Gullivers Travel Group, Poised For Growth

Gullivers Travel Group, Poised For Growth, Registers Prospectus

Gullivers Travel Group will build on the combined strengths that have made it New Zealand's largest outbound travel services business and pursue a number of growth opportunities, according to the prospectus for the group's initial public offering (IPO) of shares.

As a result, the prospectus states the group's earnings before interest, taxation, depreciation and amortisation, are forecast to increase by 30% over two years from $18.47 million for the year to March 2004 to $24.13 million for the year to March 2006.

Gullivers Travel Group today confirmed registration of the prospectus following the announcement last week last week of its decision to make an initial public offering of shares at an issue price of $1.60 a share, valuing the business at $160 million. The offer will open on Monday November 22 and close on Tuesday December 7, with the shares expected to be dual-listed on the New Zealand and Australian stock exchanges in mid-December.

Proceeds from the offer will be used for the acquisition of the entities making up the group.

Gullivers was founded in 1976 as a travel wholesaler and has experienced significant growth over the last 28 years, driven by the increasing propensity of New Zealanders to travel and a number of strategic acquisitions.

The Group is now vertically and horizontally integrated, operating multiple business lines and distribution channels, including:

• Wholesale and ticketing (Gullivers Wholesale and Gullivers Ticketing) • Retail leisure (Holiday Shoppe and United Travel franchises) • Corporate travel (Atlantic Pacific, Signature Travel, Biztrav) • Online distribution (Zuji licence, Serko, Calypso) • Technology (Access Interactive and Interactive Technologies Limited).

Gullivers' founder and managing director Andrew Bagnall, who, with other existing management, will hold 35% of the shares in the group, said today: "It is my strong view that the travel industry has been and will continue to be one of the most exciting and fastest growing industries in the world. Gullivers has been at the forefront of that industry in New Zealand and has a track record of driving change and innovation."

Mr Bagnall said the company was well-positioned to capitalise on growth opportunities through a four-pronged growth strategy, embracing:

• Commitment to growing the franchisee businesses, the group's primary distribution channel, leveraging affiliations with rewards programmes • Continued investment in information technology, particularly internal web-based interfaces, to increase volume and revenue at a marginal cost • Development of online distribution channels such as Zuji, which would provide the means for the group to further diversify, into the inbound tourism market, allowing it to market its inbound product directly to the global marketplace, and • Continued growth in the corporate travel sector, in particular the niche segments in which the group's brands have specialised, while also focusing on leveraging global affiliations and participating in global tenders.

"As a result of its combined strengths, the group has real growth potential and has already shown its ability to overcome industry impacts, such as SARS, September 11 and the Iraq wars," said Mr Bagnall. "It is also operating in a strong macro environment, with outbound traveller numbers increasing consistently at a healthy rate and forecast to continue to surpass GDP growth.

"As the largest outbound travel services business in New Zealand, the group has the benefits of vertical and horizontal integration, strength in its brand portfolio, diversity through its franchises and information technology, and very experienced management. To this it can now add the exciting potential of participating in the inbound tourist market."

Mr Bagnall said the group's members had already achieved significant growth, both organically and through strategic acquisitions, and today had more outlets and offices than any other travel services business in New Zealand. The group had an estimated share of 23% of the wholesale, corporate travel and retail leisure travel market.

On an annual basis, the group accounted for approximately 350,000 outbound travel arrangements and 400,000 domestic travel arrangements.

Gullivers was one of the largest tour and travel wholesalers and the second largest ticket consolidator in New Zealand. The group contained two of New Zealand's best-known retail leisure travel brands and two of New Zealand's six largest corporate travel companies.

In addition to its own technology businesses, GTG was now licensed to use the technology, branding and intellectual property of one of Asia-Pacific's best-known online travel brands, Zuji, a joint venture between 15 major airlines and Travelocity.com of the United States. This would open up a new inbound market to the group.

"We have a newly-appointed and first-class board of directors, and I believe an IPO will create a new platform for the future growth of Gullivers Travel Group as a publicly listed company. My vision is for Gullivers Travel Group to become one of the most successful travel services businesses in the world," said Mr Bagnall.

The company's board is now chaired by Jeff Todd, a noted business and government adviser and non-executive director.

Mr Todd was the managing partner of PricewaterhouseCoopers New Zealand and Pacific prior to his retirement in 1998. Since that time he has been a director of a number of companies and currently is chairman of Dynasty Hotel Group Ltd and The New Zealand Guardian Trust Co Ltd and a director of Sanford Ltd, Southern Cross Healthcare and a member of the council of Massey University. Mr Todd was formerly a director at the Reserve Bank of New Zealand and ANZ Banking Group.

The other members of the board include Mr Bagnall, who founded Gullivers as a travel wholesale company in 1976, Rob McLeod (chairman of the Business Roundtable, director of Telecom NZ and SKYCITY, and previous chairman of Ernst & Young), Rick Ellis (chief executive of EDS and former chief executive of TVNZ), Rod McGeoch (chairman of SKYCITY, director of Telecom NZ and chairman emeritus of Corrs Chambers Westgarth in Sydney) and Paul Norling (former managing director of merchant bankers Bancorp).

The management team includes a number of New Zealand's best-known travel industry identities.

Mr Bagnall said the 35% shareholding to be held by members of the existing management signalled a commitment to the continued success of the group. Under the terms of the offer, these shares will remain in escrow until after the financial results for the year ending March 31, 2006 are released.

These persons do not guarantee the shares being offered under the IPO.

A bookbuild for the shares was conducted by UBS on Tuesday last week, with all shares in the IPO being allocated to institutional investors and a number of retail brokers. There will be no public pool. Macquarie Equities and First NZ Capital have been appointed New Zealand Retail Co-Managers and UBS Private Clients Australia Limited has been appointed the Australian Retail Co-Manager.

The offer price of $1.60 represents a PE multiple (pre goodwill amortisation) of 11.6x for the year to 31 March 2005 and 11.1x for the year to 31 March 2006. This is equivalent to an EV/EBITDA multiple of 6.6x for the year to 31 March 2005 and 6.2x for the year to 31 March 2006. The expected gross dividend yield for the year to 31 March 2006 is 8.7%.

An investment statement has been prepared in relation to the shares in Gullivers Travel Group. A copy of a combined investment statement and registered prospectus is available free of charge from the lead manager, UBS, and the New Zealand retail co-managers, Macquarie Equities NZ Limited and First New Zealand Capital Securities. Application has been made to the NZX for permission to list Gullivers Travel Group, and all the requirements of the NZX relating thereto that can be complied with on or before the date of this advertisement have been duly complied with. However, the NZX accepts no responsibility for any statement in this advertisement.

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