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The recovery of business travel in North America and Europe in the fourth quarter has given Corporate Travel Management (ASX: CTD) some cause for optimism after the company widened its net loss to $57.76 million in FY21.
The result compares with a $10.62 million loss a year earlier and reflects a full year that the business was impacted by COVID-19 travel restrictions globally.
The recent recovery for the company in North America could be seen as a sweet spot for Corporate Travel Management (CTM) after the company went on a spending spree during the downturn, acquiring US-based Travel & Transport in October for $275 million.
North America and Europe currently generate about 80 per cent of group revenue, up from 72 per cent of pre-COVID pro forma 2019 revenue.
"The integration of Travel & Transport is progressing well and has helped us to capitalise on the momentum in North America and grow our exposure to the world's largest travel market," says CTM's managing director Jamie Pherous.
"After the Travel & Transport acquisition, CTM is now estimated to be the world's fourth-largest global travel management company. Through our recent acquisitions, realised synergies, and permanent reductions to our cost base we expect the business will deliver material accretion to group earnings post-COVID."
While CTM's group revenue was down 43 per cent to $200.5 million in FY21, more than half of that at $126.3 million was in the June half, while more than a third at $74.1 million was recorded in the last three months of the financial year.
Total transaction value (TTV) for the year was $1.6 billion, down from $4.5 billion in FY20.
However, CTM delivered positive underlying EBITDA in the second half of $8.1 million, a figure that was buoyed by underlying EBITDA of $13.6 million in the fourth quarter. Revenue in this quarter recovered to 62 per cent of pre-COVID levels.
Pherous says the EBITDA result was supported by a 'rapid turnaround in fourth quarter activity from North America and Europe'.
"Significant progress in administering vaccines and reopening the economy in these regions gives us reason to be optimistic about FY22," he says.
"We continue to see encouraging signs that momentum is building in these regions. July has delivered a record revenue result post-COVID."
Pherous notes that CTM entered FY22 with a significantly reduced cost base.
"So, we are in a strong financial position to continue investing in our technology solutions and exploring value-adding acquisition opportunities," he says.
CTM's earnings in Australia and New Zealand remain in positive territory with revenue and other income of $42 million and underlying EBITDA of $7.7 million.
Lockdowns in Sydney are stymying the broader national recovery, the company says, adding that any significant recovery in the region will not occur until the Sydney corridor is opened to the rest of the east coast.
"Despite this, the ANZ business remains resilient, experiencing strong recovery in volumes when border restrictions have been lifted, with travel activity in New Zealand currently over 150 per cent of pre-COVID levels," it says.
CTM continues to grow market share in Asia, but the region remains a minor drain on profitability due to ongoing travel restrictions.
CTM ended FY21 with no debt and cash of $99 million, with the revenue recovery leading it to cut its unused credit facility from $180 million to $110.6 million.
The company has not paid a final dividend, but it expects a return to investors in calendar 2022.
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