A year after its IPO eDreams has its work cut out to win over the market. Sally White reports

There are lessons for today’s travel high-flyers from a falling star that is barely a year old. No fireworks – then no one will be interested! That is what Spanish-listed global online flight specialist eDreams ODIGEO is finding. While it has just released another set of perfectly decent figures for growth companies, its share price is less than a third of its IPO price.

There is no sign that the price will be rushing back to the €10.25 IPO price of April last year. Although it has been around as a company for 15 years, this was its stock market debut. Then eDreams was celebrated as Spain’s second mega-tech company, worth over €1billion. Now the price is near the bottom of its €1.02 – 5.26 range of the last 12 months, trading around €2.70.

Spoilt by the step profits gradients promised in other parts of the global travel industry, the markets are just not won over by the Spanish offering. Although, this year’s European travel has started out promisingly after a recovery began last year. Figures showing increases in 2015 bookings of well into double figures for outbound travellers were being indicated earlier this year.   

eDreams’ geographic split on bookings in the year to end March was France 1.6 million (1.9 million this time last year), southern Europe 0.71 million (0.73 million), Germany and Austria 0.65 million (0.64 million) and the UK and Nordic and other regions 1.3 million (1.1 million). Outside of these core countries there were an expanding number of bookings at 1.95 million (1.75 million.)

Summarised, for the group and its five brands – eDreams, GO Voyages, Opodo, Travellink and Liligo- there was a rise of 12% in revenue and bookings in non-core countries, which now account for 40% of revenues. The growth in non-core has been impressive after a relatively short-term campaign. Core markets were down by 10% on bookings and 5% on revenues.

Lessons and lists

The lessons learned from the eDreams experience must include that it is never a good idea to pull back market hopes for the future. And certainly not for a growth company to show figures that contain little overall growth. eDreams has just announced that its revenue margin last year was €436 million, a rise of 1.5% and that operating level profits were €90.5 million, about half that of a year ago.  

Underlying those numbers, the picture was a lot better. There was a big hit of €178 million for accounting reasons rather than related to a slowing business. eDreams blames a jump in variable costs on the major blow of a ‘change in the Google algorithm’ which relegated the site lower in searches, hurting traffic referrals.  But investors were not impressed by any of this or by the cash of €121.8 million (€146 million a year earlier.)

Guidance for the future left the market unsatisfied too. eDreams does not seem to expect a lot of progress this year: -

* 2015-16 bookings in excess of 9.7 million

* 2015-16 revenue margin above €436 million

*2015-16 adjusted EBITDA to be in the range of €91-94 million

And the market is not sure how much impact can be made by the new CEO or of his new formula.  Javier Pérez-Tenessa, co-founder and CEO who had been at the company for 15 years, has been replaced by Dana Dunne, formerly chief commercial officer at EasyJet.

There is a lot of work ahead for the new CEO. He lists in his short-term tasks:

• Optimising traffic source by reassigning channel mix, focusing on lower-cost channels and customer retention
   
• Enhancing end-customer experience, simplifying the user interface, addressing pain points and enhancing value and service delivery
   
• Increasing focus on the mobile web
   
• Diversifying revenue mix, delivering value-added products and services that increase customer basket size and diversifying out from the strong flights core
   
• Strengthening culture and talent

After that, in 2017, he hopes to move on to make more innovative offerings, new products and partnerships and also to increase eDreams’ IT ‘agility’.

He is very aware of need for change if eDreams is going to improve its bottom-line: “To build on our success we need to act differently,” he states in the report to shareholders.

Soon, hopefully, he will be able to put behind him current difficulties, which are not uncommon for IPO companies. The weight of paperwork and bureaucracy involved is almost guaranteed to take management’s eye off the ball.