It’s been a very tough year but with a new CEO at the helm and with bookings on the rise, the market seems to be responding, writes Sally White

There’s a lot riding on the e-Dreams Odigeo share price recovery. More than a few European digital travel IPOs are lined up in the wings.

The Barcelona-based online flight booking group’s post IPO debacle did their prospects no good at all. Having debuted at €10.25 last April the shares were down at €1.53 by October. Since then they’ve climbed steadily back to reach €3.7.

IPOs are notorious for taking management’s eye off the ball. Too many days closeted away over the paperwork with lawyers, bankers and brokers. Too much time spent dressing up the presentation and anticipating proceeds! Too little spare to run the business!

It all ended horribly wrong for Javier Pérez-Tenessa de Block, which seems a bit unfair given the hard road he travelled since co-founding the company back in 2000. In 15 years he’d taken Odigeo up to be a business worth €1.5bn by the time it joined the Madrid stock market, with sales of €4.4bn.

His press release only last June celebrated becoming “the largest distributor of regularly-scheduled flights in the world”. Operating in 43 countries, Odigeo had had 15.4m customers in the financial year just ended in March, an increase of 10%. And there was no shortage of industry awards. Or a total of lack of profits, with underlying earnings up 8% at EBITDA of €117.6m.

Nor was he in sole charge, having had a raft of financial groups around and European venture capital firm Permira as the latest investor.

But Odigeo ran into a huge squalls of problems over 2013 and 2014 with lawyers writs flying, criticism coming from consumer groups and rows with airlines. Not good publicity for a consumer business!

Then there were problems when Google changed its algorithms. And, as the travel market stayed tough and price wars got nasty, last August Odigeo reported that margins had come under severe pressure in the previous quarter. Profits had slid badly.  

Someone had to pay the price. Javier Pérez-Tenessa de Blockfell on his sword, announcing that he was stepping down from being CEO to become honorary chairman. He also introduced the new CEO Dana Dunne, ex chief commercial officer of EasyJet (much of whose sales are online) and formerly CEO at AOL Europe Sarl.

Further stiffening for the board came with the appointment as non-executive-chairman of Philip Wolf, founder of PhoCusWright, the travel research group. He was already on the board, and is also on the board of MakeMyTrip.

So what now? While revenues are expected to rise with the increasing number of travellers, trading conditions are no easier. The latest numbers from Odigeo, for the nine months to end December, were, said Dana Dunne, are “in line with our annual targets of flat revenue margin and an adjusted EBITDA of EUR90 million at close of year”. That is down from last year’s €118m.

There is a ten-point “turnaround plan” which involves more money for mobile and customer relations and more focus on hotels.

There were encouraging trends in the latest numbers. There was good performance in bookings and profits in Spain and in markets outside of Spain, France and Italy - they grew by 12 and 10% respectively. Even better figures came from its international markets (outside of Europe and Scandinavia.) Here the third quarter delivered sales growth of growth 38% and the nine-month period came in with a 24% rise.

Odigeo has just opened in Japan (taking it up to 44 countries). Since Japan is the largest travel market in the Asia-Pacific and the second largest worldwide, this makes it a key part of the eDreams development strategy and should help boost Asian sales.

The analysts are seeing some recovery next year, with EBITDA up at €98. So investors should get comfort in an upward trend in returns per share from a loss of 21 cents last year to earnings of 3 cents this year and 16 cents next.

And their recommendations? Well of the seven analysts covering the stock, five have it down as a ‘buy’. Is this enough to help the IPO queues? It won’t hurt, but most, of course, will depend on pricing and investors’ anticipated margins.