Travel agent, Flight Centre Ltd has revealed what all the buyout fuss has been about over the past 10 months or so.
The company was the subject of two buyout proposals from private equity group, Pacific Equity Partners.
The first was defeated by a group of hold out shareholders at a meeting called earlier this year to approve the deal at $17.20 a share, the second proposal was more complicated and involved PEP and management and shareholders sort of owning the operating assets.
But that was rejected by independent directors who said a valuation from independent expert, Ernst and Young had concluded the buyout deal undervalued the company and carried tax problems for many shareholders.
PEP took umbrage with the rejection and spent a couple of weeks moaning and groaning about the rejection and the role of the independent directors.
Yesterday Flight Centre showed that both rejections were justified with news that earnings jumped sharply in the year to June and especially in the final six months.
Flight Centre said net profit rise 51% to more than $120.8 million (including the profit on the sale of the Brisbane HQ), and its looking to "transaction growth" of 15 to 20% this financial year.
"During the 12 months to June 30 2007, the company achieved 26% pre-tax profit growth to $151.6 million, excluding the $22.4m abnormal gain on the sale of the company's Brisbane city headquarters," FLT said in its statement to the ASX.
FLT shares jumped nicely, rising 82 cents at one stage before settling back to be up around 65c at $19.45.
The company said earnings growth was "driven by strong second half : $99 million pre tax profit for six months to June 30.
The company said that was a " 40% growth in comparison to previous corresponding period with slight income margin improvement."
No wonder PEP wanted to deal, it would have been a steal.
Looking to 2008 the company said that it expects to achieve 10-15 per cent growth in total transaction value and will target bottom line profit growth in line with this … for the 12 months to June 30, 2008," it said.
"Based on the momentum gained during 2006/07 and a good first month's trading in 2007/08, FLT believes this goal is achievable."
Earnings in 2007 share grew 51 per cent to $1.28.
Flight Centre said it performed strongly in Queensland, Victoria and Tasmania, and in Western Australia, South Australia and the Northern Territory, but New South Wales was weak.
"The overall NSW business and the corporate travel businesses in both Australia and New Zealand generally performed below expectations," the company said.
Flight Centre said its South African, UK, North American and Indian businesses performed strongly.
The directors have declared a 46c a share, fully franked final dividend. This follows the fully franked 20c a share interim dividend paid in March 2007 and represents a 60% return of net profit after tax (excluding abnormal) to shareholders.
But the company isn't going down the private equity route again
It said in yesterday's statement that it was planning " increased dividends and plans to introduce some debt but there will be no major change to capital management policy.
There is "no plan for joint venture or privatisation with private equity in the foreseeable future."
One worrying point is that the two independent directors who led the examination of the private equity deals are retiring.
FLT said: The company has initiated a search for two independent directors to succeed chairman Bruce Brown and director Howard Stack, who have signalled their intentions to resign. Mr Brown and Mr Stack will serve as directors until successors are appointed.
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It's quite a way from the surge in earnings reported by Flight Centre to the sluggish result turned in by gaming giant, Tabcorp yesterday.
It's problems are home grown (with some help, it must be said from smoking bans in Queensland) and some from within as the company flicked CEO Matthew Slatter during the year then went for theinsider in Elmer Funke Kipper.
Nor can Tabcorp (TAH) blame the rising Australian dollar for any of its woes.
The company said 'normalised' net profit after tax before non-recurring items fell 3.8% to $515.6 million for 2007.
But the company has paid a final dividend of 47 cents per share, bringing a total for the year of 94c, up 5.6 per cent on the 2006 payout, reflecting the board's view that profit growth would return.
It was also a way of keeping faith with shareholders who have seen the stock tack like a yacht in a storm, buffeted by the management and earnings problems, private equity or acquisition talk and a long delay in filling the CEO's role.
And it's also a way for the board and management to keep some shareholders interested after they virtually wrote off any chances of seeing growth in 2008. The company talked about regaining its growth trajectory in 2009, more than a year away!
"2008 earnings (normalised and before non-recurring items) are expected to be broadly in line with 2007, with the second half benefiting from the improvement initiatives currently under way," the CEO said in yesterday's statement.
Releasing Tabcorp's preliminary results, chairman Michael Robinson (who is stepping down at the AGM) said the company's financial performance in 2007, during which time it replaced its chief executive, had been "unacceptable".
But he said the challenges the company faced were recognised and were being addressed by the new CEO.
"The increase in the full year dividend reflects the Board's confidence that profit growth will return," Mr Robinson said.
The new CEO, Elmer Fun
