Travel services business Corporate Management Ltd (ASX: CTD) handed in a statutory net profit of $30.6 million on revenues of $172.8 million for the six-month period ending December 31, 2017. The underlying net profit (excluding acquisition amortisation) clocked in at $36.4 million which was up 33% on the prior corresponding period (pcp).
The company will pay a fully franked interim dividend of 15 cents per share on underlying earnings of 34.4 cents per share.
Underlying operating income (EBITDA) came in at $53.5 million with the group reaffirming guidance for full year EBITDA to come in at the top end of an estimated range between $122 million to $125 million.
As such it will need to produce a stronger second half to the year that implies second half EBITDA "organic growth on the pcp of nearly 23%" which would be a strong result all round if achieved.
Notably, the group now has substantial operations in North America and the UK which means the relative strength of the Australian dollar over the second half could have a meaningful impact in the final result reported in Australian dollars.
The founder-led travel agency had $77.1 million of debt as at December 31 2017 which was attributed to acquisition payments over the half year and the company flagged that this is expected to be the "peak" debt level going forward.
The group posted a positive operating cash flow of $25.7 million over the half year, down from $42.4 million in the pcp in a result that largely looks to be related to the timing of airline and rail payables. Over the period there was a $6.8 million net decrease in cash held with greater borrowings offsetting larger investing cash flows.
Operating
On an operating basis the highlight of the result was the strong performance of its Australian and UK-based travel operations. In ANZ underlying EBITDA grew 20% as the group continues to win market share, while Europe was the standout with EBITDA up 239% on the back of stronger margins and the signifiant contribution from the Redfern Travel acquisition.
Asia and the US produced flattish results in part due to currency headwinds although the group is forecasting a much stronger second half for both regions and flagged a substantial bottom-line benefit going forward for US operations thanks to corporate tax reforms in the US.
Foolish takeaway
This looks another strong result of organic growth from a business that has seen short interest in it fall off recently which comes as no surprise given the stock has risen 455% over the past 5 years to leave almost every short seller red faced and facing a potential single-travel trip to CentreLink.
Corporate Travel also continues to demolish the total returns of more widely talked about growth stocks such as Domino's Pizza Enterprises Ltd (ASX: DMP).
The group does trade on a premium valuation though and any slip ups in its growth trajectory could heap pressure on its share price, alongside a retraction in global growth for example that is likely to slice demand for corporate travel services across the board. On the flip-side if the much talked about "global synchronised growth" does come about in 2018 then Corporate Travel is likely to see an upturn in demand for its services. While competitors like Flight Centre Travel Group Ltd (ASX: FLT) are also fighting for market share globally.
The debt load is something to watch as much of the group's growth has come via successful acquisitions by capital-markets guru Jamie Pherous and his team, which means they remain on the agenda and likely funded by cash flows, debt and capital raisings depending on their size.
Mr Pherous retains around a 20% ownership interest in the business and it's the alignment of staff's interests with the company's sales-driven interests across its 2,500+ employees which is really powering the growth. I'd rate the stock a buy at today's prices around $21.37.
