24 February 2017

CTM trading at top of profit guidance after record 1H growth

Corporate Travel Management (CTM, ASX Code: CTD) has today reported record half-year results, indicating it is trading at the top of its previous guidance, at $97 million, after achieving strong organic growth in each of its domestic and international markets.

The result was accompanied by strong cash flows across the group and growth in new clients across all regions, with underlying net profit after tax, excluding acquisition amortisation, up 55 per cent at $27.3 million.

CTM Managing Director and founder Jamie Pherous said that, despite the impacts of airline ticket price cuts and a falling $A, CTM continued to provide earnings certainty for its investors.

“Strong organic growth underpinned our first-half EBITDA performance, resulting in underlying profit growth. Excluding acquisitions, this was up 29 per cent over the same period last year,” he said.

CTM’s global operations continued to grow, recording $1.87 billion in total transaction value (TTV), which was up 9 per cent, with revenues up 26 per cent due to transactional growth from client wins.

“TTV can be a misleading indicator in CTM’s business, as this was significantly affected by steep ticket price declines, especially in Asia, and negative FX movements to the $A,” he said.

“CTM have said all along that transactional volume growth, not ticket prices, is the driver of CTM revenue. Lowering ticket prices is an excellent outcome for our clients that we proactively encourage.” Mr Pherous said that, despite the currency depreciation and the effects of the US election on the economy, North America was now CTM’s biggest profit contributor, with underlying EBITDA up 254 per cent.

“CTM’s top two performing regions by growth percentage were in the world’s largest developed economies of North America and Europe, with the US now the largest single contributor in both revenue and profit,” Mr Pherous said.

“CTM continues to strengthen its position by leveraging our technology suite, delivering a return on investment to clients and creating new areas for expansion.”

Mr Pherous said CTM’s record operating cash conversion reflected the continued success of its business model, with underlying earnings per share growing 51 per cent (excluding amortisation from acquisition accounting), demonstrating the company’s ability to successfully integrate acquisitions.

“From the beginning, we have always been clear that acquisitions must strengthen our business, align with our client-focused culture, and share the same value proposition,” he said.

“All acquisitions are contributing positively to the group – including our most recent additions of Redfern Travel in the UK and Andrew Jones Travel here in Australia – demonstrating our ability to integrate newly acquired businesses and increase market share through CTM’s proven strategy.”

Mr Pherous said CTM had now established a global footprint in all its primary markets, with 65 per cent of profits derived offshore.

“We will continue to focus on winning market share by combining local experience with industry-leading technology and are expecting a strong second half this financial year,” he said.

The CTM Board has declared an interim fully franked dividend of 12.0 cents per share, to be paid on 12 April, 2017.