The travel industry continues to face unprecedented resourcing shortfalls, corresponding challenges to service levels and airport and airline capacity.
International supply remained subdued during the year, which has affected the revenue yield in ANZ, but revenue is climbing as international travel increases, with revenue recovery at 74% by June 2022. The Group is recovering faster than the broader corporate travel market through increased market share and 97% client retention, with revenue recovering to 69.5% of average FY19 Pro-forma revenue¹ in the fourth quarter, compared to IATA’s reported average of 60% across CTM’s regions.
Regional operational outcomes
The pace of recovery in travel activity across CTM’s regions increased significantly, except for Asia, particularly in the fourth quarter as COVID-19 became endemic and travel restrictions were lifted.
Trading Update and Outlook
In June 2022 equated to 74% of the monthly average Pro-forma revenue for FY19¹.
Highlights of CTM’s internal VIBE employee survey in June 2022:
• All regions recorded staff engagement scores above 85%, CTM’s pre-Covid benchmark
• 99% score for staff prepared to ‘go the extra mile for clients and a 98% score for both empowerment and CTM being an inclusive workplace with equal opportunity for all in terms of progress and development.
China’s approach to COVID-19 containment has continued to impact travel in the region severely. However, the post-year-end reduction in quarantine restrictions in Hong Kong is creating a significant step up in demand. In 4Q22, CTM earned revenue and other income of $140.8 million, underlying EBITDA of $35.7 million, underlying PBT of $25.5 million and underlying NPAT of $20.5m. The board has determined a 5.0c dividend (unfranked), payable 5 October 2022.
However, CTM is confident of improving corporate travel demand in FY23 and expects both capacity constraints and China’s opening to be progressively resolved during FY23. Based on Pro- forma numbers, known synergies and productivity improvements, this represents revenue of $810m and underlying EBITDA of $265m.
Travel demand remains strong, with TTV post-year-end at Pro-forma FY19³ levels. The Group added 950 new employees during the financial year as part of its commitment to maintaining service levels to support customers’ travel needs in this complex and fast-changing environment.
Corporate travel demand remained strong in North America, with the region again leading the Group in new client wins. The path to full recovery from an annualised 4Q22 underlying EBITDA of $143m to FY24’s $265m is not expected to be linear through FY23 due to capacity constraints and Greater China’s current travel restrictions. The acquisition of the Helloworld Travel Limited’s corporate and entertainment businesses in Australia and New Zealand was completed on 31 March 2022, and integration is well underway.
CTM assumes a full recovery in FY24, referencing IATA’s projections for travel activity. The Group’s global customer survey, conducted in May 2022, found that 80% of respondents expect to travel as much or more in the coming 12 months as they did pre-pandemic. In Asia, reducing Hong Kong’s quarantine period from seven to three days from 12 August 2022 has created an immediate step-up in travel activity. The momentum continued with revenue recovering to 74% of the Pro-forma FY19 average in June 2022. In Europe, a combination of new client wins and a broad recovery in travel have enabled a strong financial result.
CTM established an office in Japan on 1 July 2022 to address demand from regional and global clients. Following the removal of most border and travel restrictions globally, the fourth quarter momentum makes us optimistic for the future. We are pleased that the business has successfully translated that momentum into earnings.
Increasing scale and technology investments are driving productivity gains with improvements in revenue per FTE, which was 14% higher in 4Q22 than the FY19 average. Given the global shortage of travel-industry people, CTM has engaged in several initiatives to manage the shortfall, including innovative employee recruitment, training, onboarding and retention initiatives to attract and retain the best talent in the industry. On 30 June 2022, the Group had no debt and $127 million in corporate cash with strong operating cashflows enabling continued investment in proprietary technology. The integration of Travel and Transport into CTM North America is largely complete, enabling increased productivity and synergies to build as activity continues to recover in FY23.
After COVID-19 materially impacted the first three quarters, travel activity in ANZ recovered rapidly during the fourth quarter. Whilst the North American and European summer vacation period is typically quieter for corporate travel, forward bookings for September are strong. Despite capacity constraints, forward bookings post-summer vacation in September are strong, and the region continues to win significant business into FY23. ANZ has shown continued resilience with no travel activity slowdown, with TTV at pre-COVID levels.
Managing Director, Jamie Pherous, said, “Our customers are embracing the opportunity to return to face-to-face connectivity in a post-COVID world. The Group continues to deliver enhanced internal efficiencies by implementing advanced automation and new technologies across its operations, giving employees more time to deliver personalised customer service. Singapore has experienced rapid growth in activity following the lifting of travel restrictions in the second half of 22.
In the fourth quarter of 22, revenue recovered to 86% of Pro-forma FY19² levels. The Group expanded its Singapore operations with the acquisition of Safe2Travel on 29 April 2022 to service a growing client base.
“CTM is a different business than it was before the COVID-19 pandemic. Q4 of 22 TTV was above Pro-forma FY19³ monthly average levels.
Addressing this challenge within our operations
CTM today reported an underlying EBITDA for FY22 of $59.8 million, increasing from a loss of $7.2 million in FY21. Our results in FY22, particularly in the fourth quarter, put us on a path to full recovery in the near-term.” At the same time, CTM has remained profitable at an EBITDA level since early 2021, the fourth quarter’s key driver of the FY22 result. Demand is expected to strengthen after summer vacation as key clients return to offices.
CTM will hold its 2022 Annual General Meeting in person on Thursday, 27 October 2022, commencing at 11:00 am (Brisbane time) at the Hilton Hotel in Brisbane.
Written by: Jill Walsh
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