Travelzest, the specialist travel business led by industry visionary Chris Mottershead, delivered dramatic earnings growth in a year of four acquisitions and senior board appointments.

Driven by acquisitions, finals to October comfortably beat forecasts, with chief executive Mottershead announcing 1,066% growth in ‘normalised’ pre-tax profits to £863,000, ahead of the £840,000 estimate from house broker Investec. Turnover took off by 70% to £19.2m, well above the £17.9m number in the market. Earnings of 4.25p soared 20% above forecasts and the gross margin grew from 26% to 37.8%.

Acquisitions included three niche UK travel companies – Best of Morocco, Peng Travel and Fair’s Fare – with each contributing positively to the results. Original business VFB, which sells cottage holidays in France, performed well, whilst Holiday Express is about to launch new holiday.co.uk and flight.co.uk websites that allow customers to dynamically package up holidays.

Right before the year-end, Travelzest completed a fourth acquisition, iTravel2000.com, Canada’s biggest pure online travel retailer and a higher margin business. The deal has brought counter-seasonal revenues to the predominantly summer based revenues of the European businesses, and Mottershead is also looking to drive bags of organic growth through the site by introducing dynamic packaging as well as web links to the tour operations, where there is huge potential for cross selling.

The travel industry has undergone major recent upheaval, but Mottershead has astutely honed in on the two big growth drivers, niche tour operations and online distribution, and given growth rates and the likelihood of further acquisitions, earnings upgrades are highly likely. For 2007, expect pre-tax profits of £3.6m from £36m sales, and earnings of 9p. The forward multiple of 16 times is way too low, and the shares trade at bargain levels.

Travelzest	AIM	£9.89m	48.50p	0.00p
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