ASX 200 ends the day flat, BOQ (ASX:BOQ) shares drop on impairments

The S&P/ASX 200 Index (ASX:XJO) was flat today. The biggest decline was the Bank of Queensland Limited (ASX:BOQ) share price falling 7%.

The S&P/ASX 200 Index (ASX: XJO) was flat today, it finished at 5,952 points.

Here are the main highlights from the ASX 200:

a woman

Bank of Queensland Limited (ASX: BOQ)

The challenger bank announced FY20 impairments to the market today, sending the BOQ share price down by 7%.

BOQ revealed that it has completed its FY20 collective provision modelling. The bank announced that the FY20 loan impairment expense will be $175 million (pre-tax), which includes a COVID-19 provision expense of $133 million (pre-tax). These provisions are based on the latest data that BOQ has access to.

The $175 million impairment expense amounts to approximately 37 basis points of gross loans. The $133 million COVID-19 provision consists of $10 million in the first half of FY20 and $123 million in the second half. This is expected to reduce the CET1 ratio by 39 basis points. However, the CET1 ratio will still be above its target range of 9% to 9.5% because of strong organic capital generation in the second half of FY20.

BOQ is now expecting higher unemployment, downgrades to property prices and an increased duration of the economic downturn.

The ASX 200 bank said that it's committed to support customers during this difficult period through a range of relief measures and by ensuring a flow of new credit into the economy to help small and medium businesses get back on their feet. BOQ continues to see reductions in customers accessing financial assistance through the banking relief package.

At 31 August 2020, BOQ had 12% of housing customers on the banking relief package and 16% of SME customers (based on gross loans and advances). Of those customers accessing relief packages, a quarter are still making full or partial repayments.

The company has also been reviewing its remuneration and superannuation. It has found errors amounting to $11 million. It's completing a broader external wage analysis and review for enterprise agreement employees.

Corporate Travel Management Ltd (ASX: CTD)

Corporate Travel announced today it's buying Travel & Transport. This is a North American corporate travel business which had US$2.8 billion of total transaction value (TTV) in the 2019 calendar year.

The enterprise value of this acquisition is US$200.4 million on a cash-free, debt-free basis.

The leadership of the ASX 200 share believe there are compelling strategic reasons for the acquisition, with scope for good combination benefits.

The enterprise value implies a multiple of seven times the 2019 calendar year pro-forma earnings before interest, tax, depreciation and amortisation (EBITDA), which was before the impacts of COVID-19. The implied multiple reduces to 4.3 times including the estimated full run-rate synergies of US$18 million.

It's expected to be approximately 10% earnings per share (EPS) accretive on a pro-forma 2019 calendar year basis excluding synergies, and 30% EPS accretive including synergies.

To fund it, Corporate Travel is carrying out a fully underwritten entitlement offer to raise $375 million. Additional capital is being raised to fund acquisition costs, integration costs, provide additional liquidity to fund potential Travel & Transport losses for a prolonged period, balance sheet flexibility and capacity for other acquisitions.

The capital raising is being done by the ASX 200 share at $13.85 per share, a 14.3% discount to the last traded price last week.

After the raising, Corporate Travel will have net cash of $126.8 million. The acquisition is expected to complete in late October 2020.

In terms of current trading, both CTM and Travel & Transport are being impacted – they are currently operating at 25% and 13% of last year's transaction volumes respectively.

Over July 2020 and August 2020, the pro-forma group generated average revenue of $14 million per month and an average underlying EBITDA loss of $5.7 million per month and average pro-forma group cash burn of $7.5 million per month.    

Other movers

The Whitehaven Coal Ltd (ASX: WHC) share price was one of the best performers in the ASX 200, it rose by around 4% today.

At the red end of the ASX, the Mesoblast Limited (ASX: MSB) share price dropped almost 5% and the A2 Milk Company Ltd (ASX: A2M) share price fell around 4%.

Motley Fool contributor Tristan Harrison 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 owns shares of A2 Milk. 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.

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