Flight Centre chases the young and wealthy with $211m UK acquisition

By Emma Koehn
Updated

Flight Centre will look to capture more young and affluent travellers through a $211 million acquisition of a UK travel outfit known for its luxury tour experiences across the globe.

The travel retailer told investors on Tuesday morning it would buy the Scott Dunn business with a $180 million equity raise and $40 million of existing cash.

Scott Dunn offers a range of luxury travel packages.
Scott Dunn offers a range of luxury travel packages.Credit:iStock

Scott Dunn is well known in the UK for its range of luxury travel experiences, from heli-skiing in Canada to boutique safaris in Kenya.

Flight Centre’s global leisure chief executive James Kavanagh said Scott Dunn had grown strongly throughout COVID and was a unique proposition to capture the younger end of the travel market.

“They attract a younger, more affluent customer. A typical [customer] is 35 to 45 years of age,” he said.

By comparison, Flight Centre’s core customers are an older audience, at 51 years of age on average.

Luxury holiday makers spend big on their adventures and the Flight Centre team highlighted on Tuesday that they are much more resilient to cost of living pressures than the typical consumer. The average value of a holiday booked through the Scott Dunn business is $39,000.

“The consumers in this segment are increasingly looking for more meaningful experiences… they are less susceptible to economic downturns,” Kavanagh said.

Funds for the acquisition will largely come through an institutional placement to eligible investors at $14.60 a share, which is a 7.8 per cent discount to where shares closed at $15.83 on Monday.

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The company will also offer a share placement plan to retail investors which aims to raise up to $40 million.

Flight Centre’s focus on luxury comes as the company flagged booming transaction values and strong earnings for the first half of the financial year.

Flight Centre chief executive Graham Turner said: .
Flight Centre chief executive Graham Turner said: .Credit:Dan Peled

The business confirmed on Tuesday morning it is expecting underlying earnings to come in at $95 million for the first half of 2023, ahead of its previous guidance to the market of between $70 million to $90 million.

Total transaction values hit $9.8 billion for the half, more than tripling compared with the same period last year, which was marred by pandemic interruptions.

The company said higher-than normal airfare prices had contributed to that rocketing transaction growth, but higher fares are also hurting revenue margins in travel segments where Flight Centre earns fixed fees on transactions, regardless of the value of a ticket.

Flight Centre is forecasting underlying earnings of between $250 million and $280 million for the full financial year, compared with a $183 million loss last year.

Shares in the company are up 10 per cent year-to-date.

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