With most countries finally open to tourism again (even the most restrictive ones like Japan), your next office trip might be happening sooner than you thought. Imagine how many Australian companies are planning to have their long-awaited team bonding vacation or business trips now. Probably they all will need a corporate travel coordinator, which makes companies like Corporate Travel Management (ASX: CTD) sitting pretty, reaping about $25.7 million profit within the first half of FY23.
Focusing on growth recovery and return to business as usual ahead of its peers, the Company reported underlying EBITDA of $51.3m and PBT of $120-140m. Aside from both being improvements from $18.2m EBITDA and loss before tax of $0.6m on the previous corresponding period (pcp), these are also record results surpassing FY19 (pre-pandemic). Reported NPAT is $15.7m, which is a $25.7m turnover after incurring $10m loss on pcp.
Total transaction value (TTV) is up by 102% from $2m pcp to $4.2m. The Company currently holds $110.3m cash at bank with zero debt.
Managing Director, Jamie Pherous, said, “It was pleasing to deliver a record TTV and revenue result in 1H23, noting this half included an additional $8.4m charge for excess staff capacity held to be ready for a further expected 2H23 recovery. This is a one-off investment; thankfully, we are seeing strong momentum into 2H23 through significant new clients transacting and activity recovery. We expect to utilise this staff investment to service our customer growth imminently”
“CTM has largely rebuilt our workforce with excess capacity for future servicing, adding 204 FTE [full-time employees] during the half, employing a total of 3,062 FTE at 31 December 2022. All recognition and development programs are well underway ensuring a highly motivated team delivering for CTM customers.”
CTM continues to lead client wins in North America after the business fully integrated into the region. However, there was a well-publicised stalling of corporate travel recovery in the North America region in H1 FY23, primarily driven by poor airport experience and schedule reliability. Though so, the corporate travel recovery has shown positive signs of revival, with January booking volumes now at the highest levels since COVID. North American TTV is up by 51% from $950m pcp to $1.4 billion, while underlying EBITDA was up by 177% from $6m pcp to $16.6m.
January was a record month for CTM’s operations across Europe, despite January being a seasonally weak month. CTM managed to deliver $924m TTV, $45.2m revenue, and $17m EBITDA at record levels above H1 FY19 due to COVID-specific projects completed in FY22. The region is on track to achieve targeted TTV of $2b for FY23, almost double pre-COVID level and will be the largest contributor to CTM profits in H2 FY23 due to new logistics-related revenue streams, which opens a new addressable market for the region.
Similarly, CTM’s operations in Australia and New Zealand (ANZ) also delivered a regional record for TTV and revenue supported by an increase in demand for post-summer vacation activities. CTM ANZ delivered a 457% TTV increase to $1.3b from $238m pcp, and a 2511% underlying EBITDA increase to $23.5m from $0.9m pcp. The results are obtained after including the newly-acquired Helloworld (ASX: HLO) corporate into the baseline, and includes a $2m investment in graduate programs that has delivered new talent to the industry to support the significant customer recovery that occurred late in the half. CTM expects the recent China opening to create a significant recovery in airline supply, resulting in much-needed competition in international airfare prices and increased choice for the ANZ market.
Lastly, CTM’s operation in Asia experienced a stepped recovery in activity after Hong Kong opened late in Q1 FY23 and China on 8 January. Almost half the profit was generated within the couple months before the half ended. The region continues to win significant market share, and competitor closures have continued. New clients are acquired at record rates with demand continuing to outpace supply, as shown in TTV increase of 477% to $513m from $89m pcp, and EBITDA recovery to $3.4m compared to a ($2.6m) loss on pcp. CTM established an office in Japan on 1 July 2022 to address demand from regional and global clients, with Japan being one of the most in-demand destinations in Asia.
Corporate travel is a huge and fragmented sector with an estimated value of US$1.5 trillion in FY25. CTM is the fourth largest corporate travel brand in the world yet manages under 1% of the global market. With more than 97% client retention rate, the Company aims to consolidate the industry, setting higher growth expectations for FY24 due to COVID recovery phase.
CTM has declared an unfranked dividend of 6.0c per share, up on their unfranked 5.0c per share as final dividend in FY22.
Clara is a Business Reporter for The Sentiment.
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