Corporate Travel Management flags Europe revenue growth at risk

The news: Travel agency Corporate Travel Management says its Europe revenue growth guidance could potentially be at risk because of reduction in government travel budgets in the UK.

The numbers: Europe represents 20% of Corporate Travel’s group revenues, with half of this coming from government work. The company had previously forecast an 18% revenue decline in the region in FY25, while revenue is expected to go up 10% in North America, Asia, and Australia and New Zealand.

Shares in the company are up 1.2% to $11.98 in early trading on the ASX.

The context: Managing director Jamie Pherous said there is a risk of reduction in UK government travel spend following the budget, that could adversely impact the regional and full-year results. The company’s UK government contract has been extended for an additional three years from January 2025.

However, the company continues to see strong revenue and profit growth in the North America and ANZ markets, and said it has not seen any significant impact due to price deflation in ticket prices that has been reported by some of its peers.

More news: Corporate Travel Management shares jumped 10.7% to $13.10 in early trading despite the company flagging that its Europe revenue growth guidance was a risk.

RBC Capital Markets analysts described the update as ‘negative’ and had a price target of $13.50 on the stock.

The analysts estimated that a 25% to 30% reduction in European revenues represented around a 2% to 3% ($12 million to $20 million) downgrade to FY25 group revenue guidance and around a 3% to 5% ($6 million to $10 million) downgrade to FY25 group EBITDA guidance.

They also noted that while Europe was about 20% of group revenues, owing to its high margins it accounts for about 30% of group EBITDA.

Corporate Travel did note that for FY25 they expected revenue from the rest of the world, excluding the UK, to grow about 10% and EBITDA margins to expand from 23% to 27.5%.

“This implies significant profit growth versus the prior year, and I am pleased to say we are on track. This is a testament to the strategy being delivered and more pleasingly is being led by our largest markets, North America and ANZ,” Corporate Travel managing director Jamie Pherous said.