Corporate Travel Management

About the author:

Belinda Moore
Author name:
By Belinda Moore
Job title:
Senior Analyst
Date posted:
29 August 2016, 2:34 PM
Sectors Covered:
Agriculture, Food & Beverage, Travel and Chemicals

FY16 - an impressive outcome

Corporate Travel Management (CTD) underlying EBITDA growth of 41% was largely driven by organic growth, an impressive result given the economic uncertainty and tough trading conditions in each of CTD's geographies. FY16 benefited from record client wins in all countries, a full year of the European operations, a full year of the Diplomat Travel acquisition, six months of Montrose Travel, margin expansion and a lower Australian dollar. Market share wins in all regions were due to CTD's superior technology offering, strong customer service and ROI focus. CTD won a regional client every four weeks. The US performance was a highlight of the result with EBITDA growth of 123%. The US EBITDA margin of 27.5% beat management's previous aspirational target of 25.0%. Management said that the US business is now scalable for high growth in the future. This gives us confidence in CTD's ability to scale its European operations in the future. 

Strong cashflow generation was another highlight, up 187% on the previous corresponding period (pcp), with cashflow conversion of 121%.

FY17 - another big year for growth

FY17 EBITDA guidance is a range of A$85-90m, up 23-30% on the pcp. As usual, we expect that guidance has been conservatively set (CTD like to upgrade through the year). Guidance assumes no new acquisitions, flat client activity and an average AUD of 74c. CTD continues to look for further acquisitions in North America and Europe and said that multiples have become more attractive post Brexit. We have increased our FY17 forecast marginally to be at the top end of guidance. We have made larger upgrades to our outer year forecasts (EPS +5.7% in FY18 and 9.1% in FY19) to include Flybuys Travel, the growth of B2B in other regions and the scaling of the offshore business.

Investment view

The FY16 result demonstrates that Corporate Travel Management has a business model which can deliver under all conditions. CTD is a well-managed, quality growth company with a service and technological competitive advantage. Over coming years, there is plenty of market share it can win in big global markets which will continue to drive strong earnings growth.

We retain our Add recommendation with an upgraded share price target.

More information

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Disclaimer(s): Analyst owns shares.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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