Flight Centre Travel Group (FCTG) plans to buy a UK luxury travel company to further its footprint in the high-end travel market.
Scott Dunn, a boutique business that operates exclusively in the luxury travel sector, comes with a price tag of $211 million.
Flight Centre told investors on Tuesday it would acquire the business through a $180 million capital raise and $40 million of existing cash.
And in a statement released on the Australian Securities Exchange (ASX) this morning, FCTG said it had successfully completed the placement of new shares “with demand received exceeding Placement size”.
FCTG global managing director and CEO Graham Turner said, “we are very pleased with the support shown by new and existing institutional investors for the Placement”.
“The acquisition of Scott Dunn will enable us to grow our leisure presence in the attractive US and UK luxury markets, complementing our existing footprint.”
In a statement yesterday, Turner said, “the business has a very strong and experienced management team, headed by CEO Sonia Davies, who have built a global leader in the luxury travel segment, and will continue to run Scott Dunn as a separate business unit”.
“High-net-worth, time-poor customers highly value the services of Scott Dunn as shown by their customers’ loyalty,” he added.
“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.”
Younger and more affluent customers
According to Fairfax Media, Flight Centre global leisure CEO James Kavanagh said part of Scott Dunn’s appeal was its customer base, which was younger than the average Flight Centre customer age of 51 years,
“They attract a younger, more affluent customer. A typical [customer] is 35 to 45 years of age,” Kavanagh told investors Tuesday.
“The consumers in this segment are increasingly looking for more meaningful experiences… they are less susceptible to economic downturns.”
With its high-end clientele, the average value of a Scott Dunn holiday is $39,000.
The announcement comes after Flight Centre experienced a strong first half to the financial year.
Total transaction values were $9.8 billion for the half, which was around three times more than the year before. Meanwhile, FCTG expects underlying earnings to hit $95 million over the six months.
Flight Centre expects full-year underlying earnings of between $250 million and $280 million, following a $183 million loss last year.
While Flight Centre said recent high airfares had helped grow overall transactions, they had also hurt profits where the company earns fixed fees on airfares of any value.
Last week, FCTG announced that senior executive Greg Parker would be the new CEO of the company’s global supply division.
In January, Flight Centre’s documentary Grounded also aired on Nine. Read our recap of the program.
