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Corporate Travel Management – 1H23 results, full-year underlying EBITDA guidance $160-$180m

On 31 December 2022, the Group had no debt and $110 million in cash with strong operating cash flow generation expected.

CTM reported underlying EBITDA1 for 1H23 of $51.3 million, increasing from $18.2m million in 1H22. This result leveraged the momentum building late in the half. Beyond EBITDA, the company is generating fast-growing underlying PBT1,2 and underlying NPAT3, evidence of ‘business as usual” conditions and cash flow generation.

Highlights

  • 1H23 Underlying EBITDA1 of $51.3m, PBT1,2 $30.4m, underlying NPAT3 $22.1m.
  • Generating fast-growing PBT and NPAT, reinforcing CTM’s recovery and return to ‘business as usual’ ahead of peers.
  • Full-year guidance: underlying EBITDA1 $160-$180m, underlying PBT1,2 $120-$140m. Both would be record results, surpassing FY19.
  • Financial strength: $110.3m cash, zero debt.
  • Strong client wins: >97% client retention.
  • Interim unfranked dividend of 6.0c per share, payable 14 April 2023. Follows unfranked 5.0c per share FY22 final dividend as recovery continues.

The Board has determined a 6.0c interim dividend (unfranked), payable on 14 April 2023.

On 31 December 2022, the Group had no debt and $110 million in cash with strong operating cash flow generation expected.

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. As a result, we are guiding to an FY23 underlying EBITDA1 range of $160-$180m, and an underlying PBT2 range of $120-$140m. Both would be record results for CTM, exceeding FY19 (pre-COVID).”

“The full-year guidance delivers a 2H underlying EBITDA result of $109-$129m which would ensure great momentum for the expected FY24 full recovery. CTM expects a higher revenue/EBITDA margin in 2H23 due to further supply chain stability, positively impacting productivity and revenues. Our people – investment in rebuilding and reconnecting.”

Mr Pherous continued, “CTM has largely rebuilt our workforce with excess capacity for future servicing, adding 204 FTE 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.”

1H23 Regional outcomes

North America
There was a well-publicised stalling of corporate travel recovery in the North America region in 1H23, driven by poor airport experience and schedule reliability. As a result, the region carried excess staff capacity throughout the half for a recovery that did not occur (approximately $6.4m in 1H23).

The corporate travel recovery has reignited with January booking volumes now at the highest levels since COVID, a positive sign. 62% of all new clients are choosing CTM’s Lightning online booking tool over incumbent tools.

As a result of acquisition integration completion and the excess staff carried, the region can manage an additional revenue recovery to 80% with limited additional costs. This will create significant incremental profit for every new dollar of revenue, and we expect the region to surpass 80% revenue recovery during 2H23 due to new client wins transacting.

Europe
In 1H23 the Europe region delivered TTV, revenue and EBITDA at levels above 1H19. The 1H22 result was a record half due to COVID-specific projects completed in FY22. The region is on track for TTV of $2bn for FY23, almost double pre-COVID and will be the largest contributor to Group profits in 2H23 due to new logistics-related revenue streams, opening a new addressable market for the region. CTM expects a very strong 2H growth on 1H, a typical skew enhanced by significant and large new client wins transacting. January’s EBITDA was a record month for the region, despite January being a seasonally weak month.

Australia & New Zealand (ANZ)
In 1H23, ANZ delivered a regional record for TTV and revenue. TTV for the half has recovered beyond 100% when including HLO corporate into the baseline. The result includes a $2m investment in our graduate program that has delivered new talent to the industry to support the significant customer recovery that occurred late in the half. The revenue/TTV margin decline is due to the impact of the HLO acquisition. 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. Momentum from client wins, combined with HLO synergies and productivity gains, are expected to translate into a significantly stronger 2H in the ANZ region.

Asia
The Asia region experienced a stepped recovery in activity after Hong Kong opened late in 1Q23, with almost half the profit generated in the last two months of the half. The region continues to win significant market share, and competitor closures have continued. China’s opening for travel on 8 January is the last piece of the puzzle for a full CTM recovery. Asia continues to win new clients at record rates with demand continuing to outpace supply. As a result, the region is experiencing a stepped recovery into February, only limited by supply constraints in the region. CTM established an office in Japan on 1 July 2022 to address demand from regional and global clients.

FY23 Guidance

For FY23 CTM expects an underlying EBITDA1 range of $160-$180m and an underlying PBT2 of $120-$140m. Both would be a record for CTM, driven by transformational acquisitions, significant client wins, supply chain stability, integration completion, and productivity gains. As a result, we expect significantly higher EBITDA and EBITDA/revenue margins in 2H23, beyond our historic 2H seasonal skew.

The full-year guidance delivers a strong 2H underlying EBITDA of $109-$129m, which would provide strong momentum into FY24. CTM expects a full recovery in FY24, well in advance of IATA’s projections for travel activity, due to continued client wins and retention and significant known large account wins that will start trading with CTM in 2H23.

Trading Update by region

North America
January transactions have recovered to the highest level since COVID and this region is expected to surpass the 80% revenue recovery rate during 2H23, resulting in strong ongoing Group profit contributions.

Europe
Significant client wins are expected to deliver a very strong 2H result, with expectations that Europe is the largest contributor to the Group in 2H23. January was a record profit despite the month being seasonally weak.

ANZ
Post-summer vacation activity is at record levels, the Group is expecting international supply, operational improvements, and synergies to deliver a strong 2H23.

Asia
The region experienced an immediate stepped activity increase upon China opening, with demand presently outstripping available supply.

1 Excluding pre-tax non-recurring costs of $1.1m (1H22: $7.7m)
2 Excluding pre-tax client amortisation, a non-cash item of $7.m (1H22: $4.0m)
3 Excluding post-tax non-recurring costs of $0.8m and client relationship amortisation, a non-cash item of $5.4m

News Editor - TravelDailyNews Media Network | + Posts

Tatiana is the news coordinator for TravelDailyNews Media Network (traveldailynews.gr, traveldailynews.com and traveldailynews.asia). Her role includes monitoring the hundreds of news sources of TravelDailyNews Media Network and skimming the most important according to our strategy.

She holds a Bachelor's degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.

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