Vietravel in choppy waters after CODIV 19 drives down profit

Vietravel gets in trouble as reducing profit as well as nCoV threat

According to the Vietnam National Administration of Tourism, in the next three months, the Vietnamese tourism industry will be hurt by the novel coronavirus (CODIV 19) to the tune of about $5.9-7.7 billion. The number of home and foreign travellers will reduce by at least 50 per cent, which is the main reason for the damage, as Chinese travellers account for more than half .

The current epidemic is bad news for Vietravel as the company recorded a loss of VND14 billion ($608,700) in the last quarter of 2019, according to the company's consolidated financial report.

The after-tax profit of Vietravel in 2019 was only VND39.93 billion ($1.74 million), down 32 per cent compared to 2018.

It is notable that the company's ratio of profit to net sales is quite low, less than 1 per cent. In 2018, the net revenue of Vietravel was more than VND7 trillion ($304,350), and the after-tax profit of the parent company was VND56 billion ($2.43 million), according to its consolidated financial report from the year.

Thus, the decline in the tourism sector's revenue in the first quarter of 2020 will put pressure on the company in the following quarters. The company's late entry into the aviation industry has also been hampered by the impacts of the epidemic, pushing off the timeline of profitability.

It is known that the company issued more than VND700 billion ($30.43 million) of bonds to set up Vietravel Airlines. These are 24-month bonds with an interest rate of 9.25 per cent a year for the first 15 months and an increase of 11 per cent a year for the remaining time.

The revenue of Vietravel mainly comes from selling domestic and foreign tours. In its 2019 prospectus, Vietravel set the target to maintain its leading position in the country and become a top 10 travel company in Asia.So far, the company has yet to announce its goals for 2020.

At the end of September 2019, Vietravel traded on UPCoM with the code VTR and was the first domestic travel company to go on the stock exchange. The initial reference price was VND40,000 ($1.74) per share. The peak for the stock was VND90,980 ($3.96) in October. Currently, the stock is trading at around VND43,000 ($1.87).

Regarding the impact of CODIV 19, Vietravel's representative told Saigon Tiep Thi Online that the company had to cancel about 100 tours for nearly 2,000 customers to China and vice versa between January 22 and the end of February.

“In case the customer cannot choose an alternative tour instead, Vietravel will refund the tour cost in full. With the cancellation of tours to China, in addition to causing damage to our revenue, we will have to take on additional costs for visa applications and cancellation fees to service providers,” the Vietravel representative shared.