Corporate Travel Management claws back losses

Strategic acquisitions made during the height of the pandemic have helped Corporate Travel Management (ASX: CTD) claw back losses to post an underlying profit, as the Brisbane-based company positions itself to become a major player in the global travel sector.

While Corporate Travel Management posted a net loss of $10.04 million in the six months to December, this was big improvement on the $37.38 million loss a year earlier.

However, the company returned to underlying profitability by recording EBITDA of $18.19 million for the period, up from a $15.19 million loss the previous year.

The result was driven by a 180 per cent increase in revenue to $158.1 million for the period as total transaction value surged 416 per cent to $2.08 million.

Revenue from the company’s North American operations is now above pre-COVID levels. North America experienced a 213 per cent increase in revenue to $92 million in the first half, with client wins running at an all-time high in the region for the group.

Corporate Travel Management’s result was fortified by the company’s acquisition of US-based Travel & Transport in 2020, a move that has lifted the group’s scale in North America, UK and Europe. It is seen as a counter-cyclical move that is now starting to pay off.

The company is also acquiring the business and entertainment travel arm of Helloworld Travel (ASX: HLO) for $175 million. That deal was struck in mid-December and is not reflected in the latest earnings result as it is expected to settle in the third quarter of FY22.

“The strategic acquisitions we made during the pandemic have transformed CTM into a much larger business with greater exposure to the North America market which along with the UK market is rebounding sharply,” says Corporate Travel Management CEO Jamie Pherous.

“CTM has a unique combination of personalised service and proprietary technology which is helping our clients adjust with confidence to the increased complexity of corporate travel.

“Revenue in North America is now above pre-CTM COVID levels, pointing to the potential of the business when the travel market fully recovers.”

Pherous says the integration of the company’s North American acquisitions is now ‘well advanced’.

“Because of our expanded global footprint and strong financial position, we are targeting EBITDA of $265 million in full recovery compared with $150 million pre-pandemic,” he says.

The company estimates it will become the world’s fourth largest global corporate travel manager once it has achieved full recovery.

Corporate Travel Management has reported a rebound in trading for the UK and North America this month as travel restrictions continued to ease. The company sees its gains in North America as pivotal to its prospects of returning to group-wide pre-pandemic profitability.

Corporate Travel Management’s fortunes in Europe are also on the rise with record first-half revenue in the region of $43.8 million, up 229 per cent. This led to underlying EBITDA for Europe of $20.9 million, up from a $2.2 million loss previously.

Despite travel constrains in Australia, New Zealand and Asia, the group reported underlying EBITDA of about $900,000 during the period as it contained its losses in Asia.

Corporate Travel Management says the Australian, New Zealand and Asian regions had experienced a ‘significant bounce back in domestic travel through February’.

The company is not providing guidance for FY22 due to what it says is an ‘uncertain short-term trading environment’. However, it sees positives in high vaccination rates easing travel restrictions and a trend of more workers returning to office environments as key to driving growth.

The company is expecting client activity to materially increase in the fourth quarter of this year as travel restrictions are eased further. This will lead to a stronger than normal skew of profitability to the second half of the financial year, which traditionally stands at 67 per cent.

Corporate Travel Management shares were up as much as 6 per cent in early trade following the release of its half-year results.