THE FUTURE OF
TODAY
CTM ANNUAL
REPORT
2016
Contents.
Chairman and Managing Director’s Report ................................................................................. 5
Innovation and the Age of the Millennial ..................................................................................... 8
Strength Through Diversity ........................................................................................................................ 11
Award Winning ................................................................................................................................................... 12
Directors ......................................................................................................................................................................14
Senior Leadership Team ............................................................................................................................. 16
Annual Financial Report ............................................................................................................................. 19
3
Chairman
and Managing
Director's Report.
Dear Shareholders,
Introduction
We are pleased to present the 2016 Annual
Financial Report of Corporate Travel Management
Limited (“CTM” or “the Group”). The Group has
had another strong year, its 6th year since the IPO
of the Company in December 2010.
All CTM regions performed strongly, with growth
driven both organically and through acquisitions.
CTM also remains well placed to benefit
from future upturns in the general economic
environment, despite what may appear to be
challenging economic conditions in some of the
regions in which CTM operates.
The acquisition of Montrose Travel, effective on 1
January 2016, was particularly significant in that it
provides CTM with access to additional expertise
in the area of loyalty programs which have
significant potential in other regions. Subsequent
to 30 June 2016, CTM also acquired the Boston
based Travizon Travel (Travizon, Inc., Business
Travel, Inc., and All Performance Associates, Inc.)
to further expand its footprint in North America.
Outstanding performance
In the year to 30 June 2016, CTM’s TTV (total
transaction value) of $3,587m (unaudited) was
35.1% higher than the previous year and travel
income of $260.9m was 32.0% higher than the
previous year.
Financial position
CTM is in a sound financial position, with total
assets of $570.1m at 30 June 2016, an increase
of $129.7m or 29.4% from 30 June 2015. The
growth in assets is largely due to the impact of
the Montrose Travel acquisition completed during
the year.
The continued generation of strong cash flows
contributed to the Group’s sound financial position,
with net cash flows from operating activities of
$70.2m over the year to 30 June 2016.
The acquisition of Montrose Travel was funded by
using cash reserves and borrowings of $38.0m.
Importantly, this acquisition was able to be achieved
without the need to raise additional capital.
Total equity of $271.6m at 30 June 2016 compares
with $235.9m at 30 June 2015, an increase of
$35.7m or 15.1% over the year.
The Group focused on the following key strategic
initiatives during the year;
1. Strong Organic Growth and Acquisitions
• Enhancing our value proposition to meet client
needs across the CTM global network.
• Organic growth in local, regional and global
segments.
2. Client Facing Innovation
CTM’s statutory net profit after tax (“NPAT”) of
$42.1m for the year to 30 June 2016 compares
with $26.4m in the previous year, representing a
59.5% increase.
• Expanding SMART technology globally by
developing new tools for and with our clients.
• Continued to leverage our technology suite in
new market segments, including B2B and B2C.
5
All CTM regions
performed strongly,
with growth driven
both organically
and through
acquisitions.
Tony Bellas, Chairman
Corporate Travel Management Limited
4
3. Productivity and Internal Innovation
• Internal innovation feedback loops to improve
and automate existing client and non-client
facing processes.
• Staff empowerment in decisions to drive
high staff engagement and client satisfaction
outcomes.
4. Leveraging our Scale and Geography
• Capitalising on scale and our global network, to
develop and optimise supplier performance for
our clients.
• Continued to demonstrate that CTM is a
valuable partner in the supply chain.
5. Our People
• Continue to attract, retain and develop the
industry’s brightest talent.
• Empower our team to support our client’s needs.
• Embraced a culture that represents our values
and business drivers.
Employees
A competent and motivated workforce is integral to
CTM’s success.
CTM’s culture is founded upon the principle of
empowering its people, through good processes
and excellent training, to grow, evolve, and deliver
the superior service that CTM’s clients demand.
CTM continues to invest in its people, through its in-
house training programs, selective recruitment and
a commitment to provide the resourcing to support
its people in delivering service excellence to clients.
Over the past year, the total number of employees
increased by 5.0% to over 2,000 (full time
equivalent), reflecting the Montrose Travel
acquisitions and CTM’s positioning to underwrite
growth with the best talent.
The Board and the senior management team
appreciate the contribution that CTM’s staff
have made to the Group’s strong performance.
Their professionalism and commitment have
been fundamental to the development of CTM’s
reputation as a highly valued business partner for
its clients.
Positioning for the Future
As we look forward to 2017, CTM remains
confident that its customer value proposition
remains compelling and that there is enormous
untapped potential in each of the markets in which
we operate.
6
CTM’s continued investment in innovative client
facing technology, particularly the introduction of
CTM SMART Technology, coupled with the entry
into the European market in 2015 and enhanced
market presence in North America through
further acquisition in 2016, has the Company well
positioned for growth.
CTM now has operations in the four identified key
markets and is expanding its global footprint as an
underpinning for sustained growth. Geographic
diversification is important in driving the
sustainable performance and managing risk.
CTM’s focus remains its clients and staff, to
ensure its service offering is both innovative and
cost effective, and enabling staff to offer the
personalised service and expertise demanded
by clients.
CTM will continue to pursue additional EPS
accretive acquisition opportunities in FY17.
Conclusion
We would like to take this opportunity to thank the
Board, management team and staff for their efforts,
and congratulate them on the continued success
of CTM as a leading-edge and profitable corporate
travel solutions company.
We would also like to thank CTM’s shareholders
and, most importantly, CTM’s clients for their
continuing support.
The Board has declared a dividend of 15 cents per
share on 26 August 2016, which will be paid on 6
October 2016 to all shareholders registered on 9
September 2016.
Tony Bellas
Chairman
Corporate Travel Management Limited
26 August 2016
Jamie Pherous
Managing Director
Corporate Travel Management Limited
26 August 2016
CTM remains
confident that its
customer value
proposition remains
compelling and that
there is enormous
untapped potential in
each of the markets
in which we operate.
Jamie Pherous, Managing Director
Corporate Travel Management Limited
7
Innovation and the
Age of the Millennial.
Just one example of our commitment to deliver
our customers intuitive technology solutions
is the launch of an award winning proprietary
online booking tool – Lightning. Lightning puts
users front and centre of the booking experience,
bringing innovation, speed and agility to the
corporate travel technology landscape. Lightning
delivers a deeply immersive and engaging
booking experience in a highly intuitive and user
friendly interface.
Integration remains a core focus for CTM. Our
clients want to access travel details from a range
of devices while on the go. Not only does our
technology save user’s time and provide data
to enable better buying decisions which reduce
travel costs, they are also fully integrated to ensure
clients can use all of our solutions through one
system: the SMART Portal. This includes CTM’s
new booking app, CTM Mobile, an intuitive mobile
application for business travellers.
This year saw CTM spearheading
a transformation in corporate travel,
where consumerisation and the rise
of the millennial traveller is driving a
revolution in the delivery of corporate
travel technology.
Guided by continuous feedback loops from our
clients and staff, CTM recognised an opportunity
to enhance its service offering for a client base
with an increasing proportion of millennials, by
delivering intuitive technology for these tech-
savvy corporate travellers. Through our research,
we found 80 per cent of corporate clients travel
with two or more mobile devices. Our millennial
clients, having grown up with technology playing
an integral part of their lives, demand more from
traditional corporate services.
We believe intuitive technology should be available
to our clients anywhere, at any time, to ensure
they have complete control of their corporate
travel needs. As technology is evolving faster
than ever before, collaborative partnerships grow
increasingly important to our business and, as
such, CTM partners with many providers to ensure
we are constantly evolving and remain leaders in
the field.
8
CTM is proud of its proprietary software and
collaborative partnerships. We remain committed
to delivering state-of-the-art client-focused
solutions that reduce the cost of travel and
simplify processes, delivering a return on
investment for clients.
As leaders in innovation, CTM will continue to meet
the challenges of the corporate travel industry
through the delivery of sophisticated technology
made available exclusively to its clients. The
travel technology landscape will continue to
be determined by those who understand the
importance of agility, usability and speed, and
CTM remains ahead of the game.
Just one example
of our commitment
to deliver our
customers intuitive
technology
solutions is the
launch of an award
winning proprietary
online booking tool
— Lightning.
9
Strength Through
Diversity.
In April, Corporate Travel Management
announced two significant steps to
broaden its product offering, opening
up its award-winning service to new
customers internationally and online.
Just four years after entering the North American
market, CTM this year cemented its position as one
of the 10 largest travel management companies in
the region. The 2015/16 financial year has extended
CTM’s history of growth, not only by breaking into
new regional markets, but new market segments.
This includes CTM’s exciting entry into the Loyalty
travel market through the acquisition of Travizon
Travel (with an established Loyalty offering in North
America), and the delivery of a consumer-focused
online booking platform for Australia’s most popular
shopping rewards program*, flybuys.
The acquisition of Boston-based Travizon Travel in
July (following the acquisition of California-based
Montrose Travel) means CTM operates in more
than 20 cities across the USA, and increases CTM’s
presence on the east coast of the country. Since its
first expansion beyond Australia in 2010, CTM has
grown to now service clients in 53 countries.
The company’s continued growth this financial
year is a reflection of the CTM philosophy. Travizon
Travel, Montrose Travel and flybuys travel build
market share, providing clients with improved
service offerings, a return on their investment, and
specialised local knowledge through local experts.
CTM has never grown just for the sake of growth.
We have grown to meet our clients’ need for high-
quality, local advice in all of the regions our clients
operate. Our increasing scale has delivered benefits
for clients, allowing us to capture greater savings in
negotiating partnerships and deals with suppliers,
and invest in the technology and client-focused
systems that save them money, time and stress.
In early 2016
CTM launched
flybuys travel,
flybuystravel.com.au
built on proprietary
CTM technology.
The launch of flybuys travel, in partnership with
our client Coles, opened up an entirely new B2C
leisure market to CTM; targeting more than two-
thirds of Australian households who actively use a
flybuys card.
The flybuys travel program has attracted support
from customers who are excited to be rewarded
for their travel at industry-leading prices, and we
share this excitement. This partnership allows
the Australian public to easily earn and redeem
their points, and makes travel both simple and
rewarding.
As we continue to expand our reach, we will
ensure we never lose sight of our goals, and
continue to respond and adapt to the needs of
our clients.
* First point consulting research 2013, 2014, 2015.
10
11
Award Winning.
CTM has been
recognised as one of
the most innovative
companies in
Australia and the UK.
CTM has been acknowledged as
a leader in the delivery of travel
solutions across every area of our
service offering; corporate, events,
leisure and technology.
CTM has been recognised as one of the most
innovative companies in Australia and the UK, not
just for our proactive and disruptive development
of technology solutions to the corporate travel
market, but for our relentless pursuit of innovation
and improvement within our business.
Complacency is not in our nature. We recognise
the benefits of agility, in listening to our clients and
employees, and in building our business goals and
development roadmaps around tomorrow’s travel
landscape, always staying one step ahead. We are
committed to continuous improvement through an
ongoing investment in our people, technology and
services. That’s what makes CTM award winning.
Australia
Europe
Asia
CTM has once again been acknowledged by the
Australian Federation of Travel Agents (AFTA) as
best in class, securing the Best National Travel
Management Company award for CTM and Best
Business Events Agency award for Event Travel
Management in the 2016 National Travel Industry
Awards. Additionally, our high performing
personnel were also recognised as leaders in
their field; CTM’s Chief Operating Officer Andre
Moten was named AFTA’s Best Travel Agency
Manager - Corporate Multi-Location, and our
Sydney-based Operations Manager Cherie
Drummond named Best Travel Agency Manager -
Corporate Single-Location.
CTM was also ranked the 28th most innovative
company in Australia in the BRW Most Innovative
Companies List 2015. CTM was the only company
in the Australian travel industry ranked in the
top 50 list.
CTM’s European business continues to go from
strength to strength. CTM Europe took its place in
the top 10 leading travel management companies
in Buying Business Travel’s Top 50 TMCs List and
was recognised in the People’s Awards as winners
of the Best Account Management Team award.
Following its European roll out in early 2016, CTM’s
SMART Technology offering is already sending
shockwaves throughout the European travel
market. Just 12 months after its roll out in Europe,
CTM’s SMART Technology platform secured the
GTMC Innovation Award for its range of ground-
breaking business travel applications.
CTM’s Asian operations continue to be
acknowledged as best in class, securing the 2015
TTG Award for Best Travel Agency – Hong Kong
for the third time.
As CTM has expanded its operations globally,
we have remained true to our promise; to deliver
superior service, innovative technology and
savings to our customers across every area of their
travel needs.
But ultimately the success of our business comes
down to people, and our team have once again
shown they are truly award winning.
North America
Demonstrating CTM’s strength and reputation
across diverse travel markets, CTM’s Allure Travel
leisure travel offering took the top gong as North
America’s Leading Travel Agency in the highly
competitive World Travel Awards in late 2015.
12
13
Directors.
Tony Bellas
Chairman
Jamie Pherous
Stephen Lonie
Managing Director
Independent Non-Executive
Director
Tony Bellas has more than 30
years’ experience in both the
government and private sectors.
Tony Bellas has previously held
positions of Chief Executive
Officer of Ergon Energy Ltd,
CS Energy Ltd, Seymour Group
Pty Ltd, and was previously
Queensland’s Deputy
Under Treasurer.
Jamie Pherous, Managing
Director, founded Corporate
Travel Management in 1994.
He built the company from its
headquarters in Brisbane to
become the largest privately-
owned travel management
company in Australia and, in
late 2010, became successfully
listed on the Australian Securities
Exchange (ASX).
Stephen Lonie is a Chartered
Accountant with more than 40
years’ industry experience, and
is a former Managing Partner
Queensland of the international
accounting and consulting firm,
KPMG. He now practices as
an independent management
consultant and business adviser.
Greg Moynihan
Independent Non-Executive
Director
Greg Moynihan is a former Chief
Executive Officer of Metway
Bank Limited. He has also held
senior executive positions with
Citibank Australia and Suncorp
Metway. He now focuses on
commitments as a Non-Executive
Company Director, as well as
pursuing business interests in
the investment management and
private equity sectors.
Admiral Robert J.
Natter, US Navy (Ret.)
Laura Ruffles
Executive Director
Independent Non-Executive
Director
Robert Natter retired from
active military service a decade
ago and now has more than 10
years’ of experience in both the
government and private sectors
in the North American market.
In his Navy career, Robert Natter
served as the Commander of
the U.S. Seventh Fleet operating
throughout Asia and the Indian
Ocean; Commander in Chief
of the U.S Atlantic Fleet; and
the first Commander of U.S.
Fleet Forces, overseeing all
Continental U.S. Navy bases,
facilities and training operations.
Laura Ruffles is CTM’s Chief
Executive Officer Australia &
New Zealand, Global COO and
in late 2015 was appointed an
Executive Director in recognition
of her leadership contribution
to CTM’s success. Laura has
more than 20 years’ experience
leading local, regional and
global business strategy, and
in 2013 completed a Master of
Business Administration from the
Australian Institute of Business.
14
15
Senior
Leadership Team.
Jamie Pherous
Steve Fleming
Laura Ruffles
Managing Director
Global Chief Financial Officer
Executive Director, Global COO
& CEO Australia / New Zealand
Debbie Carling
CEO Europe
Larry Lo
CEO Asia
Chris Thelen
CEO North America
Jamie Pherous, Managing
Director, founded Corporate
Travel Management in 1994.
He built the company from its
headquarters in Brisbane to
become the largest privately-
owned travel management
company in Australia and, in
late 2010, became successfully
listed on the Australian Securities
Exchange (ASX). Prior to
establishing CTM, Jamie was
employed by Arthur Andersen
(now Ernst & Young) as a
chartered accountant specialising
in business services and the
financial consulting division in
Australia, Papua New Guinea and
the United Arab Emirates.
16
Steve Fleming is responsible for
Corporate Travel Management’s
finance function, treasury
management, key stakeholder
liaison and strategic planning in
conjunction with the Managing
Director and Board. Steve has
more than 23 years’ experience
in commercial finance roles
gained with high growth
companies across a number
of industries and countries
including Abbey National,
TrizecHahn, Deutsche Morgan
Grenfell and Arthur Andersen.
Laura Ruffles, Corporate Travel
Management’s Chief Executive
Officer Australia & New Zealand,
Global Chief Operations Officer
and Executive Director, has
significant local, regional and
global industry experience. In a
career of more than 20 years’,
she has led teams across
strategy, operations, product
development, relationship
management, sales, business
planning and technology.
Laura plays a key role in CTM’s
business planning, innovation,
client growth and profit
contribution, and is passionate
about leadership effectiveness.
In December 2015, Laura was
appointed to the CTM Board as
an Executive Director.
Larry Lo brings 23 years’ travel
industry experience to the
Corporate Travel Management
leadership team. Larry is
responsible for the local and
regional sales and operations
of CTM’s Asian operations at
Westminster CTM. He was a
Director of the Travel Industry
Council of Hong Kong (TIC)
from 2010 to 2012 and is
currently Vice Chairman of
the Society of International Air
Transport Association Passenger
Agents (SIPA). He holds a
Bachelor Degree in Business
Management.
Chris Thelen joined Chambers
Travel (UK, Europe) in 1999 and
led a management buy-out of
the company five years later.
Under his leadership, Chambers
Travel quadrupled its turnover
and its staff, and became an
award-winning business with
offices across eight European
countries. Chambers Travel was
acquired by CTM in December
2014, where Chris remained at
the helm of CTM’s European
operations until his transfer to
CEO North America in July 2016.
Debbie has worked in the travel
industry for over 30 years’
in a number of key strategic
and senior roles, including
Commercial Director at Britannic
Travel. During this time Debbie
lead the set up of global brand
FCM Travel Solutions and
became the Executive General
Manager of Europe. In 2011
Debbie joined Chambers Travel
and became COO soon after.
Debbie successfully instilled new
company processes, productivity
and developments in supplier
relations. In 2015 Chambers was
acquired by Corporate Travel
Management, during which time
Debbie played a key role in the
successful transition. Debbie was
appointed as CEO Europe for
CTM in July 2016.
17
Annual Financial
Report.
Annual Financial Report ............................................................................................................................. 19
Directors’ Report ................................................................................................................................................ 20
Corporate Governance Statement ...................................................................................................... 41
Consolidated Statement of Comprehensive Income ....................................................... 42
Consolidated Statement of Financial Position ....................................................................... 43
Consolidated Statement of Changes in Equity ...................................................................... 44
Consolidated Statement of Cash Flows ........................................................................................ 45
Notes to the Consolidated Financial Statements ................................................................ 46
Directors’ Declaration .................................................................................................................................... 97
Independent Auditor’s Report .............................................................................................................. 98
Shareholder Information ......................................................................................................................... 100
Corporate Directory ....................................................................................................................................... 102
18
19
Directors’ Report
The Directors present their report, together with the financial report of Corporate Travel Management Limited and
its controlled subsidiaries (CTM or “the Group”), for the financial period ended 30 June 2016.
Directors
The following persons were directors of Corporate Travel Management Limited during the whole of the financial
year and up to the date of this report:
• Tony Bellas
• Jamie Pherous
• Stephen Lonie
• Greg Moynihan
• Claire Gray (resigned 1 December 2015)
• Admiral Robert J. Natter, U.S. Navy (Ret.)
• Laura Ruffles (appointed 1 December 2015)
Principal activities
The principal activities of the Group during the year consisted of managing the purchase and delivery of travel
services for its clients. There were no significant changes in the nature of the activities of the Group during the
year.
Dividends
Dividends paid to members during the financial year were as follows:
Final ordinary dividend for the year ended 30 June 2015 of 10 cents per fully paid share paid
on 9 October 2015
Interim ordinary dividend for the year ended 30 June 2016 of 9.0 cents per fully paid share
paid on 8 April 2016
2016
$’000
9,712
8,827
18,539
Since the end of the financial year, the Directors have recommended the payment of a final ordinary dividend of
$14,711,821 (15.0 cents per fully paid share), to be paid on 6 October 2016 out of retained earnings at 30 June
2016.
Review of operations
Group overview
The Group continued to engage in its principal activity, being the provision of travel services, the results of which
are disclosed in the following financial statements.
Further North American acquisitions
On 1 January 2016, the Group continued its expansion into the North American market with the acquisition of
100% of the shares of SARA Enterprise Inc (Montrose Travel), a travel management company headquartered
in Glendale CA, USA. With the acquisition of Montrose Travel, the Group’s coverage of the USA now extends
to the West Coast. The Montrose Travel acquisition brings a new loyalty business unit into the Group. The
consideration was paid by a mixture of cash, and CTM shares, with the cash component funded through a
combination of short term debt and working capital.
Subsequent to balance date, CTM acquired 100% of the shares of All Performance Associates, Inc., Business
Travel, Inc., and Travizon, Inc., which make up the Travizon Travel business with effect from 1 July 2016.
Travizon Travel is a highly regarded corporate travel company that has been operating for more than 40 years
and it is headquartered in Boston, USA.
Following these acquisitions, the Group now operates out of 53 countries and employs over 2,000 people.
20
21
Directors’ Report (continued)
Review of operations (continued)
Group financial performance
CTM’s key financial metrics are summarised in the following table:
2016
$’000
2015
$’000
Change
%
Total Transaction Value (TTV) (unaudited)
Total revenue and other income
Earnings before interest, tax, depreciation and amortisation (EBITDA)
adjusted for acquisition / non-recurring costs (adjusted EBITDA)
Profit before related income tax expense
Income tax expense
Net profit after tax:
Attributable to members
Attributable to minority interest
3,587,063
2,656,023
264,839
197,925
69,030
49,095
57,869
39,256
(12,126)
(10,162)
42,134
26,367
3,609
2,727
Earnings per share (EPS) basic (cents per share)
43.2 cents
28.1 cents
Total dividends paid/proposed in relation to financial period
23,539
15,519
271,585
235,911
Net assets
Net operating cash flow
35%
34%
41%
47%
19%
60%
32%
54%
52%
15%
Directors’ Report (continued)
Review of operations (continued)
Total Transaction Value (TTV) (unaudited)
TTV represents the amount at which travel products and services have been transacted across the Group’s
operations whilst acting as agents for airlines and other service providers, along with revenue streams. TTV
does not represent revenue in accordance with Australian Accounting Standards and is not subject to audit.
TTV is stated net of GST. TTV is utilised by management as a key travel industry metric.
TTV net of GST (unaudited)
2016
$’000
2015
$’000
3,587,063
2,656,023
CTM continues to maintain a strong financial position, with net current assets of $16.9m and total equity of
$271.6m. At 30 June 2016, the Group had $37.2m in borrowings, partially to fund the acquisition of Montrose
Travel and has continued to generate strong operating cash flows.
The business growth has been funded by a combination of operating cash flow and debt funding on 31
December 2015 of $37.0 million, applied to fund the Montrose Travel acquisition. In addition to the business
acquisition, there has been further deferred acquisition payments of $14.9m and capital expenditure of $8.2m
during the year, which have been funded through operating cash flow.
The Company continues to pay dividends at its stated divided policy level, with a final dividend declared at 15
cents per share (full year: 24.0 cents). This dividend represents an increase of 50% on the preceding period.
70,210
24,436
187%
Review of underlying operations
The net profit after tax of the Group for the financial period amounted to $42,134,000 (2015: $26,367,000).
The result was underpinned by a 35% increase in TTV, to $3,587m (unaudited) and the six month contributed
results from the acquisition of Montrose Travel on 1 January 2016. In addition, strengthening of return and
margin in all regions from organic growth and productivity initiatives resulted in a 40.5% increase in adjusted
EBITDA to $69.0m.
Refer Note 1 for the reconciliation to profit before income tax from continuing operations.
Net profit after tax:
Attributable to members
2016
$’000
2015
$’000
2014
$’000
2013
$’000
42,134
26,367
15,845
11,268
Attributable to minority interest
3,609
2,727
734
-
Shareholder funds
Basic EPS (cents per share)
Basic EPS growth
Diluted EPS (cents per share)
Diluted EPS growth
Return on equity
ROE growth
Dividend per share - year end
Dividend per share - interim
Dividend per share - full financial year
22
175,231
161,675
99,823
47,856
43.2
54%
42.8
53%
24%
47%
15.0
9.0
24.0
28.1
48%
27.9
48%
16%
3%
10.0
6.0
16.0
19.0
28%
18.8
26%
16%
14.9
(9%)
14.9
(9%)
24%
(33%)
(32%)
7.5
4.5
12.0
6.5
4.0
10.5
Australia and New Zealand (“ANZ”)
TTV (unaudited) rose by 4.3% to $848.6m. The region grew despite the challenging environment, in particular
the decline in travel in the resources sector, as it was able to more than offset this decline through continue
market share growth and client retention.
The increased turnover has flowed through to the adjusted EBITDA with an improved margin of 36.8%, which is
up from 33.9% in the prior comparative period. Continued productivity and further absorption of the fixed cost
base element due to top line growth being the major components of this improvement.
North America
TTV (unaudited) rose by 41.5% to $867.0m as a result of new business wins and the Montrose Travel acquisition
during the year. During the period, CTM also completed the integration of the North American business, to
provide the platform to further scalable growth in the future.
Improved top line margin percentage is due to revenue synergies provided by the combined business. The
adjusted EBITDA margin improved from 19.8% in 2015 to 27.5%, due to:
• Increase revenue margin as noted;
• Strong organic growth;
• Inclusion of the Montrose Travel business for six months; and
• Integration activities and resultant investment.
CTM remains confident regarding its future growth opportunities in the North America market. The Montrose
Travel acquisition brings a new business unit into the Group, being loyalty. In particular, Montrose Travel
provides technology, fulfilment and servicing for a number of bank branded credit card loyalty programs which
CTM will now apply across all of its operations.
23
Directors’ Report (continued)
Directors’ Report (continued)
The Group intends to continue to pursue the
opportunity for its growth globally through acquisition,
as well as pursuing organic growth in each market,
underpinned by a focus on client service, supported
by the continued investment in new client facing
technology.
The next twelve months will also involve leveraging
global synergy opportunities where available.
Material business risks
The Group is subject to both specific risks to its
business activities and risks of a general nature.
These risks include:
• Global terrorism and pandemics: International
travel remains susceptible to the impact of regional
terrorism and health pandemics.
• Economic conditions: Economic downturn may
have an adverse impact on the Group’s operating
performance.
• Information technology: The Group relies heavily
on outsourced technology platforms. Whilst all
systems are licensed, any disruption to supply or
performance of systems may have a long term
impact on client and supplier satisfaction.
• Competition: The Group operates in a competitive
market, and current competitors or new
competitors may become more effective.
• Key personnel: The Group is reliant on talent and
experience to run its business. The Group’s ability
to retain and attract key people is important to its
continued success.
• Employee costs: Employee costs represent a
significant component of the Group’s total cost
base. Legislative changes in relation to employee
costs may have an adverse impact on the Group’s
cash flow and profitability.
Review of operations (continued)
Review of underlying operations (continued)
Europe
The operation in Europe contributed $338.7m in TTV
(unaudited) during the year. The adjusted EBITDA
margin for the first full year of consolidation is 16.4%.
The European market has been challenging in the
past six months in particular underpinned with the
growing fear around security and the Brexit decision.
CTM will continue to focus on its clients and support
their needs as the European market condition
develops.
Asia
The TTV (unaudited) in Asia rose by 41.7%
to $1,532.8 million in 2016 financial year. The
performance of the wholesale business was
instrumental in this growth. Due to the top line growth
in the lower yielding wholesale business, the income
margin dropped from 5.3% to 4.5%. However, the
adjusted EBTIDA margin improved from 27.7%
to 30.8% due to continuing focus on productivity.
The core corporate travel business still performs
adequately and FY17 will see greater focus on
this core market noting a significant investment in
enlarging CTM’s Singapore operations.
Strategy and future performance
The Group continues to focus on its key strategic
drivers, being:
• Retaining current clients;
• Winning new clients; and
• Improving productivity.
In the 2016 financial year, the Group executed well
on these business drivers, with maintenance of the
historically strong client retention numbers, a solid
year of new client wins and improved productivity in
all regions.
A vast proportion of CTM’s cost base is employee
costs, which highlights the importance of productivity
initiatives. During the year, there has been an
increase in productivity, but not through a reduction
of service. In fact, service levels have risen as
automation has replaced manual processes,
providing CTM’s consultants with the time to operate
more effectively and for the benefit of clients.
Likely developments and expected
results of operations
Further information on likely developments in the
Group’s operations and the expected results of
operations has not been included in this report
because the Directors consider that would be likely to
result in unreasonable prejudice to the Group.
Environmental regulation
The Group has determined that no particular or
significant environmental regulations apply to its
operations.
Significant changes in the state of affairs
In the opinion of the Directors, there were no
significant changes in the state of affairs of the Group
during the financial year not otherwise disclosed in
this report or the consolidated financial statements.
Events since the end of the
financial year
Other than the following item, there have been no
other matters, or circumstances, not otherwise dealt
with in this report, that will significantly affect the
operation of the Group, the results of those operations
or the state or affairs of the Group or subsequent
financial years.
The Group acquired 100% of the shares of All
Performance Associates, Inc., Business Travel, Inc.,
and Travizon, Inc., which make up the Travizon Travel
business with effect from 1 July 2016. Travizon Travel
is a highly regarded corporate travel company that
has been operating for more than 40 years and it is
headquartered in Boston, USA.
As part of this transaction, an initial consideration of
$27,393,686 (US$ 21,000,000) was paid through a
mixture of cash and Corporate Travel Management
Limited shares.
A further deferred consideration payment of up to
$19,566,920 (US $15,000,000) may also be payable
on 29 September 2017.
Due to the timing of the acquisition, CTM has not
yet finalised the provisional calculation of the net
identifiable assets or purchased goodwill. The
financial effects of the transactions have not been
brought to account at 30 June 2016.
24
25
Directors’ Report (continued)
Information on Directors
Mr Tony Bellas, BEcon, DipEd, MBA, FAICD, FAIM, FCPA – Independent Non-Executive Director - Chairman
Experience and expertise
Listed Company Directorships
(including key dates)
Special responsibilities
Tony Bellas has more than 30 years’ experience in both the government and
private sectors. Tony Bellas has previously held positions of Chief Executive
Officer of Ergon Energy Ltd, CS Energy Ltd, Seymour Group Pty Ltd, and was
previously Queensland’s Deputy Under Treasurer.
ERM Power Limited (since 2009), Shine Corporate Limited (since 2013) and
Graphitecorp Ltd (since 2016).
Chairman of not-for-profit company: Endeavour Foundation (since 2016).
Chair of the Board
Chair of Nomination Committee
Audit Committee member
Risk Management Committee member
Remuneration Committee member
Interests in shares and options Ordinary shares in Corporate Travel Management Limited
232,752
Mr Jamie Pherous, BCom, CA – Managing Director
Experience and expertise
Jamie Pherous founded Corporate Travel Management Ltd (CTM) in Brisbane in
1994. He has built the Group from its headquarters in Brisbane to become the
one of the world’s largest travel management companies now employing more
than 2,000 staff.
Prior to establishing CTM, Jamie Pherous was employed by Arthur Andersen, now
Ernst & Young, as a Chartered Accountant, specialising in business services and
financial consulting in Australia, Papua New Guinea and the United Arab Emirates.
Jamie Pherous was also a major shareholder and co-founder of an online hotel
booking engine, Quickbeds.com.au, which was sold to The Flight Centre Group in
2003 and is a Director of the Australian Federation of Travel Agents.
Listed Company Directorships
(including key dates)
Special responsibilities
Interests in shares and options Ordinary shares in Corporate Travel Management Limited
Managing Director
None.
21,500,000
Mr Stephen Lonie, BCom, MBA, FCA, FFin, FAICD, FIMCA, Senior MACS – Independent Non-Executive Director
Experience and expertise
Listed Company Directorships
(including key dates)
Special responsibilities
Stephen Lonie is a Chartered Accountant, and is a former Managing Partner
Queensland of the international accounting and consulting firm, KPMG. He now
practices as an independent management consultant and business adviser.
MyState Limited (since 2011), Retail Food Group Limited (since 2013), CMI
Limited (2012 to 2013) and Dart Energy Limited (2013 – 2014).
Chair of Audit Committee
Chair of Risk Management Committee
Remuneration Committee member
Nomination Committee member
Interests in shares and options Ordinary shares in Corporate Travel Management Limited
242,752
Directors’ Report (continued)
Information on Directors (continued)
Mr Greg Moynihan, BCom, Grad Dip SIA, CPA, SFFIN, MAICD – Independent Non-Executive Director
Experience and expertise
Listed Company Directorships
(including key dates)
Special responsibilities
Greg Moynihan is a former Chief Executive Officer of Metway Bank Limited. He
has also held senior executive positions with Citibank Australia and Suncorp
Metway. Since leaving Suncorp Metway in 2003, Greg Moynihan has focussed
on his commitments as a Non-Executive Company Director, as well as pursuing
business interests in the investment management and private equity sectors.
Shine Corporate Limited (since 2013) and a Director of several private companies
and Ausenco Limited (2008 – 2013).
Chair of Remuneration Committee
Nomination Committee member
Audit Committee member
Risk Management Committee member
Interests in shares and options Ordinary shares in Corporate Travel Management Limited
242,752
Laura Ruffles – MBA, Executive Director, CEO AU/NZ, Global COO
Experience and expertise
Laura Ruffles is CTM’s Chief Executive Officer Australia & New Zealand, Global
COO and in late 2015 was appointed an Executive Director in recognition of her
leadership contribution. She has significant local, regional and global industry
experience and in a career of more than 20 years, has led teams across sales,
account management, operations and technology. Laura is responsible for
all aspects of CTM’s business performance and is passionate about customer
experience, strategic business planning, product development, productivity
and leadership effectiveness. Laura joined CTM in 2010 and has been a key
contributor to its successful growth.
Prior to joining Corporate Travel Management Laura was a Director at American
Express, where she was responsible for managing the small and medium
enterprises business function. She is also an Alternate Director of the Australia
Federation of Travel Agents.
Listed Company Directorships
(including key dates)
Special responsibilities
Interests in shares and options Ordinary shares in Corporate Travel Management Limited
None.
Executive Director, Chief Executive Officer AU/NZ, Global Chief Operating Officer
126,923
Admiral Robert J. Natter, US Navy (Ret.) – Independent Non-Executive Director
Experience and expertise
Robert Natter retired from active military service a decade ago and now has more
than 10 years of experience in both the government and private sectors in the
North American market.
In his Navy career, Robert Natter served as the Commander of the U.S. Seventh
Fleet operating throughout Asia and the Indian Ocean; Commander in Chief of
the U.S Atlantic Fleet; and the first Commander of U.S. Fleet Forces, overseeing
all Continental U.S. Navy bases, facilities and training operations. He is currently
Chairmen of the U.S. Naval Academy Alumni Association, services on the Board
of BAE systems, Inc. (the U.S. based subsidiary of ABE Systems plc) and on
the Board of Allied Universal (a privately held US based security company with
140,000 employees). He was on the Board of the National U.S. Navy Seal Museum
and was Chairman of G4S Government Solutions Inc.
Listed Company Directorships
(including key dates)
Special responsibilities
None.
Remuneration Committee member
Nomination Committee member
Interests in shares and options Ordinary shares in Corporate Travel Management Limited
136,000
26
27
Directors’ Report (continued)
Company secretaries
• Mr Steve Fleming (Joint Company Secretary)
• Mrs Lyndall McCabe (Joint Company Secretary for the financial year ended 30 June 2016, retired 22 July
2016)
• Ms Brooke Connell (Joint Company Secretary, effective 22 July 2016)
Steve Fleming, BBus (Accounting), CA
Steve Fleming is CTM’s Global Chief Financial Officer and is responsible for the finance function, treasury
management, key stakeholder liaison and strategic planning, in conjunction with the Board and the Managing
Director.
Steve Fleming has more than 20 years’ experience in commercial finance roles gained with high growth
companies across a number of industries and countries, including Abbey National, TrizecHahn, Deutsche Bank
and Arthur Andersen. Prior to joining CTM in 2009, Steve Fleming was Group Finance Manager of Super Retail
Group Ltd.
Steve Fleming is a member of the Institute of Chartered Accountants in Australia.
Lyndall McCabe
Lyndall McCabe has held managerial positions with CTM since joining the Group in 2000, including Finance
Manager and National Operations and Human Resources Manager.
She has more than 20 years’ experience in the travel industry sector, having previously been employed by a
travel consolidator. In 2005, Lyndall McCabe became a shareholder and was appointed as a Director of CTM,
from which she subsequently resigned 23 June 2010 as part of CTM’s transition to a listed public corporation.
Lyndall McCabe is a member of the Governance Institute of Australia and is currently completing the Graduate
Certificate of Applied Corporate Governance. Lyndall McCabe has resigned from CTM effective 22 July 2016.
Meetings of Directors
The numbers of meetings of the Group’s Board of Directors and of each Board Committee held during the year
ended 30 June 2016, and the numbers of meetings attended by each Director were:
Director
Full meetings of
directors
A
9
9
9
8
5
9
4
B
9
9
9
9
5
9
4
Mr Tony Bellas
Mr Stephen Lonie
Mr Greg Moynihan
Mr Jamie Pherous
Ms Claire Gray (resigned
1 December 2015)
Admiral Robert J. Natter
Ms Laura Ruffles
(appointed 1 December
2015)
A = Number of meetings attended.
Committee meetings
Audit
Risk
Management
Remuneration
Nomination
A
3
4
4
*
*
*
*
B
4
4
4
*
*
*
*
A
4
4
4
*
*
3
*
B
4
4
4
*
*
4
*
A
2
2
2
*
*
2
*
B
2
2
2
*
*
2
*
A
2
2
2
*
*
2
*
B
2
2
2
*
*
2
*
B = Number of meetings held during the time the Director held office or was a member of the Committee during the year.
* Not a member of the relevant Committee.
Directors’ Report (continued)
Remuneration report
This Remuneration Report sets out remuneration information for Corporate Travel Management Limited’s Non-
Executive Directors, Executive Directors and other key management personnel of the Group.
Directors
Mr Tony Bellas
Mr Jamie Pherous
Mr Stephen Lonie
Mr Greg Moynihan
Admiral Robert J. Natter
Ms Claire Gray
Ms Laura Ruffles
Non-Executive Director
Managing Director and Global Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director (resigned 1 December 2015)
Global Chief Operating Officer and Chief Executive Officer – Australia & New
Zealand (appointed 1 December 2015)
Other key management personnel
Mr Steve Fleming
Mr Larry Lo
Ms Julie Crotts
Mr Chris Thelen
Global Chief Financial Officer
Chief Executive Officer – Asia
Chief Executive Officer – North America (appointed 1 July 2015)
Chief Executive Officer – Europe
Role of the Remuneration Committee
The Remuneration Committee is a Committee of the Board. The role of the Remuneration Committee is to advise
on remuneration and issues relevant to remuneration policies and practices, including for senior executives and
Non-Executive Directors.
CTM’s Corporate Governance Statement provides further information on the role of this Committee.
Principles used to determine the nature and amount of remuneration
Non-Executive Directors
Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities
of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The
Chairman’s fees are determined independently to the fees of Non-Executive Directors. The Chairman is not
present at any discussions relating to determination of his own remuneration.
Non-Executive Directors do not receive performance-based remuneration.
Directors’ fees
The current base fees were last increased with effect from 29 September 2014.
Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically
recommended for approval by shareholders. The maximum approved amount currently stands at $600,000
(2015: $600,000).
Retirement allowances for Non-Executive Directors
Superannuation contributions required under the Australian superannuation guarantee legislation are made and
are deducted from the Directors’ overall fee entitlements.
Executive Remuneration Framework
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic
objectives and the creation of value for shareholders, and conforms with market practice for delivery of reward.
28
29
Directors’ Report (continued)
The framework provides for a mix of fixed and
variable remuneration, and a blend of short and long-
term incentives. As executives gain seniority with
the Group, the balance of this mix shifts to a higher
proportion of ‘at risk’ rewards.
The current executive remuneration framework
currently has three components:
• Base remuneration and benefits, including
superannuation;
• Short-term performance incentives; and
• Long-term incentives through participation in the
Share Appreciation Rights Plan.
The combination of these components comprises an
executive’s total remuneration. The Group intends
to continue to review incentive plans during the year
ending 30 June 2017, to ensure continued alignment
with the Group’s financial and strategic objectives.
Fixed remuneration and benefits
Base remuneration and benefits are structured as
a total employment cost package, which may be
delivered as a combination of cash and prescribed
non-financial benefits at the executives’ reasonable
discretion.
Executives are offered a competitive base
remuneration package that comprises the fixed
component of remuneration and rewards. Base
remuneration for executives is reviewed annually, to
ensure the executive’s remuneration is competitive
with the market. An executive’s remuneration is also
reviewed on promotion.
There is no guaranteed base remuneration increase
included in any executives’ contracts.
Executives receive benefits, including motor vehicle
benefits as part of the fixed remuneration package.
Remuneration report (continued)
Principles used to determine the nature and
amount of remuneration (continued)
Executive Remuneration Framework (continued)
The Board ensures that executive reward satisfies
the following key criteria for good reward governance
practices:
• Competitiveness and reasonableness;
• Alignment to the interests of shareholders;
• Performance linkage and alignment of executive
compensation;
• Transparency; and
• Capital management.
The Group has structured an executive remuneration
framework that is considered to be market
competitive and complementary to the reward
strategy of the organisation.
The two key elements of the framework are:
• Alignment to shareholders’ interests, which:
- Has economic profit as a core component of
plan design;
- Focuses on sustained growth in shareholder
wealth, consisting of dividends and growth
in share price, and delivering an appropriate
return on assets, as well as focusing the
executive on key non-financial drivers of value;
and
- Attracts and retains high calibre executives.
• Alignment to program participants’ interests,
which:
- Rewards capability and expertise;
- Reflects competitive reward for contribution to
growth in shareholder wealth;
- Provides a clear structure for earning rewards;
and
- Provides recognition for individual and team
contributions.
Directors’ Report (continued)
Remuneration report (continued)
Principles used to determine the nature and amount of remuneration (continued)
Superannuation
Superannuation contributions are paid in accordance with relevant Government legislation, to employee
nominated defined contribution superannuation funds.
Short-term incentives
If the Group achieves a pre-determined profit target set by the Remuneration Committee, a short-term incentive
(“STI”) pool is available to executives and other eligible participants. Cash incentives/bonuses are payable
around 30 September each year. A profit target ensures variable reward is only available when value has been
created for shareholders and when profit is consistent with CTM’s approved business plan. The incentive pool is
leveraged for performance above the threshold, to provide an incentive for superior performance.
Executives have a target STI opportunity depending on the accountabilities of the role and impact on the
organisation or business unit performance. The maximum target bonus opportunity in the 2016 year was
approximately 58% (2015: 59%) of base fixed remuneration and benefits.
Each year, the Remuneration Committee considers the appropriate targets and key performance indicators
(“KPI”s), to link the STI plan and the level of payout if targets are met, including setting any maximum payout
under the STI plan, and minimum levels of performance to trigger payment of STI.
The Remuneration Committee is responsible for assessing whether the KPIs are met. The Remuneration
Committee also has absolute discretion to adjust short-term incentives, in light of unexpected or unintended
circumstances.
The STI target annual payment is reviewed annually.
Payments made under the STI plan over the last four years have typically risen and fallen in line with the Group’s
financial results. For the year ended 30 June 2016, the key performance indicators (KPIs) linked to STI plans
were based on the Group objectives, with the key financial metric being consolidated Earnings before Interest,
Tax, Depreciation and Amortisation.
The relationship between STI and Corporate Travel Management Ltd.’s performance over the last 5 years is set
out in the following table:
Profit for the year attributable to owners of
Corporate Travel Management Ltd ($’000)
Basic earnings per share (cents)
Dividend payments ($’000)
Dividend payout ratio (%)
Increase / (decrease) in share price %
Total KMP STI as a percentage of profit /
(loss) for the year (%)
2016
2015
2014
2013
restated
2012
42,134
26,367
15,845
11,268
11,798
43.2
18,539
44.0%
35.8%
28.1
12,609
47.80%
60.6%
19.0
9,129
57.60%
56.6%
14.9
7,497
66.50%
111.3%
16.3
5,813
49.30%
(0.5%)
2.1%
2.7%
0.9%
2.6%
1.9%
Long-term incentives
Currently, the Group has a long term incentive scheme using a Share Appreciation Rights Plan.
The Plan is designed to focus executives on delivering long-term shareholder returns. Under the Plan,
participants will be granted rights only if performance conditions pertaining to the earnings per share growth are
met and the employee is still employed at the end of the three year vesting period.
Participation in the Plan is at the Board’s absolute discretion and no individual has a contractual right to
participate in the Plan.
30
31
Directors’ Report (continued)
Remuneration report (continued)
Details of remuneration
Details of the remuneration of the Directors and the key management personnel of the Group are set out in the
following tables.
Short-term benefits
Long-term benefits
2016
Cash
salary
and fees
Short-
term
Incentive
Annual
Leave^
Non-
monetary
benefits
Super-
annuation
Long
service
leave^
Share
apprecia-
tion rights
Total
Non-Executive Directors
Tony Bellas
Stephen Lonie
Greg
Moynihan
Admiral Robert
J. Natter
Total Non-
Executive
Remuneration
124,615
103,846
103,846
88,689
420,996
Executive Directors
-
-
-
-
-
-
-
-
-
-
Jamie Pherous
459,302
225,000
13,800
Laura Ruffles
516,404
300,000
3,694
Claire Gray*
55,423
-
-
Total
Executive
Remuneration
1,031,129
525,000
17,494
Other key management personnel of the Group
Steve Fleming
353,231
140,000
(7,553)
Larry Lo
Julie Crotts
Chris Thelen**
Total KMP
Remuneration
Total
Remuneration
505,704
212,307
304,120
508,345
-
-
1,934
1,797
(11,662)
1,671,400
352,307
(15,484)
3,123,525
877,307
2,010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,838
9,865
9,865
-
31,568
-
-
-
-
-
64,629
(54,084)
-
-
-
-
-
-
136,453
113,711
113,711
88,689
452,564
708,647
69,958
15,229
92,426
997,711
-
-
-
55,423
134,587
(38,855)
92,426
1,761,781
50,182
11,256
73,581
620,697
3,185
2,851
81,335
-
-
-
31,396
754,526
20,931
329,699
-
578,018
137,553
11,256
125,908
2,282,940
303,708
(27,599)
218,334
4,497,285
* Claire Gray resigned as Executive Director on 1 December 2015. The amounts presented in the previous table represent remuneration paid to
this date.
** Chris Thelen ceased as CEO of Europe on 1 July 2016 and became CEO of North America. Debbie Carling was appointed CEO of Europe on
1 July 2016.
^ Annual leave and long service leave represents the movement in the leave provision balances. The accounting value may be negative, for
example, when an Executive’s leave balance decreases as a result of taking more than the entitlement accrued during the year.
Directors’ Report (continued)
Remuneration report (continued)
Details of remuneration (continued)
Short-term benefits
Long-term benefits
2015
Cash
salary
and fees
Short-
term
Incentive
Annual
Leave^
Non-
monetary
benefits
Super
annuation
Long
service
leave^
Share
apprecia-
tion rights
Total
Non-Executive Directors
Tony Bellas
Stephen Lonie
Greg Moynihan
Admiral Robert
J. Natter
Total Non-
Executive
Remuneration
117,308
97,308
97,308
111,487
423,411
Executive Directors
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,144
9,244
9,244
-
29,632
-
-
-
-
-
Jamie Pherous
403,982
221,145
1,409
2,539
38,378
4,535
Claire Gray
107,327
-
-
-
-
-
Total Executive
Remuneration
511,309
221,145
1,409
2,539
38,378
4,535
Other key management personnel of the Group
-
-
-
-
-
-
-
-
128,452
106,552
106,552
111,487
453,043
671,988
107,327
779,315
Laura Ruffles
391,666
220,000
Steve Fleming
298,000
175,000
430,948
533,252
260,619
92,346
-
-
16,392
(1,306)
(3,542)
-
-
-
-
-
43,828
32,110
2,770
-
(1,002)
3,840
38,948
9,265
9,087
-
-
-
59,661
740,812
41,973
554,864
35,295
557,817
-
-
533,252
302,405
1,914,485
487,346
10,542
3,840
117,656
18,352
136,929
2,689,150
2,849,205
708,491
11,951
6,379
185,666
22,887
136,929
3,921,508
Larry Lo
Romeo Cuter *
Chris Thelen *
Total KMP
Remuneration
Total
Remuneration
* Romeo Cuter resigned as Chief Executive Officer – North America on 15 May 2015. Chris Thelen was appointed as Chief Executive Officer -
Europe on 2 January 2015. The amounts presented in the previous table represent remuneration paid to/from the respective dates.
^ Annual leave and long service leave represents the movement in the leave provision balances. The accounting value may be negative, for
example, when an Executive’s leave balance decreases as a result of taking more than the entitlement accrued during the year.
32
33
Directors’ Report (continued)
Remuneration report (continued)
Details of remuneration (continued)
The relative proportions of remuneration that are fixed or linked to performance are as follows:
Fixed remuneration
At risk – STI
At risk - LTI
2016
%
2015
%
2016
%
2015
%
2016
%
2015
%
Non-Executive Directors
Tony Bellas
Stephen Lonie
Greg Moynihan
Admiral Robert J. Natter
Executive Directors
Jamie Pherous
Laura Ruffles
Claire Gray
100%
100%
100%
100%
67%
57%
100%
Other key management personnel of the Group
Steve Fleming
Larry Lo
Julie Crotts
Chris Thelen
62%
68%
94%
100%
100%
100%
100%
100%
100%
65%
58%
100%
58%
77%
-
-
-
-
-
33%
33%
-
25%
28%
-
-
-
-
-
-
35%
33%
-
34%
17%
-
-
-
-
-
-
10%
-
13%
4%
6%
-
-
-
-
-
-
9%
-
8%
6%
-
-
Directors and other key management personnel of the Group are included in this disclosure for the period they
held the applicable roles.
Service agreements
There are no fixed-term service agreements with Directors or other key management personnel. Standard
contracts are in place for key executive employees and are reviewed annually. Employees can terminate
employment with the Group in accordance with statutory notice periods.
Short term incentive bonus
For each short term incentive included in the table on page 32, the percentage split of the available bonus
awarded and forfeited is disclosed in the following table.
2016
2015
Awarded
%
Forfeited
%
Awarded
%
Forfeited
%
100%
80%
100%
100%
-
20%
-
-
100%
100%
100%
100%
-
-
-
-
Laura Ruffles
Steve Fleming
Jamie Pherous
Larry Lo
34
Directors’ Report (continued)
Remuneration report (continued)
Details of remuneration (continued)
Long-term incentives
Currently, the Group has a long term incentive scheme via a Share Appreciation Rights Plan (SARs).
The plan is designed to focus executives on delivering long-term shareholder returns. Under the plan, SARs will
only vest if performance conditions pertaining to the earnings per share growth are met and the employee is still
employed at the end of the vesting period. For the grants outlined in the table below, the vesting period is three
years and target earnings per share growth is 10% p.a. average.
Participation in the plan is at the Board’s absolute discretion and no individual has a contractual right to
participate in the plan. Once vested, a participant will be deemed to have automatically exercised all vested
SARs and CTM will settle its obligation in line with the SARs Plan. There is no consideration payable by the
participant upon exercising of vested SARs. Upon vesting, the conversion of a SAR to an equity or cash based
settlement, is determined using a formula referencing the relevant share prices of CTM, the number of SARs
exercised, and is at the Board’s sole discretion.
Grants made during 2016 will vest on a scaled basis as follows:
• 50% vest at 80% target achievement; and
• 75% vest at 90% target achievement; and
• 100% at 100% target achievement.
Grants made to key management personnel that have not yet vested as at 30 June 2016 are as follows:
Vested
%
Forfeited
%
Max value
yet to vest
$
Year of
grant
Year in
which
rights
may vest
Number
of rights
granted
Value per
right at
grant date
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
2016
2019
2018
2017
2016
2019
2018
2017
2016
2019
2018
2017
2016
100,000
100,000
75,000
75,000
75,000
100,000
50,000
-
75,000
100,000
-
-
$1.26
$1.06
$0.41
$0.57
$1.26
$1.06
$0.41
-
$1.26
$1.06
-
-
2019
50,000
$1.26
Laura
Ruffles
Steve
Fleming
Larry Lo
Julie
Crotts
Number of
rights
vested
during the
year
-
-
-
-
-
-
75,000
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No Directors or other key management personnel hold any share appreciation rights.
-
-
-
-
-
-
-
-
-
-
-
-
-
125,699
106,274
30,075
-
94,274
106,274
20,050
-
94,274
106,274
-
-
62,849
35
Directors’ Report (continued)
Directors’ Report (continued)
Remuneration report (continued)
Details of remuneration (continued)
Shares under option
There are currently no unissued ordinary shares of CTM under option.
Equity instruments held by key management personnel
i. Share appreciation rights
During the financial year, share appreciation rights were issued to Laura Ruffles, Steve Fleming, Larry Lo
and Julie Crotts, as listed in the Directors’ Report.
No share options were granted as equity compensation benefits during the financial year (2015: nil).
ii. Shares held by key management personnel
Ordinary shares
Non-Executive Directors
Tony Bellas
Stephen Lonie
Greg Moynihan
Admiral Robert J. Natter
Executive Directors
Balance
at
30 June
2015
232,752
242,752
242,752
116,000
Jamie Pherous
Claire Gray^
Laura Ruffles*
21,500,000
4,977,239
155,012
Other key management personnel of the Group
Steve Fleming
Larry Lo
Julie Crotts
Chris Thelen
46,467
25,000
20,307
905,547
Purchased
Disposed
Received on
vesting of
rights
Other
changes
during the
year
-
-
-
20,000
-
-
-
-
-
-
-
-
-
-
-
-
(17,239)
(75,000)
(18,000)
-
-
-
-
-
-
-
-
-
46,911
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
at
30 June
2016
232,752
242,752
242,752
136,000
21,500,000
4,960,000
126,923
28,467
25,000
20,307
905,547
^ Claire Gray resigned as a Director as at 1 December 2015.
* Laura Ruffles was appointed as Executive Director as at 1 December 2015.
Remuneration report (continued)
Details of remuneration (continued)
Ordinary shares
Non-Executive Directors
Tony Bellas
Stephen Lonie
Greg Moynihan
Admiral Robert J. Natter
Executive Directors
Balance
at
30 June
2014
229,630
229,630
229,630
92,000
Purchased
Disposed
Received on
vesting of
rights
Other
changes
during the
year
13,122*
13,122*
13,122*
24,000
(10,000)
-
-
-
Balance
at
30 June
2015
232,752
242,752
242,752
116,000
21,500,000
4,977,239
155,012
46,467
25,000
-
-
-
-
-
-
-
-
-
-
-
905,547**
905,547
-
-
-
-
-
-
-
-
-
-
-
Jamie Pherous
Claire Gray
23,000,000
500,000*
(2,000,000)
5,003,624
-
(26,385)
Other key management personnel of the Group
Laura Ruffles
Steve Fleming
Larry Lo
Romeo Cuter
Chris Thelen
153,956
43,955
25,000
-
-
1,056*
2,512*
-
-
-
-
-
-
-
-
*
**
Shares were acquired as part of participating in the rights issue December 2014.
Received shares as part of Chambers acquisition.
All equity transactions with key management personnel have been entered into under terms and conditions no
more favourable than those the Group would have adopted if dealing at arm’s length.
Other transactions and balances with key management personnel
During the year, $114,367 (2015: $382,929) has been paid to a party related to Mr Jamie Pherous for rent and
outgoings in relation to an office lease. An amount of $57,097 (2015: $27,336) was also paid to Mr Chris Thelen
for rent in relation to an accommodation lease. The balance payable at 30 June 2016 for these transactions is
$nil (2015: nil).
A balance of $22,270,864 (2015: $24,856,307) which represents the present value of the estimated contingent
consideration, which may be payable to Chris Thelen, as a part of the acquisition of Chambers Travel Group
Limited, is included within the contingent consideration balance. Refer to Trade and Other Payables (note 11).
Directors of the Group hold other directorships in public corporations, as detailed in the Directors’ Report.
Where any of these related entities are clients of the Group, the arrangements are on similar terms to other
clients.
Insurance of officers and indemnities
An Officers’ Deed of Indemnity, Access and Insurance is in place for Directors, the Company Secretaries and
some other key executives. The liabilities covered by the insurance include legal costs that may be incurred in
defending civil or criminal proceedings that may be brought against the Officers in their capacity as Officers of
the Company or its controlled entities. Disclosure of premiums paid is prohibited under the insurance contract.
36
37
Directors’ Report (continued)
Directors’ Report (continued)
Proceedings on behalf of the company
Auditor’s independence declaration
A copy of the auditors’ independence declaration, as required under section 307C of the Corporations Act 2001,
is appended to this Directors’ Report.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘’rounding off’’ of amounts in the Directors’ Report. Amounts in the Directors’ Report
have been rounded off in accordance with that Class Order to the nearest thousand dollars or in certain cases,
to the nearest dollar.
Signed in accordance with a resolution of the Directors.
Mr Tony Bellas
Chairman
Brisbane, 26 August, 2016
Mr Jamie Pherous
Managing Director
No person has applied to the Court, under section 237 of the Corporations Act 2001, for leave to bring
proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the
purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section
237 of the Corporations Act 2001.
Non-audit services
The Group may decide to employ the auditor on assignments in addition to its statutory audit duties, where the
auditor’s expertise and experience with the Group are important.
The Board has considered the position and, in accordance with the advice received from the Audit Committee,
is satisfied that the provision of non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit
services by the auditor did not compromise the auditor independence requirements of the Corporations Act
2001 as none of the services undermine the general principles relating to auditor independence as set out in
APES110 Code of Ethics for Professional Accountants.
During the year, the following fees were paid or payable for services provided by PricewaterhouseCoopers, the
auditor of the consolidated entity, its related practices and non-related audit firms:
Amounts received or due and receivable by:
PricewaterhouseCoopers Australia:
Audits and review of the financial reports of the entity and any other entity in the
consolidated group
Other services in relation to the entity and any other entity in the consolidated group:
Tax compliance
Tax services – acquisitions
Other advisory services
Total remuneration of PricewaterhouseCoopers Australia
Other PricewaterhouseCoopers network firms:
Other services in relation to the entity and any other entity in the consolidated group:
Audit and review of the financial report
Tax compliance
Tax services – acquisitions
Other services
2016
$
2015
$
493,597
465,300
179,047
151,362
0
33,270
42,218
18,832
705,914
677,712
439,088
207,770
5,490
40,722
394,716
104,326
37,283
-
Total remuneration of PricewaterhouseCoopers network firms
693,070
536,325
Non-PricewaterhouseCoopers firms:
Services in relation to the entity and any other entity in the consolidated group:
Audit and review of the financial report
Total remuneration of PricewaterhouseCoopers network firms
133,206
133,206
-
-
38
39
Corporate Governance Statement
Corporate Travel Management Limited and the Board are committed to achieving
and demonstrating the highest standards of corporate governance. Corporate Travel
Management Limited has reviewed its corporate governance practices against the Corporate
Governance Principles and Recommendations (3rd edition) published by the ASX Corporate
Governance Council.
The 2016 corporate governance statement is dated as at 30 June 2016 and reflects the
corporate governance practices in place throughout the 2016 financial year. The 2016
corporate governance statement was approved by the Board on 26 August 2016. A
description of the Group’s current corporate governance practices is set out in the Group’s
corporate governance statement which can be viewed at www.travelctm.com/resources/
investor-relations/corporate-governance/.
Auditor’s Independence Declaration
As lead auditor for the audit of Corporate Travel Management Limited for the year ended 30 June
2016, I declare that to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Corporate Travel Management Limited and the entities it controlled
during the period.
Michael Shewan
Partner
PricewaterhouseCoopers
Brisbane
26 August 2016
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
40
41
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2016
Revenue
Other income
Total revenue and other income
Operating expenses
Employee benefits
Occupancy
Depreciation and amortisation
Information technology and telecommunications
Travel and entertainment
Administrative and general
Total operating expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to:
Owners of Corporate Travel Management Limited
Non-controlling interests
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income for the period, net of tax
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Owners of Corporate Travel Management Limited
Non-controlling interests
Note
2016
$’000
2015
$’000
2
260,945
197,725
3,894
200
264,839
197,925
(147,139)
(113,549)
(14,914)
(10,562)
(13,870)
(4,235)
(14,441)
(10,931)
(7,540)
(9,911)
(3,424)
(12,355)
(205,161)
(157,710)
(1,809)
57,869
(12,126)
(959)
39,256
(10,162)
45,743
29,094
6
6
5
24(b)
42,134
3,609
45,743
26,367
2,727
29,094
(2,635)
(2,635)
43,108
38,369
4,739
43,108
25,186
25,186
54,280
49,503
4,777
54,280
Earnings per share for profit from continuing operations attributable to
the ordinary equity holders of the company
- Basic (cents per share)
- Diluted (cents per share)
3
3
43.2
42.8
28.1
27.9
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
42
Consolidated Statement of Financial Position
As at 30 June 2016
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value
Other current assets
Income tax receivable
Total current assets
Non-current assets
Plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
Capital and reserves attributed to owners of the company
Non-controlling interests – equity
TOTAL EQUITY
Note
2016
$’000
2015
$’000
9
10
20
21
8
5
11
14
12
11
14
12
5
81,178
40,663
168,130
153,398
12
4,906
0
17
3,242
1,384
254,226
198,704
5,426
3,697
308,090
237,925
2,405
82
315,921
241,704
570,147
440,408
202,720
148,385
14,347
7,663
12,563
-
5,729
11,275
237,293
165,389
28,148
22,833
4,745
5,543
30,285
-
1,997
6,826
61,269
39,108
298,562
204,497
271,585
235,911
13(a)
13(b)
13(c)
24(b)
175,231
161,675
17,787
63,802
256,820
14,765
21,609
40,207
223,491
12,420
271,585
235,911
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes.
43
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Consolidated Statement of Cash Flows
For the year ended 30 June 2016
Note
Contributed
Equity
$’000
Retained
Earnings
$’000
Other
Reserves
$’000
Total
$’000
Non-
Controlling
Interests
$’000
Total Equity
$’000
99,823
26,449
(1,944)
124,328
8,556
132,884
-
-
-
26,367
-
26,367
2,727
29,094
-
23,136
23,136
2,050
25,186
26,367
23,136
49,503
4,777
54,280
Balance at 30 June
2014
Profit for the period
as reported in 2015
financial statements
Other comprehensive
income (net of tax)
Total comprehensive
income for the year
Transactions with owners in their capacity as owners:
Shares issued
Dividends paid
Non-controlling interest
on acquisition of
subsidiary
Share based payments
Balance at 30 June
2015
Profit for the period
as reported in 2016
financial statements
Other comprehensive
income (net of tax)
Total comprehensive
income for the year
13(a)
61,852
-
4
-
-
-
(12,609)
-
-
61,852
(12,609)
-
-
-
61,852
(12,609)
-
61,852
(913)
(13,522)
-
-
-
-
417
(913)
48,747
417
417
417
49,660
161,675
40,207
21,609
223,491
12,420
235,911
-
-
-
42,134
-
42,134
3,609
45,743
-
(3,765)
(3,765)
1,130
(2,635)
42,134
(3,765)
38,369
4,739
43,108
Transactions with owners in their capacity as owners:
Shares issued
Dividends paid
Non-controlling interest
on acquisition of
subsidiary
Share based payments
Balance at 30 June
2016
13(a)
13,556
-
4
-
-
-
(18,539)
-
-
13,556
(18,539)
-
-
-
(57)
(57)
13,556
-
13,556
(18,539)
(2,394)
(20,933)
-
(57)
-
-
-
(57)
(5,040)
(2,394)
(7,434)
175,231
63,802
17,787
256,820
14,765
271,585
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Transaction costs relating to acquisition of subsidiary
Dividends received
Interest received
Finance costs
Income tax (paid) / received
Net cash flows from operating activities
Cash flows from investing activities
Payment for plant and equipment
Payment for intangibles
Proceeds from sale of plant and equipment
Changes in financial assets
Purchase of controlled entities, contingent consideration
Purchase of controlled entities, net of cash acquired
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of new shares
Share issue transaction costs
Proceeds from borrowings
Repayments of borrowings
Dividends paid to company’s shareholders
Dividends paid to non-controlling interests in subsidiaries
Net cash flows from financing activities
Net increase / (decrease) in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2016
$’000
2015
$’000
255,159
198,863
(171,230)
(164,951)
(383)
2
155
(1,294)
(12,199)
70,210
(4,295)
(3,903)
16
5
(14,890)
(27,031)
(50,098)
-
(32)
75,571
(36,262)
(18,539)
(2,444)
18,294
38,406
2,109
40,663
81,178
(1,032)
5
102
(219)
(8,332)
24,436
(1,275)
(1,792)
6
-
(6,613)
(42,547)
(52,221)
45,549
(1,514)
35,900
(35,900)
(12,609)
(914)
30,512
2,727
5,936
32,000
40,663
9
21
8
7
13
4
9
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
44
45
FINANCIAL STATEMENTS
Notes to the Consolidated
Financial Statements.
Basis of preparation
Critical estimates, assumptions and judgements
Performance
48
49
50
This section explains the results and performance of the Group. It provides a breakdown of those
individual line items in the financial statements, that the Directors consider most relevant in the
context of the operations of the Group, or where there have been significant changes that required
specific explanations. It also provides detail on how the performance of the Group has translated
into returns to shareholders.
1. Segment reporting
2. Revenue
3. Earnings per share
4. Dividends paid and proposed
5.
Income tax expense
6. Expenses
Group structure
50
52
53
54
55
59
60
This section explains significant aspects of the Group structure and how changes have affected
the financial position and performance of the Group.
7. Business combinations
8.
Intangible assets
Capital
A core part of the Group’s operations is to maintain a strong financial position and low levels of
external debt. This section explains how the Group has performed in areas relating to capital
management.
9. Cash and cash equivalents
10. Trade and other receivables
11. Trade and other payables
12. Provisions
13. Contributed equity, reserves and retained earnings
14. Borrowings
46
60
63
65
65
66
67
68
70
73
Risk
74
This section discusses the Group’s exposure to various financial risks, explains how these affect
the Group’s financial position and performance, and what the Group does to manage these risks.
15. Impairment testing of goodwill
16. Financial risk management
Unrecognised items
74
77
79
This section provides information about items that are not recognised in the financial statements,
but could potentially have a significant impact on the Group’s financial position and performance.
17. Contingent liabilities
18. Commitments
19. Events occurring after the reporting period
Other items
79
79
80
81
This section provides information on items which require disclosure to comply with Australian
Accounting Standards and other regulatory pronouncements, however are not considered critical
in understanding the financial performance of the Group.
20. Other current assets
21. Plant and equipment
22. Fair value measurement
23. Share-based payments
24. Interest in other entities
25. Related party transactions
26. Parent entity financial information
27. Deed of cross guarantee
28. Auditors’ remuneration
29. Summary of significant account policies
81
81
82
84
86
89
90
92
94
95
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CONTENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CONTENTS iii. Foreign operations
The results and financial position of all the foreign
operations that have functional currencies different
to the presentation currencies are translated into the
presentation currency as follows:
• Assets and liabilities for each Consolidated
Statement of Financial Position item presented are
translated at the closing rate at the date of that
statement;
• Income and expenses for each profit and loss item
in the Consolidated Statement of Comprehensive
Income are translated at average exchange rates;
and
• All resulting exchange differences are recognised
as a separate component of equity.
Exchange differences arising from the translation
of any net investment in foreign operations and
of borrowings and other financial instruments
designated as hedges of such investments are
recognised in other comprehensive income. When a
foreign operation is sold or any borrowings forming
part of the net investment are repaid, a proportionate
share of such exchange differences is recognised in
the profit and loss in the Consolidated Statement of
Comprehensive Income as part of the gain or loss on
sale.
Goodwill and fair value adjustments arising on the
acquisition of foreign operations are treated as
the foreign operations’ assets and liabilities and
translated at the closing rate.
Basis of preparation
Basis of consolidation
a)
The consolidated financial statements comprise the
financial statements of Corporate Travel Management
Limited and its controlled entities (“CTM” or “the
Group”).
Subsidiaries are all entities over which the Group has
control. The Group controls an entity when the Group
is exposed to, or has right to, variable returns from
its involvement with the entity and has ability to affect
those returns through its power to direct the activities
of the entity.
The financial statements of subsidiaries are prepared
for the same reporting period as the parent company,
using consistent accounting policies. Adjustments
are made to bring into line any dissimilar accounting
policies that may exist.
In preparing the consolidated financial statements, all
intercompany balances and transactions, income and
expenses and profit and losses resulting from intra-
Group transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date
on which control is transferred to the Group and
deconsolidated from the date that control ceases.
b)
Foreign currency translation
i. Functional and presentation currency
Items included in each of the Group entities’ financial
statements are measured using the currency of
the primary economic environment in which the
entity operates (‘the functional currency’). The
consolidated financial statements are presented in
Australian dollars, which is the Group’s functional and
presentation currency.
ii. Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
prevailing at the transaction dates. Foreign exchange
gains and losses resulting from the settlement of
such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised
in the profit and loss in the Consolidated Statement
of Comprehensive Income, except when deferred in
equity as qualifying cash flow hedges and qualifying
net investment hedges.
Translation differences on non-monetary financial
assets and liabilities, such as equities held at fair
value through profit or loss, are recognised in profit or
loss in the Consolidated Statement of Comprehensive
Income as part of the fair value gain or loss.
Translation differences on non-monetary financial
assets, such as equities classified as available-for-
sale financial assets, are included in the fair value
reserve in other comprehensive income.
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CRITICAL ESTIMATES
Critical estimates, assumptions and judgements
Estimates and judgements are continually evaluated
and are based on historical experience and other
factors, including expectations of future events
that may have a financial impact on the entity and
that are considered to be reasonable under the
circumstances.
In the process of applying the Group’s accounting
policies, management is required to exercise
judgement. Those judgements involving estimations
that may have an effect on the amounts recognised in
the financial statements.
The Group makes estimates, assumptions and
judgements concerning the future. The resulting
accounting estimates will, by definition, seldom
equal the related actual results. The judgements,
estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next
financial year are discussed in this report, as follows:
• Value of intangible assets relating to acquisitions
- Refer note 7 – Business combinations.
• Impairment of goodwill
- Refer note 15 – Impairment testing of goodwill.
• Contingent consideration
- Refer note 7 – Business combinations.
- Refer note 11 – Trade and other payables.
- Refer note 22 – Fair Value Measurement.
• Allowance for doubtful debts
- Refer note 10 – Trade and other receivables.
• Override revenue
- Refer note 2 – Revenue.
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: BASIS OF PREPARATION Performance
This section explains the results and performance of the Group. It provides a breakdown of those individual line
items in the financial statements, that the Directors consider most relevant in the context of the operations of the
Group, or where there have been significant changes that required specific explanations. It also provides detail on
how the performance of the Group has translated into returns to shareholders.
1.
Segment reporting
Description of segments
a)
The operating segments are based on the reports reviewed by the group of key senior managers who assess
performance and determine resource allocation.
The Chief Operating Decision Makers (“CODM”) are Managing Director Jamie Pherous (MD), Global Chief
Financial Officer Steve Fleming (CFO) and Global Chief Operating Officer Laura Ruffles (COO).
The CODM considers, organises and manages the business from a geographic perspective. The CODM has
identified four operating segments being Travel Services Australia and New Zealand, Travel Services North
America, Travel Services Asia, and Travel Services Europe. There are currently no non-reportable segments.
Segment information provided to the Chief Operating Decision Makers
b)
The CODM assess the performance of the operating segments based on a measure of adjusted EBITDA. This
measurement basis excludes the effects of the costs of acquisitions and any acquisition related adjustments
during the year.
The segment information provided to the CODM for the reportable segments for the year ended 30 June 2016 is
as follows:
Travel
services
Travel
services
Travel
services
Travel
services
Australia
and New
Zealand
$’000
2016
1.
b)
Segment reporting (continued)
Segment information provided to the Chief Operating Decision Makers (continued)
Travel
services
Australia
and New
Zealand
$’000
2015
Travel
services
Travel
services
Travel
services
North
America
$’000
Asia
$’000
Europe
$’000
Other*
$’000
Total
$’000
Revenue from the sale of travel
services
74,415
47,526
57,272
17,226
Revenue from other sources
1,392
106
(12)
-
-
-
-
196,439
1,486
197,725
Total revenue from external
parties
Adjusted EBITDA
Interest revenue
Interest expense
Depreciation and amortisation
Income tax expense
Total segment assets
Total assets include:
Non-current assets
- Plant and equipment
- Intangibles
Total segment liabilities
75,607
47,632
57,260
17,226
25,698
9,451
15,854
2,925
(4,833)
49,095
96
362
2,270
6,655
2
131
2,538
1,808
5
-
1,600
2,284
-
86
1,132
500
-
380
-
(1,085)
103
959
7,540
10,162
77,681
94,125
171,783
96,809
10
440,408
1,933
44,560
27,594
652
74,530
33,368
728
40,985
92,865
384
77,850
17,020
-
-
3,697
237,925
33,650
204,497
North
America
$’000
Asia
$’000
Europe
$’000
Other*
$’000
Total
$’000
c)
Other segment information
i. Adjusted EBITDA
The reconciliation of adjusted EBITDA to operating profit before income tax is provided as follows:
Revenue from the sale of travel
services
76,447
77,241
69,086
36,962
2
259,738
Revenue from other sources
429
15
33
268
462
1,207
Total revenue from external
parties
Adjusted EBITDA
Interest revenue
Interest expense
Depreciation and amortisation
Income tax expense
Total segment assets
Total assets include:
Non-current assets
76,876
77,256
69,119
37,230
464
260,945
28,266
21,212
21,256
6,117
(7,821)
69,030
94
118
2,658
5,129
14
643
4,027
5,024
33
(3)
1,859
3,201
14
25
2,018
262
0
1,026
0
(1,490)
155
1,809
10,562
12,126
101,374
209,033
168,529
90,694
517
570,147
- Plant and equipment
2,729
655
845
- Intangibles
47,303
152,078
41,047
Total segment liabilities
32,665
106,760
100,444
1,197
67,661
18,282
(0)
0
5,426
308,090
40,411
298,562
*The other segment includes the Group support service, created to support the operating segments and growth of the global business.
50
Adjusted EBITDA
Interest revenue
Finance costs
Depreciation
Amortisation
One off items
Release of earn out payable
Acquisition / non-recurring costs
Profit before income tax from continuing operations
2016
$’000
69,030
155
(1,809)
(2,732)
(7,830)
2,505
(1,450)
57,869
2015
$’000
49,095
103
(959)
(1,920)
(5,620)
-
(1,443)
39,256
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
1.
Segment reporting (continued)
Accounting policy
AASB 8 Operating Segments requires a ‘management approach’, under which segment information is presented
on the same basis as that used for internal reporting purposes.
Operating segments are reported in a manner that is consistent with the internal reporting provided to the Chief
Operating Decision Makers. The CODM has been identified as a group of executives, which is the steering
committee that makes strategic decisions.
Goodwill is allocated by management to groups of cash-generating units on a segment level.
2.
Revenue
Revenue from the sale of travel services
Revenue from other sources
Rental income
Interest
Other revenue
Total revenue
Accounting policy
2016
$’000
2015
$’000
259,738
196,439
156
155
896
1,207
148
103
1,035
1,286
260,945
197,725
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity, and specific criteria set out are met. The amount of revenue is not
considered to be reliably measured until all contingencies relating to the sale have been resolved.
The Group bases its estimates on historical results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
• Revenue from sale of travel services
Revenue from sale of travel services represents net revenue earned via commissions and fees, and also
includes any commission payable by suppliers after completion of the transaction. Commission and fees
from the sale of travel services is recognised when a travel booking is received and travel documents are
issued. Commission payable by suppliers includes PDC’s, which is recognised upon receipt, the point at
which it can be reliably measured, and it is probable that future economic benefits will flow to the entity.
Revenue relating to volume incentives (override revenue) is recognised at the amount receivable when annual
targets are likely to be achieved.
• Rental income
Rental income is recognised when the right to receive revenue is established.
• Interest revenue
Interest income is recognised using the effective interest method.
• Dividends
Revenue is recognised when the Group’s right to receive the payment is established.
• Other revenue
Other revenue is recognised when the right to receive the revenue is established.
2.
Revenue (continued)
Critical estimates, assumptions and judgements
• Override revenue
In addition to commission payments, the Group is eligible for override payments from its suppliers. These
overrides are negotiated with individual suppliers and will typically include a combination of guaranteed
payments and volume incentives. The volume incentives are recognised at the amount receivable when
annual targets are likely to be achieved. The override revenue accrual process is inherently judgemental and
is impacted by factors which are not completely under Group’s control. These factors include:
- Year-end differences
As supplier contract periods do not always correspond to the Group’s financial year, judgements and
estimation techniques are required to determine anticipated future flown revenues over the remaining
contract year and the associated override rates applicable to these forecast levels.
- Timing
Where contracts have not been finalised before the start of the contract period, override and commission
earnings may have to be estimated until agreement has been reached.
- Re-negotiations
Periodic re-negotiation of terms and contractual arrangements with suppliers may result in additional
volume incentives, rebates or other bonuses being received. These payments may not be specified in
existing contracts.
3.
Earnings per share
The following information reflects the income and share data used in the basic and diluted earnings per share
computations:
2016
$’000
2015
$’000
Net profit attributable to ordinary equity holders of Corporate Travel Management Limited
42,134
26,367
Weighted average number of ordinary shares used as a denominator in calculating basic
earnings per share
97,578,403 93,813,273
Adjustments for calculation of diluted earnings per share:
Share appreciation rights (i)
Deferred shares on acquisitions (ii)
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
831,607
570,053
-
-
98,410,010 94,383,326
2016
Shares
2015
Shares
i. Share appreciation rights
Share Appreciation Rights (SARs) are considered to be potential ordinary shares. They have been included
in the determination of diluted earnings per share if the required hurdles would have been met based on the
Group’s performance up to the reporting date, and to the extent to which they are dilutive. The options have not
been included in the determination of basic earnings per share. Details relating to the options are set out in note
23.
52
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
3.
Earnings per share (continued)
ii. Deferred shares
A number of shares are offered as part of the contingent consideration payable component of a business
combination. They have been included in the determination of diluted earnings per share if the required hurdles
would have been met based on the Group’s performance up to the reporting date, and to the extent to which
they are dilutive. The deferred shares have not been included in the determination of basic earnings per share.
Accounting policy
Basic earnings per share are calculated as net profit attributable to owners of the Group, adjusted to exclude
any costs of servicing equity (other than dividends) divided by the weighted average number or ordinary shares,
adjusted for any bonus element.
Diluted earnings per share are calculated as net profit attributable to members of the parent, divided by the
weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element, and adjusted for:
• Costs of servicing equity (other than dividends);
• The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
• Other non-discretionary changes in revenues or expenses during the period that would result from the
conversion into potential ordinary shares.
4. Dividends paid and proposed
Ordinary shares
Final franked dividend paid for the year ended 30 June 2015 of 10 cents (2014:7.5
cents) per fully paid share
Interim franked dividend for the year ended 30 June 2016 of 9.0 cents (2015: 6.0 cents)
per fully paid share
2016
$’000
2015
$’000
9,712
6,789
8,827
5,820
18,539
12,609
Approved by the Board of Directors on 26 August 2016 (not recognised as a liability as
at 30 June 2016)
Final franked dividend for the year ended 30 June 2016 of 15 cents (2015: 10 cents) per
fully paid share
14,712*
9,699
*This dividend does not include shares issued post balance sheet date as part of the initial consideration for the acquisition of Travizon Travel.
Franking credit balance
2016
$’000
2015
$’000
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the financial year at 30% (2015: 30%)
5,676
5,358
Plus:
Franking credits that will arise from the income tax payable/(the receipt of income tax
receivable) as at the end of the financial year
1,412
2,639
Equals:
The amount of franking credits available for future reporting periods
7,088
7,997
Less:
The impact on the franking account of dividends proposed or declared before the
financial report was authorised for issue but not recognised as a distribution to equity
holders during the period
(6,305)
(4,157)
Balance of franking credits available for subsequent years
783
3,840
Accounting policy
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the financial year but not distributed at balance dates. Provisions
are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period.
5.
Income tax expense
Income tax expense
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
Deferred income tax
2016
$’000
2015
$’000
17,526
(498)
10,216
(359)
Relating to origination and reversal of temporary differences
(4,902)
305
Income tax expense reported in the Consolidated Statement of Comprehensive
Income
12,126
10,162
(Increase) decrease in deferred tax assets
Increase (decrease) in deferred tax liabilities
Numerical reconciliation of income tax expense to prima facie tax payable
Accounting profit before income tax
Tax at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible/(assessable) in calculating taxable
income:
Non-deductible amounts
Other amounts
Recognition of temporary differences previously not brought to account
Derecognition of temporary differences previously brought to account
Difference in overseas tax rates
Adjustments for current tax of prior periods
Research and development tax credit
Unrecognised tax losses
Income tax expense
(1,652)
(3,250)
(4,902)
57,869
17,361
206
913
1,119
(844)
(2,744)
(2,309)
(498)
(60)
101
(6,354)
12,126
(1,121)
1,426
305
39,256
11,777
538
(164)
374
54
-
(1,619)
(359)
(200)
135
(1,989)
10,162
54
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
5.
Income tax expense (continued)
5.
Income tax expense (continued)
Deferred income tax
Deferred tax assets
Provisions and expenses not yet deductible
Other
Set off against deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Difference tax to accounting depreciation / amortisation
Accrued income assessable in year of receipt
Other
Set off against deferred tax assets
Net deferred tax liabilities
Deferred tax assets expected to be recovered within 12 months
Deferred tax assets expected to be recovered after more than 12 months
Deferred tax liabilities expected to be recovered within 12 months
Deferred tax liabilities expected to be recovered after more than 12 months
2016
$’000
7,734
163
7,897
(5,492)
2,405
8,297
1,345
1,393
11,035
(5,492)
5,543
6,449
1,448
7,897
3,392
7,643
2015
$’000
3,715
30
3,745
(3,663)
82
4,269
5,241
979
10,489
(3,663)
6,826
2,837
908
3,745
5,946
4,543
11,035
10,489
Transfer
from
income tax
receivable
$’000
(Charged)/
credited
in year via
P&L
$’000
(Charged)/
credited
in year via
equity
$’000
Acquisition
of
subsidiaries
$’000
At 1 July
$’000
Change in
FX rates
$’000
At 30 June
$’000
3,715
30
3,745
2,205
30
2,235
-
-
-
-
-
-
1,515
(157)
2,625
137
1,652
-
(157)
-
2,625
1,121
-
1,121
348
-
348
-
-
-
36
(4)
32
41
-
41
7,734
163
7,897
3,715
30
3,745
Deferred tax
assets
2016
Provisions and
expenses not
yet deductible
Other
2015
Provisions and
expenses not
yet deductible
Other
56
Transfer
from
income tax
receivable
$’000
(Charged)/
credited
in year via
P&L
$’000
(Charged)/
credited
in year via
equity
$’000
Acquisition
of
subsidiaries
$’000
At 1 July
$’000
Change in
FX rates
$’000
At 30 June
$’000
4,269
5,241
979
10,489
2,842
3,264
(41)
6,065
-
-
-
-
-
-
-
-
672
(3,922)
-
(3,250)
-
-
431
431
3,298
58
8,297
-
-
3,298
26
1,345
(17)
67
1,393
11,035
(446)
(65)
1,255
683
4,269
1,873
-
(1)
1,426
1,026
961
-
-
1,255
104
5,241
(5)
782
979
10,489
Deferred tax
liabilities
2016
Difference tax
to accounting
depreciation /
amortisation
Accrued
income
assessable in
year of receipt
Other
2015
Difference tax
to accounting
depreciation /
amortisation
Accrued
income
assessable in
year of receipt
Other
Accounting policy
Tax consolidation
Corporate Travel Management Limited and its 100% owned Australian resident subsidiaries have formed a tax
consolidated group with effect from 1 July 2008. Corporate Travel Management Limited is the head entity of the
tax consolidated group. Members of the Group have entered into a tax sharing agreement in order to enable
Corporate Travel Management Limited to allocate income tax expense to the wholly owned subsidiaries on a
pro-rata basis. In addition, the agreement provides for the allocation of income tax liabilities amongst the entities
should the head entity default on its tax payment obligations.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement
provides for the allocation of current taxes to members of the tax consolidated group in accordance with their
accounting profit for the period, while deferred taxes are allocated to members of the tax consolidated group in
accordance with the principles of AASB 112 Income Taxes. Allocations under the tax funding agreement are
made at the end of each quarter.
The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the
subsidiaries’ inter-company accounts with the tax consolidated group head company, Corporate Travel
Management Limited.
The income tax expense (or revenue) for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused tax losses.
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
5.
Income tax expense (continued)
Accounting policy (continued)
The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the
countries where the Group’s subsidiaries and
associates operate and generate taxable income.
Management periodically evaluates positions taken
in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation.
It establishes provisions, where appropriate, on the
basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is provided in full, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial
statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business
combination that, at the time of the transaction,
affects neither accounting nor taxable profit nor loss.
Deferred income tax is determined using tax rates
and laws that have been enacted, or substantially
enacted, by the end of the reporting period and are
expected to apply when the related deferred income
tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only
if it is probable that future taxable amounts will be
available to utilise those temporary differences and
losses.
Deferred tax liabilities and assets are not recognised
for temporary differences between the carrying
amount and tax bases of investments in controlled
entities where the parent entity is able to control the
timing of the reversal of the temporary differences
and it is probable that the differences will not reverse
in the foreseeable future.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred
tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit
or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity,
respectively.
Other taxes
Revenues, expenses and assets are recognised net
of the amount of GST except:
• When the GST incurred on a purchase of goods
and services is not recoverable from the taxation
authority, in which case, the GST is recognised
as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
• Receivables and payables, which are stated with
the amount of GST included.
The net amount of GST recoverable from, or
payable to, the taxation authority is included as
part of receivables or payables in the Consolidated
Statement of Financial Position.
Cash flows are included in the Consolidated
Statement of Cash Flows on a gross basis and the
GST component of cash flows arising from investing
and financing activities, which is recoverable from,
or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to,
the taxation authority.
6. Expenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation of non-current assets – plant and equipment note 21
Amortisation of non-current assets – intangibles note 8
Finance costs
Bank loans
Net exchange differences
Other interest
Other expense disclosures
Defined contribution superannuation expense
Rental expense relating to operating leases
Accounting policy
2016
$’000
2015
$’000
2,732
7,830
10,562
689
(3)
1,123
1,809
3,589
11,269
1,920
5,620
7,540
225
(226)
960
959
3,151
8,455
Depreciation expense
Depreciation is calculated over plant and equipment using the following estimated useful lives and methods:
Item
Plant and equipment:
Leasehold improvements
Computer hardware
Furniture, fixture and equipment
Years
Method
5
2.5 – 3
4 – 10
Straight line
Straight line
Diminishing value or straight line
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted, if appropriate, at
each financial year end.
Amortisation expense
The useful lives of these intangible assets are assessed to be finite.
A summary of the amortisation policies applied to the Group’s intangible assets is as follows:
Item
Method
Internally generated / acquired
Client contracts and relationships
Straight line – ranging between two and
seventeen years
Intellectual property
5.00% - straight line
Acquired
Acquired
Software
Straight line – ranging between three
and five years
Acquired/ Internally generated
Where amortisation is charged on assets with finite lives, this expense is taken to the profit and loss in the
Consolidated Statement of Comprehensive Income in the expense category ‘depreciation and amortisation’.
Finance costs
This expense is recognised as interest accrues, using the effective interest method. This method calculates
the amortised cost of a financial liability and allocates the interest expense over the relevant period using the
effective interest rate, which is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability to the net carrying amount of the financial liability.
58
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE
Group Structure
7.
Business combinations (continued)
This section explains significant aspects of the Group structure and how changes have affected the financial
position and performance of the Group.
7.
Business combinations
SARA Enterprises, Inc. trading as Montrose Travel (“Montrose”)
On 1 January 2016, the Group effectively acquired 100% of the shares of Montrose Travel (“Montrose”), a travel
management company headquartered in Glendale CA, USA. The initial cost of the acquisition was $49,571,033
(US $35,805,157), paid in both cash $38,011,906 (US $27,456,000) and shares $11,559,127(US $8,349,157),
with further contingent consideration payable at 31 March 2017, as set out in this note.
The potential undiscounted amounts of future payments that the Group could be required to make, in cash,
based on the financial criteria relating to the earn-out period, is as follows:
• A multiple of earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending
31 December 2016, with the maximum payment being a capped value of $36,245,327 (US $26,180,000)
adjusted for the final working capital over the target working capital of $5,260,972 (US $3,800,000). The
expected adjustment at year end is $3,349,976 (US $2,419,688).
At the acquisition date, the projected result for the earn-out period, 12 months ending December 2016, was
assessed to determine the acquisition date fair value of this contingent consideration, as set out in the following
table.
Purchase consideration
Initial cash and shares paid / payable *
Acquisition date fair value contingent consideration – earn-out **
Working capital adjustment
Total acquisition date fair value consideration
$’000
49,571
36,245
3,350
89,166
* $38,011,906 (US $27,456,000) in cash and $11,559,127 (US $8,349,157) in shares paid on 1 January 2016.
** The contingent consideration has been accrued in the Statement of Financial Position within the Trade and other payables classification.
Management has not changed its expectation of contingent consideration payable.
The provisional fair values of the assets and liabilities of the Montrose Travel business, acquired as at the date of
acquisition, are as follows:
Cash and cash equivalents
Trade and other receivables
Other assets
Property, plant and equipment
Intangible assets: Client contracts and relationships
Intangible assets: Software
Deferred tax asset
Trade and other payables
Provisions
Deferred tax liability
Net identifiable assets / (liabilities) acquired
Goodwill on acquisition
Net assets acquired
60
Fair Value
$’000
10,981
13,106
1,747
149
6,144
2,755
2,625
(12,976)
(4,096)
(3,298)
17,137
72,029
89,166
SARA Enterprises, Inc. trading as Montrose Travel (“Montrose”) (continued)
As a part of the fair value balance sheet assessment, the Group has recognised a provision for a fixed price
contract, which recognised the estimated cost of fulfilling the obligations on a fixed price contract which may
exceed the future expected economic benefits, over its remaining term. This exposure is limited to one fixed
price contract.
The consideration payable for the combination effectively includes amounts in relation to the benefit of expected
synergies, revenue growth and the assembled workforce of the acquiree, which has resulted in goodwill of
$72,029,671 (US$52,027,031). The full value of the goodwill and client intangibles is not expected to be tax
deductible for USA tax purposes.
i. Acquisition costs
Acquisition-related costs of $294,861 (US $207,335) are included in administrative and general expenses in the
Statement of Comprehensive Income.
ii. Acquired receivables
The fair value of the acquired trade receivables is $13,106,469 (US $9,466,802). The gross contractual
amount for trade receivables due is $13,106,469 (US $9,466,802), of which no balances are expected to be
uncollectable.
iii. Revenue and profit contribution
The acquired business contributed revenues of $24,165,121 (US $17,772,727) and net profit after tax of
$5,640,479 (US $4,170,897) to the Group for the period 1 January 2016 to 30 June 2016. If the acquisition had
occurred on 1 July 2015, consolidated revenue and profit for the year ended 30 June 2016 would have been
$279,247,963 and $47,124,945 respectively.
Purchase consideration – cash outflow:
Outflow of cash to acquire subsidiary, net of cash acquired:
Purchase consideration
Cash consideration
Less: cash balances acquired
Outflow of cash – investing activities
$’000
38,012
(10,981)
27,031
Accounting policy
The purchase method of accounting is used to account for all business combinations regardless of whether
equity instruments or other assets are acquired. The consideration transferred is measured as the fair value
of the assets acquired, shares issued or liabilities incurred or assumed at the date of exchange, and, for
acquisitions prior to 1 July 2009, included costs directly attributable to the combination. For acquisitions after 1
July 2009, acquisition-related costs are expensed in the period in which the costs are incurred, rather than being
added to the cost of the business combination, as required by revised AASB 3 Business Combinations.
Where equity instruments are issued in a business combination, the fair value of the instruments is their
published market price as at the date of exchange. Transaction costs arising on the issue of equity instruments
are recognised directly in equity. The consideration transferred also includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
With limited exceptions, all identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are measured initially at their fair values at the acquisition date. The excess of the
consideration transferred, amount of any non-controlling interest in the acquired entity, over the net fair value
of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the consideration
transferred of the acquisition is less than the Group’s share of the net fair value of the identifiable net assets
of the subsidiary, the difference is recognised as a gain in the profit and loss in the Consolidated Statement of
Comprehensive Income, but only after a reassessment of the identification and measurement of the net assets
acquired.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE
Non-controlling interests in the results and equity of
subsidiaries are shown separately in the Consolidated
Statement of Comprehensive Income, Consolidated
Statement of Financial Position and Consolidated
Statement of Changes in Equity.
Critical estimates, assumptions and judgements
• Value of intangible assets relating to acquisitions
The Group has allocated portions of the cost of
acquisitions to client contracts and relationships
intangibles, valued using the multi-period excess
earnings method. These calculations require the
use of assumptions including future customer
retention rates and cash flows.
7.
Business combinations (continued)
Accounting policy (continued)
Where settlement of any part of the cash
consideration is deferred, the amounts payable in
the future are discounted to their present value, as at
the date of exchange. The discount rate used is the
entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an
independent financier under comparable terms and
conditions.
Contingent consideration is classified either as
equity or a financial liability. Amounts classified as
a financial liability are subsequently remeasured to
fair value, with changes in fair value recognised in
other income or other expenses in the Consolidated
Statement of Comprehensive Income. Any
subsequent adjustment to the final contingent
consideration, based on actual results as at 30
June 2016, will be reflected in the Statement of
Comprehensive Income.
The Group recognises any non-controlling interest, in
the acquired entity on an acquisition-by-acquisition
basis either at fair value or at the non-controlling
interests’ proportionate share of the acquired entity’s
net identifiable assets.
8.
Intangible assets
Year ended 30 June 2016
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/businesses [note 7]
Disposals
Amortisation charge
Exchange differences
Closing net book amount
Year ended 30 June 2015
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/businesses
Disposals
Amortisation charge
Exchange differences
Closing net book amount
Client
contracts and
relationships
$’000
Intellectual
property
$’000
Software
Goodwill
Total
$’000
$’000
$’000
32,590
(13,142)
19,448
19,503
-
6,144
-
(6,483)
284
19,448
26,445
(6,942)
19,503
12,478
-
7,993
-
(4,363)
3,395
19,503
283
(139)
144
114
39
-
-
(9)
-
144
244
(130)
114
99
25
-
-
(20)
10
114
12,366
(3,975)
8,391
2,753
4,389
280,425
(318)
280,107
215,555
-
325,664
(17,574)
308,090
237,925
4,428
2,755
72,029
80,928
(32)
(1,338)
(136)
8,391
-
-
(7,477)
(32)
(7,830)
(7,329)
280,107
308,090
5,774
215,831
(3,021)
(276)
215,555
94,260
-
248,294
(10,369)
237,925
109,031
1,791
99,602
107,595
-
-
-
(5,620)
25,128
30
21,693
2,753
215,555
237,925
2,753
2,194
1,766
-
-
(1,237)
Customer contracts
The customer contracts were acquired as part of a business combination (see note 7 for details). They are
recognised at their fair value at the date of acquisition and are subsequently amortised on a straight-line based
on the timing of projected cash flows of the contracts over their estimated useful lives.
Accounting policy
Acquired from a business combination
Intangible assets from a business combination are capitalised at fair value as at the date of acquisition.
Following initial recognition, the cost model is applied to the class of intangible assets.
Software acquired not as part of a business combination
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will
contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to
software and systems.
Gains or losses arising from the derecognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss in the
Consolidated Statement of Comprehensive Income when the asset is derecognised.
62
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE
As at the acquisition date, any goodwill acquired
is allocated to each of the cash-generating units
that are expected to benefit from the combination’s
synergies.
Impairment is determined by assessing the
recoverable amount of the cash-generating unit to
which the goodwill relates.
Where the recoverable amount of the cash-
generating unit is less than the carrying amount, an
impairment loss is recognised.
Where goodwill forms part of a cash-generating unit
and part of the operation within that unit is disposed,
the goodwill associated with the disposed operation
is included in the carrying amount of the operation
when determining the gain or loss on disposal of the
operation.
Disposed goodwill in this circumstance is measured
on the basis of the relative values of the disposed
operation and the portion of the cash-generating unit
retained.
8.
Intangible assets (continued)
Accounting policy (continued)
Software acquired not as part of a business
combination (continued)
For an asset that does not generate largely
independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the
asset belongs.
If any such indication exists and where the carrying
values exceed the estimated recoverable amount, the
assets or cash-generating units are then written down
to their recoverable amount.
Intangible assets are tested for impairment where
an indicator of impairment exists, and, in the case of
indefinite life intangibles, annually, either individually
or at the cash-generating unit level. Useful lives are
also examined on an annual basis and adjustments,
where applicable, are made on a prospective basis.
Goodwill
Goodwill acquired on a business combination
is initially measured at cost, being the excess of
the consideration transferred for the business
combination over the Group’s interest in the net fair
value of the acquiree’s identifiable assets, liabilities
and contingent liabilities.
Following initial recognition, goodwill is measured at
cost less any accumulated impairment losses.
Goodwill is reviewed for impairment, annually,
or more frequently, if events or changes in
circumstances indicate that the carrying value may
be impaired.
64
Capital
A core part of the Group’s operations is to maintain a strong financial position and low levels of external debt. This
section explains how the Group has performed in areas relating to capital management.
9.
Cash and cash equivalents
Cash at bank and on hand
Client accounts
2016
$’000
47,346
33,832
81,178
2015
$’000
14,013
26,650
40,663
Cash at bank earns interest at floating rates based on daily bank deposit rates: 2016: 0.00%-2.20% (2015:
0.00%-2.45%).
The client accounts earn interest at floating rates based on daily bank deposit rates: 2016: 0.00%-1.55% (2015:
0.00%-2.05%). The weighted average interest rate for the year was 0.26% (2015: 0.21%).
Bank overdraft facilities were in place but unused at 30 June 2016. Security for the bank overdrafts is detailed in
note 14.
Accounting policy
Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and on
hand and short-term deposits, with an original maturity of three months or less, that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
Client cash represents amounts from clients held before release to service and product suppliers, with a maturity
of three months or less.
For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents consist of cash and cash
equivalents as defined, net of outstanding bank overdrafts.
Reconciliation of profit after income tax to net cash inflow from operating
activities
Profit for the year
Adjustments for:
Depreciation and amortisation
Appreciation in value of investments
Make-good provision accretion
Non-cash interest
Net exchange differences
Net gain/(loss) on disposal of non-current assets
Changes in operating assets and liabilities
(Increase) in trade and other receivables
(Increase) in prepayments
(Decrease) in deferred tax balances
Decrease in current tax liability / (receivable)
Increase in payables and provisions
Net cash flow from operating activities
Disclosure of financing facilities – refer note 14
2016
$’000
2015
$’000
45,743
29,094
10,562
7,540
-
4
514
739
5
(2,863)
(1,377)
(2,670)
2,916
16,637
70,210
-
3
254
(671)
(3)
(14,819)
(162)
1,146
1,204
850
24,436
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE
10. Trade and other receivables
11.
Trade and other payables
Current
Trade payables (i)
Client payables (i)
Other payables and accruals (ii)
Acquisition payable (iii)
Contingent consideration payable (note 22)
Non-current
Other payables and accruals
Contingent consideration payable (note 22)
2016
$’000
2015
$’000
4,741
5,261
134,689
104,470
24,036
3,999
35,255
20,834
9,245
8,575
202,720
148,385
1,393
26,755
28,148
423
29,862
30,285
(i) Trade payables and client payables are non-interest bearing and are normally settled on terms ranging from 7 to 30 days.
(ii) Included within other payables and accruals are amounts due to related parties.
(iii)This balance represents amounts payable relating to business combinations which are no longer contingent on performance hurdles.
Fair value
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
Interest rate risk and liquidity risk
Information regarding interest rate risk and liquidity risk exposure is set out in note 16.
Accounting policy
Trade and other payables and client payables are carried at original invoice amount and represent liabilities
for goods and services provided to the Group to the end of the financial year that are unpaid and arise when
the Group becomes obliged to make future payments in respect of the purchase of these goods and services.
These amounts are unsecured and are paid within terms ranging from 7 to 30 days from recognition.
Client payables result from provision of travel services and products to clients. Trade payables result from other
activities required to provide those travel services, such as corporate services.
Current
Trade receivables (i)
Client receivables (i)
Allowance for doubtful debts
Deposits (ii)
Other receivables
2016
$’000
2015
$’000
23,083
25,230
129,848
100,820
(1,586)
(1,345)
151,345
14,872
1,913
124,705
26,053
2,640
168,130
153,398
(i) Trade and client receivables are non-interest bearing and are generally on terms ranging from 7 to 30 days.
(ii) Deposits relate to advance deposits to suppliers and deposits made on behalf of clients for leisure travel which will occur at a future date.
Supplier deposits within the Westminster Travel business pertains to securing access during high sales periods, which is the business practise
in Hong Kong.
As of 30 June 2016, trade and client receivables of $28,808,000 (2015: $27,474,000) were past due but not
impaired. Operating units are following up on these receivables with the relevant debtors and are satisfied that
payment will be received in full.
The ageing analysis of these trade and client receivables is as follows:
0 – 31 days
31 – 60 days
60+ days
Balance at 30 June
2016
$’000
2015
$’000
21,997
15,196
3,426
3,385
4,893
7,385
28,808
27,474
Other balances within trade, client and other receivables do not contain impaired assets and are not past due. It
is expected that these other balances will be received when due.
Detail regarding risk exposure relating to credit, market and interest rate risk have been disclosed in note 16.
Accounting policy
Trade and client receivables, which generally have 7-30 day terms, are recognised initially at fair value and,
subsequently, measured at amortised cost using the effective interest method, less an allowance for impairment.
Client receivables result from the provision of travel services to clients. Trade receivables result from other
activities relating to the provision of travel services, such as commissions payable by suppliers.
Collectability of trade and client receivables is reviewed on an ongoing basis at an operating unit level.
Individual debts that are known to be uncollectible are written off when identified. An impairment provision
is recognised when there is objective evidence that the Group will not be able to collect the receivable. The
amount of the impairment loss is the receivable carrying amount compared to the present value of estimated
future cash flows, discounted at the original effective interest rate.
The amount of the impairment loss is recognised in the profit and loss in the Consolidated Statement of
Comprehensive Income within administration expenses. When a trade receivable, for which an impairment
allowance had been recognised, becomes uncollectible in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against administration
expenses in the profit and loss in the Consolidated Statement of Comprehensive Income.
Critical estimates, assumptions and judgements
• Allowance for doubtful debts
The Group determines whether client and trade receivables are collectable on an ongoing basis. This
assessment requires estimations of the individual recoverability of each debt and, if considered uncollectable,
is subject to an impairment provision.
66
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL
12. Provisions
Movements in provisions
At 1 July 2015
Arising during the year
Acquisition of subsidiary
Utilised
Write back of provision
Changes due to change in foreign currency
At 30 June 2016
2016
Current
Non-current
2015
Current
Non-current
Accounting policy
Employee
entitlements
Make-good
provision
$’000
$’000
Provisions
for other
liabilities and
charges
$’000
3,907
4,759
670
(4,272)
-
(1)
5,063
3,567
1,496
5,063
2,593
1,314
3,907
834
112
-
(119)
-
18
845
128
717
845
151
683
834
8,531
42,368
3,426
(40,497)
(2,597)
169
11,400
8,868
2,532
11,400
8,531
-
8,531
Total
$’000
13,272
47,239
4,096
(44,888)
(2,597)
186
17,308
12,563
4,745
17,308
11,275
1,997
13,272
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the
present value of management’s best estimate of the expenditure required to settle the present obligation at the
end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised as interest expense.
Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract,
the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to any provision is presented in the profit and loss in the Consolidated Statement of
Comprehensive Income, net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance
cost.
12. Provisions (continued)
Accounting policy (continued)
iv. Bonus plans
Employee benefits
i. Short term obligations
Liabilities for wages and salaries including non-
monetary benefits, expected to be settled within 12
months of the reporting period, are recognised in
other payables and accruals in respect of employees’
services up to the reporting date. Liabilities for annual
leave and accumulated sick leave, expected to be
settled within 12 months of the reporting period, are
recognised in the provision for employee benefits in
respect of employees’ services up to the reporting
date. They are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities for
non-accumulated sick leave are recognised when the
leave is taken and are measured at the rates paid or
payable.
ii. Other long term obligations
Liabilities for long service leave are recognised in
the provision for employee benefits and measured
at the present value of expected future payments
to be made in respect of services provided by
the employees up to the reporting date, using the
projected unit credit method. Consideration is
given to the expected future wage and salary levels,
experience of employee departures, and periods of
service. Expected future payments are discounted
using market yields at the reporting date on national
government bonds, with terms to maturity and
currencies that match, as closely as possible, the
estimated future cash outflows.
The obligations are presented as current liabilities in
the Statement of Financial Position if the entity does
not have an unconditional right to defer settlement
for at least twelve months after the reporting period,
regardless of when the actual settlement is expected
to occur.
iii. Retirement benefit obligations
Contributions to defined contribution funds are
recognised as an expense as they become payable.
Prepaid contributions are recognised as an asset to
the extent that a cash refund or reduction in the future
payments is available.
The Group recognises a provision for future bonus
payments where it is contractually obliged or
where there is a past practice that has created a
constructive obligation.
v. Termination benefits
Termination benefits are payable when employment
is terminated before the normal retirement date, or
when an employee accepts voluntary redundancy in
exchange for these benefits. The Group recognises
termination benefits when it is demonstrably
committed to either terminating the employment of
current employees according to a detailed formal
plan without possibility of withdrawal, or providing
termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling
due more than 12 months after reporting date are
discounted to present value.
Make-good provision
In accordance with the Group’s contractual
obligations under tenancy lease agreements, the
Group is required to restore the leased premises on
the expiry of the lease term.
Provision for other liabilities and charges
i. Provision for unclaimed charges
The Group recognises a provision for unclaimed
charges, arising from the sale of travel services.
This provision pertains to the Asian business, and is
common practise in this market. Based on historical
data and past experience, management considers
the possibility of claims and if appropriate it is written
back to the consolidated income statement.
ii. Provision for fixed price contract
The Group recognises a provision where the
estimated cost of fulfilling the obligations on a fixed
price contract may exceed the future expected
economic benefits, over its remaining term. This
exposure is limited to one fixed price contract for a
remaining term of three and a half years.
68
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL
13. Contributed equity, reserves and retained earnings
13. Contributed equity, reserves and retained earnings (continued)
a)
Contributed equity
Ordinary shares
Issued and fully paid
2016
$’000
175,231
175,231
2015
$’000
161,675
161,675
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Group, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid
up on shares held.
On a show of hands, every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to
one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the company does not have a limited amount of authorised capital.
Movement in ordinary share capital
Opening balance as at 1 July 2014
2 July 2014
Shares issued
3 September 2014
Shares issued
3 September 2014
Shares issued
3 September 2014
Shares issued
31 December 2014
Shares issued
5 January 2015
Shares issued
5 January 2015
Shares issued
Initial consideration for the USTravel Alaska,
LLC. business combination.
Contingent consideration payment for the
TravelCorp LLC business combination.
Contingent consideration payment for the
R&A Travel Inc. business combination.
Initial consideration for the Avia International
Travel business combination.
Used for the acquisitions of Chambers Travel
Group Limited and Diplomat Travel Services.
Initial consideration for the Chambers Travel
Group Limited business combination.
Initial consideration for the Diplomat Travel
Services business combination.
Number of
shares
$’000
89,890,763
99,823
40,614
260
170,650
1,305
109,770
840
305,825
2,340
5,176,046
45,549
1,087,846
10,650
211,842
2,074
Total shares issued
7,102,593
Less: transaction costs arising on share issue
Deferred tax credit recognised directly in equity
63,018
(1,514)
348
At 30 June 2015
96,993,356
161,675
a)
Contributed equity (continued)
Movement in ordinary share capital
Number of
shares
$’000
Opening balance as at 1 July 2015
96,993,356
161,675
1 September 2015
Shares issued
Contingent consideration payment for the
TravelCorp LLC business combination.
3 September 2015
Shares issued
Provision of Lightning software purchase.
13 November 2015
Shares issued
Share appreciation rights issue.
4 January 2016
Shares issued
Initial consideration for the Montrose Travel
business combination.
Total shares issued
Less: transaction costs arising on share issue
Deferred tax credit recognised directly in equity
78,473
48,431
78,185
824
525
835
880,360
11,559
1,085,449
13,743
(32)
(155)
At 30 June 2016
98,078,805
175,231
Capital management
The Group maintains a conservative funding structure that allows it to meet its operational and regulatory
requirements, while providing sufficient flexibility to fund future strategic opportunities.
The Group’s capital structure includes a mix of debt (refer note 14), general cash (refer note 9) and equity
attributable to the parent’s equity holders.
When determining dividend returns to shareholders the Board considers a number of factors, including the
Group’s anticipated cash requirements to fund its growth, operational plan, and current and future economic
conditions. The Group is not bound by externally imposed capital requirements.
While payments may vary from time to time, according to these anticipated needs, the Board’s current policy is
to return between 50% to 60% of net profit after tax to shareholders.
Total borrowings
Total equity
Gearing ratio
2016
$’000
2015
$’000
37,180
-
271,585
235,911
14%
0%
70
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL
13. Contributed equity, reserves and retained earnings (continued)
14. Borrowings
(b) Reserves
The following table shows a breakdown of the ‘reserves’ line item as per the Consolidated Statement of Financial
Position, and the movements in these reserves during the year. A description of the nature and purpose of each
reserve is provided in the following table.
At 30 June 2014
Currency translation differences – current period
Deferred tax
Other comprehensive income
Share-based payment expenses
At 30 June 2015
Currency translation differences – current period
Deferred tax
Other comprehensive income
Share-based payment expenses
At 30 June 2016
Nature and purpose of other reserves
FX
translation
$’000
Share based
payment
$’000
(2,040)
24,097
(961)
23,136
-
21,096
(3,334)
(431)
(3,765)
-
17,331
96
-
-
-
417
513
-
-
-
(57)
456
Total
$’000
(1,944)
24,097
(961)
23,136
417
21,609
(3,334)
(431)
(3,765)
(57)
17,787
Financial facilities
On 24 December 2015, the Group renegotiated its facility with the ANZ Bank. The Group’s facility with ANZ now
includes accessible lines of credit totaling $72.9 million. In addition, there are facilities for overdraft, merchant
facilities and bank guarantees. The total facility is $75.8 million and has terms ranging from 5 months to 3 years.
A portion of the facility totaling $37.0 million (US$27.5 million), was initially drawn upon for the acquisition of
Montrose Travel as set out in note 7.
The amount of this facility used at 30 June 2016 relates mainly to:
a. Bank guarantees predominantly provided as a replacement for Asian subsidiaries cash bonds given to
suppliers, as at 30 June 2016 was $13.6 million (2015: $1.5 million).
b. Montrose Travel acquisition $32.3 million (US$24.0 million) (2015: nil).
c. Short term temporary funding for working capital cash flow needs globally was $4.9 million (2015: nil).
The facility is fully secured by a fixed and floating charge over all existing and future assets and undertakings
of Corporate Travel Management Group Ltd and material subsidiaries, excluding Westminster Travel Limited
(‘Westminster’) and Westminster owned subsidiaries.
On 19 November 2015, the Group renegotiated its facility with HSBC Bank. The Group’s facilities in Asia with
HSBC and other banks now includes accessible lines of credit totaling $9.5 million. In addition, there are facilities
for overdraft, merchant facilities and bank guarantees. The total facilities in Asia are $71.8 million, of which $37.3
million relates to bank guarantees required for supplier bonding purposes. The available facilities are multi-
currency but have been expressed in their Australia dollar (AUD) equivalent for purposes of this disclosure.
Breakdown of the existing borrowings balance in the following table below:
2016
$’000
9,426
4,921
22,833
37,180
2015
$’000
-
-
-
-
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other
comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is
recognised in the Consolidated Statement of Comprehensive Income when the net investment is sold.
Share-based payments
The share-based payments reserve is used to recognise the grant date fair value of deferred shares granted to
employees but not yet vested.
Current Borrowings
Montrose acquisition
Other working capital & cash flow
Non-current Borrowings
Montrose acquisition
Total Borrowings
Accounting policy
(c) Retained earnings
Movements in retained earnings were as follows:
Balance at 1 July
Net profit for the year
Dividends
Balance at 30 June
Accounting policy
2016
$’000
2015
$’000
40,207
42,134
26,449
26,367
(18,539)
(12,609)
63,802
40,207
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
All loans and borrowings are initially recognised at the fair value of consideration received less directly
attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently
measured at cost.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date.
Borrowing costs
Borrowing costs are recognised as an expense using the effective interest method. The Group does not
currently hold qualifying assets but, if it did, the borrowing costs directly associated with this asset would be
capitalised, including any other associated costs directly attributable to the borrowing and temporary investment
income earned on the borrowing.
Borrowings are removed from the Consolidated Statement of Financial Position when the obligation specified
in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another party and the consideration paid, including any non-
cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor
to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in the Consolidated
Statement of Comprehensive Income, which is measured as the difference between the carrying amount of the
financial liability and the fair value of the equity instruments issued.
72
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL
Risk
This section discusses the Group’s exposure to various financial risks, explains how these affect the Group’s
financial position and performance, and what the Group does to manage these risks.
15.
Impairment testing of goodwill
For the purposes of impairment testing, the cash generating unit has been defined as the lowest level of travel
services operations to which goodwill relates, where individual cash flows can be ascertained for the purposes
of discounting future cash flows.
The carrying amount of goodwill allocated to the cash generating unit:
Travel services - Australia and New Zealand
Travel services - North America
Travel services - Asia
Travel services - Europe
2016
$’000
2015
$’000
41,900
144,715
28,046
65,446
41,841
72,230
27,142
74,342
280,107
215,555
The recoverable amount of the cash generating unit has been determined based on financial budgets set for the
next financial year and management’s cash flow projections for subsequent years.
Travel services
Australia and
New Zealand
North
America
Asia
Europe
2016
Pre-tax nominal discount rate applied to the cash flow projection
16.10%
15.11%
12.58%
13.56%
Cash flows beyond the next financial year, up to year 5, are
extrapolated using an average growth rate of:
Revenue (years 2 – 5)
Operating expenses (years 2 – 5)
Terminal multiple of EBITDA in year 5
2015
3.50%
3.00%
6.35
3.50%
2.50%
7.18
3.50%
3.00%
8.82
5.10%
3.00%
8.11
Pre-tax nominal discount rate applied to the cash flow projection
17.78%
17.05%
15.09%
14.78%
Cash flows beyond the next financial year, up to year 5, are
extrapolated using a growth rate of:
Revenue (years 2 – 5)
Operating expenses (years 2 – 5)
Terminal multiple of EBITDA in year 5
3.50%
3.00%
5.79
3.50%
2.50%
6.02
3.50%
3.00%
6.70
6.68%
3.00%
7.53
Key assumptions used for value-in-use calculations for the years ended 30 June 2016 and 30 June 2015
The following key assumptions were applied to the cash flow projections when determining the value-in-use:
• Budgeted revenue – the basis used to determine the amount assigned to the budgeted sales volume is the
average value achieved in the year immediately before the budgeted year, adjusted for growth and other
known circumstances.
• Budgeted operating expenses – the basis used to determine the amount assigned to the budgeted costs is
the average value achieved in the year immediately before the budgeted year, adjusted for growth and other
known circumstances.
• Terminal multiple – calculated based on a multiple of estimated Year 5 earnings before interest, tax,
depreciation and amortisation.
15.
Impairment testing of goodwill (continued)
Sensitivity to changes in assumptions
Management recognises that there are various reasons the estimates used in these assumptions may vary. For
cash generating units, there are possible changes in key assumptions that could cause the carrying value of
the unit to exceed its recoverable amount. The changes required to each of the key assumptions to cause the
carrying value of a unit to exceed its recoverable amount are shown as follows:
Growth rates – Travel services – Australia and New Zealand
Possible change considered
Change required to indicate
an impairment
Revenue
Operating expenses
Growth rates – Travel services – North America
Revenue
Operating expenses
Growth rates – Travel services – Asia
Revenue
Operating expenses
Growth rates – Travel services – Europe
Revenue
Operating expenses
Accounting policy
Reduction in yield, rates,
client retention
Higher labour and / or other
support costs
Reduction in yield, rates,
client retention
Higher labour and / or other
support costs
Reduction in yield, rates,
client retention
Higher labour and/or other
support costs
Reduction in yield, rates,
client retention
Higher labour and/or other
support costs
Decrease to (4.69%)
Increase to 12.06%
Decrease to 0.92%
Increase to 5.91%
Decrease to (1.22%)
Increase to 7.61%
Decrease to 2.43%
Increase to 6.39%
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill
that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting
period.
For the purposes of impairment testing, the cash generating unit has been defined as the lowest level of travel
services operations to which goodwill relates, where individual cash flows can be ascertained for the purposes
of discounting future cash flows.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an
individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to
sell and it does not generate cash inflows that are largely independent of those cash flows from other assets or
groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the
asset belongs.
In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
74
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISKNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK 15.
Impairment testing of goodwill (continued)
16.
Financial risk management (continued)
Credit risk
b)
The Group trades only with creditworthy third parties
and the Group’s policy is that all clients which wish to
trade on credit terms are subject to credit verification
procedures, and subsequent risk limits, which are
set for each individual client in accordance with
the Group’s policies. For some client receivables,
the Group may also obtain security in the form of
deposits. In addition, receivable balances are
monitored on an ongoing basis, with the result that
the Group’s exposure to bad debts is considered
reasonable.
With respect to credit risk arising from the other
financial assets of the Group, comprising of cash
and cash equivalents, the Group’s exposure to credit
risk arises from default of the counter party, with a
maximum exposure equal to the carrying amount of
these instruments.
Critical estimates, assumptions and judgements
• Impairment of goodwill
The Group determines whether goodwill is
impaired on an annual basis. This assessment
requires an estimation of the recoverable amount
of the cash-generating units to which the goodwill
is allocated.
16.
Financial risk management
The Group’s principal financial instruments comprise
deposits with banks, overdraft facilities and
borrowings.
The main purpose of these financial instruments is to
raise finance for the Group’s operations. The Group
has various other financial assets and liabilities, such
as trade receivables and trade payables, which
arise directly from its operations. It is, and has been
throughout the period under review, the Group’s
policy that no trading in financial instruments shall be
undertaken.
The main risk arising from the Group’s financial
instruments are interest rate risk, liquidity risk, credit
risk and foreign exchange risk. The Board reviews
and agrees policies for managing each of these risks,
which are summarised in the note. The Group is not
exposed directly to commodity trading risks.
Interest rate risk
a)
As at 30 June 2016, the Group had interest bearing
borrowings – principally related to the acquisition
of Montrose, therefore the Group’s income and
operating cash flows would be impacted by changes
in market interest rates. Interest rate risk is managed
by way of proactive action by management and
advisors. At balance date CTM has no interest rate
cap, swap or options in place and has managed
interest rate risk by fixing interest payable for short
terms of 1 - 6 months on material borrowings. Under
the terms of CTM’s financing arrangements, interest
payable is determined using an appropriate base for
the currency borrowed. Changes in US LIBOR for
example could therefore affect CTM in the medium
or long term and accordingly, various strategies to
mitigate interest payable may be adopted should
material volatility or rates increases be forecast.
The Group has interest bearing assets (cash and
cash equivalents) with a short turnover period. The
interest earned from these assets is not considered
material to the Group.
The Group considers that there is an immaterial risk
exposure as a result of interest rate returns on these
assets.
76
Credit risk (continued)
b)
The Group’s cash (refer note 9), is held at financial institutions with the following credit ratings:
Australia and New Zealand
North America
Asia
Europe
Total
2016
$’000
Moody’s
Investor
Service
Rating
19,465
26,843
26,440
Aa2 - Aa3
Aa3 - A1
Aa1 - Ba1
8,430
Aa2 - Baa1
81,178
Client and Trade receivables are held with predominantly un-rated entities.
Liquidity risk
c)
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of
bank overdrafts, bank loans and hire purchase contracts.
The Group manages liquidity risk by monitoring cash flows and estimating future operational draws on cash
reserves. The following table reflects all contractually fixed repayments and interest resulting from recognised
financial liabilities as at 30 June 2016.
The Group’s financial liabilities comprise of trade and other payables, borrowings, and no derivative financial
instruments are held. The respective undiscounted cash flows for the respective upcoming fiscal years are
included in the following table. Cash flows for financial liabilities without fixed amount or timing are based on the
conditions existing at 30 June 2016.
The remaining non-derivative contractual maturities of the Group’s financial liabilities are:
1 year or less
1 – 5 years
Over 5 years
Contractual cash flows
Carrying amount
2016
$’000
2015
$’000
2016
$’000
2015
$’000
202,481
148,385
202,720
148,385
27,753
31,525
28,148
30,285
-
-
-
-
Total Trade and Other Payables
230,234
179,910
230,868
178,670
1 year or less
1 – 5 years
Over 5 years
Total Borrowings
14,347
22,833
-
37,180
-
-
-
-
14,347
22,833
-
37,180
-
-
-
-
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISKNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK
16.
Financial risk management (continued)
Foreign exchange risk
d)
The Group operates internationally and is subject to foreign exchange risk arising from exposure to foreign
currencies.
The Group adopts various procedures and policies to manage foreign currency risk where practicable.
These procedures include the use of natural hedges arising from trading operations and subsidiaries’ results,
forecasting of future cash flows by currency, and can include the use of forward exchange contracts where
abnormal transactions outside of operating activities could give rise to a material exposure – e.g. initial and
contingent consideration payments made in relation to acquisitions (note 11). Additionally, the Group has a
multi-currency debt facility which allows for borrowings in the relevant entity’s functional currency. At 30 June
2016, there are no forward exchange contracts in place.
The following table includes the financial assets and liabilities denominated in currencies other than the
functional currency of the respective entities and presents the Group’s exposure to foreign exchange risk at the
end of the reporting period, expressed in Australian dollars.
2016
USD
HKD
GBP
NZD
SGD
THB
JPY
EUR
SEK
CHF
Others
Total
2015
USD
HKD
NZD
SGD
THB
JPY
EUR
SEK
CHF
Others
Total
Borrowings
Total
$’000
-
-
$’000
17,012
808
(3,244)
(3,446)
Cash
and cash
equivalents
$’000
10,577
440
64
2
420
613
35
343
-
402
114
13,010
Trade
and other
receivables
$’000
7,807
410
-
27
114
1
202
121
-
9
287
8,978
Related
party loans
$’000
3,918
-
-
1,270
-
-
-
22
406
144
200
Trade
and other
payables
$’000
(5,290)
(42)
(266)
(20)
(1,134)
(1,502)
(3,788)
(277)
-
-
(1,207)
Cash and cash
equivalents
$’000
1,368
691
-
443
1,066
32
1,778
197
282
312
6,169
Trade
and Other
receivables
$’000
6,810
-
-
220
-
501
1,937
7
21
361
9,857
5,960
(13,525)
(3,244)
Related party
loans
Trade and
Other payables
$’000
-
-
1,336
-
-
-
-
-
-
-
1,336
$’000
(6,951)
(45)
-
(1,323)
(2,496)
(3,531)
(2,966)
(136)
(65)
(1,691)
(19,204)
-
-
-
-
-
-
-
-
1,279
(600)
(888)
(3,551)
209
406
555
(606)
11,179
Total
$’000
1,227
646
1,336
(660)
(1,430)
(2,998)
749
68
238
(1,018)
(1,842)
Unrecognised Items
This section provides information about items that are not recognised in the financial statements, but could
potentially have a significant impact on the Group’s financial position and performance.
17. Contingent liabilities
Guarantees / Letter of credit facilities
The Group has provided bank guarantees and letters of credit in relation to various facilities with vendors
and in accordance with local travel agency licensing and International Air Transport Association regulations.
Guarantees provided by the parent are held on behalf of other Group entities.
Guarantees provided for:
Various vendors
Total
2016
$’000
42,050
42,050
2015
$’000
26,176
26,176
Guarantees, as part of the overall facilities including term loans, overdraft, merchant facilities and bank
guarantees, are fully secured by a fixed and floating charge over all existing and future assets and undertakings
of Corporate Travel Management Group Ltd for Australia and New Zealand. There are no assets pledged as
security for facilities held in Asia (refer note 14).
There were no other contingencies as at reporting date (2015: $nil).
18. Commitments
Operating lease commitments – Group as lessee
a)
The Group has entered into commercial leases for the rental of premises. These leases have an average life of
between one and three years. There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but not more than five years
More than five years
Total
2016
$’000
9,943
20,619
3,076
33,638
2015
$’000
8,268
13,690
-
21,958
Capital commitments
b)
There is no significant capital expenditure contracted as at the end of the reporting period but not recognised as
liabilities.
Accounting policy
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a rights to use the asset.
Operating lease payments, which do not transfer to the Group substantially all the risks and benefits incidental
to ownership of the leased item, are recognised as an expense in the Consolidated Statement of Comprehensive
Income on a straight-line basis over the lease term.
Incentives for entering into operating leases are recognised on a straight-line basis over the term of the lease.
Lease income from operating leases, where the Group is a lessor, is recognised in income on a straight-line
basis over the lease term.
Based on the 2016 balances, a 10% stronger/ (weaker) Australian dollar against the currencies held, would
result in movement of $1,071,318/ ($1,308,389).
78
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: UNRECOGNISED ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK
19. Events occurring after the reporting period
Other than the following item, there have been no other matters, or circumstances, not otherwise dealt with in
this report, that will significantly affect the operation of the Group, the results of those operations or the state or
affairs of the Group or subsequent financial years.
The Group acquired 100% of the shares of All Performance Associates, Inc., Business Travel, Inc., and Travizon,
Inc., which make up the Travizon Travel business with effect from 1 July 2016. Travizon Travel is a highly
regarded corporate travel company that has been operating for more than 40 years and it is headquartered in
Boston, USA.
As part of this transaction, an initial consideration of $27,393,686 (US$ 21,000,000) was paid through a mixture
of cash and Corporate Travel Management Limited shares.
A further deferred consideration payment of $19,566,920 (US $15,000,000) will also be payable on 29
September 2017.
Due to the timing of the acquisition, CTM has not yet finalised the provisional calculation of the net identifiable
assets or purchased goodwill. The financial effects of the transactions have not been brought to account at 30
June 2016.
Other Items
This section provides information on items which require disclosure to comply with Australian Accounting
Standards and other regulatory pronouncements, however are not considered critical in understanding the financial
performance of the Group.
20. Other current assets
Prepayments
21. Plant and equipment
Year ended 30 June 2016
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/ businesses [note 7]
Transfers/reallocations
Disposals
Depreciation charge
Exchange differences
Closing net book amount
Year ended 30 June 2015
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/ businesses
Disposals
Depreciation charge
Exchange differences
Closing net book amount
2016
$’000
4,906
4,906
2015
$’000
3,242
3,242
Furniture,
fixtures and
equipment
$’000
3,894
(3,273)
621
1,071
463
-
(536)
211
(565)
(23)
621
4,818
(3,747)
1,071
593
525
296
(2)
(390)
49
1,071
Computer
equipment
$’000
3,988
(2,678)
1,310
804
660
-
542
(174)
(610)
88
1,310
3,154
(2,350)
804
627
501
177
-
(642)
141
804
Leasehold
improve-
ments
$’000
Other
Total
$’000
$’000
5,274
(1,959)
3,315
1,649
3,091
149
(6)
(31)
(1,431)
(106)
3,315
3,750
(2,101)
1,649
1,943
205
177
-
(766)
90
1,649
476
(296)
180
173
108
-
-
(3)
(126)
28
180
414
(241)
173
208
67
54
-
(122)
(34)
173
13,632
(8,206)
5,426
3,697
4,322
149
-
3
(2,732)
(13)
5,426
12,136
(8,439)
3,697
3,371
1,298
704
(2)
(1,920)
246
3,697
No additions during the year (2015: $nil) were financed under lease agreements.
Additions of $27,439 (2015: $56,000) relate to a lease make-good asset recognised under AASB 137 Provisions,
contingent liabilities and contingent assets.
80
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: UNRECOGNISED ITEMS
21. Plant and equipment (continued)
22. Fair value measurement (continued)
Accounting policy
Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the item.
All other repairs and maintenance costs are charged to the profit and loss in the Consolidated Statement of
Comprehensive Income during the reporting period in which they are incurred.
Impairment of non-financial assets, other than goodwill and intangible assets
At each reporting date, the Group assesses whether there is an indication that an asset may be impaired.
Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the
carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount.
The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable.
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
Derecognition
An item of plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal
proceeds and the carrying amount of the asset, is included in the Statement of Comprehensive Income in the
year the asset is derecognised.
22. Fair value measurement
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis:
• Contingent consideration.
Fair value hierarchy
AASB 13 requires disclosure of fair value measurements by level according to the following hierarchy:
a. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
b. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly or indirectly (level 2); and
c. Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level
3).
The following information represents the Group’s assets and liabilities measured and recognised at fair value at
30 June 2016:
Liabilities: Level 3 – Contingent Consideration
$62,009,514 (30 June 2015: $38,436,486).
Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 instruments for the year ended 30 June 2016:
Opening balance 1 July 2015
Additions
Paid out (cash and shares)
Release to profit and loss
Foreign exchange movement
Discount unwind
Closing balance 30 June 2016
Contingent
Consideration
$’000
38,437
36,245
(6,123)
(2,707)
(4,365)
523
62,010
There were no changes made to any of the valuation techniques applied as of 30 June 2016.
Valuation inputs and relationships to fair value quantitative information about the significant unobservable inputs
used in level 3 fair value measurements is summarised as follows:
Description:
Fair Value at 30 June 2016:
Valuation technique used:
Unobservable inputs:
Discount rate:
Contingent consideration
$62,009,514
Discounted cash flows
Forecast EBITDA
3.02%
The main level 3 inputs used by the Group in measuring the fair value of financial instruments are derived and
evaluated as follows:
• Discount rates: these are determined using a model to calculate a rate that reflects current market
assessments of the time value of money and the risk specific to the asset.
An increase/ (decrease) in the discount rate by 100 bps would (decrease)/increase the fair value by
($315,277)/$322,618.
• Forecast EBITDA, the entity’s knowledge of the business and how the current economic environment is likely
to impact it.
If forecast EBITDA were 5% higher or lower, the fair value would increase/decrease by $16,966/ ($2,730,491).
Fair values of other financial instruments
The Group also has a number of financial instruments which are not measured at fair value in the Statement of
Financial Position. For these instruments, their carrying value was considered to be a reasonable approximation
of their fair value.
Due to their short-term nature, the carrying amounts of the current receivables, current payables and current
borrowings are assumed to approximate their fair value.
Valuation processes
The finance department of the Group performs the valuations of assets required for financial reporting purposes,
including level 3 fair values. This team reports directly to the Chief Financial Officer (CFO) and the Audit
Committee (AC). Discussions of valuation processes and results are held between the CFO, AC, and the finance
team at least once every six months, in line with the Group’s reporting dates.
82
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
23. Share-based payments
23. Share-based payments (continued)
Share appreciation rights
The establishment of the CTM Share Appreciation Rights (SARs) Plan was approved by the Board on 19 October
2012. The SARs Plan is designed to provide long-term incentives for senior executives to deliver long-term
shareholder returns. Under the plan, participants are granted SARs which only vest if certain performance
standards are met, and the employee remains in service. Participation in the plan is at the Board’s absolute
discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed
benefits.
Once vested, a participant will be deemed to have automatically exercised all vested SARs and CTM will settle
its obligation in line with the SARs Plan. There is no consideration payable by the participant upon exercising of
vested SARs. When exercised, the conversion of a SAR to an equity or cash based settlement, is determined
using a formula referencing the relevant share prices of CTM, the number of SARs exercised, and is at the
Board’s sole absolute discretion.
Grants made during 2016 will vest on a scaled basis as follows:
• 50% vest at 80% target achievement;
• 75% vest at 90% target achievement; and
• 100% at 100% target achievement.
For equity based settlements, the calculation is as follows:
Equity Settlement Amount = ((SMV – BP) / SMV) x PQSR
For cash based settlements, the calculation is as follows:
Cash Settlement Amount = (SMV – BP) x PQSAR
Where:
Equity Settlement Amount – is the number of shares to be issued or transferred to the relevant
participant in equity settlement of the performance qualified SAR at exercise;
Cash Settlement Amount – is the amount paid to a participant in cash settlement of a performance
qualified SAR at exercise;
SMV – the Subsequent Market Value is the market value of a CTM Ltd share as at the performance
qualification date in connection with that SAR;
BP – the Base Price of the SAR as determined by the Board; and
PQSAR – is the total number of performance qualified SARs with the same Base Price held by the
relevant participant.
SARs granted under the plan carry no dividend or voting rights.
The following table summarises the SARs granted under the plan, no SARS expired during the periods below:
As at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
As at 30 June
Vested and exercisable at 30 June
2016
Number of
SARS
1,475,000
965,000
(125,000)
(130,000)
2,185,000
-
2015
Number of
SARS
495,000
1,215,000
-
(235,000)
1,475,000
-
Share appreciation rights (continued)
SARs outstanding at the end of the year have the following expiry date and share base prices:
Grant date
Expiry date
Base price
SARS
30 June 2016
SARS
30 June 2015
5 November 2012
5 November 2015
1 July 2013
1 July 2014
1 July 2015
1 July 2015
1 July 2016
1 July 2017
1 July 2017
1 July 2018
$4.00
$5.00
$7.00
$8.80
$11.50
-
300,000
940,000
50,000
895,000
125,000
310,000
1,040,000
-
-
2,185,000
1,475,000
Fair value of SARs granted
The assessed fair value at grant date of the SARs granted during the year ended 30 June 2016 was $1.26 per
SAR (2015 - $1.06). The fair value at grant date has been determined using a Black-Scholes pricing model that
takes into account the share price at the time of the grant, the exercise price, the term of the SAR, the expected
dividend yield, the expected price volatility of the underlying share and the risk free interest rate for the term of
the SAR.
The fair value model inputs for SARs granted during the year ended 30 June 2016 included:
• SARs are granted for no consideration and vest based on Corporate Travel Management Limited’s Earnings
per Share growth over a 3 year vesting period.
• Base price: $11.50 (2015 - $7.00).
• Grant Date: 1 July 2015 (2015 - 1 July 2014).
• Expiry Date: 1 July 2018 (2015 - 1 July 2017).
• Share Price at Grant Date: $10.64 (2015 - $6.39).
• Expected price volatility of the Group’s shares: 25% (2015 - 32.26%).
• Expected dividend yield: 3.0% (2015 - 3.0%).
• Risk-free interest rate: 1.95% (2015 - 2.64%).
The expected price volatility is based on the historic volatility, based on the remaining life of the SARS, adjusted
for any expected changes to future volatility due to publicly available information.
Expenses arising from SARS
Total expenses arising from share-based payment transactions recognised during the period as part of
employee benefit expense relating to share appreciation rights is $778,000 (2015: $417,000).
Accounting policy
Share-based compensation benefits are provided to employees by way of a SARs. The fair value of SARs
granted is recognised as an employee benefits expense, with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the rights granted, which includes any
market performance conditions and the impact of any non-vesting conditions but excludes the impact of any
service and non-market performance vesting conditions.
Non-market vesting conditions are included in assumptions about the number of SARs that are expected to
vest. The total expense is recognised over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each period, CTM revises its estimates of the number of
SARs that are expected to vest based on the non-market vesting conditions. CTM recognises the impact of the
revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
84
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
24.
Interests in other entities
Material subsidiaries
a)
The Group’s principal subsidiaries at 30 June 2016 are set out in the following table. Unless otherwise stated,
each entity has share capital consisting solely of ordinary shares that are held by the Group, and the proportion
of ownership interests held equals the voting rights held by the Group. The country of incorporation or
registration is also their principal place of business.
Name of entity
Place of
business/
country of
incorporation
Ownership
interest held
by The Group
Principal
activities
Ownership
interest held
by non-
controlling
interest
2016
2015
2016
2015
Corporate Travel Management
Group Pty Ltd*
Sainten Pty Ltd*
Floron Nominees Pty Ltd*
Australia
Australia
Australia
WA Travel Management Pty Ltd*
Australia
Travelogic Pty Ltd*
Corporate Travel Management
(New Zealand) Limited*
Travelcorp Holdings Pty Ltd*
Travelcorp (Aust) Pty Ltd*
ETM Travel Pty Ltd*
CTM Employee Share Trust
Australia
Australia
Australia
Australia
Australia
Australia
Corporate Travel Management
North America Limited*
United States of
America
Corporate Travel Management
North America, Inc (previously
known as TMC Group Inc)
United States of
America
SARA Enterprises, Inc (trading as
Montrose Travel)*
United States of
America
%
100
100
100
100
100
100
100
100
100
100
100
%
100
100
100
100
100
100
100
100
100
-
100
100
100
100
-
United Kingdom
100
100
Corporate Travel Management
(UK) Limited
Wealthy Aim Investments Limited
%
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Travel services
- Travel services
- Travel services
- Travel services
- Travel services
- Travel services
- Travel services
- Travel services
- Travel services
- Share Trust
-
Investment holding
- Travel services
- Travel services
-
Investment holding
British Virgin
Islands
75.1
75.1
24.9
24.9 Investment holding
Westminster Travel Limited
Hong Kong
Jecking Tours & Travel Limited
Hong Kong
75.1
75.1
75.1
75.1
24.9
24.9
24.9 Travel services
24.9 Travel services
Westminster Travel (China)
Limited
Hong Kong
75.1
75.1
24.9
24.9 Investment holding
Westminster Travel (Guangzhou)
Limited
People’s Republic
of China
Westminster Travel Consultancy
(Guangzhou) Limited
People’s Republic
of China
Beijing Westminster Air Service
Company Limited
People’s Republic
of China
Westminster Travel Limited
Macau
Wincastle Travel (HK) Limited
Hong Kong
Westminster Travel Limited
Taiwan
75.1
75.1
24.9
24.9 Investment holding
75.1
75.1
24.9
24.9 Travel services
75.1
75.1
24.9
24.9
Travel services/sale
of air tickets
75.1
56.3
75.1
75.1
56.3
75.1
24.9
43.7
24.9
24.9 Travel services
43.7 Travel services
24.9 Travel services
24.
Interests in other entities (continued)
a)
Material subsidiaries (continued)
Name of entity
Place of
business/
country of
incorporation
Ownership
interest held
by The Group
Ownership
interest held
by non-
controlling
interest
Principal
activities
Far Extent Investments Limited
Hong Kong
Westminster Travel (S) Pte. Ltd
Singapore
S Travel Holdings Limited
S Travel Limited
Profit Shine Holdings Limited
TLX Travel Limited
TLX Overseas Education Centre
Limited
British Virgin
Islands
Hong Kong
British Virgin
Islands
Hong Kong
2016
2015
2016
2015
%
75.1
75.1
%
75.1
75.1
%
24.9
24.9
%
24.9 Leasing of properties
24.9 Travel services
52.6
52.6
47.4
47.4 Investment holding
52.6
52.6
47.7
47.4 Travel services
75.1
75.1
24.9
24.9 Investment holding
75.1
75.1
24.9
24.9 Travel services
Hong Kong
75.1
75.1
24.9
24.9
Overseas educational
consultancy service
MIA Travel International Limited
Hong Kong
45.1
45.1
54.9
54.9 Travel service
Corporate Travel Management
(Europe) Limited
Corporate Travel Management
(United Kingdom) Limited
Corporate Travel Management
(Sweden) AB
Corporate Travel Management
(Netherlands) B.V.
Corporate Travel Management
(Switzerland) GmbH
Corporate Travel Management
(Germany) GmbH
United Kingdom
100
100
United Kingdom
100
100
Sweden
100
100
Netherlands
100
100
Switzerland
100
100
Germany
100
100
-
-
-
-
-
-
-
Investment holding
- Travel service
- Travel service
- Travel service
- Travel service
- Travel service
Corporate Travel Management
(France) SAS
France
60
60
40
40 Travel service
Chambers Travel Management
sro
Corporate Travel Management
(Norway) AS
Corporate Travel Management
(Denmark) ApS
Chambers Elite Limited
Interact Events Limited
Czech Republic
100
100
Norway
100
100
Denmark
United Kingdom
United Kingdom
100
100
100
100
100
100
-
-
-
-
-
- Dormant
- Travel service
- Dormant
- Dormant
- Dormant
* These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/14 issued by the
Australian Securities and Investments Commission. For further information refer to note 27.
86
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS 24.
Interests in other entities (continued)
25. Related party transactions
Non-controlling interests (NCI)
b)
The following table summarises the financial information for Wealthy Aim Investments Limited (“Westminster
Travel”), which has a non-controlling interest which is material to the Group.
The Westminster Travel Group and Chambers Travel Group Limited both include non-controlling interests which
are not material to the Group.
The amounts disclosed are before inter-company eliminations.
Summarised Statement of Financial Position
2016
$’000
2015
$’000
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated NCI
Summarised Statement of Comprehensive Income
Revenue
Profit for the period
Other comprehensive income
Total comprehensive income
Profit / (loss) allocated to NCI
Dividends paid to NCI
Summarised Statement of Cash Flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase / (decrease) in cash and cash equivalents
146,395
(98,569)
47,826
18,496
(1,409)
17,087
64,913
14,649
2016
$’000
68,754
15,552
(2,348)
13,204
3,611
2,394
2016
$’000
33,029
(656)
(28,405)
3,968
129,940
(90,454)
39,486
18,442
(1,108)
17,334
56,820
12,420
2015
$’000
57,261
11,808
9,747
21,555
2,727
913
2015
$’000
2,863
(390)
(3,135)
(662)
Parent entities
a)
The ultimate parent entity within the Group is Corporate Travel Management Limited.
Subsidiaries
b)
Interest in subsidiaries are set out in note 24.
c)
Key management personnel compensation
Short-term
Post-employment
Long-term benefits
Share-based payments
2016
$
2015
$
4,002,842
3,576,026
303,708
(27,599)
218,334
185,666
22,887
136,929
4,497,285
3,921,508
Detailed remuneration disclosures are provided in the Remuneration Report on pages 29-37.
d)
Transactions with other related parties
The following transactions occurred with related parties:
Expenses
Payment for rent and outgoings in relation to an office lease paid to a party related to
Mr Jamie Pherous
Payment for rent in relation to an accommodation lease paid to a related party Mr Chris
Thelen
Payment for consultancy services paid to Admiral Robert J. Natter
Other
Working capital advance
2016
$’000
2015
$’000
114
383
57
-
27
7
109
194
Outstanding balances with related parties
e)
The following balances are outstanding at the end of the reporting period in relation to transactions with related
parties:
Other receivables
Key management personnel
Other related parties
Other payables
Key management personnel (i)
Parties related to key management personnel
Other related parties
2016
$’000
-
-
2015
$’000
48
-
22,271
24,856
-
580
-
471
(i) The payable represents the present value of the estimated contingent consideration, which may be payable to Chris Thelen, as a part of the
acquisition of Chambers Travel Group Limited – refer to note 11.
88
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
25. Related party transactions (continued)
26. Parent entity financial information (continued)
Terms and conditions
f)
Directors for the Group hold other directorships as detailed in the Directors’ Report. Where any of these related
entities are clients of the Group, the arrangements are on similar terms to other clients.
All transactions were made on normal commercial terms and conditions and at market rates.
Outstanding balances are unsecured and are repayable in cash.
26. Parent entity financial information
Summary financial information
a)
The individual financial statements of the parent entity show the following aggregate amounts:
Statement of Financial Position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholders’ equity
Issued capital
Reserves
Retained earnings
Shareholders’ equity
Profit for the year
Total comprehensive income
2016
$’000
2015
$’000
3,506
255,286
28,332
28,819
226,467
1,348
205,606
1,572
2,835
202,771
195,635
182,080
10,136
20,696
8,887
11,804
226,467
202,771
27,370
16,621
27,370
16,621
Guarantees entered into by the parent entity
b)
The parent entity is party to the overall financing arrangements and related security as detailed in note 14 and
note 17.
Contingent liabilities of the parent entity
c)
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015.
Contractual commitments
d)
The parent did not have any contractual commitments at 30 June 2016 or 30 June 2015.
The amounts receivable/payable under the tax
funding agreement are due upon receipt of the
funding advice from the head entity, which is issued
as soon as practicable after the end of each financial
year. The head entity may also require payment of
interim funding amounts, to assist with its obligations
to pay tax instalments.
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities are
recognised as current amounts receivable from
or payable to other entities in the Group. Any
difference between the amounts assumed and
amounts receivable or payable under the tax funding
agreement are recognised as a contribution to or
distribution from wholly-owned tax consolidated
entities.
iii. Financial guarantees
Where the parent entity has provided financial
guarantees in relation to loans and payables of
subsidiaries for no compensation, the fair values of
these guarantees are accounted for in the parent
company and consolidated financial statements
Accounting policy
The financial information for the parent entity,
Corporate Travel Management Limited, has been
prepared on the same basis as the consolidated
financial statements, except as follows:
i.
Investments in subsidiaries
Investments in subsidiaries are accounted for at
cost in the financial statements of Corporate Travel
Management Limited.
ii. Tax consolidation legislation
Corporate Travel Management Limited and its
wholly-owned Australian controlled entities have
implemented tax consolidation legislation. The
head entity, Corporate Travel Management Limited
and the controlled entities in the tax consolidated
group account for their own current and deferred tax
amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a
stand-alone taxpayer in its own right.
In addition to its own current and deferred tax
amounts, Corporate Travel Management Limited also
recognises the current tax liabilities or assets and the
deferred tax assets arising from unused tax losses
and unused tax credits assumed from controlled
entities in the tax consolidated group.
The entities have also entered into a tax funding
agreement under which the wholly-owned entities
fully compensate Corporate Travel Management
Limited for any current tax payable assumed and
are compensated by Corporate Travel Management
Limited for any current tax receivable and deferred
tax assets relating to unused tax losses or unused
tax credits that are transferred to Corporate Travel
Management Limited under the tax consolidation
legislation. The funding amounts are determined by
reference to the amounts recognised in the wholly-
owned entities’ financial statements.
90
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
27. Deed of cross guarantee
Corporate Travel Management Limited, Corporate Travel Management Group Pty Ltd, Floron Nominees Pty
Ltd, Sainten Pty Limited, Travelogic Pty Limited, WA Travel Management Pty Ltd, Travelcorp Holdings Pty Ltd,
Travelcorp (Aust) Pty Ltd, ETM Travel Pty Ltd and Corporate Travel Management (New Zealand), Corporate
Travel Management North America Limited, Corporate Travel Management North America, Inc, Sara Enterprise,
Inc., are parties to a Deed of Cross Guarantee, under which each company guarantees the debts of the other
companies.
By entering into the Deed, the wholly owned Australian entities have been relieved from the requirement to
prepare a Financial report and Directors’ Report under Class Order 98/1418 (as amended by Class Orders
98/2017, 00/0321, 01/1087, 02/0248 and 02/1017) issued by the Australian Securities and Investments
Commission.
These companies represent a ‘closed group’ for the purposes of the Class Order and, as there are no other
parties to the deed of cross guarantee that are controlled by Corporate Travel Management Limited, they also
represent the ‘extended closed group’.
The following table presents a consolidated income statement, a Consolidated Statement of Comprehensive
Income and a summary of movements in consolidated retained earnings for the year ended 30 June 2016 of the
closed Group.
a)
Consolidated Statement of Comprehensive Income
2016
$’000
2015
$’000
160,957
2,983
163,940
(87,753)
(6,467)
(6,685)
(11,376)
(2,363)
(5,422)
129,083
-
129,083
(72,244)
(5,116)
(4,809)
(8,610)
(2,235)
(7,229)
(120,066)
(100,243)
(1,273)
42,601
(8,509)
34,092
9,730
9,730
43,822
(928)
27,912
(7,585)
20,327
12,266
12,266
32,593
Revenue
Other income
Total revenue and other income
Operating expenses
Employee benefits
Occupancy
Depreciation and amortisation
Information technology and telecommunications
Travel and entertainment
Administrative and general
Total operating expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income for the period, net of tax
Total comprehensive income for the year
92
27. Deed of cross guarantee (continued)
b)
Consolidated Statement of Financial Position
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value
Other current assets
Related party receivable
Total current assets
Non-current assets
Plant and equipment
Intangible assets
Investment in related parties
Deferred tax assets
Related party receivable
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Income tax payable
Provisions
Related party payable
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Related party payable
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
2016
$’000
2015
$’000
46,623
57,635
12
1,735
-
106,005
3,384
199,382
94,649
2,151
5,205
304,771
410,776
100,473
14,347
(255)
3,874
23,931
142,370
1,393
22,833
3,801
-
6,669
34,696
177,066
15,054
32,636
18
1,046
1,279
50,033
2,584
119,089
94,649
-
806
217,128
267,161
54,692
-
1,284
2,253
-
58,229
425
-
1,112
-
3,808
5,345
63,574
233,710
203,587
175,231
11,331
47,148
233,710
161,705
10,632
31,250
203,587
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
28. Auditors’ remuneration
The auditor of the Group is PricewaterhouseCoopers.
PricewaterhouseCoopers Australia:
Audits and review of the financial reports of the entity and any other entity in the
consolidated group
Other services in relation to the entity and any other entity in the consolidated
group:
Tax compliance
Tax services – acquisitions
Other advisory services
Total remuneration of PricewaterhouseCoopers Australia
Other PricewaterhouseCoopers network firms:
Other services in relation to the entity and any other entity in the consolidated
group:
Audit and review of the financial report
Tax compliance
Tax services – acquisitions
Other services
Total remuneration of PricewaterhouseCoopers network firms
Non-PricewaterhouseCoopers firms:
Services in relation to the entity and any other entity in the consolidated group:
Audit and review of the financial report
Total remuneration of PricewaterhouseCoopers network firms
29. Summary of significant accounting policies
2016
$
2015
$
493,597
465,300
179,047
-
33,270
705,914
439,088
207,770
5,490
40,722
693,070
133,206
133,206
151,362
42,218
18,832
677,712
394,716
104,326
37,283
-
536,325
-
-
Basis of preparation
a)
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act
2001. Corporate Travel Management Limited is a for-profit entity for the purpose of preparing the financial
statements.
i. Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars
($’000), unless otherwise stated.
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of financial assets and liabilities, fair value through Statement of Comprehensive Income.
94
29. Summary of significant account policies (continued)
New and amended standards
b)
There are no new standards and amendments to standards that are mandatory for the first time for the financial
year beginning 1 July 2015 that materially affect the amounts recognised in the current period or any prior period
and are not likely to affect future periods. The Group has not early adopted any amendments, standards or
interpretations that have been issued but are not yet effective in the current year.
Certain new accounting standards and interpretations have been published that are not mandatory for the
reporting period ending 30 June 2016 and have not been adopted early by the Group. The Group’s assessment
of the impact of these new standards and interpretations is set out in the following table.
Nature of change
Impact
Title of
standard
AASB 9
Financial
instruments
AASB 15
Revenue
from
contracts
with
customers
AASB 16
Leases
AASB 9 addresses the classification,
measurement and de-recognition of
financial assets and financial liabilities,
introduces new rules for hedge
accounting and a new impairment
model for financial assets.
The AASB has issued a new standard
for the recognition of revenue. This
will replace AASB 118 which covers
revenue arising from the sale of goods
and the rendering of services and
AASB 111 which covers construction
contracts.
The new standard is based on the
principle that revenue is recognised
when control of a good or service
transfers to a customer.
The standard permits either a
full retrospective or a modified
retrospective approach for the
adoption.
AASB 16 was issued in February 2016.
It will result in almost all leases being
recognised on the balance sheet, as
the distinction between operating and
finance leases is removed. Under the
new standard, an asset and a financial
liability to pay rentals are recognised.
The only exceptions are short-term
and low-value leases.
The accounting for lessors will not
significantly change.
Mandatory application
date / date of adoption
by the Group
Mandatory for financial
years commencing on or
after 1 January 2018.
The Group is currently
assessing whether it
should adopt AASB 9
before its mandatory
date.
Mandatory for financial
years commencing on or
after 1 January 2017.
Expected date of
adoption by the Group:
1 July 2018.
The new hedging rules align
hedge accounting closely with
the Group’s risk management
practices. As a general rule, it
will be easier to apply hedge
accounting in the future. The
new standard also introduces
a new impairment model
and expanded disclosure
requirements. Management is
currently assessing the effects
of applying the new standard on
the Group’s financial statements.
Management is currently
assessing the effects of applying
the new standard on the Group’s
financial statements. At this
stage, the Group is not able to
estimate the effect of the new
rules on the Group’s financial
statements. The Group will make
more detailed assessments of
the impact in the near future.
Mandatory for financial
years commencing on or
after 1 January 2019.
At this stage, the group
does not intend to adopt
the standard before its
effective date.
The standard will affect primarily
the accounting for the group’s
operating leases. As at the
reporting date, the group has
operating lease commitments
of $33.6 million. The Group has
yet to determine to what extent
these commitments will result in
the recognition of an asset and a
liability for future payments and
how this will affect the group’s
profit and classification of cash
flows.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
29. Summary of significant account policies (continued)
New and amended standards (continued)
b)
Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with policies
adopted by the Group.
Rounding of amounts
c)
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, the nearest dollar.
Directors’ Declaration
In the Directors’ opinion:
a)
The financial statements and notes set out on pages 42 to 96 are in accordance with the Corporations
Act 2001, including:
i. Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
ii. Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its
performance for the financial year ended on that date; and
b)
c)
There are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable; and
At the date of this declaration, there are reasonable grounds to believe that the members of the
extended closed group identified in note 27 will be able to meet any obligations or liabilities to which
they are, or may become, subject by virtue of the deed of cross guarantee described in note 27.
Note 29 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Mr Tony Bellas
Chairman
Brisbane, 26 August 2016
Mr Jamie Pherous
Managing Director
96
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
Independent auditor’s report to the members of Corporate
Travel Management Limited
Report on the financial report
We have audited the accompanying financial report of Corporate Travel Management Limited (the
company), which comprises the consolidated statement of financial position as at 30 June 2016, the
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year ended on that date, a summary of significant
accounting policies, other explanatory notes and the directors’ declaration for Corporate Travel
Management Limited (the consolidated entity). The consolidated entity comprises the company and
the entities it controlled at year’s end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 29, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor’s opinion
In our opinion:
(a)
the financial report of Corporate Travel Management Limited is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June
2016 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 29.
Report on the Remuneration Report
We have audited the remuneration report included in pages 29 to 37 of the directors’ report for the
year ended 30 June 2016. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Corporate Travel Management Limited for the year ended
30 June 2016 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Michael Shewan
Partner
Brisbane
26 August 2016
98
99
Shareholder Information (continued)
Substantial holders
c)
Substantial holders (including associate holdings) in the Company are set as follows:
Pherous Holdings Pty Ltd
HSBC Custody Nominees (Australia) Ltd
J P Morgan Nominees Australia Limited
UBS Group AG
Number
held
Percentage
Issued shares
21,500,000
10,834,397
7,144,913
5,009,870
21.65%
10.91%
7.19%
5.04%
Ordinary shares voting rights
On a show of hands, every member present at a meeting in person or by proxy shall have one vote. Upon a poll,
each share shall have one vote. There are currently no options held.
Shareholder Information
The shareholder information set out below was applicable at 29 July 2016.
Distribution of equity securities
a)
Analysis of numbers of equity security holders by size of holding:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
b)
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed as follows:
Number of
shareholders
4,663
3,808
606
407
52
9,536
Pherous Holdings Pty Ltd
HSBC Custody Nominees (Australia) Ltd
J P Morgan Nominees Australia Limited
Claire Lesley Gray
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Steven Craig Smith
Matthew Michael Cantelo
RBC Investor Services Australia Nominees Pty Limited
Matimo Pty Ltd
Mr Matthew Dalling
Ms Helen Logas
CS Fourth Nominees Pty Limited
Christopher Alexander Thelen
Doobie Investments Pty Limited
National Nominees Limited
Jeffrey B Smith
Mr Michael Pherous & Mrs Diane Pherous
HSBC Custody Nominees (Australia) Limited
2016
$’000
Percentage of
issued shares
21,500,000
10,834,397
21.65%
10.91%
7,144,913
4,767,759
4,749,439
2,313,997
2,267,716
2,069,595
1,856,820
1,648,412
1,221,197
1,179,796
1,113,729
991,446
905,547
882,893
689,784
671,220
533,488
533,053
7.19%
4.80%
4.78%
2.33%
2.28%
2.08%
1.87%
1.66%
1.23%
1.19%
1.12%
1.00%
0.91%
0.89%
0.69%
0.68%
0.54%
0.54%
67,875,201
68.34%
100
101
Corporate Directory
Directors
Secretary
Notice of annual general meeting
Tony Bellas
Stephen Lonie
Greg Moynihan
Jamie Pherous
Claire Gray (resigned 1 December 2015)
Admiral Robert J. Natter, U.S. Navy (Ret.)
Laura Ruffles (appointed 1 December 2015)
S. Fleming
B. Connell
The Annual General Meeting of Corporate Travel
Management will be held in Sydney on Thursday 27
October 2016 at 11 am at the office of McCullough
Robertson (Level 32, MLC Centre, 19 Martin Place,
Sydney NSW 2000).
Registered office in Australia
Level 24, 307 Queen Street
Brisbane QLD 4000
Share register
Auditor
Computershare Investor Services Pty Limited
117 Victoria Street
West End QLD 4101
Telephone: 1300 782 544
PricewaterhouseCoopers Australia
480 Queen Street
Brisbane QLD 4000
Stock exchange listing
Corporate Travel Management shares are listed on
the Australian Securities Exchange (ASX).
Website address
www.travelctm.com
ABN
17 131 207 611
102
103
REGISTERED OFFICE:
Level 24,
307 Queen Street,
Brisbane QLD 4000
www.travelctm.com