Wotif warns of profit decline

Wotif warns of profit decline
By admin


Wotif has warned that profits will dip this year as its Asia and Rest of World operations continue to struggle.

The online retailer said after tax profits are expected to be between $50.5 million and $51.5m, down from $58m in 2012.

While its core Australian and New Zealand business is likely to show an increase in Total Transactional Value and revenue, that growth will be offset by a $2.3m shortfall in Asia and ROW, the company said.

Expenses are expected to rise $5m with marketing and IT costs accounting for 40% of the increase.

Wotif will also write down assets to the tune of $2.5m, the majority relating to “lower-ranked” Asia Web Direct domain names. Traffic to these sites “has declined dramatically” because of algorithm changes made by Google.

Wotif chief executive Scott Blume said: “Our core Australian/New Zealand accommodation business has maintained some momentum with an expected small topline TTV growth despite a lacklustre domestic retail environment.

“We are also seeing some encouraging growth in our flights business. Our incremental investment in marketing in the last quarter, together with some solid merchandising of deals has stimulated retail demand in the same period.

"In addition, previously announced hotel commission increases to 11% in 2013 have been successfully rolled out to the significant majority of our partners throughout the second half of the fiscal year.

“[But] These positive factors have been eroded by a continuation of the year-on-year revenue shortfalls in Asia and ROW.”

Strategies to turn around its Asia and ROW business are underway, Blume said.

They include improved cross selling across its business divisions, exploring new lines of business – including the roll out of dynamic packaging – and a refresh of its marketing.

A project to improve sales of Asia hotels across the group has also begun with “a number of key initiatives” being developed to improve sales and conversion of Asia property searches on Australian and New Zealand websites.

Dynamic packaging for short haul destinations, including Asia, will be rolled out in the second half of 2014.

“We are confident that this new strategy and work already underway will well position the company for future growth,” Blume said.

In March, the Wotif chief described the company as doing a "lousy" job of promoting short haul destinations to Australians.

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