CTM Annual Report 2017
Conte
ents
Contents.
Chairman and Managing Director’s Report
Growing a Global Brand
Excellence in Every Market
Directors
Senior Leadership Team
Annual Financial Report
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Conteents Chairman
& Managing
Director's
Report
In the year to 30 June 2017, CTM’s
revenue of $324.4m was 24.3%
higher than the previous year.
Dear Shareholders,
Introduction
We are pleased to present the 2017 Annual Financial
Report of Corporate Travel Management Limited (“CTM”
or “the Group”). The Group has had another strong
year, its 7th year since the Company listed on the ASX 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 Group continued its expansion into the North
American market with the acquisition of 100% of the
shares of Boston based Travizon Travel, effective 1 July
2016. With the acquisition of Travizon Travel, the Group
has extended its coverage of the USA East Coast.
CTM also acquired 100% of the shares of Redfern
Travel and Andrew Jones Travel, both with effect
from 1 February 2017. Redfern Travel is a leading UK
Travel Management Company (TMC) headquartered in
Bradford, UK. Andrew Jones Travel is recognised as the
leading TMC in Tasmania, with over 30 years’ experience
in this market, based in Hobart.
The acquisitions of Redfern Travel and Andrew Jones
Travel were fully funded by a renounceable entitlement
offer, which was completed on 20 January 2017 and
was successful in raising approximately $71.1m. The
entitlement offer was fully underwritten and the allotment
of 4,744,475 shares took place on 24 January 2017.
Total equity of $401.4m at 30 June 2017 compares with
$273.4m at 30 June 2016, an increase of $128.0m or
46.8% 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:
• 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.
Outstanding performance
3. Productivity and Internal Innovation:
In the year to 30 June 2017, CTM’s revenue of $324.4m
was 24.3% higher than the previous year.
CTM’s statutory net profit after tax (“NPAT”) of $54.6m
for the year to 30 June 2017 compares with $42.1m
in the previous year, representing a 29.7% increase.
Underlying NPAT was $67.0m, when adding back one-off
acquisition costs of $1.4m and non-cash amortisation
of client intangibles of $11.1m, representing a 41.6%
increase on prior year.
Financial position
CTM is in a sound financial position, with total assets
of $740.2m at 30 June 2017, an increase of $168.2m
or 29.4% from 30 June 2016. The growth in assets is
due to the impact of the Travizon Travel and Redfern
Travel acquisitions completed during the year and the
continued strong operating performance of the business.
The continued generation of strong cash flows
contributed to the Group’s sound financial position, with
net cash flows from operating activities of $69.3m over
the year to 30 June 2017. On a normalised basis, taking
into account immediate-term timing differences, the
operating cash conversion rate is approximately 100%.
• 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 clients’ needs.
• Embraced a culture that represents our values and
business drivers.
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5
Employees
A competent and motivated workforce is integral to CTM’s success. CTM
employs over 2,200 employees (full time equivalent).
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.
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 2018, 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.
CTM’s continued investment in innovative client facing technology, particularly
the introduction of CTM SMART Technology, coupled with the scale in presence
in North America and Europe, has the Company well positioned for growth.
Geographic diversification is important in driving the sustainable performance
and managing risk. CTM is leveraged to the world’s largest markets, with over
70% of profit expected to be derived outside of Australia. CTM has regional
technology hubs in each global region to accelerate client facing technology
development and solve regionally specific needs.
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.
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 18 cents per share on 22 August 2017,
which will be paid on 5 October 2017 to all shareholders registered on 8
September 2017.
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.
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Tony Bellas
Chairman
Corporate Travel Management Limited
22 August 2017
Jamie Pherous
Managing Director
Corporate Travel Management Limited
22 August 2017
Growing a
global brand
CTM’s growth strategy is founded on a robust and proven
business model, combining personalised service excellence
with innovative technology solutions which deliver a return
on investment to our customers.
This financial year has seen continued growth for CTM in every global market, reflecting both
strong organic growth from new client wins and client retention, and the continued execution of
the Company’s acquisition strategy.
The recent acquisitions of UK-based Redfern Travel and Tasmanian-based Andrew Jones Travel
continue to strengthen CTM’s position as a global travel management company, enabling us to
service our customers seamlessly in new regional areas whilst leveraging opportunities in new
market niches.
CTM operates a highly differentiated business model. Our travel solutions are developed and
delivered by local travel consultants and strategic account management teams in every region
– a model which we replicate successfully around the world. We understand the complexities
and local market nuances of every market we operate in, and ensure that we attract and retain
the industry’s most talented professionals who truly understand their customer’s local and global
travel needs. We believe the critical combination of localised customer support and tailored
technology solutions underpins our customer’s and our business’s ongoing success.
CTM’s global footprint continues to expand year on year, and our extensive global partner
network provides our customers with consistency and assurance wherever they travel. Through
this network, our customers receive the same high level of customer-service and local market
expertise they know and expect from CTM, supported by consistent systems and processes in
more than 70 countries around the world.
Technology remains central to
delivering value and productivity to
customers in all corners of the world.
CTM’s SMART Technology suite of
travel tools is being progressively
developed in all global markets,
giving our customers access to the
most innovative and meaningful travel
technology at their fingertips wherever
their travels take them.
As our global footprint continues to
grow, providing customised solutions
which drive value to our customers at
every step of their journey will remain
our priority.
CTM operates a highly differentiated business model.
Our travel solutions are developed and delivered
by local travel consultants and strategic account
management teams in every region – a model which
we replicate successfully around the world.
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Growing a G global brand G ng a and Excellence in
Every market
EUROPE
Best Travel
Management Company
Business Travel Awards
(£50m to £200m annual UK sales)
Corporate Travel Management
Top 50 Travel
Agencies Award
TTG Travel Awards
Corporate Travel Management
NORTH AMERICA
ASIA
North America’s
Leading Travel Agency
World Travel Awards
Allure Travel by CTM
#11 Travel Weekly
Power List
Travel Weekly’s Power List
Corporate Travel Management
Top Agency
Award
Singapore Airlines
Corporate Travel Management
Best Travel Agency
Hong Kong
TTG Travel Awards
Westminster Travel
Top Passenger
Agent Award
Cathay Pacific Airways
Corporate Travel Management
Best Progress
Award
Air China/Shenzhen Airlines
Corporate Travel Management
Our customer-centric
travel solutions are
award-winning around
the world and underpin
our ongoing success.
AUSTRALIA AND NEW ZEALAND
Best National Travel
Management Company
AFTA Awards
Corporate Travel Management
AFR Most Innovative
Companies List
AFR Most Innovative Companies List
Corporate Travel Management
Best Travel Agency
Manager
AFTA Awards
Andre Moten, COO
Travel Executive
of the Year
Association of Travel Management
Companies (ATMC)
Scott Ward, GM Victoria
Best Business Events
Travel Agency
AFTA Awards
Event Travel Management
CIO Magazine’s
CIO 50 list
CIO Magazine
Tom Clark, Global CTO
Best Agency
Manager
AFTA Awards
Cherie Drummond,
Operations Manager NSW
Outstanding Team
Achievement Award
BAE Commercial and
Procurement Awards
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Excellence inEvery marketExcellence inEvery marketExcellence inEvery market Directors
Tony Bellas
Chairman
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
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
Independent Non-Executive Director
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.)
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
Executive Director
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.
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DirectorsDirectorsDirectors Senior
Leadership team
Jamie Pherous
Managing Director
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.
Steve Fleming
Global Chief Financial Officer
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
24 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
Executive Director, Global COO & CEO Australia / New Zealand
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 Ruffles is responsible
for all aspects of CTM’s business performance. She joined CTM in 2010 and has
been a key contributor to its successful growth.
Debbie Carling
CEO Europe
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 led 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.
Larry Lo
CEO Asia
Larry Lo brings 24 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
CEO North America
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.
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SeniorSeniorLeadership teamLeadership teamLeadership team Annual Financial Report.
Annual Financial Report
Directors’ Report
Corporate Governance Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
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39
40
41
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44
94
95
103
105
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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 2017.
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.
• Admiral Robert J. Natter, U.S. Navy (Ret.).
• Laura Ruffles.
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.
Directors’ Report (continued)
Review of operations (continued)
Further acquisitions (continued)
• Andrew Jones Travel (AJT) is recognised as the leading TMC in Tasmania, with over 30 years’ experience in
this market, based in Hobart. The Tasmanian corporate market is particularly leveraged to expansion in key
markets, particularly aquaculture, food and wine, that are now exporting into the expanding Asian markets.
AJT also services three of the largest Australian Sporting Bodies and Tasmanian Government departments,
which provides CTM with further leverage to grow into these important specialised market segments.
In order to ensure best utilisation of acquired skills and strengths, CTM new business wins are often serviced out
of newly acquired offices.
Following these acquisitions, the CTM network provides localised service solutions to clients in more than 70
countries and employs over 2,200 FTE staff.
Group financial performance
CTM’s key financial metrics are summarised in the following table:
Dividends
Dividends paid to members during the financial year were as follows:
Revenue and other income
EBITDA adjusted for one-off non-recurring / acquisition costs (adjusted
EBITDA)
Net profit after tax (NPAT):
NPAT - Attributable to owners of CTD
One-off non-recurring / acquisition costs (tax effect)
Underlying NPAT - Attributable to owners
Amortisation of client intangibles
Underlying NPAT - Attributable to owners (excluding acquisition
amortisation)
2017
$’000
2016
$’000
325,874
264,839
98,615
69,030
57,838
54,556
45,743
42,134
1,376
(1,306)
55,932
11,100
40,828
6,483
Change
%
23%
43%
26%
29%
37%
67,032
47,311
42%
The net profit after tax of the Group for the financial period amounted to $54,556,000 (2016: $42,134,000). The
result was underpinned by a 24% increase in revenue, and includes a full year contributed results from the
acquisition of Travizon Travel and the five months contributed results from the acquisitions of Redfern Travel and
Andrew Jones Travel, both acquired on 1 February 2017.
In addition, adjusted EBITDA grew by 42.9% to $98.6m, with the reconciliation to profit before income tax
from continuing operations as set out in Note 1 in the Financial Statements. Although recent acquisitions have
contributed to this growth, importantly, over $16.0m of the adjusted EBITDA increase has resulted from organic
growth. Market adoption of CTM’s SMART technology program and further expansion of the CTM’s global
network were considered to be key contributing factors.
Final ordinary dividend for the year ended 30 June 2016 of 15.0 cents per fully paid share paid on 6
October 2016
Interim ordinary dividend for the year ended 30 June 2017 of 12.0 cents per fully paid share paid on
12 April 2017
Total dividends paid
2017
$’000
14,928
12,626
27,554
Since the end of the financial year, the Directors have recommended the payment of a final ordinary dividend of
$18,939,825 (18.0 cents per fully paid share), to be paid on 5 October 2017 out of retained earnings at 30 June
2017.
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 acquisitions
On 1 July 2016, the Group continued its expansion into the North American market with the acquisition of 100%
of the shares of All Performance Associates, Inc., Business Travel, Inc., and Travizon, Inc., which make up
Travizon Travel, a travel management group headquartered in Boston MA, USA. With the acquisition of Travizon
Travel, the Group has extended its coverage of the USA East Coast.
On 1 February 2017, CTM acquired 100% of the shares of Arizonaco Limited and Portall Travel Limited, trading
as Redfern Travel and Andrew Jones Travel Pty Ltd, trading as Andrew Jones Travel:
• Redfern Travel (Redfern) is a leading UK Travel Management Company (TMC), specialising in delivering
on-line travel services, through a fully automated and integrated proprietary travel system, headquartered in
Bradford, UK. Redfern’s key competitive advantage is its proprietary, highly automated, end-to-end integrated
system. Redfern’s business base is corporate travel, with a high concentration in the UK Government sector
and low exposure to Brexit affected industries.
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Directors’ Report (continued)
Directors’ Report (continued)
Review of operations (continued)
Group financial performance (continued)
Net profit after tax:
Attributable to members
Attributable to minority interest
Shareholder funds
Basic EPS (cents per share)
Basic EPS growth
Return on equity
Dividend per share - year end
Dividend per share - interim
2017
$’000
2016
$’000
2015
$’000
2014
$’000
54,556
3,282
42,134
3,609
26,367
15,845
2,727
734
281,847
175,231
161,675
99,823
53.5
24%
19%
43.2
54%
24%
28.1
48%
16%
18.0
15.0
10.0
12.0
9.0
6.0
19.0
28%
16%
7.5
4.5
12.0
Dividend per share - full financial year
30.0
24.0
16.0
CTM continues to maintain a strong financial position, with net current assets of $11.0m and total equity of
$401.4m. At 30 June 2017, the Group had $45.4m in borrowings, partially to fund the Montrose Travel initial and
deferred acquisition payments, and has continued to generate strong operation cash flows.
Current trade and other payables increased during the period by $30.3m, which includes current payables
relating to acquisitions of Travizon Travel ($20.5m) and Redfern Travel ($9.7m).
CTM’s business growth has been funded through a combination of operating cash flow and short term debt. In
addition to the Travizon Travel business acquisition, there has been further capital expenditure of $13.9m during
the year, which has been funded from operating cash flow.
The acquisitions of Redfern Travel and Andrew Jones Travel were fully funded by a renounceable entitlement
offer, which was completed on 20 January 2017, and was successful in raising approximately $71.1m. The
entitlement offer was fully underwritten and the allotment of 4,744,475 shares took place on 24 January 2017.
The Group renegotiated one of its bank facilities during the year, which resulted in further access to capital to
assist with continued growth. This facility was utilised to fund the Montrose earnout payment of USD 26.0m in
March 2017.
The Company continues to pay dividends at its stated divided policy level, with a final dividend declared at 18
cents per share (full year: 30.0 cents). This dividend represents an increase of 25% on the preceding period.
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 net of GST (unaudited)
2017
$’000
2016
$’000
4,161,943
3,587,063
The Group maintained strong growth in TTV (unaudited), despite the impact from ticket price decline and non-
core business sale in Asia and global FX translation, which had an estimated combined negative impact of
($565m).
Review of operations (continued)
Constant currency
Due to a significant portion of the Group’s operations being outside Australia, the Group is exposed to
currency exchange rate translation risk. i.e. the risk that the Group’s offshore earnings fluctuate when reported
in Australian dollars. The Group’s regional results for the 2017 financial year have also been provided on a
constant currency basis in the following commentary (i.e. based on the 2017 local currency, the revenue and
EBITDA for the regions have been converted at the average rate for the 2016 financial year), to remove the
impact of foreign exchange movements from the Group’s performance against the prior year. The constant
currency comparatives are not compliant with Australian Accounting Standards.
Review of underlying operations
The key financial results by region are summarised in the following table:
CTM Consolidated
Australia & New
Zealand
North America
Asia
Europe
Group
Jun-17 Jun-16
Jun-17 Jun-16
Jun-17 Jun-16
Jun-17 Jun-16
Jun-17 Jun-16
Jun-17 Jun-16
REPORTED AUD
$m
$m
$m
Revenue
324.4
260.9
24% 91.5
Adj. EBITDA
98.6
69.0
43% 36.3
$m
76.9
28.3
$m
19% 126.7
28% 35.9
$m
77.2
21.2
$m
$m
64% 56.7
69.1 (18%)
69% 18.1
21.3
(15%)
$m
49.2
18.4
$m
37.2
32%
$m
0.3
$m
0.5
6.1 202% (10.1)
(7.9)
28%
Adj. EBITDA as a
% of Revenue
30.4% 26.4% 15% 39.7% 36.8%
8% 28.3% 27.5%
3% 31.9% 30.8%
4% 37.4% 16.4% 128%
CONSTANT CURRENCY*
Revenue
341.1
260.9
31% 91.5
76.9
19% 131.3
77.2
70% 59.0
69.1
(15%)
Adj. EBITDA
104.0
69.0
51% 36.3
28.3
28% 37.2
21.2
75% 18.7
21.3
(12%)
59.0
21.9
37.2
59%
0.3
0.5
6.1 259% (10.1)
(7.9)
28%
Adj. EBITDA as a
% of Revenue
30.5% 26.4% 15% 39.7% 36.8%
8% 28.3% 27.5%
3% 31.7% 30.8%
3% 37.1% 16.4% 126%
* Constant currency reflects June 2016 as previously reported. June 2017 represents local currency converted at FY2016 average foreign
currency rates.
Australia and New Zealand (“ANZ”)
Revenue rose by 19.0% to $91.5m. The increased revenue has flowed through to the adjusted EBITDA, which
rose by 28.3% to $36.3m with an improved margin of 39.7%, which is up from 36.8% in the prior comparative
period. The region continued to benefit from top line growth and productivity initiatives resulting in increased
revenue per FTE generation. 80% of all transactions now originate online.
North America
Revenue rose by 64.1% to $126.7m as a result of new business wins and inclusion of the Travizon Travel
acquisition from 1 July 2016. The adjusted EBITDA rose by 69.0% to $35.9m and the adjusted EBITDA margin
improved from 27.5% in 2016 to 28.3%, due to a combination of client wins, integration success and leveraging
scale.
This result was particularly encouraging given the currency depreciation and the effect of the recent US election
on general economic activity. On a constant currency basis, revenue for North America increased by 70% and
adjusted EBITDA increased by 75% over the previous comparative period.
Europe
The operation in Europe contributed $49.2m in revenue during the year, an increase of 32% on prior year, with
inclusion of the Redfern Travel acquisition from 1 February 2017.
Despite the average GBP exchange rate weakening by over 20% year on year, the adjusted EBITDA for the
Europe business rose by 202% to $18.4m and the adjusted EBITDA margin increased from 16.4% to 37.4%,
benefiting from a large move to CTM’s online platforms, automation resulting from the Redfern acquisition and
record client wins and retention. On a constant currency basis, revenue increased by 59% and adjusted EBITDA
increased by 259% over the previous period.
Redfern’s key competitive advantage is its proprietary, highly automated, end-to-end integration system,
particularly applicable to the government and large corporate sectors, which CTM continues to leverage across
the rest of CTM Europe.
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Directors’ Report (continued)
Review of operations (continued)
Review of underlying operations (continued)
Asia
Revenue declined 17.9% to $56.7m for the financial year. The underlying EBITDA is down 15.0% on the prior
comparative period, largely due to a fall in average ticket prices of approximately 14%, which had a negative
impact on supplier revenues in the wholesale business. Encouragingly, however, the EBITDA margin increased
slightly from 30.8% to 31.9% as the business benefited from productivity gains through enhanced automation.
The underlying business has continued to grow with circa 14% increase in transactions. During the period, the
region also sold its non-core legacy packaged travel business, as CTM looks to focus on its corporate, B2B and
B2C opportunities. Specifically, the Group sold its share of ownership in Wincastle Travel (HK) Limited with a
gain from sale of $0.9m recorded in the first half of the financial year.
Strategy and future performance
The Group continues to focus on its key strategic drivers, being:
• Retaining current clients;
• Winning new clients; and
• Innovating client tools and internal processes to enhance service to clients and improve internal productivity.
In the 2017 financial year, the Group executed well on these business drivers, with maintenance of the
historically strong client retention numbers, a record 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.
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 and delivery of measurable return on investment (ROI) to its clients.
Material business risks
The Group is subject to both specific risks to its business activities and risks of a general nature.
These strategic risks include:
• Global conflicts, terrorism and pandemics: International travel remains susceptible to the impact of regional
conflicts, terrorism and health pandemics.
• Economic conditions: Economic downturns, both globally and regionally, may have an adverse impact on the
Group’s operating performance.
• Foreign exchange: The volatility of foreign exchange markets impacts on the Australian dollar results for the
Group, which is mitigated by matching funding sources to operating cash flows.
• Financial structure: The Group has acquired a number of businesses, all of which has resulted in the creation
of significant intangible assets, the recoverability of which is totally dependent upon future performance,
including a dependency on major contracts.
• 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 an immediate and a longer 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.
Directors’ Report (continued)
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
There have been no 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.
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.
Information on Directors
Mr Tony Bellas, BEcon, DipEd, MBA, FAICD, 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
NOVONIX Limited (previously 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
243,836
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)
None.
Special responsibilities
Managing Director
Interests in shares and options
Ordinary shares in Corporate Travel Management Limited
21,650,000
22
23
Directors’ Report (continued)
Directors’ Report (continued)
Information on Directors (continued)
Information on Directors (continued)
Mr Stephen Lonie, BCom, MBA, FCA, FFin, FAICD, FIMCA, Senior MACS – Independent Non-Executive Director
Admiral Robert J. Natter, US Navy (Ret.) – Independent Non-Executive Director
Experience and expertise
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.
Listed Company Directorships
(including key dates)
MyState Limited (since 2011), Retail Food Group Limited (since 2013) and Apollo
Tourism and Leisure Ltd (since 2016).
Special responsibilities
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
254,312
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 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
254,312
Laura Ruffles – MBA, MAICD, 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 Ruffles is responsible
for all aspects of CTM’s business performance. She 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)
None.
Special responsibilities
Executive Director, Chief Executive Officer AU/NZ, Global Chief Operating Officer
Interests in shares and options
Ordinary shares in Corporate Travel Management Limited
Share appreciation rights over ordinary shares in Corporate
Travel Management Limited
98,691
400,000
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
Chairman 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
NOVONIX Limited (since 2017)
Remuneration Committee member
Nomination Committee member
Interests in shares and options
Ordinary shares in Corporate Travel Management Limited
143,200
Company secretaries
• Mr Steve Fleming (Joint Company Secretary).
• Ms Brooke Connell (Joint Company Secretary, effective 22 July 2016 to 1 March 2017).
• Mrs Suzanne Yeates (Joint Company Secretary, effective 18 April 2017).
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.
Suzanne Yeates, BBus (Accounting), CA
Suzanne Yeates was appointed to the position of Joint Company Secretary on 18 April 2017. Suzanne is a
Chartered Accountant, Founder and Principal of Outsourced Accounting Solutions Pty Ltd. She holds similar
positions with other public and private companies.
24
25
Directors’ Report (continued)
Directors’ Report (continued)
Meetings of Directors
Remuneration report
The numbers of meetings of the Group’s Board of Directors and of each Board Committee held during the year
ended 30 June 2017, and the numbers of meetings attended by each Director were:
Director
Full meetings
of directors
Committee meetings
Audit
Risk
Management
Remuneration
Nomination
Mr Tony Bellas
Mr Stephen Lonie
Mr Greg Moynihan
Mr Jamie Pherous
Admiral Robert J. Natter
Ms Laura Ruffles
A
8
8
8
7
8
8
B
8
8
8
8
8
8
A
6
6
6
*
*
*
B
6
6
6
*
*
*
A
3
3
3
*
*
*
B
3
3
3
*
*
*
A
4
4
4
*
4
*
B
4
4
4
*
4
*
A
1
1
1
*
1
*
B
1
1
1
*
1
*
A = Number of meetings attended.
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.
The Directors are pleased to present Corporate Travel Management Limited’s 2017 remuneration report,
outlining key aspects of the Group’s remuneration policy and framework, as well as remuneration awarded in the
year.
The report is structured as follows:
1. CTM’s remuneration framework.
2. Key elements of remuneration.
3. Who is covered by this report.
4. Details of Executive KMP remuneration.
5. Contractual arrangements for Executive KMP.
6. Non-executive director arrangements.
7. Additional required disclosures.
1. CTM’s remuneration framework
The following section outlines CTM’s remuneration framework and the policies that underpin it. Information is
presented in a question and answer format.
Key questions
CTM’s approach
Remuneration framework
1. What is the objective
of the Group’s
executive reward
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 the
delivery of executive rewards.
The Board ensures that the approach to 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.
2. What are the key
The framework is based on the following key elements:
elements of the
remuneration
framework?
• Alignment to shareholders’ interests, which:
ο Has economic profit as a core component of plan design;
ο 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
ο Attracts and retains high calibre executives.
• Alignment to program participants’ interests, which:
ο Rewards capability and expertise;
ο Reflects competitive reward for contribution to growth in shareholder wealth;
ο Provides a clear structure for earning rewards; and
ο Provides recognition for individual and team contributions.
26
27
Directors’ Report (continued)
Remuneration report (continued)
CTM’s remuneration framework (continued)
Key questions
CTM’s approach
3. What is the role of
the Remuneration
Committee?
The Remuneration Committee is a Committee of the Board and its
role of is to advise the Board 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.
4. What proportion of
remuneration is at
risk?
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 proportion of short-term
incentives (STI) and long-term incentives (LTI) (relative to fixed pay)
is set at the start of the financial year, along with all relevant KPI’s.
Remuneration in 2017
5. How is CTM’s
performance
reflected in this
year’s remuneration
outcomes?
6. What are the
performance
measures for LTI?
7. What changes
have been made
to the remuneration
structure in FY17?
8. Are any changes
planned for FY18?
CTM’s remuneration outcomes are strongly linked to delivery of
return on investment to shareholders over the short and long term.
Section 4
Short term: CTM has delivered strong performance in 2017 in terms
of EBITDA and financial targets, as well as non-financial strategic
targets, which has resulted in corresponding payout of STI at 60-
100% for Executive KMP.
Long term: The three-year performance period for the FY15 LTI
completed on 30 June 2017. Based on strong growth in earnings
per share (EPS), the performance conditions pertaining to the FY15
share appreciation rights have been achieved.
CTM’s Board is committed to ensuring executives’ remuneration
links to return on investment for shareholders and therefore will
continue to use EPS growth as the primary performance metric for
the FY18 LTI award.
Target earnings per share growth of 10% per annum average over
a three-year vesting period.
Section 4
There have been no significant changes to the approach to
remuneration in FY17.
No, there are no significant changes planned for FY18. However,
in line with previous years, the Board will review and adjust
(if necessary) the threshold and performance levels for the
performance objectives applicable to the STI and LTI awards.
Further info
Section 2
Directors’ Report (continued)
Remuneration report (continued)
2. Key elements of remuneration
The executive remuneration framework has three components:
• Fixed pay;
• Short-term performance incentives (STI); and
• Long-term incentives through participation in the Share Appreciation Rights Plan (LTI).
Additional detail on each of these components is included in the following table.
Section 4
Key elements of remuneration
Fixed Pay
Fixed pay includes base remuneration and benefits
and is 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.
Superannuation contributions are paid in accordance
with relevant Government legislation, to employee
nominated defined contribution superannuation funds.
STI
Based on a pre-determined profit targets set annually
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 increased for performance above the profit target, in
order 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.
STI (continued)
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.
Additional detail on the STI scheme is included in Section
4: Details of Executive KMP remuneration.
LTI
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 are 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.
Additional detail on the LTI scheme is included in Section
4: Details of Executive KMP remuneration.
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 2018, to ensure continued alignment with the
Group’s financial and strategic objectives.
28
29
Directors’ Report (continued)
Remuneration report (continued)
3. Who is covered by this report
This Remuneration Report sets out remuneration information for CTM’s Non-Executive Directors, Executive
Directors and other key management personnel (KMP) of the Group, which includes the following persons:
Directors’ Report (continued)
Remuneration report (continued)
4. Details of Executive KMP remuneration (continued)
Short-term incentive (STI)
The key components of the Group’s STI structure as follows:
Board of Directors
Non-Executive Directors
Mr Tony Bellas.
Mr Stephen Lonie.
Mr Greg Moynihan.
Admiral Robert J. Natter.
Executive Directors
Mr Jamie Pherous.
Ms Laura Ruffles.
Other Group KMP
Mr Steve Fleming - Global CFO.
Mr Larry Lo - CEO - Asia.
Mr Chris Thelen - CEO - North America.
Ms Debbie Carling - CEO - Europe.
4. Details of Executive KMP remuneration
Remuneration outcomes are disclosed in accordance with Australian accounting standards.
Fixed remuneration
Variable remuneration
Cash
salary and
fees
$
Non-
cash
benefits*
$
Leave#
$
Super-
annuation
$
Short-term
Incentive
$
Long-term
incentive^
$
At
risk
%
Total
$
Name
Year
Executive Directors
63,956
64,629
79,654
69,958
-
-
31,464
50,182
3,071
3,185
225,000
225,000
360,000
300,000
-
-
167,926
140,000
143,323
212,307
-
-
679,319 33%
715,447 31%
185,623 1,167,589 47%
92,426 1,008,345 39%
-
-
-
55,423
-
-
107,495
719,405 38%
73,581
628,001 34%
107,477
750,003 33%
31,396
754,526 32%
-
211,949
40,592
908,732 28%
Jamie Pherous
Laura Ruffles
Claire Gray¹
2017
2016
2017
2016
2017
2016
448,221
459,302
538,462
516,404
-
55,423
9,776 (67,634)
6,800 (40,284)
11,032
(7,182)
10,634
18,923
-
-
-
-
Other key management personnel of the Group
Steve Fleming
Larry Lo
Chris Thelen²
Debbie
Carling²
Julie Crotts²
Total
Executive KMP
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
(2,227)
3,703
(5,497)
1,934
30,416
410,024
353,231
501,629
505,704
625,775
508,345
251,889
-
-
304,120
4,723
7,304
-
-
-
-
-
-
-
-
(11,662)
81,335
-
-
578,018
-
5,560
2,519
83,963
57,336
401,267 35%
-
-
-
-
1,797
2,851
-
-
-
-
-
-
-
20,931
329,699
-
-
-
2,776,000
25,531 (46,564)
180,664
1,192,161
498,523 4,626,315
2,702,529
24,738 (25,589)
272,140
877,307
218,334 4,069,459
Purpose
Participants
Performance
conditions
Structure
The STI scheme is designed to reward and recognise outstanding employee performance,
provided the Group can also demonstrate it has created value for its shareholders.
All Executive KMP participate in the STI scheme.
For the year ended 30 June 2017, 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 (EBITDA).
If the Group achieves a pre-determined EBITDA target set by the Remuneration Committee,
a short-term incentive (“STI”) pool is available to executives and other eligible participants.
Executives have a target STI opportunity depending on the accountabilities of the role and
impact on the organisation or business unit performance. The average maximum target
bonus opportunity for Executive KMP in the 2017 year was approximately 42% (2016: 30%)
of base fixed remuneration and benefits.
Payments made under the STI plan are highly correlated with the Group’s financial results. The relationship
between STI and Corporate Travel Management Ltd’s performance over the last 5 years is set out in the
following table.
Item
2017
2016
2015
2014
2013
restated
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 (%)
54,556
42,134
26,367
15,845
11,268
53.5
27,554
50.5%
63.9%
43.2
18,539
44.0%
35.8%
28.1
12,609
47.8%
60.6%
19.0
9,129
57.6%
56.6%
14.9
7,497
66.5%
111.3%
2.2%
2.1%
2.7%
0.9%
2.6%
For each short term incentive included in the table on page 17, the percentage split of the available bonus
awarded and forfeited is disclosed in the following table.
Name
Jamie Pherous
Laura Ruffles
Steve Fleming
Larry Lo
Chris Thelen
Debbie Carling*
2017
2016
Awarded
%
Forfeited
%
Awarded
%
Forfeited
%
90%
90%
80%
60%
80%
100%
10%
10%
20%
40%
20%
-
100%
100%
80%
100%
-
-
-
-
20%
-
-
-
¹ Claire Gray resigned as Executive Director on 1 December 2015. The amounts presented in the table represent remuneration to this date.
* Executive KMP of the Group are included in this disclosure for the period they held the applicable roles.
² Chris Thelen ceased as CEO of Europe and became CEO of North America on 1 July 2016. Debbie Carling was appointed CEO of Europe on 1
July 2016. Julie Crotts returned to the position of COO of North America on 1 July 2016.
* Non-cash benefits represents the cost to the Group of providing parking.
30
# Leave represents the movement in the annual leave and long service 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.
^ Long-term incentive represents amounts expensed during the year relating to share appreciation rights granted to date and not yet vested.
31
Directors’ Report (continued)
Directors’ Report (continued)
Remuneration report (continued)
Remuneration report (continued)
4. Details of Executive KMP remuneration (continued)
4. Details of Executive KMP remuneration (continued)
Long-term incentive (LTI)
The Group introduced a long-term incentive scheme using a Share Appreciation Rights Plan during the 2013
financial year. The key components of the Plan as follows.
Purpose
Eligibility
Instrument
Performance
period
Performance
hurdles
Vesting
The purpose of the LTI scheme at CTM is to provide long-term incentives to senior executives to
deliver long-term shareholder returns.
Participation in the plan is at the Board’s absolute discretion and no individual has a contractual
right to participate in the plan.
Awards under this plan are made in the form of Share Appreciation Rights (SARs).
Performance is measured over a three-year period. The FY17 grant has a performance period
commencing 1 July 2016 and ending 30 June 2019.
The SARs are subject to average Earnings per Share (EPS) growth over the performance period,
with target performance being set at 10% average EPS growth.
The SARs will only vest if the performance hurdles are met and the employee remains in service.
Once vested, a participant will be deemed to have automatically exercised all vested SARs and
CTM will settle in line with the SARs Plan.
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 FY17 will vest on a scaled basis as follows:
Minimum EPS growth from
1 July 2016 to 30 June 2019
Portion of SARs that become
performance qualified
80% achievement of target growth rate
(i.e. 8% EPS growth)
90% achievement of target growth rate
(i.e. 9% EPS growth)
50% of SARs
75% of SARs
100% achievement of target growth rate
(i.e. 10% EPS growth)
100% of SARs
SARs will become performance qualified on a straight-line basis where average EPS growth falls
between 8-10% EPS growth.
Termination/
forfeiture
Upon termination of employment, all unvested SARs will automatically be forfeited by the
participant, unless the Board otherwise determines, in its absolute discretion, to permit some or
all of the SARs to vest.
Dilution
Dilution that may results from securities being issued under CTM’s LTI plan is capped at the
limit set out in ASIC Class Order 14/1000, which provides that the number of unissued securities
under those plans must not exceed five per cent of the total number of the securities of that
class at the time of the relevant offer.
Hedging
Consistent with the Corporations Act 2001, participants are prohibited from hedging their
unvested performance rights.
The following table sets out details of the SARs granted to key management personnel during the financial year
under the 2017 allocation and vested under the 2014 allocation as well as details of SARs granted under prior
year awards that have not yet vested as at 30 June 2017.
Year in
which
rights may
vest
Year of
grant
Number
of rights
granted
Value per
right at
grant date
Number
of rights
vested
during the
year
Forfeited
%
Max value
yet to vest
$
Vested %
Laura
Ruffles
Steve
Fleming
Larry Lo
Chris
Thelen
Debbie
Carling
2017
2016
2015
2014
2017
2016
2015
2014
2017
2016
2015
2014
2017
2016
2017
2016
2020
2019
2018
2017
2020
2019
2018
2017
2020
2019
2018
2017
2020
2019
2020
2019
200,000
100,000
100,000
75,000
75,000
75,000
100,000
50,000
75,000
75,000
100,000
-
$1.62
$1.26
$1.06
$0.41
$1.62
$1.26
$1.06
$0.41
$1.62
$1.26
$1.06
-
75,000
$1.62
-
75,000
40,000
-
$1.62
$1.26
-
-
-
-
-
-
75,000
100%
-
-
-
-
-
-
50,000
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
324,734
125,699
106,274
-
121,775
94,274
106,274
-
121,775
94,274
106,274
-
121,775
-
121,775
50,280
5. Contractual arrangements for Executive KMP
Each Executive KMP member, including the Managing Director, has a formal contract, known as a service
agreement. These service agreements are of a continuing nature and have no fixed term of service. There were
no changes to the service agreements for Executive KMP in FY17.
The Group requires Executive KMP to provide six months’ written notice of their intention to leave CTM.
Termination payments are assessed on a case-by-case basis and are capped by law. As is the case for all
employees, KMP employment may be terminated immediately by serious misconduct.
32
33
Directors’ Report (continued)
Directors’ Report (continued)
Remuneration report (continued)
6. Non-Executive Director Arrangements
In contrast to Executive KMP remuneration, the remuneration of CTM’s Non-Executive Directors is not linked to
performance, which is consistent with Non-Executive Directors being responsible for objective and independent
oversight of the Group.
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 have not received any fees other than those described in this section, and do not
receive bonuses or any other incentive payments or retirement benefits. Non-Executive Directors are reimbursed
for expenses properly incurred in performing their duties as a Director of CTM.
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 $700,000
(2016: $600,000).
Details of the remuneration of the Non-Executive Directors of the Group are set out in the following table.
Name
Tony Bellas
Stephen Lonie
Greg Moynihan
Admiral Robert J. Natter
Total Non-Executive Director
Remuneration
Year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Director fees Super-annuation*
Total
120,000
124,615
100,000
103,846
100,000
103,846
126,688
88,689
446,688
420,996
11,400
11,838
9,500
9,865
9,500
9,865
-
-
30,400
31,568
131,400
136,453
109,500
113,711
109,500
113,711
126,688
88,689
477,088
452,564
* Superannuation contributions required under the Australian superannuation guarantee legislation are made and are deducted from the
Directors’ overall fee entitlements.
Remuneration report (continued)
7. Additional required disclosures
Equity instruments held by key management personnel
The number of ordinary shares held during the financial year by CTM’s directors and KMP is set out in the
following table:
Ordinary shares
Balance at 30
June 2016
Purchased
Disposed
Received on
vesting of
rights
Other
changes
during the
year
Balance at
30 June 2017
Non-Executive Directors
Tony Bellas
Stephen Lonie
Greg Moynihan
Admiral Robert J.
Natter
Executive Directors
232,752
242,752
242,752
11,084
11,560
11,560
136,000
7,200
Jamie Pherous
21,500,000
150,000
-
-
-
-
-
-
-
-
-
-
Laura Ruffles
126,923
726
(80,012)
51,054
Other key management personnel of the Group
Steve Fleming
Larry Lo
Debbie Carling
Chris Thelen
28,467
25,000
21,307
905,547
642
(15,000)
34,036
-
-
-
-
(10,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
243,836
254,312
254,312
143,200
21,650,000
98,691
48,145
25,000
11,307
905,547
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.
Shares under option
There are currently no unissued ordinary shares of CTM under option. No share options were granted as equity
compensation benefits during the financial year (2016: nil).
Other transactions and balances with key management personnel
The portion of contingent consideration payable to Chris Thelen, in relation to the Chambers Travel acquisition,
has been transferred to deferred consideration, and is no longer contingent on meeting earn out thresholds. The
total balance of $21.3 million is payable, with $8.7 million being payable within 12 months and $12.6 million after
12 months.
The portion of contingent consideration payable to Debbie Carling, in relation to the Chambers Travel
acquisition, has also been transferred to deferred consideration, as earn out thresholds have been met as at 30
June 2017. The balance of $0.5 million is payable within 12 months.
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.
34
35
Directors’ Report (continued)
Proceedings on behalf of the company
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.
Details of the amounts paid or payable to PricewaterhouseCoopers, the auditor of the consolidated entity, for
audit and non-audit services provided during the year are set out in note 28.
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.
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 2016/191, 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, 22 August, 2017
Mr Jamie Pherous
Managing Director
36
37
Auditor’s Independence DeclarationAs lead auditor for the audit of Corporate Travel Management Limited for the year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been: (a)no contraventions of the auditor independence requirements of the Corporations Act 2001in relation to the audit; and(b)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 ShewanBrisbanePartner PricewaterhouseCoopers22 August 2017PricewaterhouseCoopers, ABN 52 780 433 757480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.auLiability limited by a scheme approved under Professional Standards Legislation.
Corporate Governance Statement
The Board and management of Corporate Travel Management Limited 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 2017 corporate governance statement is dated as at 30 June 2017 and reflects the
corporate governance practices in place throughout the 2017 financial year. The 2017
corporate governance statement was approved by the Board on 22 August 2017. 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/.
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2017
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:
Note
2017
$’000
2016
$’000
2
324,391
260,945
1,483
3,894
325,874
264,839
(175,175)
(147,139)
(12,657)
(16,157)
(20,239)
(5,181)
(14,914)
(10,562)
(13,870)
(4,235)
(15,396)
(14,441)
(244,805)
(205,161)
(3,443)
77,626
(1,809)
57,869
(19,788)
(12,126)
57,838
45,743
6
6
5
24(b)
54,556
3,282
57,838
42,134
3,609
45,743
Exchange differences on translation of foreign operations
(8,639)
(2,635)
Changes in the fair value of cash flow hedges
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
360
(8,279)
49,559
46,130
3,429
49,559
-
(2,635)
43,108
38,369
4,739
43,108
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
53.5
52.5
43.2
42.8
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
38
39
FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
As at 30 June 2017
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value
Other current assets
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
2017
$’000
2016
$’000
9
10
20
21
8
5
11
14
12
11
14
12
5
79,217
81,178
201,210
168,130
236
4,226
12
4,906
284,889
254,226
5,262
5,426
441,022
308,090
8,982
4,263
455,266
317,779
740,155
572,005
233,049
202,720
18,122
8,238
14,512
14,347
7,663
12,563
273,921
237,293
24,868
27,301
2,653
10,008
64,830
28,148
22,833
4,745
5,543
61,269
338,751
298,562
401,404
273,443
13(a)
13(b)
13(c)
24(b)
281,847
175,231
13,519
90,804
386,170
15,234
19,645
63,802
258,678
14,765
401,404
273,443
Note
Contributed
Equity
$’000
Retained
Earnings
$’000
Other
Reserves
$’000
Total
$’000
Non-
Controlling
Interests
$’000
Total
Equity
$’000
Balance at 30 June 2015
161,675
40,207
21,609
223,491
12,420
235,911
Profit for the period as reported
in 2016 financial statements
Other comprehensive income
(net of tax)
Total comprehensive income
for the year
-
-
-
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
Share based payments
13(a)
4
-
-
13,556
-
(18,539)
-
-
13,556
-
13,556
(18,539)
(2,394)
(20,933)
-
1,801
1,801
-
1,801
Balance at 30 June 2016
175,231
63,802
19,645
258,678
14,765
273,443
13,556
(18,539)
1,801
(3,182)
(2,394)
(5,576)
Profit for the period as reported
in 2017 financial statements
Other comprehensive income
(net of tax)
Total comprehensive income
for the year
-
-
-
54,556
-
54,556
3,282
57,838
-
(8,426)
(8,426)
147
(8,279)
54,556
(8,426)
46,130
3,429
49,559
Transactions with owners in their capacity as owners:
Shares issued
Dividends paid
Share based payments
13(a)
106,616
-
4
-
-
(27,554)
-
106,616
(27,554)
-
-
2,300
2,300
106,616
-
106,616
(27,554)
(2,960)
(30,514)
2,300
-
2,300
81,362
(2,960)
78,402
Balance at 30 June 2017
281,847
90,804
13,519
386,170
15,234
401,404
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes.
40
41
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
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
Interest received
Finance costs
Income tax paid
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
Proceeds from sale of financial assets
Purchase of controlled entities, contingent consideration
Purchase of controlled entities, net of cash acquired
Proceeds from sale of controlled entities
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
2017
$’000
2016
$’000
334,806
255,159
(242,836)
(171,228)
(771)
197
(2,160)
(19,958)
(383)
155
(1,294)
(12,199)
69,278
70,210
(1,316)
(12,634)
1
12
(34,308)
(69,418)
394
(4,295)
(3,903)
16
5
(14,890)
(27,031)
-
(117,269)
(50,098)
72,181
(2,003)
57,134
(48,039)
(27,554)
(2,960)
-
(32)
75,571
(36,262)
(18,539)
(2,444)
48,759
18,294
768
(2,729)
81,178
79,217
38,406
2,109
40,663
81,178
9
21
8
7
13
4
9
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
42
43
FINANCIAL STATEMENTS
Notes to the Consolidated
Financial Statements.
Basis of preparation
Critical estimates, assumptions and judgements
Performance
46
47
48
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
48
50
51
52
53
57
58
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
58
63
65
65
66
67
68
70
72
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
76
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
79
80
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
80
80
81
83
85
87
88
90
92
93
44
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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
ο Refer note 7 – Business combinations.
• Impairment of goodwill
ο Refer note 15 – Impairment testing of goodwill.
• Contingent consideration
ο Refer note 7 – Business Combinations.
ο Refer note 11 – Trade and Other Payables.
ο Refer note 22 – Fair Value Measurement.
• Allowance for doubtful debts
ο Refer note 10 – Trade and other receivables.
• Override revenue
ο Refer note 2 – Revenue.
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.
46
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 2017 is
as follows:
Travel
services
Australia
and New
Zealand
$’000
2017
Travel
services
Travel
services
Travel
services
North
America
$’000
Asia
$’000
Europe
$’000
Other*
$’000
Total
$’000
91,502
126,647
56,700
49,238
304
324,391
36,328
35,883
18,064
18,364
(10,024)
98,615
197
3,443
1,883
14,274
19,788
Total revenue from
external parties
Adjusted EBITDA
Interest revenue
Interest expense
Depreciation
Amortisation
Income tax expense
Total segment assets
110,265
248,171
144,012
226,294
11,413
740,155
Total assets include:
Non-current assets
- Plant and equipment
- Intangibles
2,705
55,745
760
455
1,342
-
5,262
194,482
37,947
148,834
4,014
441,022
Total segment liabilities
44,289
61,575
77,319
65,534
90,034
338,751
* The other segment includes the Group support service, created to support the operating segments and growth
of the global business.
1.
b)
Segment reporting (continued)
Segment information provided to the Chief Operating Decision Makers (continued)
Travel
services
Australia
and New
Zealand
$’000
2016
Travel
services
Travel
services
Travel
services
North
America
$’000
Asia
$’000
Europe
$’000
Other*
$’000
Total
$’000
Total revenue from
external parties
Adjusted EBITDA
Interest revenue
Interest expense
Depreciation
Amortisation
Income tax expense
76,876
77,256
69,119
37,230
464
260,945
28,266
21,212
21,256
6,117
(7,821)
69,030
155
1,809
2,732
7,830
12,126
Total segment assets
101,374
209,033
168,529
90,694
517
570,147
Total assets include:
Non-current assets
- Plant and equipment
- Intangibles
Total segment liabilities
2,729
47,303
32,665
655
845
152,078
41,047
106,760
100,444
1,197
67,662
18,282
-
-
5,426
308,090
40,411
298,562
c)
Other segment information
i) Adjusted EBITDA
The reconciliation of adjusted EBITDA to operating profit before income tax is provided as follows:
Adjusted EBITDA
Interest revenue
Finance costs
Depreciation
Amortisation
One off items
Release of earn out payable
Gain on sale of subsidiary
Acquisition / non-recurring costs
Profit before income tax from continuing operations
2017
$’000
2016
$’000
98,615
69,030
197
155
(3,443)
(1,883)
(14,274)
-
912
(2,498)
77,626
(1,809)
(2,732)
(7,830)
2,505
-
(1,450)
57,869
48
49
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
2017
$’000
2016
$’000
323,190
259,738
133
197
871
156
155
896
1,201
1,207
324,391
260,945
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:
ο 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.
ο 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.
ο 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:
2017
$’000
2016
$’000
Net profit attributable to ordinary equity holders of Corporate Travel Management
Limited
54,556
42,134
2017
Shares
2016
Shares
Weighted average number of ordinary shares used as a denominator in
calculating basic earnings per share
101,929,958
97,578,403
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
1,489,362
831,607
567,661
-
103,986,981
98,410,010
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.
50
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
3.
Earnings per share (continued)
ii) Deferred shares
Deferred shares on acquisitions relates to shares 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 2016 of 15.0 cents (2015:
10.0 cents) per fully paid share
Interim franked dividend for the year ended 30 June 2017 of 12.0 cents (2016:
9.0 cents) per fully paid share
Approved by the Board of Directors on 22 August 2017 (not recognised as a
liability as at 30 June 2017)
Final franked dividend for the year ended 30 June 2017 of 18 cents (2016: 15
cents) per fully paid share
2017
$’000
2016
$’000
14,928
9,712
12,626
8,827
27,554
18,539
18,940^
14,712*
^ This dividend does not include shares issued on 22 August 2017, pursuant to the CTM Share Appreciation Rights Plan. Refer note 23.
* This dividend does not include shares issued post balance sheet date as part of the initial consideration for the acquisition of Travizon Travel.
The final dividend recommended after 30 June 2017 will be fully franked out of existing franking credits, or out of
franking credits arising from the payment of income tax in the year ending 30 June 2018.
Franking credit balance
Franking credits available for subsequent reporting periods based on a tax rate of
30% (2016: 30%)
2017
$’000
2016
$’000
6,881
7,088
The above amounts are calculated from the balance of the franking account as at the end of the reporting
period, adjusted for franking credits and debits that will arise from the settlement of liabilities or receivables for
income tax and dividends after the end of the year.
4. Dividends paid and proposed (continued)
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 tax on profits for the year
Adjustments for current tax of prior periods
Deferred income tax
(Increase) decrease in deferred tax assets
Increase (decrease) in deferred tax liabilities
Income tax expense
Numerical reconciliation of income tax expense to prima facie tax payable
Accounting profit before income tax
Tax at the Australian tax rate of 30% (2016: 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
2017
$’000
2016
$’000
19,633
17,526
(619)
(498)
726
48
(1,652)
(3,250)
19,788
12,126
77,626
23,288
57,869
17,361
447
(481)
(34)
344
-
(3,192)
(619)
(45)
46
206
913
1,119
(844)
(2,744)
(2,309)
(498)
(60)
101
(3,466)
(6,354)
19,788
12,126
52
53
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
The balance comprises temporary differences attributable to:
Provisions
Employee benefits
Other
Set off against deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Depreciation / amortisation
Accrued income
Other
Set off against deferred tax assets
Net deferred tax liabilities
2017
$’000
2016
$’000
6,087
6,779
30
12,896
(3,914)
7,348
2,244
163
9,755
(5,492)
8,982
4,263
10,409
2,581
932
13,922
(3,914)
10,008
8,297
1,345
1,393
11,035
(5,492)
5,543
Deferred tax
assets
2017
Provisions
Employee benefits
Other
2016
Provisions
Employee benefits
Other
(Charged)/
credited
in year via
P&L
$’000
(Charged)/
credited
in year via
equity
$’000
Acquisition
of
subsidiaries
$’000
At 1 July
$’000
Sale of an
entity
$’000
Change in
FX rates
$’000
At 30 June
$’000
7,348
2,244
163
9,755
(1,130)
404
-
(7)
4,131
-
(726)
4,124
20
-
-
20
(32)
-
(132)
(164)
(112)
-
(1)
6,087
6,779
30
(113)
12,896
3,561
1,282
154
30
233
137
(156)
1,857
-
2,625
-
-
3,745
1,652
1,701
2,625
-
-
-
-
36
-
(4)
32
7,348
2,244
163
9,755
During the period, an adjustment has been made to the opening balance of the deferred tax asset to reflect the
future income tax deduction relating to vesting of Share Appreciation Rights. This has resulted in an adjustment
of $1,857,000 to the deferred tax asset and share based payments reserve.
Deferred tax
liabilities
2017
Depreciation /
amortisation
Accrued income
Other
2016
Depreciation /
amortisation
(Charged)/
credited
in year via
P&L
$’000
(Charged)/
credited
in year via
equity
$’000
Acquisition
of
subsidiaries
$’000
At 1 July
$’000
Sale of an
entity
$’000
Change in
FX rates
$’000
At 30 June
$’000
8,297
(1,238)
1,345
1,393
11,035
1,286
-
48
4,269
672
-
-
(461)
(461)
-
-
431
431
3,566
-
-
3,566
3,298
-
-
3,298
-
-
-
-
-
-
-
-
(216)
10,409
(50)
-
2,581
932
(266)
13,922
58
26
(17)
67
8,297
1,345
1,393
11,035
Accrued income
5,241
(3,922)
Other
979
-
10,489
(3,250)
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.
54
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
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.
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.
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 client contracts and relationships – intangibles note 8
Amortisation of software – intangibles note 8
Amortisation of other intangible assets – intangibles note 8
Finance costs
Bank loans
Other interest
Other expense disclosures
Defined contribution superannuation expense
Rental expense relating to operating leases
Accounting policy
2017
$’000
1,883
11,100
2,949
225
2016
$’000
2,732
6,483
1,338
9
16,157
10,562
1,542
1,901
3,443
5,730
9,536
689
1,120
1,809
3,589
11,269
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
3 - 8
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
Diminishing value - ranging between
three and seventeen years
Acquired
Software
Straight line - ranging between three and
five years
Acquired/ Internally
generated
Other intangible assets
Straight line - ten years
Acquired
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.
56
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE
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
Arizonaco Limited and Portall Travel Limited trading as Redfern Travel (“Redfern”)
On 1 February 2017, the Group acquired 100% of the shares of Arizonaco Limited and Portall Travel Limited,
trading as Redfern Travel (“Redfern”), a travel management company headquartered in Bradford, UK. The initial
cost of the acquisition was $68,397,525 (GBP 41,161,631), paid in both cash $53,173,812 (GBP 32,000,000)
and shares $15,223,713 (GBP 9,161,631), with further contingent consideration payable 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:
• Earnout A is payable based on a multiple of earnings before interest, tax, depreciation and amortisation
(EBITDA) for the year ending 31 March 2017, with the maximum payment being a capped value of
$8,308,408 (GBP 5,000,000);
• Earnout B is payable based on a multiple of EBITDA for the year ending 30 June 2018, and the amount is
dependent upon meeting certain revenue and EBITDA targets, with the maximum payment being a capped
value of $8,308,408 (GBP 5,000,000).
At the acquisition date, the projected result for the earn-out periods 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 *
Acquisition date fair value contingent consideration – earn-out **
Working capital adjustment
Total acquisition date fair value consideration
* 53,173,812 (GBP 32,000,000) in cash and $15,233,713 (GBP 9,161,631) in shares paid on 1 February 2017.
$’000
68,398
16,098
2,900
87,396
** The contingent consideration has been recognised in the Statement of Financial Position within the Trade and other payables classification.
Management has not changed its expectation of contingent consideration payable. Earnout A was paid on 3 July 2017.
The provisional fair values of the assets and liabilities of the Redfern Travel business, acquired as at the date of
acquisition, are as follows:
Arizonaco Limited and Portall Travel Limited trading as Redfern Travel (“Redfern”) (continued)
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
$69,862,477 (GBP42,043,238). The full value of the goodwill and client intangibles is not expected to be tax
deductible for tax purposes.
Acquisition costs
Acquisition-related costs of $750,847 are included in administrative and general expenses in the Statement of
Comprehensive Income.
Acquired receivables
The fair value of the acquired trade receivables is $35,513,286 (GBP 21,371,896). The gross contractual
amount for trade receivables due is $35,513,286 (GBP 21,371,896), of which no balances are expected to be
uncollectable.
Revenue and profit contribution
The acquired business contributed revenues of $12,470,624 (GBP 7,493,048) and net profit after tax of
$6,012,544 (GBP 3,616,565) to the Group for the period 1 February 2017 to 30 June 2017. If the acquisition had
occurred on 1 July 2016, consolidated revenue and profit for the year ended 30 June 2017 would have been
$337,669,537 and $64,751,793 respectively.
Purchase consideration - cash outflow:
Outflow of cash to acquire subsidiary, net of cash acquired:
Purchase consideration
Initial cash consideration
Working capital adjustment paid
Less: cash balances acquired
Outflow of cash – investing activities
$’000
53,174
1,691
(3,798)
51,067
Andrew Jones Travel Pty Ltd trading as Andrew Jones Travel
On 1 February 2017, the Group acquired 100% of the shares of Andrew Jones Travel Pty Ltd, trading as Andrew
Jones Travel, a travel management company headquartered in Tasmania, Australia. The initial cost of the
acquisition was $5,770,305, paid in both cash $4,625,000 and shares $1,145,305.
The provisional fair values of the assets and liabilities of the Andrew Jones 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
Trade and other payables
Provisions
Income tax payable
Deferred tax liability
Net identifiable assets / (liabilities) acquired
Goodwill on acquisition
Net assets acquired
58
Fair Value
$’000
3,798
35,513
2,062
557
16,169
665
(36,890)
(31)
(868)
(3,441)
17,534
69,862
87,396
Cash and cash equivalents
Trade and other receivables
Other assets
Property, plant and equipment
Intangible assets: Client contracts and relationships
Trade and other payables
Notes payable
Provisions
Income tax receivable
Deferred tax liability
Net identifiable assets / (liabilities) acquired
Goodwill on acquisition
Net assets acquired
Fair Value
$’000
690
1,035
3
287
415
(1,251)
(26)
(227)
45
(125)
846
4,986
5,832
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE 7. Business combinations (continued)
7. Business combinations (continued)
Andrew Jones Travel Pty Ltd trading as Andrew Jones Travel (continued)
Purchase consideration
Initial cash and shares paid *
Working capital adjustment
Total acquisition date fair value consideration
* $4,625,000 in cash and $1,145,305 in shares paid on 1 February 2017.
$’000
5,770
62
5,832
The consideration paid 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
$4,986,249. The full value of the goodwill and client intangibles is not expected to be tax deductible for tax
purposes.
Acquisition costs
Acquisition-related costs of $50,500 are included in administrative and general expenses in the Statement of
Comprehensive Income.
Acquired receivables
The fair value of the acquired trade receivables is $1,034,808. The gross contractual amount for trade
receivables due is $1,034,808, of which no balances are expected to be uncollectable.
Revenue and profit contribution
The acquired business contributed revenues of $2,304,832 and net profit after tax of $597,170 to the Group
for the period 1 February 2017 to 30 June 2017. If the acquisition had occurred on 1 July 2016, consolidated
revenue and profit for the year ended 30 June 2017 would have been $326,683,756 and $58,216,353
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
4,625
(690)
3,935
Travizon, Inc., All Performance Associates, Inc., and Business Travel, Inc., trading as Travizon Travel
(Travizon)
On 1 July 2016, the Group acquired 100% of the shares of Travizon, Inc., All Performance Associates, Inc.,
and Business Travel, Inc., trading as Travizon Travel (Travizon), a travel management company headquartered
in Boston MA, USA. The initial cost of the acquisition was $31,867,698 (US $23,773,302), paid in both cash
$14,075,067 (US $10,500,000) and shares $17,792,631 (US $13,273,302), with further deferred consideration
payable on 29 September 2017, as set out in this note.
Purchase consideration
Initial cash and shares paid*
Deferred consideration payable
Working capital adjustment
Total acquisition date fair value consideration
* $14,075,067 (US $10,500,000) in cash and $17,792,631 (US $13,273,302) in shares paid on 1 July 2016.
$’000
31,868
20,107
2,488
54,463
Travizon, Inc., All Performance Associates, Inc., and Business Travel, Inc., trading as Travizon Travel
(Travizon) (continued)
The final fair values of the assets and liabilities of the Travizon 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
Deferred tax asset
Trade and other payables
Provisions
Notes payable
Income tax payable
Net identifiable assets / (liabilities) acquired
Goodwill on acquisition
Net assets acquired
Fair Value
$’000
5,205
4,482
203
45
4,958
20
(4,313)
(227)
(2,682)
(280)
7,411
47,052
54,463
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 $47,051,916 (US$35,100,729). The full value of the goodwill and client intangibles is expected to be tax
deductible for USA tax purposes.
Acquired receivables
The fair value of the acquired trade receivables is $4,481,709 (US $3,343,355). The gross contractual amount
for trade receivables due is $4,481,709 (US $3,343,355), of which no balances are expected to be uncollectable.
Revenue and profit contribution
The acquired business contributed revenues of $28,385,779 (US $21,435,486) and net profit after tax of
$4,828,421 (US $3,646,176) to the Group for the period 1 July 2016 to 30 June 2017.
Purchase consideration – cash outflow:
Outflow of cash to acquire subsidiary, net of cash acquired:
Purchase consideration
Initial cash consideration
Working capital adjustment paid
Less: cash balances acquired
Outflow of cash – investing activities
$’000
14,075
1,434
(5,205)
10,304
60
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURENOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE 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 2017, 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.
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)
Prior period business combinations
On 1 January 2016, the Group acquired 100% of
the shares of SARA Enterprises, Inc., trading as
Montrose Travel (Montrose). The accounting for the
business combination for the Montrose acquisition
has been finalised as at 31 December 2016. This
finalisation included an additional $1.4 million being
recognised relating to the acquisition payable, which
has contributed to an increase in goodwill for same
amount. No other measurement period adjustments
have been made. During the period $2.6 million was
paid relating to the working capital adjustment, which
is included in outflow of cash from investing activities
on the Consolidated Statement of Cash Flows.
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.
8.
Intangible assets
Year ended 30 June 2017
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/businesses [note 7]
Disposals through sale of an entity
Amortisation charge
Exchange differences
Closing net book amount
Year ended 30 June 2016
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/businesses
Disposals
Amortisation charge
Exchange differences
Closing net book amount
Customer contracts
Client
contracts and
relationships
$’000
Software
$’000
Goodwill
$’000
Other
Intangible
assets
$’000
Total
$’000
472,698
(31,676)
441,022
308,090
12,634
146,025
(382)
(14,274)
(11,071)
21,664
(7,447)
14,217
8,391
8,318
665
(15)
(2,949)
(193)
393,551
(313)
393,238
280,107
-
123,818
(367)
-
(10,320)
4,513
(357)
4,156
144
4,316
-
-
(225)
(79)
14,217
393,238
4,156
441,022
12,366
(3,975)
8,391
2,753
4,389
2,755
(32)
(1,338)
(136)
8,391
280,425
(318)
280,107
215,555
-
72,029
-
-
(7,477)
280,107
283
(139)
144
114
39
-
-
(9)
-
325,664
(17,574)
308,090
237,925
4,428
80,928
(32)
(7,830)
(7,329)
144
308,090
52,970
(23,559)
29,411
19,448
-
21,542
-
(11,100)
(479)
29,411
32,590
(13,142)
19,448
19,503
-
6,144
-
(6,483)
284
19,448
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
8.
Intangible assets (continued)
Accounting policy (continued)
Software developed or 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 (refer note 15).
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.
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
2017
$’000
49,192
30,025
79,217
2016
$’000
47,346
33,832
81,178
Cash at bank earns interest at floating rates based on daily bank deposit rates: 2017: 0.00%-1.95% (2016:
0.00%-2.20%). The client accounts earn interest at floating rates based on daily bank deposit rates: 2017:
0.00%-1.30% (2016: 0.00%-1.55%). The weighted average interest rate for the year was 0.24% (2016: 0.26%).
No bank overdraft facilities were in place at 30 June 2017, refer 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
Make-good provision accretion
Net exchange differences
Non-cash interest
Non-cash employee benefits expense
Non-cash release of earn out payable
Net (gain)/loss on sale of subsidiary
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
2017
$’000
2016
$’000
57,838
45,743
16,160
10,562
4
73
1,274
1,366
-
(912)
(2)
(2,433)
928
841
(1,198)
(4,661)
69,278
4
739
514
778
(2,505)
-
5
(2,863)
(1,377)
(2,670)
2,916
18,364
70,210
64
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE
10. Trade and other receivables
Current
Trade receivables (i)
Client receivables (i)
Allowance for doubtful debts
Deposits (ii)
Other receivables
2017
$’000
2016
$’000
30,775
23,083
158,146
129,848
(2,141)
(1,586)
186,780
151,345
13,125
1,305
14,872
1,913
201,210
168,130
(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 2017, trade and client receivables of $24,605,000 (2016: $28,808,000) 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
2017
$’000
2016
$’000
16,463
21,997
4,338
3,804
3,426
3,385
24,605
28,808
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.
Fair value
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.
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.
10
Trade and other receivables (continued)
Accounting policy (continued)
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.
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
Acquisition payable (iii)
Contingent consideration payable (note 22)
2017
$’000
2016
$’000
13,156
4,741
148,703
134,689
26,247
44,943
-
24,036
3,999
35,255
233,049
202,720
4,112
12,596
8,160
24,868
1,393
-
26,755
28,148
(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
The carrying value of these payables 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. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest
method.
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.
66
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL
12. Provisions
Movements in provisions
At 1 July 2016
Acquisition of subsidiary
Arising during the year
Utilised
Write back of provision
Disposal through sale of an entity
Changes due to change in foreign currency
At 30 June 2017
2017
Current
Non-current
2016
Current
Non-current
Accounting policy
Employee
entitlements
$’000
Make-good
provision
$’000
5,063
485
6,572
(6,317)
(66)
(13)
(89)
5,635
4,263
1,372
5,635
3,567
1,496
5,063
845
-
16
(65)
-
(138)
(20)
638
157
481
638
128
717
845
Provisions
for other
liabilities
and charges
$’000
11,400
-
35,993
Total
$’000
17,308
485
42,581
(33,611)
(39,993)
(2,407)
(2,473)
(52)
(431)
(203)
(540)
10,892
17,165
10,092
800
10,892
8,868
2,532
11,400
14,512
2,653
17,165
12,563
4,745
17,308
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)
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 practice 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 two and a half years.
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.
iv) Bonus plans
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.
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
2017
$’000
2016
$’000
281,847
281,847
175,231
175,231
Ordinary shares entitle the holder 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
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
At 30 June 2016
Opening balance as at 1 July 2016
1 July 2016
Shares issued
Initial consideration for the Travizon Travel
business combination.
78,473
48,431
78,185
824
525
835
880,360
11,559
1,085,449
13,743
(32)
(155)
98,078,805
175,231
98,078,805
175,231
1,236,458
17,793
2 September 2016
Shares issued
Share appreciation rights issue.
204,216
3,198
24 January 2017
Shares issued
1 February 2017
Shares issued
Capital raising used primarily for the
acquisitions of Redfern Travel and Andrew
Jones Travel.
Initial consideration for the Redfern Travel
and Andrew Jones Travel business
combinations.
30 May 2017
Shares issued
Employee compensation
Total shares issued
Less: transaction costs arising on share issue
Deferred tax credit recognised directly in equity
4,744,475
71,167
952,795
16,369
4,500
99
7,142,444
108,626
(2,003)
(7)
At 30 June 2017
105,221,249
281,847
Contributed equity (continued)
a)
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
2017
$’000
2016
$’000
45,423
401,404
37,180
271,585
11%
14%
Reserves
b)
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 2015
Currency translation differences – current period
Deferred tax
Other comprehensive income
Share-based payment expenses
At 30 June 2016
Currency translation differences – current period
Deferred tax
Other comprehensive income
Share-based payment expenses
At 30 June 2017
FX
translation
$’000
21,096
(3,334)
(431)
(3,765)
-
17,331
(8,887)
461
(8,426)
-
8,905
Share based
payment
$’000
513
-
-
-
1,801
2,314
-
-
-
2,300
4,614
Total
$’000
21,609
(3,334)
(431)
(3,765)
1,801
19,645
(8,887)
461
(8,426)
2,300
13,519
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 (continued)
b)
Reserves (continued)
Nature and purpose of other reserves
Foreign currency translation
Exchange differences arising on translation of foreign controlled entities 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.
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
2017
$’000
63,802
54,556
2016
$’000
40,207
42,134
(27,554)
(18,539)
90,804
63,802
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.
14. Borrowings
A breakdown of the existing borrowings balance is set out in the following table:
Current Borrowings
Non-current Borrowings
Total Borrowings
2017
$’000
18,122
27,301
45,423
2016
$’000
14,347
22,833
37,180
Borrowings drawn at 30 June 2017 relates to:
ο Acquisition payments of $37.0 million (2016 $32.3 million); and
ο Short term temporary funding for working capital cashflow needs globally of $8.4 million (2016 $4.9
million).
Financial facilities
On 5 January 2017, the Group renegotiated one of its facilities and entered into a Club Facility with HSBC bank
and the Commonwealth Bank of Australia. This multi-currency facility replaces the existing core facility of $75.8
million, and includes lines of credit up to $148.8 million. Security has been provided over CTM Group assets and
subsidiary shareholding to a Security Trustee for the benefit of the financiers.
Financial facilities (continued)
Redfern Travel Group has provided a fixed and floating charge over its assets to a local bank as security for a £7
million working capital facility ($11.8 million). In addition, the Group has further facilities of $9.3 million available
in Asia, which are utilised for bank guarantees required for supplier bonding purposes.
The available facilities are multi-currency, but have been expressed in their Australian dollar equivalent for
purposes of this disclosure.
The unused portion of the Group’s total facilities at 30 June 2017 is set out in the following table:
Unused
Used
Total facilities
$’000
76,322
93,590
169,912
Included within the used portion of the total facilities listed above are bank guarantees of $48.2 million. See note
17 for the total amount of bank guarantees for the Group.
Accounting policy
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: RISKNOTES 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
2017
$’000
2016
$’000
46,884
41,900
186,669
144,715
26,568
133,117
28,046
65,446
393,238
280,107
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.
2017
Pre-tax nominal discount rate applied to the cash flow projection
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
2016
Pre-tax nominal discount rate applied to the cash flow projection
Cash flows beyond the next financial year, up to year 5, are
extrapolated using a growth rate of:
Travel services
Australia
and New
Zealand
North
America
Asia
Europe
16.06%
16.48%
12.59%
11.96%
3.50%
3.00%
6.81
3.50%
2.50%
7.84
3.50%
3.00%
9.37
5.00%
3.00%
10.67
16.10%
15.11%
12.58%
13.56%
Revenue (years 2 – 5)
Operating expenses (years 2 – 5)
Terminal multiple of EBITDA in year 5
3.50%
3.00%
6.35
3.50%
2.50%
7.18
3.50%
3.00%
8.82
5.10%
3.00%
8.11
Key assumptions used for value-in-use calculations for the years ended 30 June 2017 and 30 June 2016
The following key assumptions were applied to the cash flow projections when determining the value-in-use:
• Pre-tax discount rates - reflect specific risks relating to the relevant segments and the countries in which they
operate.
• 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, expected client retentions,
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:
Possible change considered
Change required to
indicate an impairment
Growth rates – Travel services – Australia and New Zealand
Revenue
Reduction in yield, rates, client retention
Operating expenses
Higher labour and /
or other support costs
Growth rates – Travel services – North America
Revenue
Reduction in yield, rates, client retention
Higher labour and /
or other support costs
Decrease to (6.30%)
Increase to 14.42%
Decrease to (1.14%)
Increase to 8.12%
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
Decrease to (1.71%)
Higher labour and/
or other support costs
Increase to 9.10%
Reduction in yield, rates, client retention
Decrease to (10.70%)
Higher labour and/
or other support costs
Increase to 13.38%
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)
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 2017, the Group had interest bearing borrowings of $45.4 million, 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.
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.
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
2017
$’000
Moody’
Investor
Service
Rating
10,787
22,287
Aa3-A1
Aa1-A2
23,683
Aa1-Baa3
22,460
79,217
Aa3-A-
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 2017.
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 2017.
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
2017
$’000
2016
$’000
2017
$’000
2016
$’000
232,783
202,481
233,049
202,720
24,368
27,753
24,868
28,148
-
-
-
-
Total Trade and Other Payables
257,151
230,234
257,917
230,868
1 year or less
1 – 5 years
Over 5 years
Total Borrowings
18,122
27,301
-
14,347
22,833
-
18,122
27,301
-
14,347
22,833
-
45,423
37,180
45,423
37,180
76
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
2017, there are two forward exchange contracts in place to hedge the deferred consideration payments for Chris
Thelen as part of the Chambers acquisition.
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.
2017
USD
HKD
GBP
NZD
JPY
Others
Total
Cash
and cash
equivalents
$’000
Trade
and other
receivables
$’000
Related
party loans
$’000
Trade
and other
payables
$’000
Borrowings
Total
$’000
$’000
1,874
5,014
15,018
(5,864)
-
16,042
346
60
2
170
957
3,409
147
(21,339)
-
-
-
368
5,529
1,592
1,457
-
1,610
(1,662)
(90)
(182)
(1)
(1,635)
(1,793)
(9,565)
-
-
-
-
-
-
(20,936)
1,470
1,458
(1,465)
1,142
(2,289)
Based on the 2017 balances, a 10% stronger/(weaker) Australian dollar against the currencies held, would result
in Profit & Loss impact of $196,486/($240,150).
2016
USD
HKD
GBP
NZD
JPY
Others
Total
Cash
and cash
equivalents
$’000
Trade
and Other
receivables
$’000
Related
party loans
$’000
Trade
and Other
payables
$’000
Borrowings
Total
$’000
$’000
10,577
7,807
3,918
(5,290)
440
64
2
35
1,892
13,010
410
-
27
202
532
-
-
1,270
-
772
(42)
(266)
(20)
(3,788)
(4,119)
8,978
5,960
(13,525)
(3,244)
-
-
(3,244)
-
-
-
17,012
808
(3,446)
1,279
(3,551)
(923)
11,179
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. Refer note 14 for details of security
provided for the financing facilities.
Guarantees provided for:
Various vendors
Total
2017
$’000
2016
$’000
50,199
42,050
50,199
42,050
There were no other contingencies as at reporting date (2016: $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 eight 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
2017
$’000
8,060
14,244
1,675
23,979
2016
$’000
9,943
20,619
3,076
33,638
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.
19. Events occuring after the reporting period
There have been no 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.
78
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: UNRECOGNISED ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK
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 2017
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/businesses [note 7]
Transfers/reallocations
Disposals through sale of an entity
Depreciation charge
Exchange differences
Closing net book amount
Year ended 30 June 2016
Cost
Accumulated depreciation
Opening net book amount
Additions
Additions through the acquisition of
entities/businesses
Transfers/reallocations
Disposals
Depreciation charge
Exchange differences
Closing net book amount
2017
$’000
4,226
4,226
2016
$’000
4,906
4,906
Furniture,
fixtures and
equipment
$’000
Computer
equipment
Leasehold
provements
Other
Total
$’000
$’000
$’000
$’000
5,124
(4,254)
870
621
377
223
195
(82)
(388)
(76)
870
3,894
(3,273)
621
1,071
463
-
(536)
211
(565)
(23)
621
7,598
(5,843)
1,755
1,310
810
528
(195)
(14)
(687)
3
1,755
3,988
(2,678)
1,310
804
660
-
542
(174)
(610)
88
1,310
5,269
(2,725)
2,544
3,315
129
138
-
(249)
(724)
(65)
2,544
5,274
(1,959)
3,315
1,649
3,091
149
(6)
(31)
(1,431)
(106)
3,315
447
18,438
(354)
(13,176)
93
180
12
-
-
(75)
(84)
60
93
476
(296)
180
173
108
-
-
(3)
(126)
28
180
5,262
5,426
1,328
889
-
(420)
(1,883)
(78)
5,262
13,632
(8,206)
5,426
3,697
4,322
149
-
3
(2,732)
(13)
5,426
No additions during the year (2016: $nil) were financed under lease agreements.
80
21. Plant and equipment (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
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 2017:
Liabilities: Level 3 – Contingent Consideration
$8,160,000 (30 June 2016: $62,010,000).
The following table presents the changes in level 3 instruments for the year ended 30 June 2017:
Opening balance 1 July 2016
Additions
Transfer to Acquisition payable (i)
Foreign exchange movement
Discount unwind
Closing balance 30 June 2017
Contingent
Consideration
$’000
62,010
15,999
(69,930)
(510)
591
8,160
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
22. Fair value measurement (continued)
i) The balance transferred to Acquisition payable during the period consists of, the Montrose Travel contingent
consideration ($36.2 million), Chambers Travel contingent consideration ($25.5 million) and Redfern Travel
contingent consideration ($8.2 million), which are no longer contingent on performance hurdles. The
Montrose earn out was paid in March 2017. Also refer to Note 11 Trade payables and Note 25 Related party
transactions in relation to the Chambers deferred consideration balance.
There were no changes made to any of the valuation techniques applied as of 30 June 2017.
Fair value measurements using significant unobservable inputs (level 3)
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:
Contingent consideration
Fair Value at 30 June 2017:
$8,160,000
Valuation technique used:
Discounted cash flows
Unobservable inputs:
Forecast EBITDA and revenue
Discount rate:
2.06%
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.
23. Share-based payments
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 2017 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
An increase/(decrease) in the discount rate by 100 bps would (decrease)/increase the fair value by
($138,000)/$141,000.
Where:
• 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 $Nil/($4,509,000).
Fair values of other financial instruments
At 30 June 17 there are two forward exchange contracts in place to hedge the deferred consideration payments
for Chris Thelen, as a part of the Chambers acquisition. The foreign exchange contracts have been accounted
for using hedge accounting and designated at the inception of the transaction as cash flow hedges. The forward
contracts are assessed at fair value and the effectiveness of the hedge is tested at each reporting date. The fair
value is assessed to be $0.4 million at 30 June 2017 and recognised through Other comprehensive income.
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.
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.
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 and number of SARS expired during the
period:
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
2017 Number
of SARS
2016 Number
of SARS
2,185,000
1,475,000
1,582,500
965,000
(300,000)
(125,000)
(350,000)
(130,000)
3,117,500
2,185,000
-
-
82
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
23. Share-based payments (continued)
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 2017
SARS
30 June 2016
1 July 2013
1 July 2014
1 July 2015
1 July 2015
1 July 2016
1 July 2016
1 July 2017
1 July 2018
1 July 2018
1 July 2019
$5.00
$7.00
$8.80
$11.50
$15.33
-
865,000
50,000
795,000
1,407,500
3,117,500
300,000
940,000
50,000
895,000
-
2,185,000
On 22 August 2017, 600,600 shares will be issued upon vesting of 865,000 SARs. In addition to the share issue,
1,460,000 SARs will be granted, pursuant to the CTM SARs plan.
Fair value of SARs granted
The assessed fair value at grant date of the SARs granted during the year ended 30 June 2017 was $1.62 per
SAR (2016 - $1.26). 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 2017 included:
24. Interests in other entities
Material subsidiaries
a)
The Group’s principal subsidiaries at 30 June 2017 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.
Subsidiaries that provide travel services and contribute more than 5% of the Group’s net profit before tax or 5%
of the Group’s net assets are considered material to the Group.
Name of entity
Place of business/
country of
incorporation
Ownership
interest held
by The Group
Principal
activities
Ownership
interest held
by non-
controlling
interest
2017
%
2016
%
2017
%
2016
%
Corporate Travel Management Group
Pty Ltd*
Australia
100
100
Corporate Travel Management North
America Inc
United States of
America
100
100
-
-
- Travel services
- Travel services
Westminster Travel Limited
Hong Kong
75.1
75.1
24.9
24.9 Travel services
Corporate Travel Management (United
Kindom) Limited
United Kingdom
100
100
-
-
- Travel services
- Travel services
• SARs are granted for no consideration and vest based on Corporate Travel Management Limited’s Earnings
Redfern Travel Ltd
United Kingdom
100
-
* This subsidiary has been granted relief from the necessity to prepare financial reports in accordance with Class Order 2016/785 issued by the
Australian Securities and Investments Commission. For further information refer to note 27.
per Share growth over a 3 year vesting period.
• Base price: $15.33 (2016 - $11.50).
• Grant Date: 1 July 2016 (2016 - 1 July 2015).
• Expiry Date: 1 July 2019 (2016 - 1 July 2018).
• Share Price at Grant Date: $14.20 (2016 - $10.64).
• Expected price volatility of the Group’s shares: 25% (2016 - 25%).
• Expected dividend yield: 3.0% (2016 - 3.0%).
• Risk-free interest rate: 1.52% (2016 - 1.95%).
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 benefits expense relating to share appreciation rights is $1,366,000 (2016: $778,000).
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 (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 includes non-controlling interests which are not material to the Group.
The amounts disclosed are before inter-company eliminations.
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
Summarised Statement of Financial Position
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
2017
$’000
2016
$’000
126,882
146,395
(74,699)
(98,569)
52,183
16,277
(1,088)
15,189
67,372
15,304
47,826
18,496
(1,409)
17,087
64,913
14,649
2017
$’000
2016
$’000
57,832
14,836
2,430
17,266
3,189
2,568
68,754
15,552
(2,348)
13,204
3,611
2,394
2017
$’000
2016
$’000
12,038
(175)
33,029
(656)
(11,966)
(28,405)
(103)
3,968
Short-term
Post-employment
Long-term benefits
Share-based payments
2017
$
2016
$
4,440,380
4,027,580
211,064
303,708
(46,564)
(27,599)
498,523
218,334
5,103,483
4,522,023
Detailed remuneration disclosures are provided in the Remuneration Report on pages 14-22.
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 Mr Chris Thelen
Other
Working capital advance
2017
$’000
2016
$’000
-
47
-
114
57
109
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 payables
Key management personnel (i)
Other related parties
2017
$’000
2016
$’000
21,798
76
22,271
580
(i) The payable represents the present value of the deferred consideration payable to Chris Thelen ($21.3 million) and Debbie Carling ($0.5
million), as a part of the acquisition of Chambers Travel Group Limited – refer to note 11.
86
87
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
2017
$’000
2016
$’000
1,068
3,506
352,332
29,973
255,286
28,332
15,243
28,819
337,089
226,467
302,250
195,635
13,429
21,410
10,136
20,696
337,089
226,467
28,267
27,370
28,267
27,370
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 2017 or 30 June 2016.
Contractual commitments
d)
The parent did not have any contractual commitments at 30 June 2017 or 30 June 2016.
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:
Investments in subsidiaries
i)
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.
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.
88
89
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 2016/785 (as amended) 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 2017 of the
closed Group.
a)
Consolidated Statement of Comprehensive Income
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
Changes in the fair value of cash flow hedges
Other comprehensive income for the period, net of tax
Total comprehensive income for the year
2017
$’000
2016
$’000
225,683
160,957
403
2,983
226,086
163,940
(119,940)
(87,753)
(6,088)
(9,730)
(6,467)
(6,685)
(17,189)
(11,376)
(3,833)
(9,818)
(2,363)
(5,422)
(166,598)
(120,066)
(2,645)
56,843
(14,850)
41,993
(3,230)
360
(2,870)
39,123
(1,273)
42,601
(8,509)
34,092
9,730
-
9,730
43,822
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
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
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
2017
$’000
2016
$’000
32,091
66,618
236
1,732
46,623
57,635
12
1,735
100,677
106,005
3,177
244,922
175,656
9,012
-
432,767
533,444
3,384
199,382
94,649
2,151
5,205
304,771
410,776
85,450
18,095
2,691
4,742
100,473
14,347
(255)
3,874
59,470
23,931
170,448
142,370
1,186
-
1,927
4,975
8,088
1,393
22,833
3,801
6,669
34,696
178,536
177,066
354,908
233,710
281,847
175,231
11,474
61,587
11,331
47,148
354,908
233,710
90
91
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
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
2017
$
2016
$
531,419
493,597
220,578
179,047
72,127
33,270
824,124
705,914
471,027
43,639
-
6,071
439,088
207,770
5,490
40,722
Total remuneration of PricewaterhouseCoopers network firms
520,737
693,070
Non-PricewaterhouseCoopers firms:
Services in relation to the entity and any other entity in the consolidated Group:
Audit and review of the financial report
Tax compliance
Total remuneration of Non-PricewaterhouseCoopers firms
29. Summary of significant accounting policies
101,703
285,524
133,206
-
387,227
133,206
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.
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 2016 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.
29. Summary of significant account policies (continued)
New and amended standards (continued)
b)
Certain new accounting standards and interpretations have been published that are not mandatory for the
reporting period ending 30 June 2017 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.
Mandatory application date
/ date of adoption by the
Group
Mandatory for financial year
ending 30 June 2019.
At this stage, the Group
does not intend to adopt the
standard before its effective
date.
Mandatory for financial year
ending 30 June 2019.
At this stage, the Group
does not intend to adopt the
standard before its effective
date.
Mandatory for financial year
ending 30 June 2020.
At this stage, the Group
does not intend to adopt the
standard before its effective
date.
Title of
standard
AASB 9
Financial
instruments
AASB 15
Revenue from
contracts with
customers
AASB 16
Leases
Summary and impact on the Group’s financial statements
The new standard simplifies the model for classifying and
recognising financial instruments and aligns hedge accounting more
closely with common risk management practices.
The new standard also introduces a new expected-loss impairment
model that will require entities to account for expected credit losses
at the time of recognising the asset.
The Group has undertaken a preliminary assessment of the potential
impact of this new standard and at this stage, does not expect there
to be a material impact on the Group’s results.
The AASB has issued a new standard for the recognition of revenue,
which replaces virtually all revenue recognition requirements,
including those as set out in AASB 118 Revenue.
The new standard is based on the principle that revenue is
recognised when control of a good or service transfers to a
customer, so the notion of control replaces the existing notion or risk
and rewards.
The Group has undertaken a preliminary assessment of the potential
impact of this new standard and at this stage, does not expect there
to be a material impact on the Group’s results.
AASB 16 addresses the classification, measurement and recognition
of almost all leases. The changes will primarily affect the accounting
by lessees and will result in almost all leases being recognised on
the balance sheet. The standard removes the current distinction
between operating and finance leases and requires recognition of
an asset (the right to use the leased item) and a financial liability to
pay rentals for almost all leases. The only exceptions are short-term
and low-value leases.
As at the reporting date, the Group has operating lease
commitments of $23.9 million. Refer note 18.
The Group has conducted a preliminary assessment of the forecast
impact of AASB 16 on the Group’s profit, balance sheet and cash
flows. Upon adoption of AASB 16, the Group expects a material
increase in both lease liabilities and right-of-use assets. The Group
EBITDA is expected to be materially positively impacted as lease
costs are reclassified as interest and depreciation, although the
impact on the Group’s profit is not expected to be material.
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 2016/191, 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.
92
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS
Directors’ Declaration
In the Directors’ opinion:
(a) The financial statements and notes set out on pages 39 to 93 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 2017 and of its
performance for the financial year ended on that date; and
(b) 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
(c) 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, 22 August 2017
Mr Jamie Pherous
Managing Director
94
95
[][]Independent auditor’s report To the members of Corporate Travel ManagementLimitedReport on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Corporate Travel Management Limited (the Company) and its controlled entities (together, the Group) is in accordance with the Corporations Act 2001, including: a)giving a true and fair view of theGroup’sfinancial position as at 30 June 2017 and of its financial performance for the year then endedb)complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have auditedThe Group financial report comprises: •the consolidated statement of financial position as at30 June 2017•the consolidated statement of comprehensive income for the year then ended•the consolidated statement of changes in equity for the year then ended•the consolidated statement of cash flowsfor the year then ended•the notes to the consolidated financial statements, which include a summary of significant accounting policies•the directors’ declaration.Basis for opinion We conducted our audit in accordance withAustralian Accounting Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of theConsolidated Financial Statementssection of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. IndependenceWe are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (theCode) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.PricewaterhouseCoopers, ABN 52 780 433 757 480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001T: +61 7 32575000, F: +61 7 3257 5999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation.
96
97
Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context.We communicated the key audit matters to the Audit Committee. Key audit matterHow our audit addressed the Key audit matterRevenue recognitionRefer to Note 2 RevenueThe Group’s provision of travel services to clients drives a number of revenue streams.The recognition of revenue from these sources is largely dependent on the terms of the underlying contracts with the customer, the supplier, or both. Contracts can be complex and bespoke in terms of their fee structures, the range and mix of services provided, as well as potential for late adjustments and renegotiations of contractual terms. In addition, judgement is involvedin the recognition of revenue related to volume incentives (“overrides”) as revenue is accrued based on estimated Total Transaction Value (“TTV”) for the period, with reference to terms stipulated in supplier agreements.We focused on revenue recognition due to the materiality of the revenue balance as awhole and on the revenue streams ‘fees and commissions’ and ‘overrides’ in particular. This wasbecause of their relative significance to the overallrevenue balance, the bespoke nature of the agreements and (in the case of overrides) the judgement involved in accurately recognising revenue. Our procedures in relation to the recognition of revenue from all revenue streams included, amongst others:•Understanding the Group’s revenue recognitionprocesses•Testing a sample of transactions recognised in thegeneral ledger to supporting documentation,including cash receipts perthe bank statements•Utilisingdata analytic techniquesfor selectedgeographical locations to identify revenuetransactions recognised through manual journalentries and testing a sample of manual journalrevenue transactions.In addition, we performed the following procedures specific to the below revenue streams, on a sample basis:Overrides•Testing the mathematical accuracy of the Group’sunderlying revenue calculations•Comparing the percentages and TTV inputs used inthe underlying calculations to percentages stipulatedin the signed overrides agreements, and known TTVdata supplied by a third party•Testinga sampleof overrides payments receivedduring the year to bank statementsFees & Commissions•Utilising data analytic techniques to reconcile thetotal recognised revenue for fees and commissionsfor selected geographical locations to recordedtotalcash received for those selectedlocations•Agreeinga sample of recorded fees and commissionstransactions to signed customer agreements, invoicesand bank statements.Our audit approachAn audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates.The Group provides travel management solutions to the corporate market and operates in four broad geographic regions, being Australia & New Zealand (“ANZ”), North America, Asia and Europe. The regional finance functions report to the Group finance function in Brisbane, Australiawhere consolidation is performed.Materiality•For the purpose of our audit we used overall Group materiality of $3.9 million, which represents approximately 5% of the Group’s profit before tax.•We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. •We chose Group profit before tax as the benchmark becausethe Group is a profit oriented entity and because, in our view, it is one of the metrics against whichthe performance of the Group is most commonly measuredand it is a generally accepted benchmark in the travel industry. •We selected 5% based on our professional judgement noting that it is also within the range of commonly acceptableprofit related thresholds in the industry. Audit scope•Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. •In establishing the overall approach to the Group audit, we determined the type of audit work that needed to be performed by us, as the Group engagement team, and by component auditors in Hong Kong and the UK operating under our instruction. We structured our audit as follows:-We engaged component auditors in Hong Kong and the UK to perform audit procedures over the Asia and Europe regions respectively.-We performed audit procedures over the North America region, which includedus visitingthe Houston based finance function. -We also performed audit procedures over the Australia & New Zealand region, in addition to auditing the consolidation of the Group’s regional reporting units into the Group’s financial report. •For the work performed by component auditors in Hong Kong and the UK, we determined the level of involvement we needed to have in the audit work at these locations to be satisfied that sufficient audit evidence had been obtained as a basis for our opinion on the Group financial report as a whole. This included active dialogue throughout the year through discussions, issuing written instructions, receiving formal interoffice reporting, as well as attending final clearance meetings with local management.Members of our Group audit team undertook site visits to each of the four regions during the year ended 30 June 2017. 98
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Post-acquisitionmeasurement of deferred and contingent considerationRefer to Note 7 Business combinations, Note11Trade and other payablesandNote 22 Fair value measurementIt is common that, for acquisitions made by the Group, elements of the consideration are deferred to financial years after the initial acquisition and (in some cases) are contingent on future events, including financial performance based “earn out” calculations.At 30 June 2017, the Group had deferred and contingent consideration liabilities relating to acquisitions made in the current and previous financial periods.We focused on the post-acquisitionmeasurement ofthese liabilitiesas at 30 June 2017due to the judgement involved in assessing the likelihood of the contingent events being met, the discounting to be applied, as well as the disclosure requirements for such liabilities. Our procedures in relation to the post-acquisitionmeasurement of deferred and contingent consideration as at 30 June 2017included, amongst others:•Obtaining the original purchase agreements, and anysubsequent agreements entered into, to determinewhether the deferred consideration is non-contingentor contingent upon future events at balance date•Testing the mathematical accuracy of the Group’sunderlying calculations•Evaluating the Group’s assumptions for discountratesused in the calculations•Assessing the classification of liabilities betweencurrent and non-current at 30 June 2017, withreference to agreed or estimated payment terms.Specific procedures for contingent consideration liabilities included,amongst others:•Comparing the contingent criteria (or ‘earn out’)used in the Group’s underlying calculations to theterms stipulated in the purchase agreements and anysubsequent agreements•Evaluating the financial forecasts used by the Groupto estimate if “earn out” performance hurdles in thefuture are likely to be met, including comparison toBoard approved budgets•Testing that the amounts accrued as a liability wereconsistent with the outcome of theGroup’scalculations, and consistent with the financialperformance of the business from other auditprocedures•Reviewing whether reclassifications from contingentconsideration to deferred consideration wereappropriate based on whether “earn out” criteria hadbeen met or alternative contractual terms hadbeenagreed•Assessing the accuracy and completeness ofcontingent consideration disclosures in the financialstatementsas at 30 June 2017.Accounting for business combinationsRefer to Note 7 Business combinationsThe Group completed three acquisitions during the year ended 30 June 2017:•Travizon Travel (“Travizon”) inBoston, USA on 1 July 2016•Redfern Travel (“Redfern”) inBradford, UK on 1 February 2017•Andrew Jones Travel (“AJT”) inTasmania, Australia on 1 February2017.We determined that the accounting for business combinationswas a key audit matter for the FY17 audit due to the materiality of the value of the transactions, net assets acquired and resultant goodwill arising on the acquisitions, as well as thelevel of judgement involved in the Purchase Price Allocation (“PPA”) calculations.The key areas of judgementincluded:•The value of deferred and contingentconsideration liabilities recognised atacquisition date•The fair value of the acquired assetsand liabilitiesrecognised atacquisition date•The valuation of customer relationshipand customer contract intangibleassetsat acquisition date•Disclosure of acquisition details in thefinancial statements as at 30 June2017. Our procedures in relation to the accounting for acquisitions included, amongst others:•Testing of the initial consideration paid for each ofthe three acquisitions to the bank statements and thepurchase agreements•Obtaining purchase agreementsfor each of the threeacquisitionsto determine the level of deferredconsideration, and whether any consideration iscontingent on future events•Assessing the contingent consideration liabilityrecognised by the Group at acquisition date, and themeasurement and disclosure of related ‘earn out’criteria for the Redfern acquisition by reference tothe terms of the purchase agreement•Assessing the discount rates appliedin the Group’scalculations of deferred and contingent considerationliabilities by comparing to our independentlydeveloped calculation of discount rates•Testing a sample of acquired working capitalbalances to post acquisition date payments andreceipts•Assessing the Group’s valuation methodology for therecognition of customer relationship and customercontract intangible assets and the key assumptionstherein, including forecast future financialperformance and discount rates•Performing sensitivity analysis on these assumptions•Assessing the mathematical accuracy of the Group’scalculation of the resulting goodwill arising on thePPA calculation•Considering the completeness of the recognition ofintangible assets by reference tothe purchasecontract and intangible assets recognised in previousacquisitionsby the Group•Assessing the accuracy and completeness of businesscombination disclosures in the financial statements. 100
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Other information The directors of the Company are responsible for the other information. The other information comprises the Chairman and Managing Director’s Report, Corporate Directory, Directors’ Report, Corporate Governance Statement and Shareholder Information in the annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for thefinancial reportThe directors of the Company are responsible for the preparation of the financial report that gives a true and fair viewin accordance withAustralian Accounting Standards and the Corporations Act 2001, and for such internal control as the directorsdetermine is necessary to enable the preparation of the financial report that gives a true and fair view, and isfree from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directorseither intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial reportOur objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standardswill always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Impairment assessment on the Group’s goodwill balancesRefer to Note15 Impairment testing of goodwillAt 30 June 2017, the Group recorded $441.0m of intangible assets, of which $393.2m related to goodwill. These assets are allocated between four cash generating units (“CGUs”), being Australia & New Zealand, North America, Europe and Asia.As required by AustralianAccounting Standards, at 30 June 2017 management performed an impairment assessment over the goodwill balance by calculating the ‘value in use’ for each CGU, using a discounted cash flow model.Given the level of judgement involved in estimating the key assumptions in the valuation models, including forecast performance, growth rates and discount rates, and the materiality of the goodwill recognised on the Group’s balance sheet, we determined that this was a key audit matter.No impairment charge was recorded by the Group in the current financial year. Our procedures in relation to the impairment assessment of goodwill included, amongst others:•Assessing the appropriateness of the Group’sdetermination of its CGUs•Testing the mathematical accuracy of the underlyingcalculationsin the Group’s discounted cash flowvaluation models•Comparing the cash flow forecasts for FY18 used inthe models to the Board approved budget for FY18•Comparing the FY17 actual results with prior yearforecasts to assess the historical accuracy of theGroup’s forecasting processes•Evaluating the key assumptions in the cash flowmodels, includinglong term growth rates anddiscount rates•Performing sensitivity analysis to assess the impactof reasonably possible changes in the assumptionsused in the valuation models, including the discountrates, growth rates, and FY18 forecast.Based on our procedures we found that headroom remained between the carrying value of each CGU’s assets (including goodwill) and management’s calculation of the value in use, and as such no impairment of goodwill was identified.We also compared the Group’s net assets as at 30 June 2017 of $401m to its market capitalisation of $2,414m at 30 June 2017, and noted the $2,013m ofimplied headroom in the comparison. Shareholder Information
The shareholder information set out below was applicable at 18 July 2017.
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
There were 195 holders of less than a marketable parcel of ordinary shares.
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
6,680
4,203
573
386
52
11,894
Pherous Holdings Pty Ltd
HSBC Custody Nominees (Australia) Ltd
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Claire Lesley Gray
BNP Paribas Noms Pty Ltd
Steven Craig Smith
Matthew Michael Cantelo
Matimo Pty Ltd
Ms Helen Logas
BNP Paribas Nominees Pty Ltd
Doobie Investments Pty Limited
Christopher Alexander Thelen
Mr Matthew Dalling
National Nominees Limited
Shamiz Pty Ltd
Citicorp Nominees Pty Limited
Joseph D McClure and Julie A McClure
Andrea McClure – MYSZA
2017
Number
held
Percentage of
issued shares
21,650,000
18,303,335
9,877,088
4,163,534
3,315,489
2,967,759
2,189,854
1,584,338
1,498,520
1,279,350
1,136,764
959,016
924,936
905,547
899,171
558,467
526,893
441,416
440,180
440,180
20.58%
17.40%
9.39%
3.96%
3.15%
2.82%
2.08%
1.51%
1.42%
1.22%
1.08%
0.91%
0.88%
0.86%
0.85%
0.53%
0.50%
0.42%
0.42%
0.42%
74,061,837
70.40%
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103
Report on the remuneration reportOur opinion on the remuneration reportWe have audited the remuneration report included inpages27to35 of the directors’reportfor the yearended30 June 2017.In our opinion, the remuneration report ofCorporate Travel Management Limited, for the year ended30 June 2017complies with section 300A of the Corporations Act 2001.Responsibilities The directors of theCompany are responsible for the preparation and presentation of the remuneration report inaccordance 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. PricewaterhouseCoopersMichael ShewanPartner 22August 2017 Shareholder Information (continued)
Corporate Directory
c)
Equity security holders (continued)
Unquoted equity securities
Share Appreciation Rights
3,117,500
34
Substantial holders
d)
Substantial holders (including associate holdings) in the Company are set as follows:
Number on issue
Number of
holders
Pherous Holdings Pty Ltd
HSBC Custody Nominees (Australia) Ltd
J P Morgan Nominees Australia Limited
UBS Group AG
Hyperion Asset Management Limited
Number
held
Percentage
Issued shares
21,650,000
18,303,335
9,877,088
7,529,852
5,019,113
20.58%
17.40%
9.39%
7.16%
5.04%
Voting rights
e)
The voting rights attaching to each class of equity securities are set out below:
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.
Share Appreciation Rights
Share appreciation rights have no voting rights.
Directors
Secretary
Tony Bellas
Stephen Lonie
Greg Moynihan
Jamie Pherous
Admiral Robert J. Natter, U.S. Navy (Ret.)
Laura Ruffles
S. Fleming
S. Yeates
Notice of Annual General Meeting
The Annual General Meeting of Corporate Travel Management will
be held in Brisbane on Tuesday 24 October 2017 at 9am at the
office of McCullough Robertson (Level 11, Central Plaza Two, 66
Eagle Street, Brisbane QLD 4000).
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
104
105
Registered Office
Level 24,
307 Queen Street,
Brisbane QLD 4000
www.travelctm.com