Buying spree continues for Helloworld with $70m Express Travel Group acquisition

Helloworld Travel (ASX: HLO) has booked three deals within as many months after announcing the $70 million acquisition of Express Travel Group (ETG) in Australia and New Zealand from current owners Tom Manwaring and investment management company Sintack.

This comes after Helloworld purchase a 40 per cent stake in Adelaide-based travel agency Phil Hoffmann Travel (PHT) last month, and the acquisition three months ago of Australiareiser, a specialist travel wholesaler from Scandinavia to Australia, New Zealand and the South Pacific.

Unlike those transactions, the value of today's purchase was disclosed and represents a large chunk of the $100 million in cash proceeds from last year's sale of Helloworld's corporate business to Corporate Travel Management (ASX: CTD).

That sale, involving corporate and entertainment brands including QBT, TravelEdge, APX, Atlas Travel, AOT Hotels and Show Group, also gave Helloworld $70 million worth of CTD shares, which have since dipped in value slightly to $66 million.

At the time, the group said the cash component of the sale would be used to "repay debt, provide additional liquidity, capital management and to support growth opportunities in HLO’s retail and leisure travel businesses as activity rebounds following the COVID-19 disruption".

The acquisition of ETG is expected to be earnings accretive in FY24 and beyond, with the consideration representing an EBITDA multiple of approximately seven times forecast normalised earnings in FY23 of $10-11 million.

Tom Manwaring, who joined ETG in 2000 after 29 years with Cathay Pacific and took full ownership of the business in 2003, will remain as CEO and a director of ETG.

"We are delighted to announce our forthcoming acquisition of ETG," says Helloworld CEO and managing director Andrew Burnes AO.

"They have been one of the most successful travel operations in Australia and New Zealand in the ticketing, retail network and distribution sectors and we look forward to the continued growth of the business under Tom’s leadership and vision."

The ETG acquisition will be funded from a mixture of shares and cash, with the cash component to be fully funded from Helloworld’s existing reserves.

As Sintack owns 50 per cent of ETG and has a 13 per cent share in Helloworld, shareholder approval is required, and notice of a general meeting which will be held on Friday July 21 July. The deal is expected to settle early August 2023, subject to shareholder approval.

In a LinkedIn post, ETG CEO Tom Manwaring said the deal would include the sale of Creative Cruising and First Travel Group New Zealand.

"This is an exciting phase in the evolution of Express Travel Group that will help us increase scale and capacity and deliver greater opportunity for our members," he posted.

"I look forward to continuing on as CEO and Director of Express Travel Group in this next stage of growth and seeing our members benefit and optimise success. 

"Our leadership team will remain in place and it is business as usual at an operational level. Our members will continue to be serviced by ETG with improved commercial and continued high service levels, by all existing staff."

In April Helloworld lifted its earnings guidance by $10 million as travel demand continued to pick up speed following the halt during the pandemic.

After reporting a 150 per cent rise in total transaction volume (TTV) for the March quarter, the Melbourne-headquartered group announced underlying EBITDA guidance of $38-42 million for the full financial year, up 36 per cent and 31 per cent at the lower and upper ends of the range respectively.

The company reported leisure travel demand continues to hold up strongly despite challenging economic conditions, improving both domestically and internationally with a trend towards longer trips and longer lead times to overcome global supply constraints.

Senior travel executives in Australia estimate that pre-COVID conditions for the industry will likely return by 2025 with supply constraints as the main impediment.

Flight Centre (ASX: FLT) co-founder and CEO Graham Turner predicted corporate business travel would soon return to pre-COVID levels at a Queensland Business Breakfast in April this year alongside other heads in the travel industry.

Employing more than 100 staff, ETG operates an air ticket consolidation business, retail travel networks and cruise and package wholesaling in Australia and New Zealand with a national support network and offices in Melbourne, Sydney and Auckland.

Founded as Orient Express Travel Group in 1983, the word ‘Orient’ was dropped from the name in 2014. The company employs over 100 staff and encompasses a suite of brands, including Express Tickets, Independent Travel Group, Select Travel Group, Alatus, italk travel & cruise, Creative Cruising AU/NZ, and First Travel Group, YOU Travel, and Lifestyle Holidays in New Zealand.