Corporate Travel Management share price on watch

The Corporate Travel Management Ltd (ASX: CTD) share price is on watch this morning after the company revealed an $8.2 million loss.

The travel agent saw revenues collapse as global travel markets shut down earlier this year thanks to the coronavirus pandemic. Nonetheless, Corporate Travel says it is positioned for recovery and can be profitable on a domestic-only model. 

What does the company do? 

Corporate Travel is a travel solutions provider with a focus on the corporate market. It recorded EBITDA of $150.1 million in FY19 which generated a statutory profit of $86.2 million. But the sudden shutdown in travel markets this year saw volumes dry up in March.

Corporate Travel responded rapidly with redundancies and other cost reductions to stem losses. One of the few not to raise capital during the COVID-19 downturn, the travel company did, however, delay its interim dividend in March. 

How did Corporate Travel perform in FY20? 

Corporate Travel  reported underlying EBITDA of $65 million for FY20. This gave underlying net profit after taxes of $32 million but a statutory loss of $8.2 million.

The less-than-stellar results are expected given the turmoil in global travel markets. Border closures have dramatically reduced travel spend during the second half, with client activity reaching its lowest point in April 2020.

Positively, Corporate Travel reported a better than expected Q4 performance. Revenue averaged $11.5 million a month compared to $2–$5 million a month in May. This was due to its high level of exposure to clients in essential services industries who have been permitted to travel despite restrictions.

The company has established a solid platform for growth with client retention above 97% and new business wins in all regions. 

With a strong liquidity position and no debt, Corporate Travel is positioning itself for recovery. It has $60 million cash net of client cash and creditors and no further significant one-off costs expected in FY21. The deferred interim dividend has been cancelled in order to preserve funds. 

What’s next for Corporate Travel? 

Corporate Travel is seeing a significant contribution from essential services travel, which provides recurring revenues.

With a focus predominantly on domestic travel, managing director Jamie Pherous says the business model “positions the business for a rapid return to profitability with only a marginal increase in domestic travel activity from current levels”.

Given ongoing uncertainty around travel restrictions, the company has declined to provide FY21 guidance, but says an extended period with no international travel is likely to create opportunities for industry consolidation.

Corporate Travel will consider potential acquisitions that align with its strategy and says it is well-positioned to pursue these opportunities. The Corporate Travel share price was trading at $12.14 at yesterday’s close.

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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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