Here’s why the Corporate Travel Management Ltd (ASX:CTD) share price is soaring on Wednesday despite the market weakness…
The post Why the Corporate Travel Management (ASX:CTD) share price is soaring today appeared first on The Motley Fool Australia. –
The market may be sinking lower today but that hasn’t stopped the Corporate Travel Management Ltd (ASX: CTD) share price from charging higher.
In morning trade, the corporate travel specialist’s shares are up 5% to $20.02.
Why is the Corporate Travel Management share price soaring?
Investors have been buying Corporate Travel Management shares this morning following the release of a positive trading update.
According to the release, during the month of March, the company broke-even following an uptick in travel demand.
Pleasingly, things are expected to improve further, with management forecasting a return to profit in the fourth quarter of FY 2021. This is being underpinned by the UK/EU and ANZ regions of the business.
The release explains that strong domestic demand in the ANZ region means that client activity is nearing pre-pandemic levels.
For example, last week total client activity climbed to 85% of FY 2019 booking levels in the local market. New Zealand was particularly positive, with trading above 160% of FY 2019 booking levels during the period.
Europe and US
Positively, despite lockdowns in the UK and Europe, significant essential travel client wins in this region have continued to contribute profitability to the company.
Whereas over in the US, the company is experiencing positive signs of activity recovery.
Furthermore, it notes that these regions have the most advanced vaccination rollouts and are on track for all people over 18 years of age to be vaccinated by June/July.
This supports expectations of rapid return to corporate domestic travel and meaningful levels of pan-European and trans-Atlantic travel after the northern hemisphere summer vacation.
Given that ~70% of pro forma FY 2019 revenue was generated from the US and the UK, this is very encouraging for the company.
Balance sheet remains strong
Another positive supporting the Corporate Travel Management share price is its balance sheet update.
At the end of March, the company had net cash of approximately $105 million with no debt and an undrawn line of credit of 100 million pounds.
Management believes this leaves the company well positioned for any industry consolidation that may occur.
The company’s Managing Director, Jamie Pherous, commented: “It is very clear from both customer feedback and client activity that businesses are keen to get back on the road. Corporate travel and company success are highly correlated – the ability to connect face-to-face supports businesses to grow at speed, improve supply chain and productivity gains, and for companies and their employees to align on strategy in ways that virtual environments simply cannot match.”
“Now that both the US and UK markets are well advanced in their vaccination programs, with adults ‘at risk’ and over 50s largely vaccinated, travel restrictions are on the verge of being relaxed. This will allow businesses in these regions to gain a competitive advantage on the rest of the world in economic trade and recovery, and we expect that recovery to accelerate further by June/July based on the majority of all adults being vaccinated,” he added.
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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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.