 5%.
Flight Centre lost $A662 million in the 12 months to June 30 and the company raised $A700 million in capital and $A200 million in fresh debt in April to boost its liquidity to survive the pandemic..
In the meantime, over at Helloworld, there is trouble, but in this case with the Australian Stock Exchange [ASX], which is very unusual and very serious as no company wants to incur the wrath of the ASX.
Helloworld has managed to do so though, by failing to include some technical information in its recently released unaudited financial results, with as a result, Helloworld shares were suspended from trading on the ASX.
Of course we all wonder what technical information was and it appears it was that when HLO’s 2019/20 figures were lodged in the evening of 31 August, they included notification that audited accounts were expected to be released on 15 October 2020, with the company saying the “unusually lengthy period” between the preliminary report and the audited figures is “primarily due to the complexity caused by the current two month COVID lockdown in Melbourne”.
Helloworld has apologised to the ASX for failing to include notification that the lodgement extension deadline was being made under an ASX Class Waiver decision and that it would immediately make a further announcement to the market if there was a material difference between the unaudited and audited financial statements, blaming a “technical oversight” with accounts.
The seriousness of this error was demonstrated by the ASX informing Helloworld that as a result of the breach the ASX was suspending HLO’s shares.
HLO advised it will be applying to the ASX for a case specific waiver in relation to this matter and is expediting the finalisation of its audited accounts.
According to Simply Wall Street, it appears that Helloworld Travel’s shares are worth 61% less today than they were a year ago and even over three years, the returns are still disappointing, with the share price down 60% in that time, with the falls having accelerated recently, with the share price down 19% in the last three months.
Simply Wall Street also says that given that Helloworld Travel didn’t make a profit in the last twelve months, Simply Wall Street focusses on revenue growth to form a quick view of its business development as when a company doesn’t make profits, they would generally expect to see good revenue growth.
They add that unfortunately Helloworld Travel’s revenue didn’t grow at all in the last year and in fact, it fell 21%, saying that looks pretty grim, at a glance, adding that fingers crossed this is the low ebb for the stock, as Simply Wall Street has a natural aversion to companies that are losing money and shrinking revenue, but perhaps that is being too careful.
Business News Australia says Helloworld has reported a $69.9 million loss for a year it described as a “perfect storm”, just like competitors such as Flight Centre, Corporate Travel Management and WebJet, with during FY20 Helloworld’s bottom line dropping by more than $100 million as international and even some interstate travel took a hit.
The good news is though that booking activity is starting to pick up although total transaction volume (TTV) is just 30% of last year’s levels in July 2020.
One wonders how travel agencies and travel companies including Flight Centre and Helloworld and even airlines and hotels, will emerge from COVID-19, with some questioning whether they even will.
What do you think?
STOP PRESS ADDENDUM
ASX says trading in Helloworld Travel shares to resume.
The Australian Stock Exchange (ASX) announced that the suspension of trading in Helloworld Travel Limited shares is being lifted immediately.
The ASX says it has now granted a specific waiver allowing Helloworld to lodge the required figures by 15 October 2020, adding, “Although the Company did not explicitly satisfy all the conditions of the ASX class waiver, in essence it met the requirements substantively and in spirit”.
A report by John Alwyn-Jones
