Corporate Travel Management doubles earnings, but shares sour on UK asylum seeker contract

Corporate Travel Management doubles earnings, but shares sour on UK asylum seeker contract

Corporate Travel Management (ASX: CTD) managing director and founder Jamie Pherous. 

Shares in Brisbane-headquartered Corporate Travel Management (ASX: CTD) fell by almost 20 per cent in early trading today despite underlying earnings almost doubling to $100.7 million in the December half, as investors recoiled from a profit guidance downgrade sparked in part by the underperformance of a UK Home Office contract.

The bridging accommodation and travel services contract for asylum seekers came into effect in June last year and was expected to generate £800 million ($1.54 billion) annually, but today the group revealed it had been "materially underperforming versus the client’s initial expectations due to immigration issues and timing delays that are beyond our control".

Corporate Travel Management clarified that this impact was "more than offset" by significant new clients transacting and a strong performance from other crisis and humanitarian work.

Other factors working against the travel services agency have included negative travel sentiment relating to conflict in the Middle East, USA corporate annual travel budgets becoming fully utilised by mid-September due to "unsustainably high ticket prices", and a slower rebound in China's outbound recovery - all issues that led to a $15 million hit to earnings.

The company notes strong January results - including a 60 per cent year-on-year uplift in earnings in the USA - suggest the impacts of these macroeconomic issues have "largely dissipated" and are unlikely to affect results in the current half.

Nonetheless, underlying EBITDA guidance has been reduced from its previous level of $240-280 million down to $210-230 million. Corporate Travel Management describes its guidance for the UK Home Office contract as a "conservative approach" where it is assumed there will be no further growth from current levels.

"The underlying business is performing well, and we are executing on the things we can control as demonstrated by continued market share gains and our ability to successfully convert revenue into profit growth," says managing director and founder Jamie Pherous.

The group highlights the fact new client wins are on track to exceed annualised travel spend value of $1 billion for FY24, client retention is tracking at 97 per cent, and revenue per full-time employee has risen 17 per cent year-on-year.

CTD shares are currently down 18.59 per cent at $16.16. 

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