Corporate Travel share price slides despite earnings beat

The Corporate Travel Management Ltd (ASX: CTD) share price dropped 2.5% after the ASX travel share reported its FY22 result today.

As one of the world’s largest corporate travel businesses, it is highly aligned to the recovery of business travel.

But, despite positive commentary, investors weren’t impressed by what the business told the market overall.

What did the company report?

It revealed that total transaction value (TTV) increased 215% to $5.07 billion in FY22, with the fourth quarter showing $1.8 billion of TTV.

FY22 revenue rose 94% year over year. It generated $17.5 million of underlying net profit after tax (NPAT), which was a major improvement from the $32.3 million loss in FY21. According to reporting by The Australian, this is better than what the market and the broker RBC was expecting.

The broker thought the commentary about the fourth quarter of FY22 was “strong” and that demand looks “strong” too.

In a sign of future profit generation, it generated $20.5 million of underlying NPAT in the fourth quarter of FY22.

It even declared a dividend of 5 cents per share. The ASX travel share didn’t pay anything in FY21.

Investors like to look ahead

The Corporate Travel share price is usually forward-looking. In other words, the FY22 result is interesting, but what FY23 looks like (and beyond) is usually more important for investors.

In terms of what could have caused the decline of the business today, management noted that the travel industry has resourcing challenges.

It is facing “unprecedented resourcing shortfalls with corresponding challenges to service levels, airport and airline capacity”.

The company added 950 new employees during FY22 as part of its commitment to maintaining service levels to support customer travel needs.

It has engaged in several initiatives to manage this shortfall, including “innovative employee recruitment, training, onboarding and retention initiatives to attract and retain the business talent in the industry.”

The business is also focusing on delivering improved internal efficiency, by implementing advanced automation and new technologies across its operations, giving employees more time to deliver personalised customer service. Growing scale and technology investments are helping with productivity gains and the revenue per full time equivalent employee, which was 14% higher in the fourth quarter of FY22 compared to the FY19 average.

Trading update and demand

Corporate Travel said that revenue in June 2022 equated to 74% of the monthly average pro-forma revenue for FY19. It said that forward bookings for September are “strong”.

In a global customer survey, conducted in May 2022, around 80% of respondents said that they expect to travel “as much or more” in the coming 12 months as they did before the pandemic.

Corporate Travel is assuming a full recovery in FY24, based on projections for travel activity. This would be revenue of $810 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $265 million based on synergies and productivity improvements.

The recovery is not expected to be a straight line due to capacity constraints and Greater China’s current travel restrictions. But things are expected to progressively improve during FY23.

The post Corporate Travel share price slides despite earnings beat appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Corporate Travel Management Limited. 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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