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Corporate Travel Management (ASX: CTD) has lifted profits by 20 per cent and the board expects further growth in FY20, yet its share price has been languishing at levels seen after a short selling attack from hedge fund VGI Partners (ASX: VGI) in late 2018.
In Brisbane-based group's FY19 results this morning, EBITDA hit the top end of guidance at $150.1 million and total transaction value (TTV) rose 30 per cent to $6.46 billion.
Despite a range of challenges for the international travel market, the company expects EBITDA to grow further in FY20 to between $165-175 million.
"We recognise the volatility in the global market, and we have stress-tested our forward trading activity accordingly," says managing director and founder Jamie Pherous (pictured).
"The lower end of our guidance assumes there is a continuation of the current trading environment as a result of Brexit, the US-China trade tensions and the demonstrations in Hong Kong through to the end of the calendar year.
"An earlier resolution to any or all of these events will likely result in increased confidence and client activity above our low-end assumptions."
In VGI's short selling report it had criticised CTM for claiming strong organic growth while reporting declining cash flows at the same time. Pherous defended the claims by emphasising timing had an important role to play in cash flows for the industry.
Now CTM appears to be seeing the other side of that coin with the FY19 reported operating cash conversion rate at 113 per cent and the company claiming it "benefited from the timing of payment cycles against the reporting period".
Pherous now highlights CTM has grown in every year since listing in 2010.
"This result demonstrates the strength of our strategic approach and the resilience of the company's operating model," he says.
"We have stayed the course on our long-term vision and maintained focus on sustainably expanding our global operations, driving organic growth and leveraging our technology platforms.
"We are now moving into the third phase of our strategy which is to optimise our position in each market and further strengthen our technology innovation to drive a leadership position in global corporate travel.
CTM has reported organic growth with a 16 per cent increase on the FY18 baseline of $125.4 million, and the company says it will continue to seek M&A opportunities.
The strongest percentage growth in TTV has been seen in Asia at 70 per cent at $2.5 billion, compared to Australia and New Zealand (+16 per cent; $1.3 billion), North America (+12 per cent; $1.5 billion) and Europe (+13 per cent; $1.1 billion).
The biggest source of underlying EBITDA however continued to be Australia and New Zealand with $51.5 million, followed by North America with $43.5 million, Europe with $40.9 million and Asia with $24.7 million.
CTM highlights the benefits of its customised technology hubs across its operating regions, allowing it to significantly grow market share and increase staff productivity.
"Our customers come to us with complex briefs, often involving several jurisdictions, and they like CTM's capacity to quickly customise solutions and deliver value-added services," says Pherous.
CTD shares rebounded after the short sell siege in November 2018, edging closer to their former glory with a positive first half result sparking a rise to $29.27 per share by 21 February 2019.
The elation was short-lived with shares falling to $25.29 by the time then chairman Tony Bellas announced his suddent retirement.
Shares kept falling in the months that followed and were priced at $20.60 each before the market opened this morning.
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