Flight Centre to buy two New Zealand travel firms expanding local footprint
By Paul McBeth
Aug. 1 (BusinessDesk) - ASX-listed Flight Centre Travel Group will buy two local travel firms for an undisclosed sum, expanding its footprint in New Zealand and making it one of the country's biggest travel management groups.
The Brisbane-based company yesterday said it has agreed to buy Travel Managers Group (TMG) and Executive Travel Group (ETG), without providing details of the transactions, making New Zealand the Australian firm's fifth biggest business globally. The two businesses will add $3 million of annual earnings before interest, tax, depreciation and amortisation, and Flight Centre said their addition will boost the New Zealand business to almost $1.5 billion in annual sales in the 2018 financial year.
"ETG will enhance our already strong corporate travel offering in New Zealand and will give the business additional scale and expertise," Flight Centre managing director Graham Turner said in a statement to the ASX. "Through TMG, we will gain access to new business models and leisure revenue streams to complement our offerings across our other key channels, which include online, contact centres, our community and flagship shop network and our expo and event programme."
The Australian travel agent's New Zealand business generated total transaction value of A$1 billion in the year ended June 30, 2016, up 17 percent from a year earlier. Travel Managers Group generated $120 million of TTV in its 2017 year, while Executive Travel Group generated $60 million of TTV in calendar 2016. Of that total value, Flight Centre New Zealand generated a profit of $21.8 million on revenue of $161.8 million.
TMG provides systems and support to a network of 180 travel brokers and operates a 22-shop franchise network including 12 TravelSmart shops and 10 other non-branded stores, while ETG is New Zealand's biggest independent corporate travel manager.
Former Flight Centre staffer Kevin Weston co-owns ETG, which was set up in 1978 and he and business partner Nicola Jamieson bought a 40 percent stake in TMG in 2014.
Weston, Jamieson and TMG shareholder David Wallace will keep running the two businesses, and report to Flight Centre New Zealand managing director David Coombes.
Flight Centre will use company cash to pay for the acquisitions, which are expected to settle in the first quarter of the 2018 financial year. No price was disclosed, although Flight Centre said they were in line with normal multiples. The ETG purchase includes extra payments if certain earnings targets are met.
The ASX-listed company's shares last traded at A$43.50 and have jumped 39 percent so far this year.