Corporate Travel Management downgrades guidance due to coronavirus outbreak

The Corporate Travel Management Ltd (ASX:CTD) share price will be on watch today after it downgraded its FY 2020 guidance due to the coronavirus outbreak…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Corporate Travel Management Ltd (ASX: CTD) share price could be on the move on Wednesday.

This morning the corporate travel specialist released its half year results.

How did Corporate Travel Management perform in the first half?

During the first half of FY 2020, the company reported a 12% increase in total transaction value to $3.31 billion and a 6% increase in revenue to $222.2 million.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in flat with the corresponding period at $64.5 million. This was due to the underperformance of its North America segment, which offset solid underlying earnings growth in all other regions despite significant global headwinds.

Underlying net profit after tax (NPAT) declined 8% over the prior corresponding period to $39 million. This was due to weakness in North America, software amortisation, and a higher effective tax rate due to its geographical mix of profits. Statutory NPAT declined 14% to $35.1 million due to non-recurring costs.

The company's reported operating cash flow conversion rate was a lowly 27%. It notes that this reflects the timing of fixed supplier payment cycles. Things are expected to be better in the second half due to favourable timing differences. It expects its cash flow conversion to continue to be in line with the company long term average of near 100%.

The Corporate Travel Management board has declared a 50% franked 18 cents per share interim dividend. This means the company has maintained its dividend despite the decline in profits.

The company's managing director, Jamie Pherous, appeared to be pleased with the half given the tough macro-economic conditions.

He said: "We maintained steady operating momentum in 1H20 despite the macro-economic impacts from Brexit, demonstrations in Hong Kong and the US/China trade war. These one-off events have masked an otherwise solid business performance where we have been winning customers, managing costs and growing market share."

Outlook.

As Webjet Limited (ASX: WEB) also reported earlier today, the company advised that it was on track to deliver on its full year guidance until the coronavirus outbreak.

However, the unprecedented disruption from coronavirus-related travel bans will now impact its FY 2020 profit performance.

The company's previous guidance was for underlying EBITDA in the range of $165 million and $175 million in FY 2020.

However, it has assumed an underlying EBITDA impact from the coronavirus outbreak of between $15 million and $40 million for FY 2020. As a result, it has revised down its full year underlying EBITDA guidance to the range of $125 million to $150 million. This represents a flat year on year performance at the higher end of its range, or a decline of 16.5% at the lower end of its range.

The company made the move after assessing its previous experience with pandemics. It notes that the impact will be a function of duration and severity (reluctance/inability to travel). Though, it points out that this assessment is based on what it knows to date.

It will continue to monitor the situation closely.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

3 small-cap ASX healthcare shares 'with strong prospects'

Fund manager IML discusses why these 3 ASX healthcare shares are likely to rise in value.

Read more »

Magnifying glass on a rising interest rate graph.
Share Market News

Will the RBA finally cut interest rates next week?

Let's see what economists are saying about the central bank's meeting.

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors endured a rough Friday to close the trading week today.

Read more »

a man wearing old fashioned aviator cap and goggles emerges from the top of a cannon pointed towards the sky. He is holding a phone and taking a selfie.
Broker Notes

7 ASX All Ords shares elevated to 'strong buy' status in October

The brokers turned bullish on these ASX companies last month.

Read more »

A businessman compares the growth trajectory of property versus shares.
Share Market News

How ASX shares vs. property performed in October

The national home value rose for the 21st consecutive month while the ASX 200 dipped.

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

The worst 3 ASX 200 stocks to buy and hold in October unmasked

You would have done well to avoid these three ASX 200 stocks in October.

Read more »

A female Woolworths customer leans on her shopping trolley as she rests her chin in her hand thinking about what to buy for dinner while also wondering why the Woolworths share price isn't doing as well as Coles recently
52-Week Lows

Why is the Woolworths share price at its lowest point since 2020?

We haven't seen Woolies shares this low since COVID.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AFT, Amcor, Corporate Travel, and Macquarie shares are falling today

These shares are ending the week in the red. But why?

Read more »