Flight Centre mulling over a divestment

Flight Centre Travel Group is considering selling its stake in bicycle retailer Pedal Group.

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Key points
  • Flight Centre is considering the future of its stake in Pedal Group.
  • Pedal Group is the owner of 99 Bikes. 
  • It has otherwise been a challenging period for the travel company.

Flight Centre Travel Group Ltd (ASX: FLT) is considering selling its stake in bicycle retailer Pedal Group, which it owns in a joint venture with the Turner Family.

Pedal Group owns bicycle retailer 99 Bikes, and operates more than 70 retail outlets, an online business, two wholesale distribution businesses, and a commercial property business, according to its website.

Flight Centre came on board as a shareholder in 2008 and now owns approximately 47% of the company, while the family of Flight Centre's Managing Director, Graham Turner, owns an additional 35%.

More than 800 employees of the business own the remainder of the shares.

Flight Centre said in a statement to the ASX on Tuesday that the two majority owners of the business had engaged consultants Grant Samuel to "review future ownership options for the business''.

Any discussions relating to potential structures and options to support the business's continued growth are in their infancy. Flight Centre currently intends to maintain an investment in the business and to work closely with potential partners. The company will, however, consider other proposals that relate to its Pedal Group stake if it believes those proposals may be in Flight Centre shareholders' best interests.

Flight Centre said the 99 Bikes business and the Advance Traders wholesale business had performed well during FY25, and both had continued to perform well in the current financial year.

Flight Centre said any transaction in relation to Pedal Group would not be material to the company's financial performance or balance sheet position.

Shares in the $2.56 billion Flight Centre are trading significantly lower than their 12-month highs of $22.59, changing hands at $11.92 on Tuesday, up 0.2% for the day.

A large plane rolls down a runway with a sunny blue sky behind it as brokers reveal their outlook for the Flight Centre share price in FY23

Image source: Getty Images

A challenging period for travel

The company reported $2.78 billion in revenue for the full year in August, up 2.7% from the previous year, and a net profit of $108.2 million, down 22.3%.

Flight Centre said at the time that it expected the cyclical challenges that affected FY25 to continue to impact booking and travel patterns early in FY26.

While these challenges are likely to be short-term, FY26 first half underlying profit before tax is expected to be reasonably flat given a degree of ongoing volatility early in the first quarter and the comparatively strong FY25 second quarter result.

The company said accelerated profit growth was expected during the second half as key projects gained momentum and as the trading cycle gradually improved, "with the prospect of further interest rate cuts in some countries helping to alleviate cost of living pressures and boosting consumer confidence''.

The company will pay a 29-cent dividend on 16 October.

Flight Centre shares were removed from the S&P/ASX 100 Index (ASX: XTO) in its most recent rebalance on 22 September.

Motley Fool contributor Cameron England 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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