The Corporate Travel Management Ltd (ASX: CTD) share price soared nearly 5% today after the ASX travel company announced its half-year FY21 results. Here are the key points.
Corporate Travel suffers COVID crunch
Total transaction value (TTV), which represents the dollar amount of transactions processed by the company, came in at $403.8 million for the half, down 88% on the prior corresponding period (pcp) of HY20.
This led to revenue of $74.2 million, down 67% on the pcp but ahead of the guidance management provided to the market in September 2020. December, which is typically the lowest activity month in H1, delivered the best revenue result of the half at $17.3 million. This includes two months’ contribution from the $290 million Travel and Transport acquisition, which was completed on 30 October 2020.
The T&T acquisition positions Corporate Travel as the 5th largest corporate travel management company in the world by TTV.
Underlying EBITDA also landed ahead of guidance, with Corporate Travel reporting an EBITDA loss of $15.7 million during the half. On the bottom line, the company delivered a statutory net loss after tax of $36.4 million, a stark contrast to the $32.9 million profit seen in HY20.
Turning to the balance sheet, Corporate Travel finished the half with cash reserves of $119 million and no drawn debt. This was boosted by the company’s $380 million capital raising in October 2020 to fund the T&T acquisition and bolster balance sheet flexibility.
Unfortunately for income-starved investors, Corporate Travel did not declare an interim dividend.
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Regional performance
Taking a look at the segment results, North America was the company’s largest region in terms of revenue and new client wins. It experienced an 86% reduction in TTV to $77.8 million and a 72% fall in revenue to $13.3 million.
Despite suffering a 77% fall in TTV and 72% drop in revenue, the ANZ region remained profitable, delivering underlying EBITDA of $3 million in the half. Around 60% of this was achieved in December alone when borders opened, demonstrating that the company can operate a profitable domestic-only business.
The Europe region reached break-even in January and is expected to become profitable from February. And as for Asia, Corporate Travel said it increased its market share in the region during the half and has been able to acquire client books with no capital outlay, as competitors exited the travel industry.
Leadership shake-up
Commenting on the results, managing director Jamie Pherous said:
“We are in a good position to capitalise on a recovery in corporate travel activity because we have a strong balance sheet with excess cash for further opportunities. We are now very close to a break-even position with new client revenue momentum and remain most leveraged to the largest travel markets that are also the most advanced in rolling out vaccinations.”
The company also announced a shake-up in its leadership ranks, with Neale O’Connell retiring and stepping down from his role as CFO. In line with the succession plan, Neale will be replaced by the current deputy global CFO, Cale Bennett, who joined the company in August 2019.
Now what?
Given the continuing uncertainty around government-imposed travel restrictions, Corporate Travel refrained from providing earnings guidance.
However, the company said it expects the ANZ and Europe regions to be profitable in the second half. The driving forces behind the company’s overall return to profitability, as highlighted by management, include:
- ANZ domestic borders remaining open;
- Travel restrictions being relaxed as high-risk segments of the population are fully vaccinated, particularly in the USA and UK; and
- A lower permanent cost base on return to a full run-rate basis.
Commenting on the outlook, Mr Pherous spoke to the global vaccination roll-out, with the UK and US surpassing 15 million and 329 million vaccinations, respectively.
“Given 70% of our pre-COVID revenue is derived from the UK and USA, we are well positioned for the incremental revenue gains from travel relaxations in these markets,” Mr Pherous concluded.
Remarkably, the Corporate Travel share price has fully recovered to pre-COVID levels, with shares closing today at $18.90. Given the continued short-term headwinds, I’d prefer to steer clear of the ASX travel sector for now until the path forward becomes more clear.
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