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A weaker-than-expected performance of a bridging accommodation contract with the UK Government for asylum seekers has taken the shine off the full-year profit result for Corporate Travel Management (ASX: CTD) in FY24.
The company has announced a 9 per cent lift in net profit to $84.5 million for the year, backed by an equivalent lift in revenue to $716.9 million, although CEO and founder Jamie Pherous says this missed the company’s growth ambitions.
Underlying net profit was up 22 per cent to $113.3 million as the company’s European and Asian operations rebounded strongly by each reporting double-digit growth in revenue and EBITDA.
While North American revenue was up only 3 per cent to $311.5 million, underlying EBITDA from the region surged 33 per cent to $59.7 million.
Australia and New Zealand also delivered a solid performance with revenue up 6 per cent to $169.3 million, and underlying EBITDA of $44.9 million, also up 6 per cent.
The European division was buoyed by the one-off contract with the UK Home Office to provide accommodation for asylum seekers. But the deal, which was initially expected to deliver $1.5 billion annually in total transaction value (TTV) along with a big lift in revenue and profit, was materially below the company's forecast due to changes in government policy as flagged earlier this year.
One-off humanitarian support projects related to the conflict in Ukraine, Afghanistan and the Middle East also tapered off more quickly than anticipated during the second half of the year, adding to the group’s growth shortfall.
However, Corporate Travel Management says it is “proud" to have accommodated displaced people "fleeing conflict in Ukraine and Afghanistan for a number of years”, adding that 90 per cent of these families are now settled in long-term accommodation and no longer require interim accommodation services.
“The group’s financial performance in FY24 did not meet our growth ambitions, but the underlying business performed well and new client wins, improvements in investments in proprietary technology, and strong second half turnarounds in our North America and Australia/New Zealand regions are creating momentum going into FY25,” says CEO and founder Jamie Pherous in the company’s annual report.
“We are pleased to have won approximately $970 million of new customers in FY24 and maintained client retention rate of 97 per cent which will translate into a positive year ahead.
“Our 2024 Global Customer Survey findings show that a large proportion of our clients expect to maintain or increase their corporate travel for the year ahead – 90 per cent for customer meetings, 85 per cent for tradeshows and conferences, and 84 per cent for internal meetings.”
Corporate Travel Management warns that its performance in Europe will show a decline in the current financial year, but this is largely due to the completion of non-recurring projects such as the UK Home Office contract which elevated the latest result. The group is targeting a fall of about 18 per cent in European revenue in FY25.
Revenue growth for the rest of the company's markets, namely North America, ANZ and Asia, is expected to be around 10 per cent, while EBITDA margins are forecast to spike from 23 per cent to about 27.5 per cent as the company capitalises on strong momentum achieved in the second half of FY24.
Group EBITDA for the first half of FY25 is expected to be lower than the previous corresponding period because of the pullback in non-recurring project work in Europe, with the second half tipped to account for 65 per cent of group EBITDA for the year.
Corporate Travel Management is paying a final dividend of 12c per share, taking its full-year payout to 29c.
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