Flight Centre share price frozen amid $211m 'luxury' acquisition

Acquisitions, placements, and first-half earnings, oh my!

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Key points

  • The Flight Centre share price is frozen at $15.83 today as the company revealed its $211 million acquisition of luxury travel brand Scott Dunn
  • It will remain frozen until the company completes a $180 million placement, the proceeds of which will go towards the buy
  • Finally, Flight Centre released its unaudited first-half earnings this morning, detailing $1 billion of revenue and a $65 million cash outflow

The Flight Centre Travel Group Ltd (ASX: FLT) share price won't be going anywhere today. The stock has been placed in the freezer amid a $180 million capital raise, the proceeds of which will help fund a major acquisition.

The S&P/ASX 200 Index (ASX: XJO) travel giant has revealed it's acquiring UK-based luxury travel brand Scott Dunn – providing an entry point into the UK and US markets.

It also dropped its unaudited results for the first half of financial year 2023.

The Flight Centre share price last traded at $15.83.

Let's take a closer look at what's going on – or not going on – with the $3 billion travel agency today.

Why is the Flight Centre share price frozen today

There's been a deluge of news from Flight Centre today, but its share price probably won't respond. It's expected to remain frozen until the company's $180 million placement is completed.

$211m acquisition of luxury travel brand Scott Dunn

That $180 million – as well as $40 million of cash – will go towards buying Scott Dunn for an enterprise value of $211 million.

According to Flight Centre, Scott Dunn is a high-margin leisure business in the luxury travel segment with large average booking values and strong repeat bookings. It brought in $199 million of total transaction value (TTV) and $51 million of revenue last year.

Flight Centre managing director Graham Turner commented on today's news, saying:

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.

High-net-worth, time poor customers highly value the services of Scott Dunn as shown by their customers' loyalty.

The acquisition is also expected to generate supplier synergies, modest net corporate costs, and be mid-teens percentage earnings per share (EPS) accretive in the 12 months ending June 2023, on a pro forma basis before realising synergies and the transaction costs' impact

Flight Centre shares to remain frozen amid placement

To fund the purchase, Flight Centre is undergoing a $180 million placement.

It will offer around 12.3 million new shares (6.2% of its existing shares) for $14.60 apiece under the raise – a 7.8% discount to its last traded price.

The company is also conducting a $40 million share purchase plan. That will see new shares on the table for the same price, or lower, than the placement.

The Flight Centre share price has been tipped to return to trade tomorrow on the completion of the placement.

ASX 200 company unveils first-half results

Finally, here are the key takeaways from Flight Centre's unaudited first-half earnings in comparison to the prior comparable period (pcp):

  • Corporate TTV rose 146% to $5 billion and leisure TTV lifted 441% to around $4.4 billion
  • Group TTV more than tripled to reach approximately $9.9 billion
  • Revenue surged 217% to $1 billion
  • Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) beat guidance, jumping to $95 million – up from a $184 million loss
  • Operating cash outflow of around $65 million, in line with normal seasonality

The company's corporate segment is on track to post record TTV this financial year. Meanwhile, its leisure business is benefitting from the resumption of normal travel patterns.

At the end of the period, Flight Centre had a $489 million net cash position. Though, that doesn't include $800 million of convertible bonds.

It's now targeting between $250 million and $280 million of full-year underlying EBITDA before any acquisition benefits.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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