JAMIE PHEROUS SAYS CORPORATE TRAVEL MANAGEMENT WELL PLACED TO LEVERAGE GLOBAL ECONOMIC RECOVERY

JAMIE PHEROUS SAYS CORPORATE TRAVEL MANAGEMENT WELL PLACED TO LEVERAGE GLOBAL ECONOMIC RECOVERY

Yesterday, Corporate Travel Management (ASX:CTD) announced the acquisition of two businesses: Redfern in the United Kingdom; and Andrew Jones Travel in Tasmania.

The purchases, to be funded by a $71 million capital raise, are the company's first in FY17 and follow the successful acquisitions of US businesses Montrose Travel and Travison Travel the previous financial year.

Corporate Travel Management founder and managing director Jamie Pherous spoke with Business News Australia this morning about the latest deals.

How did the Redfern acquistion come about?

We noticed how well Redfern was doing in its market in both the high value online and low value, low touch travel markets and we found that we couldn't compete on price, so that is how it started.

It is a good business and the how and why of that is that they have great internal technology and great internal procedures. What they don't have is a good sales team and they don't have good front end technology or a strong network to sell in.

We do have a strong EU sales team and front end technology, and the network to sell into, so this is an acquisition where one and one equals three.

How do you approach an acquisition such as this? Do you develop a relationship with the team before making an offer?

The people in the business are often underestimated. When a business is successful, half the time it is due to the people in the business. When we approach an acquisition, we do due diligence on the middle management and when we find good people we often find that they achieve even more in the CTD system than they had dreamed of previously.

In the case of Redfern, we have acquired a great management team who have taken stock in the company, and they have jumped through our M&A hoops that all businesses have to go through when we look at them.

We have acquired a renowned leader in the marketplace with high staff and client retention and who have taken CTD stock, so there is alignment there.

You mentioned the Redfern technology was one of its strong points, how do you integrate that with your own technology?

Yes, that is what we love about them. They have very good internal processes. They book regional hotels and trains exceptionally well. Our user interface is very good and we can push one over the top of the other. They have the same core reservation system, so that will accelerate the integration.

Andrew Jones Travel in Tasmania is not as big as Redfern, but you saw some value there?

There are three key things here: Firstly, Andrew Jones Travel works with three national sporting bodies and we have had a hard time breaking into sport. Secondly, they also have a strong government niche. Thirdly, there is an opportunity with the aquaculture, food and wine exports out of Tasmania into China. We also use the same back, front and mid-end systems, so there are synergies there.

Do you see developments such as Brexit in the UK and Donald Trump's election win in the United States affecting international corporate travel?

Personally, I can't remember in my lifetime a leader having a material change on a democracy, can you? I believe a lot of it is hyperbole. In the US, we have seen the Dow Jones rise alongside improved consumer sentiment, which is a good thing. We were seeing green shoots in the US economy before Trump, and also in Europe. We're not seeing those green shoots in Australia, and yesterday we saw consumer sentiment fall. However, CTD is doing well in Australia - we are winning market share and we had a great first half (of FY17).

Is there anything else you would like to add?

We upgraded our guidance and that shows how well the underlying business is doing. We have had record client wins in Australia, New Zealand, Asia, Europe and the United States. Our business model has us highly leveraged to take advantage of a global economic recovery.

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