The shares of Flight Centre Travel Group Ltd (ASX: FLT) have drifted lower this morning following an announcement from the leading travel agent that it has acquired the corporate businesses owned by European online travel agency eDreams ODIGEO.
Not only does this deal extend the company's presence in Europe to Sweden, Denmark, Norway, Finland, and Germany, and contribute an estimated €110 million to revenue in 2017, but it is also aligned to Flight Centre's global strategy of fast-tracking growth in corporate travel.
Managing director Graham Turner sees corporate travel as one of the key drivers of growth for Flight Centre in the medium to long term according to the release.
I completely agree with Mr Turner. You only need to look at corporate travel specialist Corporate Travel Management Ltd (ASX: CTD) to see this. In its full year results released in August the company revealed a 34% rise in revenue to $265 million and an even more impressive 60% jump in net profit after tax to $42 million.
For the next two years analysts are expecting Corporate Travel Management to deliver earnings growth of 33% per annum according to CommSec. In light of this I am very pleased to see Flight Centre bolster its corporate travel network today.
This is the second investment the company has made this month, following the acquisition of a 49% stake in Gold Coast-based Ignite Travel Group just under two weeks ago.
Ignite is an emerging travel company which specialises in the development and distribution of innovative leisure market models including exclusively curated holiday packages, travel vouchers and rewards programs.
Whilst both these deals appear to be very promising and strengthen Flight Centre's offering, it is difficult to make an investment case on the back of them due to there being no financial details being disclosed.
But with such a strong management team and a long history of creating value for shareholders, I have confidence the deals will prove to be a success.
Overall at just 14x full year earnings and predicted to provide a fully franked 4.2% dividend in FY 2017, I believe Flight Centre's shares represent a great buy and hold investment today.
