Despite biting cost of living pressures, a recent Travel Trend Forecast revealed that Aussies won’t be cutting down their travel plans in 2023. Instead, they are doing so with an eye on price and more strategic planning to find the best deals and gain flexibility. Out of 1000 respondents, 61% agreed that lowest price is one of the most important factors when making bookings, and two in three agreed that price is more important now than it was before.
Any tips on getting the best travel deals? Certainly we’re no travel expert but many travellers have found value in seeking assistance from travel agents as they have more access to different booking sites and private discounts from airlines and hotels. To ensure that the majority of travellers across Australia and New Zealand will end up within their network of travel and ticketing agents, travel company Helloworld (ASX: HLO) today announced that it has acquired 100% of Express Travel Group (ETG) in Australia and New Zealand for $70 million.
HLO will be acquiring 100% of the business from the CEO and Director Tom Manwaring. He joined ETG, then known as Orient Express Travel Group, in 2000 after 29 years with Cathay Pacific and took full ownership of the business in 2003. In 2014 the word “Orient” was dropped from the name. Tom Manwaring will remain as CEO and a Director of ETG post Helloworld acquisition.
CEO and Managing Director of Helloworld Andrew Burnes AO said, “We are delighted to announce our forthcoming acquisition of ETG. They have been one of the most successful travel operations in Australia and New Zealand in the ticketing, retail network and distribution sectors and we look forward to the continued growth of the business under Tom’s leadership and vision.”
Consideration for the acquisition will be a mixture of shares and cash with the cash component to be fully funded from Helloworld’s existing cash reserves. Given the related party nature of the transaction, in which investment management company Sintack Pty Ltd owns 50% of ETG and has a 13.31% shareholding in Helloworld, the acquisition will require shareholder approval and notice of an Extraordinary General Meeting, to be held on Friday 21 July 2023.
The acquisition is expected to increase Helloworld earnings in FY24 and onwards. The purchase price reflects a multiple of around seven times ETG’s projected normalised earnings for FY23, which is estimated to be between $10m and $11m. Subject to shareholder approval, the transaction is expected to settle early August 2023.
The Helloworld network comprises travel distribution, retail leisure travel and business travel networks, travel broker networks, destination management services (inbound), air ticket consolidation, tourism transport operations, wholesale travel services, online operations and event-based freight operations. The Company has over 600 staff located in Australia, New Zealand, Fiji and Greece, and over 2000 members of its travel agency networks in Australia and New Zealand.
In May 2023, Helloworld acquired 40% ownership of retail travel agency business Phil Hoffmann Travel (PHT) from owner Phil Hoffman, with an option to acquire the remaining 10% within the next three years. A 12 times recipient of the National Tourism Industry Awards since 1994, PHT operates in the retail leisure and corporate travel sectors in South Australia from nine locations with over 150 personnel. PHT has been an Associate Member of Helloworld Travel since 2014. The acquisition value was undisclosed, but claimed to be funded from Helloworld’s existing cash reserves.
In the March quarter, Helloworld reported underlying EBITDA of $14.2m, a significant increase compared with underlying EBITDA loss of $4.9m in the previous corresponding period (pcp). Total Transaction Value (TTV) for the March quarter was $596.2m, up 150% on pcp on a continuing operations basis while YTD TTV increased by 187% to $1.804 billion compared to $629.3m YTD TTV on pcp. Total revenue and other income for the quarter totalled $46.9m, up 240% on pcp. The revenue margin for the quarter was 7.7%.
Helloworld has no external borrowings and strong liquidity, and the Company has expressed plans to continue investing in its key technology platforms such Air Tickets, ResWorld, Mango and Ready Rooms. Based on our YTD results and expectations of trading across the June quarter, Helloworld is increasing its previous guidance for underlying EBITDA from $28m-$32m to an underlying EBITDA of $38m-$42m for FY23; subject to no material adverse change in operating conditions impacting the business and continued recovery in aviation capacity.
Clara is a Business Reporter for The Sentiment.
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