This morning fast-growing travel bookings and management business Corporate Travel Management Ltd (ASX: CTD) posted a statutory net profit of $54.6 million on revenue of $324.4 million for the year ending June 30, 2017. The profit and revenue were up 29.7% and 24.3% over the prior year.
When excluding amortisation costs related to acquisitions the group's net profit was 42% above the prior year at $67 million, with organic growth contributing around $16 million to the profit growth.
Much of the group's growth over recent years has also come from the successful integration of acquisitions and over FY 17 it deepened its footprint in the large U.S. corporate travel market via the acquisition of Boston-based Travizon Travel.
In Europe the group also continued to build out its operations with the acquisition of UK-based Redfern Travel in a deal valued at around $69 million.
Despite the dilutive effects of the acquisitions underlying earnings per share (excluding acquisition amortisation costs) were up 36% to 68.5 cents.
The main reason behind Corporate Travel's success though is not its acquisition activity, but its sales focus that aligns staff's interests with those of the business and ultimately shareholders.
Staff across the business are commonly remunerated according to performance, with the company's simple sales pitch of helping clients save time and money in their travel arrangements proving effective in making market share gains.
Its mature Australia and New Zealand business posted underlying EBITDA of $36.3 million, up 28% on the prior corresponding period, with the US business delivering 69% EBITDA growth thanks to the effects of organic and acquisitive growth.
Its European operations also benefited from the acquisitive growth, while its Asian operations were the lowlight with EBITDA down 15% to $18.1 million due to inter alia, tough macro conditions, weaker ticket prices, and weaker-than-expected performance in China.
The group maintains a strong balance sheet with $45.4 million in borrowings and net current assets of $11 million.
The company will pay a final dividend of 18 cents per share to take full year dividends to 30 cents per share on the underlying earnings of 68.5 cents per share.
Outlook
Corporate Travel is forecasting underlying EBITDA in the range of $120 million to $125 million in FY 18, which would represent growth of 22% to 27.5% over FY17. However, that forecast is based on an AUD / USD cross at an average of 76 US cents and AUD / GBP cross at an average of 60 pence.
These assumptions may prove marginally optimistic, although it's tough to predict FX rates and the group remains on the hunt for earnings accretive acquisitions in what remains a fragmented global market.
