Written on the 24 February 2017

CORPORATE Travel Management (ASX:CTD) battled headwinds including a falling Australian Dollar and an airline price war in Asia to grow earnings and profit in the first half of FY17.

Underlying net profit after tax is up 55 per cent at $27.3 million and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is up 45 per cent at $40.4 million, the Brisbane-based company announced today.

Corporate Travel Management MD and founder, Jamie Pherous, says, "Strong organic growth underpinned our first-half EBITDA performance, resulting in underlying profit growth. Excluding acquisitions, this was up 29 per cent over the same period last year."

The company has upgraded its full year underlying EBITDA guidance by $7 million to be between $92-97 million, accounting for the contribution of two acquisitions made late last year: Andrew Jones Travel, Tasmania, and Redfern Travel, United Kingdom, from February.

If the Australian Dollar does not materially strengthen further against the USD and GBP and there is smooth transition of the new acquisitions, Corporate Travel expects to report at the top end of that guidance.

The market has reacted warmly to the update, and Corporate Travel Management is trading up 4.41 per cent at $18.22 per share at 11:06 AEDT.

Total transaction value (TTV) was $1.87 billion, up 9 per cent, while revenue and other income is up 26 per cent at $150.5 million.

Pherous says TTV can be a misleading indicator, as it was significantly affected by steep ticket price declines, especially in Asia, and negative foreign exchange movements to the Australian Dollar.

"CTM have said all along that transactional volume growth, not ticket prices, is the driver of CTM revenue," says Pherous.

"Lowering ticket prices is an excellent outcome for our clients that we proactively encourage."

The Asia market was where Corporate Travel Management saw largest decline in ticket prices, of 16 per cent.

The company's Asia business contributed $638.6 million to TTV, and revenue declined 14.3 per cent to $29.8 million while underlying EBITDA was 14.3 per cent down on the prior corresponding period.

CTM managed to maintain its EBITDA margin at 31.3 per cent in Asia through enhanced automation.

North America and Europe, however, performed strongly. Despite the US election and currency depreciation, North America is CTM's biggest profit contributor and underlying EBITDA is up 254 per cent.

"CTM's top two performing regions by growth percentage were in the world's largest developed economies of North America and Europe, with the US now the largest single contributor in both revenue and profit," says Pherous.

In North America, TTV increased 88.8 per cent to $619.1 million and revenue rose 129.2 per cent to $60.4 million, which was due to both organic growth and the inclusion of the Travizon Travel from 1 July 2016.

Europe contributed $162.9 million TTV and $16.8 million revenue with an adjusted EBITDA margin of 22.8 per cent.

The company will pay 12 cents per share dividend, up 33 per cent from 9 cents per share.

Business News Australia





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