The worst performer on the S&P/ASX 200 Index (ASX: XJO) on Thursday was the Webjet Limited (ASX: WEB) share price.
The online travel agent's shares finished the day with a decline of 12% to $3.24.
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Why did the Webjet share price crash lower?
Investors were selling Webjet's shares on Thursday following the release of its full year results for FY 2020.
The 12 months ended 30 June 2020 really were a tale of two halves for Webjet. The first half saw the company deliver record sales and profits and then the second half saw this wiped out in an instant because of the pandemic.
For example, in FY 2020 Webjet reported a 27% decline in revenue to $266.1 million. This might not seem like the worst sales result, but it's when you dig deeper that the full impact of the pandemic can be seen.
Webjet's first half revenue came to $217.8 million, which represents a massive 81.8% of its revenue for the year. Just $48.3 million of revenue was generated in the second half. And it's worth remembering that travel markets weren't truly disrupted until late February early March.
Unfortunately, things were much worse for its earnings. Webjet's earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a loss of $91.3 million for the year. That's despite the company posting positive EBITDA of $46.4 million in the first half.
Admittedly, this statutory result includes a number of significant one-offs that should not repeat in FY 2021. But even if you exclude them, Webjet's EBITDA fell 80% to $26.4 million. This comprises first half EBITDA of $86.3 million and a second half EBITDA loss of $59.9 million.
The good news for shareholders is that its operating costs have now been reduced materially. On its analysts call, management stated that its cost base is now ~$11.6 million per month. Annualised this comes to just under $140 million.
The big question is, how long will it take for Webjet to be generating revenue above $140 million to breakeven? Given its exposure to the domestic leisure market and the ongoing border restrictions, I feel it is unlikely to be profitable in FY 2021.
Should you invest?
In light of the above, I wouldn't be in a rush to invest. Especially given its market capitalisation of $1.1 billion.
This market capitalisation means Webjet would have to be making a profit after tax of $55 million to be trading on a PE ratio of 20. I don't see that happening any time soon unfortunately.
