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Corporate Travel Management downgrades guidance due to coronavirus outbreak

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.

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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 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.