Corporate Travel Management Ltd (ASX: CTD) shares have been out of action for over three months.
The corporate travel specialist's shares haven't traded since being suspended on 22 August.
And they will remain that way while auditors and investigators continue to work through significant historical accounting issues.
What has been announced?
This morning, Corporate Travel Management revealed the scale of the review and several immediate repercussions for the business.
According to the release, KPMG's forensic team in the UK has spent months analysing approximately 47,000 documents and more than 1.5 million individual sales and purchase transaction lines, covering over GBP 400 million in transactions for its UK business.
The draft interim report delivered on 23 November identified two key issues:
- Incorrect revenue recognition relating to several large customer contracts completed between 2021 and 2023. These "Concluded Customer Contracts" account for GBP 45.4 million of revenue that should not have been recognised.
- Additional irregularities relating to other revenue earned by Corporate Travel Management (North).
The company now expects restatements across FY 2023 and FY 2024 of up to GBP58.2 million and further FY 2025 adjustments of up to GBP19.4 million. These are due in part to customer refunds and contracts where revenue can no longer be recognised with certainty.
Given the scale of the required corrections, the company has withdrawn its FY 2025 guidance, previously issued in May.
Immediate actions
The company outlined several steps now underway, including communicating with impacted customers, completing the forensic review with KPMG, restating prior years' financial statements, and conducting a full external governance review.
The company's board also confirmed that the CEO of CTM UK and Europe, Michael Healy, has been temporarily stood down with immediate effect. The company's global COO, Eleanor Noonan, is stepping in as interim leader during the investigation.
Corporate Travel Management also disclosed that its FY 2025 accounts will include an additional $13.9 million in provisions related to the ANZ region. Though, these are separate from the UK issues.
Suspension to continue
The company says it remains well-capitalised, with A$148.3 million in cash and no drawn debt as at 31 October. However, it acknowledged that customer refunds could impact near-term liquidity, with timing and amounts still uncertain.
It has also secured an extension from ASIC to lodge its FY 2025 financial statements by 31 December. Though, it concedes that it is unlikely to meet that deadline. This could mean that we don't see Corporate Travel Management shares return to the ASX boards before the end of the year.
Commenting on the news, the company's chair, Ewen Crouch AM, said:
We recognise how serious this situation is and the concerns it has caused. We deeply regret and sincerely apologise for the impact of the trading suspension on our shareholders. We also extend our sincere apologies to the affected clients in the UK. While further investigation is required, including a comprehensive review of our UK operations and our overall governance framework, we remain fully committed to taking the necessary action to restore confidence.
Corporate Travel Management's managing director, Jamie Pherous, added:
We recognise the impact this situation has had on our shareholders and affected UK clients, and we unreservedly apologise. Our priority is to uphold the highest standards across our operations, work closely with our auditors to finalise the FY25 financial statements, and implement all necessary measures to strengthen the company. While this work continues, we remain firmly focused on delivering quality service to our clients across all markets.
