eDreams ODIGEO delivers solid results despite COVID -19 impact in Q4. Well positioned to thrive in the post COVID era
Barcelona, 9 July 2020 – eDreams ODIGEO (www.edreamsodigeo.com), Europe’s largest online travel company and one of the largest European e-commerce businesses, today reported its results for the twelve months ended 31 March 2020.
COVID-19 has had a tremendous impact on the travel sector, with an effective shutdown of the industry since March. While many travel companies have needed to raise more money or mothball their operations, eDreams ODIGEO is financially strong. We entered the crisis with a strong balance sheet and €144m of liquidity at the end of March, which has enabled the business to endure the market closure to date and a further prolonged period of closure should that be the case.
As a result of our prudent management of the crisis, and due to our superior business model, we have maintained a similar liquidity position throughout the last quarter, with €142 million of Pro-Forma Liquidity. We have acted decisively to secure the appropriate liquidity for the business by drawing down partially the cash available through the Super Senior Revolving Credit Facility (“SSRCF”), together with the Company’s prudent approach to cash management, which included swift actions to minimise costs; together with support from Governments where we operate and key business partners, we have sufficient liquidity to see this through. This places eDreams ODIGEO in a very strong position.
The qualities and capabilities of our people have come to the fore with collaboration and focus during the crisis. Together with our customers, they have been our primary concern and the actions we have taken will stand the Company in good stead in the future.
FISCAL YEAR RESULTS HIGHLIGHTS
- Revenue Margin €528.7 million – down just 1% despite fourth quarter impact of COVID-19
- Adjusted EBITDA €115.1 million (2019: €119.6 million)
- Adjusted Net Income €34.7million (2019: €40.2 million)
- Mobile now represents 44% of total flight bookings
- Revenue Diversification represents 53% of total revenues up from 44% in 2019
- Product Diversification reached 85% (2019:72%)
- Prime, our subscription offer, launched just two years ago, grew more than 200% to 556,000 members (2019: 165,000)
- Due to the uncertainty caused by COVID-19, guidance for the current year is not provided
Dana Dunne, CEO of eDreams ODIGEO said:
“In these circumstances these are good results demonstrating the relative strength of our business. We have moved from a purely transactional model over the past five years to a leading, innovative e-commerce business of scale which is customer focused and mobile-led delivering a complete end to end experience.
We are financially strong with sufficient liquidity to emerge from the crisis in good shape. Importantly, we have looked after our people and are best prepared to lead the new world with our motivated, experienced teams.
Our customers have been and continue to be our utmost priority. Given the exceptional level of cancellations caused by COVID-19, we invested in additional frontline people to handle the unprecedented volume of customer queries. We believe best in class omni channel customer service will be even more critical in a post COVID-19 world which is why we are fully committed to developing the industry leading OTA omni channel customer service experience. This is in development and will be progressively rolled out in fiscal year 2021. We are committed more than ever to continue to invest in building the best customer experience solutions and offer our customers best-in-class service.
We anticipate substantial change to the way we travel. We are well positioned to thrive in the post COVID-19 era and seize the opportunity as customers migrate to our trusted brands in an accelerating digitalising world. As restrictions lift, I am confident that, in time, we can return to and supersede the strong trading performances of 2019 and the first two months of 2020.”
During fiscal year 2020 we have seen continued progress. Prior to the COVID-19 crisis eDreams ODIGEO had been performing well and growing strongly utilising its leading position in flights and sustainable scale advantages in an attractive marketplace. Due to our strong business model, monthly Bookings in December 2019 were up 11% year-on-year and continued to grow significantly in January and early February before the pandemic took hold. At the year-end bookings were only 4% below the previous year, a highly respectable result at the end of March considering a year-on-year reduction in Bookings of 53% in the last 5 weeks of FY20 due to the spread of COVID-19.
Our business is proven to be robust. More than 80% of costs are variable, together with a well-diversified product portfolio, the benefit of scale and well spread geography. A decrease of 17% in our fourth quarter of fiscal year 2020 Revenue Margin Pro-Forma (excluding €9.2 million COVID-19 impact) resulted in a reduction in variable costs also Pro-Forma of 23% (excluding €12.3 million COVID-19 impact), which demonstrates the variability of said costs. Full detail in note 3.2 to the Consolidated Financial Statements.
Adjusted EBITDA was down 4% to €115.1 million in fiscal year 2020.
Our revenue diversification initiatives are delivering results. Diversification revenues continue to grow, up 18% year-on-year, and now represent 78% more than Classic Customer Revenue. As planned and as a consequence of our revenue model shift, Product Diversification Ratio and Revenue Diversification Ratio have increased to 85% and 53% in the fourth quarter, up from 25% and 27% in fiscal year 2015, growing 60 and 26 percentage points respectively in just five years.
Overall, we are pleased by the continued rapid progress of revenue diversification and product diversification. In fiscal year 2020 our dynamic packages and ancillaries continued to grow strongly, with revenues increasing over 20% year-on-year in both categories. In addition, we have been able to significantly grow the hotels inventory that we source directly (from 19% of our dynamic packages sales on average in fiscal year 2019 to 29% average in fiscal year 2020) and we have now successfully integrated Waylo (acquired in February 2020) which enables through AI improved hotels sourcing capabilities.
Our industry-leading subscription programme Prime, launched just two years ago, has continued its success. The number of subscribers have increased to 556,000, 391,000 more than in the fourth quarter of fiscal year 2019. We now operate Prime in four of our largest markets: Spain, Italy, Germany and France. Additionally, mobile bookings continue to grow and account for 44% of our total flight bookings in the fourth quarter of fiscal year 2020, rising 26 percentage points from the fourth quarter of fiscal year 2015.
Adjusted Net Income stood at €34.7 million, down 14%. We believe that Adjusted Net Income better reflects the real ongoing operational performance of the business.
In fiscal year 2020, despite a significant reduction in Bookings in March 2020, due to the spread of COVID-19, which resulted in working capital outflow of €207.4 million, the Group continued to have a strong balance sheet, with a liquidity position of €144 million at the end of March, including the €60.5 million undrawn from our SSRCF. This places us in a position of strength as soon as normal activity resumes. Consequently, due to COVID-19 impact, leverage ratios have been impacted with the Net Leverage ratio increased from 2.4x in March 2019 to 3.9x in 2020 and Gross Leverage ratio increasing from 3.7x to 4.9x.
On 21 April we announced that successful discussions with our lenders resulted in our Super Senior Revolving Credit Facility (“SSRCF”) covenant of Gross Leverage Ratio being waived for fiscal year 2021, achieving further financial flexibility for the Group. We have no short term financial debt payments and our Senior Notes are due in 2023.
Due to our prudent approach to our cost base and capital expenditure, and with the benefit of our cash generative model eDreams ODIGEO has maintained a strong financial position, and would have reduced by 49% over the past 5 years its Net Leverage ratio, from 3.7 in Mach 2015 to 1.9 in March 2020, had the impact of COVID-19 not occurred. This highlights eDreams ODIGEO robust deleveraging profile while at the same time creating an option for substantial long-term growth through investments such as the shift in our revenue model since November 2016.
We have managed our cash well and as at the end of June the liquidity position Pro-Forma was €142 million, same liquidity as at the end of March despite three months of COVID-19 impact, which could be used should there be periods of slowing demand. This gives us ample financial flexibility for the future.
Summary Income Statement
|(in EUR million)||4Q FY20||Var FY20 vs FY19||4Q FY19||12M FY20||Var FY20 vs FY19||12m FY19|
|Adjusted Net Income||3.3||(83%)||18.7||34.7||(14%)||40.2|
Business review by geography
We operate five leading brands eDreams, GO Voyages, Opodo, Travellink, and the metasearch engine Liligo. We have a strong presence in 45 markets, covering 80% of the total travel market through 251 websites and apps in 20 languages and 36 different currencies on one central platform.
The top 6 markets (France, Spain, Italy, Germany, United Kingdom and the Nordics) reached €405.2 million in revenue margin in fiscal year 2020. This performance was driven by the accelerated investment in the strategic shift of our revenue model.
Revenue diversification drives growth in the rest of markets (referred as “Rest of the World markets”), 18% CAGR over the past 5 years and 7% growth in fiscal year 2020 vs the prior year.
Our vision is to continue leading the European travel tech industry as the most trusted travel companion, with goals to strengthen and grow our leading online flights offering to build strong travel relationships and leverage those to serve customers’ entire travel needs.
We believe that there will be a greater shift toward digital and mobile in the light of COVID-19. eDreams ODIGEO is a technology-led business and well placed to benefit from this shift. Our business model is flexible, adaptable, innovative and driven by change, seizing opportunities as they arise including those from the pandemic.
Our priorities are to expand our unique and successful Prime membership subscription programme, to deliver the most innovative, end to end experience, to diversify and grow revenue and products sold in association with flights and to increase our relative scale.
To progress the business further to deliver success in a post COVID-19 era, focus has been targeted on 4 key areas: Prime, customer service, content and geography.
Prime for hotels has been rolled out across all four key markets, new displays and propositions have been tested, preparations for launch of Prime in 2 new markets have been made and there is continued focus on ensuring top satisfaction and service to our Prime members, given the flight cancellations during the pandemic.
Emphasis has been on customer service where we are in the process of upgrading and automating our systems. This is already 10% complete. To serve customers better we have developed a customer friendly voucher system.
We strive to always improve our content: a multi –content platform has been developed, another GDS (Global Distribution System) has been integrated into our leading proprietary platform and we are implementing a unique and even faster search capability.
Geographically, enhanced offerings have been developed for several countries and regions to engender growth.
Strategically, we are well placed to benefit in a post COVID -19 world and we continue to invest in the future to come out as a winner from the crisis.
The travel industry is robust and has strong underlying growth drivers. Whilst COVID-19 may have been very disruptive, the desire to travel, explore and experience is undiminished and will return. Even with the easing of restrictions now emerging we are seeing a marked increase in searches and healthy bookings for later dates for some destinations.
As with all crises, and this one will be no exception, there will be substantial change; safety and hygiene will come to the fore and be paramount, the longer trip may return, in the short-term domestic holidays will flourish, bookings cycles will shorten, the journey through the airport is likely to change again with more self-service, leisure will recover faster than business, a trend towards less crowded places and there will be a greater shift to digital.
Our business will emerge strongly and well positioned from the crisis. We will have sufficient funding available to increase marketing spend to meet the anticipated increase in demand.
eDreams ODIGEO is a digital technology business, both versatile and agile, that is prepared to meet these challenges head on and be at the forefront of the change to the travel sector that inevitably will occur.
We believe that eDreams ODIGEO’s strengths will play a key role in the new environment: our proposition and brands lend themselves to the leisure market which will emerge quicker than the corporate market. Europe, our powerhouse, is most likely to manage the effects of COVID–19 better than some other parts of the world - we are well positioned to thrive in these marketplaces and seize additional opportunity as customers migrate to our trusted brands characterized by end to end high quality service. Finally, eDreams ODIGEO is one of Europe’s largest e-commerce businesses and will undoubtedly continue to reap the benefits of a digitalising world, a trend which will have only been accelerated by recent events.
With restrictions lifting and the first signs of consumers seeking to travel again, in time, we can return to and supersede the strong trading performances of 2019 and the first two months of 2020.
About eDreams ODIGEO
eDreams ODIGEO is one of the world's largest online travel companies and one of the largest e-commerce businesses in Europe. Under its four leading online travel agency brands – eDreams, GO Voyages, Opodo, Travellink, and the metasearch engine Liligo – it serves more than 17 million customers per year across 45 markets. Listed on the Spanish Stock Market, eDreams ODIGEO works with 664 airlines and has partnerships with 130. The brand offers the best deals in regular flights, low-cost airlines, hotels, cruises, car rental, dynamic packages, holiday packages and travel insurance to make travel easier, more accessible, and better value for consumers across the globe.