Emboldened by a lift in underlying earnings expectations above guidance, combined with momentum from 2022 forays into an invitation-only luxury travel members' group and a Byron Bay-based packaged holiday company, Flight Centre Travel Group (ASX: FLT) is about to make a big move within the more opulent corners of its industry.
So much so that the Brisbane-based company will dilute 6 per cent of current shareholdings to help fund the $211 million purchase of UK-based luxury travel operator Scott Dunn, a brand that has won the Conde Nast Traveller Readers’ Choice Award every year since 2013.
The deal will give Flight Centre a springboard into the UK and US luxury tour markets, with the acquisition due for completion by the end of February.
Flight Centre is launching a $180 million equity raise to support the deal, allowing investors to buy in at a 7.8 per cent discount to the last trading price, coupled with a $40 million share purchase plan (SPP).
“Scott Dunn provides us with the opportunity to grow our leisure presence in the large UK and US luxury markets in an attractive and growing segment, while also fast-tracking our objective of developing a global luxury collection of travel brands,” Flight Centre managing director Graham Turner said this morning, in an update that also flagged expected earnings of $95 million for the December half, above previous guidance of $70-90 million.
“The business ticks the main boxes that we have defined to play in the luxury segment: exceptional service/high quality, an authentic brand with desired benefits, it has a prestigious image, commands a premium price and is capable of inspiring deep connections with customers.
“FLT is well-positioned to help Scott Dunn achieve its strategic objectives and unlock a new era of growth.”
Employing more than 200 staff across London, San Diego and Singapore, the company generated total transaction volumes (TTV) of £112 million (AUD$199 million) and revenue of £29 million (AUD$51 million) in 2022.
The company’s two main established markets are the UK and the US, representing 74 per cent and 21 per cent of TTV for the 12 months to 31 October 2022 respectively. Scott Dunn also has a small presence in Asia, which represented five per cent of TTV for the same period.
“We are proud of how strong the Scott Dunn brand has become in the UK and now in the US and Singapore and of our commitments to being a responsible business,” Scott Dunn CEO Sonia Davies said.
“We’re excited now to continue our journey and accelerate our growth with the Flight Centre Travel Group.”
Post-acquisition, Flight Centre anticipates its luxury revenue margin will increase by three per cent and EBITDA margin will improve by seven per cent on a pro-forma six months to 31 December 2022 basis.
The Australian-founded travel agency, which is also behind brands such as premium travel agency Travel Associates and US-based Liberty Travel, also revealed that TTV came in at $9.9 billion for the first half of 2023 – a figure that has more than tripled year-on-year.
Flight Centre is also forecasting underlying earnings of between $250 million and $280 million for the full financial year, compared with a $183 million loss last year.
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