Webjet resurgent overseas but hammered at home

Webjet, which now operates on a March financial year, said the half-year ended September would yield positive cash flows from operations. That excluded payments for investments or debt repayments. Financing costs in May were costing $700,000 a month.

Shares in Webjet, whose market capitalisation after the emergency issuance of new shares has surpassed its level before the COVID-19 pandemic devastated the travel industry, were up 19¢ at $5.69 around 1.30pm on Tuesday.

Pay packages

RBC Capital Markets analyst Chami Ratnapala described the update as “healthy” with green shoots emerging in the bedbanks business “during the northern hemisphere summer period”.

The latest details preceded Webjet’s annual general meeting, scheduled for Tuesday afternoon. The company is facing renewed discontent about equity pay packages for its top brass.

“All our businesses have significant potential to grow market share by expanding into new market segments and benefiting from consumers shifting to buy travel online,” Mr Guscic said.

The company said it had “significant cash reserves”, citing $431 million in cash as of March this year and not having to repay $87 million in term debt until November 2023. Heavy cost-cutting also meant its expense base would fall 20 per cent from pre-COVID times, it said.

Webjet said it had switched tack with its bedbanks division, which operates globally, to focus on domestic markets. Some domestic markets were opening up and overall transactions have leapt from $25.1 million in August last year to an estimated $113 million this month, based on company figures.

Options backlash

Last year, the company copped investor backlash over an options bonus package for Mr Guscic that was criticised as too easy to beat.

The package’s sole target had been to improve the company’s share price and all three year’s worth of the options are already in the money, being convertible or exercisable at $3.39 a share, $3.73 a share and $4.11 a share.

Almost 32 per cent of investor votes were against that options offer last year, although the actual remuneration report attracted a protest vote of less than 1 per cent.

Ahead of this year’s annual general meeting, proxy adviser group Institutional Shareholder Services urged a vote against Webjet’s remuneration report.

“Problematic pay practices are observed [this year] regarding the grant of retention rights to executives [excluding CEO] and grant of options to the CEO, which are inconsistent with remuneration expectations and practices in the Australian market, performance and affairs of the company and shareholder returns and interests,” ISS said.

“The retention rights to executives are subject to time-based vesting and continuous employment only, and absent any performance hurdles typically seen in the Australian market which would be expected to be aligned with shareholder interests.”

CGI Glass Lewis, another proxy advice company, also highlighted concerns with pay such as the potential “windfall” for Mr Guscic, whose pay tipped $2.4 million in the past year including $1.6 million in potential equity bonuses. But CGI said the issues were not of “enough significance to warrant a vote against the remuneration report at this time”.

It acknowledged that the board was facing “unique circumstances posed by the COVID-19 pandemic, including the need to conserve cash, difficulty in setting meaningful targets and increasing competition for talent”.

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