The Corporate Travel Management Ltd (ASX: CTD) share price has fallen a massive 9.25% today to close at $12.27.
The most recent catalyst for this sell-off of Corporate Travel shares appears to be a report from VGI Partners released over the weekend which raised concerns with the travel company's half-year results. Corporate Travel responded to the report on Monday by refuting the concerns.
However, I think that today's share price fall is more likely linked to a sell-off of Corporate Travel shares due to its position within the travel sector. We've seen ASX travel shares getting punished across the board in recent weeks due to concerns about the coronavirus and how it will impact the travel sector moving forward.
Since the beginning of last week, which was when the ASX and other global markets started to see a major sell-off, the Corporate Travel share price has declined by a massive 23%.
Other travel shares that have been hit hard during the last few weeks include Webjet Limited (ASX: WEB) which saw an 8.8% fall today, Qantas Airways Limited (ASX: QAN) which dropped by 3.1% today, and Flight Centre Travel Group Ltd (ASX: FLT) which ended the day 5.7% lower. All of these companies are in the front line with regard to the potential impact of the coronavirus over the next few weeks and months.
Recap of Corporate Travel's performance in the first half
During the first half of FY20, Corporate Travel reported a 12% increase in total transaction value 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 the company's North America segment. However, there was solid underlying earnings growth in all other regions despite significant global challenges that appear to remain ahead. On the whole, underlying net profit after tax (NPAT) declined 8% to $39 million.
I think that these results were quite solid in challenging market conditions. However, what really seemed to have spooked investors was a downgrade in Corporate Travel's previous guidance due to the estimated impact of the coronavirus. With this, management revised its full-year underlying EBITDA guidance to the range of $125 million to $150 million, down from the previously guided $165 million and $175 million.
As the coronavirus outbreak globally appears to become more severe, it is quite likely that the ASX travel sector will come under more pressure in the weeks ahead.
