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Flight Centre buys two NZ firms for A$19.5M; FY profit falls despite revenue growth

Thursday 24th August 2017

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ASX-listed Flight Centre Travel Group bought two local travel firms for a combined A$19.5 million as it seeks to expand its footprint in New Zealand, making it one of the country's biggest travel management groups.

In its annual earnings published to the ASX this morning, the Brisbane-based company said it has agreed to buy Travel Managers Group (TMG) for an initial A$8.37 million and Executive Travel Group (ETG) for an initial A$11.17 million, each with working capital adjustments to be made.

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.

The Australian travel agent's New Zealand business generated total transaction value of A$1.1 billion in the year ended June 30, 2017, up 10 percent from a year earlier. Over the whole group, TTV rose to A$20.1 billion, from $19.3 billion in 2016, with net profit dropping to A$230.8 million from A$244.6 million. 

Chief operating officer Melanie Waters-Ryan said the business was "successfully executing its key global strategies which include enhancing productivity in the short-term."

"The company has also strengthened its presence in the home-based/independent contractor sector, a rapidly growing part of the travel industry, by recently agreeing to buy established networks in both New Zealand (Travel Managers) and Australia," she said. "The business has now entered 12 new equity invested countries in the past three years, more than doubling its geographic footprint." 

When it announced the deals at the beginning of August, Flight Centre said the purchases made New Zealand its fifth biggest business globally. It also said the two businesses would add $3 million of annual earnings before interest, tax, depreciation and amortisation, and would boost the New Zealand business to almost $1.5 billion in annual sales in the 2018 financial year.

In the year and subsequent to its June 30 balance date Flight Centre also bought travel businesses based in India, Germany, Sweden, China, Quebec, Mexico and Sydney, and increased its shareholding in businesses in Singapore and Hong Kong. 

The ASX-listed company's shares last traded at A$44.37 and have jumped 42 percent so far this year.


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