Corporate Travel Management eyes record FY24 profit as it reaps rewards of bold acquisitions

The countercyclical strategy of swooping on assets during the pandemic is reaping big rewards for Corporate Travel Management (ASX: CTD), which is on track to post a record profit in FY24 after a huge rebound in earnings in the latest financial year.

The Brisbane-based company, founded and led by Jamie Pherous, has posted a 367 per cent increase in underlying net profit after tax to $92.5 million in FY23.

The result was bolstered by a 70 per cent surge in group revenue to $660.1 million as demand for corporate travel globally surged across all of the company’s geographic divisions.

Corporate Travel Management saw total transaction value (TTV) across the group jump 77 per cent to $8.95 billion during the year, with the strong result leading the company to pay a final dividend of 22c a share.

“Our performance in FY23 validates our successful strategy during the pandemic which has given us a larger global platform,” Pherous says.

“We are taking strong momentum into FY24 with EBITDA averaging $20 million per month and PBTa (adjusted profit before tax) averaging $16.5 million per month since February 2023. Pleasingly we are successfully converting the revenue recovery into net profit”.

Corporate Travel Management has affirmed its position as Australia’s largest provider of corporate travel services through the $175 million acquisition of Helloworld’s corporate and travel brand in April last year.

It was among a number of key acquisitions made by the group in the fallout of the pandemic, coming on the heels of the acquisition of major US-based Travel & Transport for $275 million in 2020 and Sydney-based travel technology company Tramada Holdings the same year.

Pherous says the latest profit has also benefitted from the company’s investment in AI and automation over the last two years.

“We are encouraged by the results in the last quarter,” he says.

“It is early days in the life cycle and we are already saving 1000 work hours per month. A key goal for FY24 is to expand this globally to free up our consultants to manage high value, urgent transactions typical of our client base and to ultimately provide superior self-service capability at any time of the day for our customers.”

Corporate Travel Management’s result was supported by a 40 per cent revenue lift in North America to $303.7 million.

While this firmly establishing the region as the key contributor to revenue, Europe delivered almost twice the underlying EBITDA at $84.1 million with less than half the revenue, at $143 million (up 70 per cent). North America’s EBITA was up 65 per cent to $44.8 million.

Australia and New Zealand were strong performers for the group, with revenue up 134 per cent to $160.1 million and underlying EBITDA surging 265 per cent to $42.4 million – a figure that nearly matches the North American result.

Asia bounced back into profit with EBITDA of $13.9 million and revenue of $51.6 million – up almost 200 per cent.

Corporate Travel Management says business momentum has continued into FY24 and despite July and August being a traditionally quiet period, activity is tracking ‘significantly’ above the same time last year.

The company says transactions and revenue are up 42 per cent and 34 per cent respectively as a number of client wins totalling $2.95 billion come into effect.

This includes the company's largest customer contract to manage the accommodation needs of asylum seekers in the UK. The contract, which began in June this year, will add £1.6 billion ($3.1 billion) to the group's TTV over the next two years and significantly boost its European results.

However, the contract is viewed as controversial by some investors with ethical fund Future Super reported by The Guardian to be planning to sell its stake in Corporate Travel Management this year on the grounds that the company is profiting from the mandatory detention of asylum seekers.

Corporate Travel Management is forecasting revenue of between $770 million and $850 million in FY24, as well as EBITDA of $240 million to $280 million and PBTa of $193 million to $233 million.

“This result will deliver record earnings per share for FY24, which would validate the group’s strategy through the global pandemic,” the company says.

CTM's share price fell more than 10 per cent in early trade despite the robust earnings outlook. The shares were down 7.6 per cent at $17.96 at the time of publication.