Corporate Travel Management Ltd (ASX: CTD) is one of Australia's largest corporate travel providers.
It has done excellently for shareholders with the share price growing from $4.57 five years ago to today's pre-open of $24.88, which represents a great return of 444%.
Today, the company has announced another acquisition to add to its growing business. It is acquiring SCT Travel Group Pty Ltd, which trades as Platinum Travel Corporation in Queensland and New South Wales. The acquisition will be effective from 1 July 2018.
Corporate Travel Management described the acquisition as a renowned Australian boutique agency that has an excellent reputation for customer service and a similar culture. One of the main reasons management went for this acquisition is that the SCT team are well placed to help Corporate Travel expand its SME corporate and events segment.
The founder of SCT, Greg McCarthy, apparently has an "impeccable" reputation in the travel industry and possesses leadership skills which are valued by Corporate Travel. Greg has over three decades of experience and will be appointed as the Chief Executive Officer of Australia and New Zealand.
The acquisition will cost around $5 million, which represents 5x FY19's earnings before interest and tax (EBIT). This will be paid with a mixture of cash and shares, there is also a potential earn-out based upon long-term growth. Corporate Travel said this will be funded entirely from short-term cashflow, there will be no effect to the FY18 results.
Foolish takeaway
This sounds like another solid fit for Corporate Travel. It has expanded its business very effectively through acquisitions and it seems as though this will integrate very well with the current setup. Although I'm not a buyer of Corporate Travel shares, I can understand why investors would be further encouraged by this news.
