Corporate Travel Management Annual Report 2019

← All annual reports

FY2019 Annual Report · Corporate Travel Management

Loading PDF…

ANNUAL REP ORT 2019

Financial Highlights

Chairman’s Report

Managing Director’s Report

Transforming Business Travel for 25 Years

Sustainability, CSR and Our People

Board of Directors

Executive Team

Annual Financial Report

Corporate Travel Management Limited

ABN 17 131 207 611

Contents
Financial Highlights

30%

$6,457.5m
TOTAL TRANSACTION VALUE

$86.2m
30%
12%

$6,457.5m
TOTAL TRANSACTION VALUE
STATUTORY NPAT
ATTRIBUTABLE TO OWNERS

$86.2m
12%

STATUTORY NPAT
ATTRIBUTABLE TO OWNERS

26%
EUROPE

15%
ASIA

26%
EUROPE

$449.5m
30%
30%
21%REVENUE & OTHER INCOME

$6,457.5m
$6,457.5m
TOTAL TRANSACTION VALUE
TOTAL TRANSACTION VALUE

30%

$6,457.5m
TOTAL TRANSACTION VALUE

$449.5m
$449.5m
$150.1m
30%
$86.2m
$449.5m
21%REVENUE & OTHER INCOME
21%REVENUE & OTHER INCOME
20%
12%
21%REVENUE & OTHER INCOME
$6,457.5m
TOTAL TRANSACTION VALUE
UNDERLYING EBITDA
STATUTORY NPAT
ATTRIBUTABLE TO OWNERS
$449.5m
$150.1m
89.5c/share
$150.1m
21%REVENUE & OTHER INCOME
$150.1m
20%
10%
20%
20%
$150.1m
40c/share
20%
11%

UNDERLYING EBITDA
UNDERLYING EPS
UNDERLYING EBITDA

UNDERLYING EBITDA

DIVIDEND PAYMENT

N
O
I
G
E

27%
NORTH
AMERICA

32%
AU/NZ

BITDA CO N T R I B U

N
O
I
G
E

Y R

N B

T I O

$449.5m
$86.2m
$86.2m
89.5c/share
$86.2m
21%REVENUE & OTHER INCOME
10%
12%
12%
12%

UNDERLYING EPS
STATUTORY NPAT
ATTRIBUTABLE TO OWNERS

STATUTORY NPAT
ATTRIBUTABLE TO OWNERS

U
N

EUROPE

UNDERLYING EPS

$86.2m
40c/share
$150.1m
89.5c/share
89.5c/share
12%
11%
20%
10%
10%

89.5c/share
15%
ASIA

26%
STATUTORY NPAT
DIVIDEND PAYMENT
UNDERLYING EBITDA
UNDERLYING EPS
UNDERLYING EPS
ATTRIBUTABLE TO OWNERS

10%
U
32%
40c/share
89.5c/share
N
27%
40c/share
AU/NZ
40c/share
10%
NORTH
11%
AMERICA
11%

11%

T I O
DIVIDEND PAYMENT

BITDA CO N T R I B U

UNDERLYING EPS
DIVIDEND PAYMENT

DIVIDEND PAYMENT

U
N

40c/share

32%
U
N
AU/NZ

U
N

89.5c/share

27%
NORTH
AMERICA

10%

Y R
15%
N B
15%
ASIA
T I O
ASIA

15%
ASIA
26%
EUROPE

U
N

26%
26%
UNDERLYING EPS
E
EUROPE
EUROPE
BITDA CO N T R I B U
32%
AU/NZ

40c/share
27%
27%
NORTH
NORTH
AMERICA
D
AMERICA

11%

27%
15%
NORTH
ASIA
AMERICA

N
32%
O
32%
I
AU/NZ
G
E
AU/NZ
Y R
N B
BITDA CO N T R I B U
27%
NORTH
AMERICA

T I O
BITDA CO N T R I B U
32%
AU/NZ

26%
DIVIDEND PAYMENT
BITDA CO N T R I B U

N
O
I
G
E

EUROPE
I
E

N B
T I O

T I O

Y R

N B

BITDA CO N T R I B U

Y R

N B

T I O

N
O
I
G
E

Y R
N B

Y R

11%

DIVIDEND PAYMENT

30%

$6,457.5m
TOTAL TRANSACTION VALUE

$449.5m

21%REVENUE & OTHER INCOME

$150.1m
20%

UNDERLYING EBITDA

Chairman’s
Report

Dear Shareholders,

I am pleased to provide shareholders with my

first report as a Director and Chairman of the

Corporate Travel Management Limited (“CTM” or

“the Group”) Board. I look forward to meeting in

person shareholders who attend the Annual General

Meeting (AGM) in Brisbane on 6 November 2019,

and I welcome shareholder questions or comments

regarding the company at any time.

and attractive market. The Australia/New Zealand

business continues to perform strongly and has again

increased market share by leveraging our proprietary

technology solutions.

As company founder and Managing Director, Jamie

Pherous, outlines in his report which follows CTM

remains confident that its customer value proposition

remains compelling and that there is enormous

untapped potential in each of the markets in which

CTM is an Australian success story which has

leveraged technology innovation to carve for itself

a leading position in the global corporate travel

market. It is an admirable achievement and a key

reason I chose to join the CTM Board. The Group

operates from four regions, and there remains scope

to grow both organically as well as through further

acquisitions. A key focus as Chairman will be to ensure

our company has appropriate governance processes,

a robust strategy and management structures to

support sustainable growth.

we operate.

Dividends

The board declared a final dividend of 22 cents

per share, franked to 50%. This represents a total

dividend payment for the year of 40 cents per share

which equates to a payout ratio of 50%. The dividend

payment date will be 3 October 2019. The payout

ratio is in line with our stated dividend policy. We

are pleased that shareholders have received good

dividend growth per share since listing.

Financial results and operating
conditions

Board and senior management
changes

I am pleased to report net profit after tax (“NPAT”)

of $86.2 million for the full year ending 30 June 2019.

Excluding the one-off or non-recurring items (tax

effected) of $5.1 million and non-cash amortisation

of client intangibles (tax effected) of $5.6 million,

underlying NPAT was $96.9 million, an increase of 13%

over the previous year.

This was a solid result given corporate travel activity

was impacted by major headwinds in our key markets

of Europe, US and Asia. Specifically, travel activity was

affected by continuing Brexit uncertainty in the UK,

continuing tension from US/China trade talks and

ongoing civil unrest in Hong Kong.

Despite these external factors, our global strategy

delivered good results and provides a strong platform
for the future. In Asia we have now integrated the

Lotus acquisition and expect this will underpin

increasing contributions from this region. In the US

we see positive signs following a sustained period of

acquisitions where increased capacity will support

new business wins in a highly competitive but deep

I would like to acknowledge my predecessor Tony

Bellas and thank him for his substantial contribution

as CTM Chairman since listing in 2010.

One of my first priorities as Chairman is to work

with the Board on a process of orderly renewal and

a broadening of our Director skill base given CTM’s

substantial growth and expansion of operations

in recent years. We recognise it is very important

the Board’s collective skills match the demands of

diligent oversight of an expanded and growing global

business.

Stephen Lonie, who has served as a Director since

CTM listed, has decided he will step down as a

Director at the AGM in November. I will speak to

Stephen’s extensive contribution to CTM as well as

provide more detail on our Board renewal plan at the

AGM. We also expect to announce the appointment

of a new Director to the Board over the coming

weeks.

Ewen Crouch AM

Chairman

financial result and continue the growth story for CTM

commenting on yet another record performance, it is

despite some tough trading conditions in the past six

important to reflect on how far CTM has come in 25

months. In particular, I acknowledge Jamie Pherous

years.

2019 represents our 25th year of operations. Before

This process of Board renewal is accompanied by a

close review of the company’s governance processes

and protocols. The Board has conducted a review and

tightened the procedures and reporting of changes

in Directors’ interests. Shareholders can be assured

of the Board’s commitment to good governance

practice.

The Board also welcomes Neale O’Connell as our

Global CFO, replacing Steve Fleming who will focus

on his role as CFO Europe. Neale brings a strong

background in ASX 100 and UK listed multi-national

companies.

Remuneration

The investment community is rightly focused on

People

I would like to thank our more than 2,600 employees

(full time equivalents) around the world for their

dedication. Their commitment to delivering customer

outcomes is what allows us to achieve a strong

and the Senior Executive Team, who have worked

tirelessly and with great passion to drive results for

shareholders and service for our clients around the

world.

I look forward to meeting all shareholders who can

attend our Annual General Meeting.

companies having the right remuneration structure to

attract and retain talent as well as align management

Yours sincerely

and shareholders’ expectations.

While the enclosed Remuneration Report provides

important insight and detail, by way of an overview

comment, the Board has endeavoured to strike the

Ewen Crouch AM

right balance between growth and accountability.

CTM’s long term appreciation incentives are a very

Chairman

important element of the remuneration structure

Corporate Travel Management Limited

which ensures management remains focussed on

21 August 2019

making long term strategic decisions while managing

for nearer term performance. We value shareholder

feedback to ensure we maintain the right balance.

Managing Director’s
Report

25 years of CTM

Outstanding performance

I am pleased to present the 2019 Annual Financial

Report of CTM.

In the year to 30 June 2019, CTM’s revenue of $446.7

million was 20% higher than the previous year.

In 1994, the company was established with one

common goal, to deliver an enhanced value

proposition to the corporate market. Corporate

customers around the world demanded intuitive

technology, supported by highly personalised

service and underpinned by a return on investment

methodology to reduce the overall cost of corporate

travel. Most importantly, that same customer service

proposition that anchored the company’s growth

from 1994 is just as relevant today and relevant

globally.

Growth opportunity

From a Brisbane start-up in 1994, CTM has grown to

become a global travel company, employing over

2,600 employees (full time equivalents) worldwide.

In FY19, over 70% of Group’s revenue was generated

outside of Australia and New Zealand, supporting the

success of the client proposition on a global scale.

The company has seen sequential TTV growth in

every year of its 25 years, and since listing in 2010, TTV,

EBITDA and dividend has sequentially grown in every

year.

There is an untapped opportunity that lies ahead now

that the company is well established in every region

it operates. Despite TTV of approximately $6.5 billion,

CTM represents under 1% of the global corporate

market and corporate travel is expected to grow

continuously over the long term.

We feel confident in our value proposition, business

model, and our ability to execute, to take advantage of

the growth opportunities ahead.

CTM’s statutory net profit after tax (“NPAT”) of $86.2

million for the year to 30 June 2019 compares with

$76.7 million in the previous year, representing a 12%

increase. Underlying NPAT was $96.9 million, when

adding back one-off acquisition costs and other non-

recurring costs (tax effected) of $5.1 million and non-

cash amortisation of client intangibles (tax effected)

of $5.6 million, representing a 13% increase on prior

year.

Financial position

The continued generation of strong cash flows

contributed to the Group’s sound financial position,

with net cash flows from operating activities of $133.5

million over the year to 30 June 2019. The operating

cash conversion rate, which is net operating cash

flows excluding interest, finance costs and income tax

paid divided by EBITDA is approximately 113%.

Total equity of $592.5 million at 30 June 2019

compares with $471.5 million at 30 June 2018, an

increase of $121.0 million or 26% over the year.

Strategic initiatives

The Group focused on the following key strategic

initiatives during the year:

1. Continued Organic Growth and Acquisitions:

•

Enhancing our value proposition to meet client

needs across the CTM global network.

Leveraging clients across all lines of business

(CTM, ETM, B2B, B2C).

Executing upon merger and acquisition

opportunities that add scale, niche, and/or

geography, including Lotus Travel in Asia and

Platinum Travel in ANZ.

2. Client Facing Innovation:

•

Expanding SMART technology globally by

developing new tools for and with our clients.

•

Through regional technology hubs, building

staff have made to the Group’s strong performance.

tools that address local or regional market

Their professionalism and commitment have been

requirements.

3. Productivity and Internal Innovation:

fundamental to the development of CTM’s reputation

as a highly valued business partner for its clients.

Positioning for the Future

•

Internal innovation feedback loops, to improve

As we look forward to 2020, CTM remains confident

and automate existing client and non-client

that its customer value proposition remains

facing processes.

compelling and that there is enormous untapped

•

Staff empowerment to make service decisions

potential in each of the markets in which we operate.

to drive high staff engagement and client

satisfaction outcomes.

CTM now has in place regional technology hubs to

ensure that we build client facing technologies that

4. Leveraging our Scale and Geography:

address local and regional market requirements. This

approach will assist our organic growth through client

•

Capitalising on scale and our global network, to

wins and retentions, which coupled with pursuing

develop and optimise supplier performance for

further merger and acquisition opportunities that add

our clients.

scale, niche and geography will ensure that CTM is

•

Continuing to demonstrate that CTM is a valuable

well positioned for further growth.

partner in the global travel supply chain.

5. Our People:

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

•

Continuing to attract, retain and develop the

and expertise demanded by clients.

industry’s brightest talent.

Empowering our team to support our clients’

Conclusion

needs.

I would like to take this opportunity to thank the

Embracing a culture that represents our values

Board, management team and staff for their efforts,

and business drivers.

Employees

and congratulate them on the continued success of

CTM as a leading-edge and profitable corporate travel

solutions company.

A competent and motivated workforce is integral to

CTM’s success. CTM employs over 2,600 employees

I would also like to thank CTM’s shareholders and,

(full time equivalents).

most importantly, CTM’s clients for their continuing

CTM’s culture is founded upon the principle of

empowering its people, through good processes

Yours sincerely

support.

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

Jamie Pherous

people in delivering service excellence to clients.

Managing Director

The Board and the senior management team

Corporate Travel Management Limited

appreciate and recognise the contribution that CTM’s

21 August 2019

Jamie Pherous

Managing Director

Transforming Business
Travel for 25 Years

From a humble start-up in 1994,

Today, more than 70% of CTM’s

Corporate Travel Management (CTM)

revenue is generated outside of

has grown its customer base and

Australia and New Zealand and our

expanded its reach and offering

reach extends to the UK/Europe, Asia

to become a well-recognised

and North America. Our strategy of

international travel management

expanding the portfolio has been

business.

carefully managed to ensure we drive

strong organic growth in new markets

This year CTM marks the exciting

entered. In 2018 we achieved our

milestone of 25 years in business.

target of generating total transaction

Founded in 1994 in Brisbane,

with the main proceeds derived from

value (TTV) of AU$1bn in every region,

Australia by Managing Director Jamie

organic growth.

Pherous, CTM has always prided

itself on building a highly responsive

Since listing in 2010, we’ve paid out

operating model that can tailor and

$159.1 million in dividends, sharing

adapt its service and technology

the rewards of our performance with

solutions quickly to meet customer

shareholders who have watched

needs. The desire to be the best

us build a long term, sustainable

travel management company in every

business.

region of operation is matched with a

vision to transform the business travel

While many milestones have been

experience, while also ensuring a

crossed in our first 25 years, we are

return on investment for customers.

excited about what is still to come.

This year CTM

marks the exciting

milestone of 25

years in business.

Our customers, which include some of

the world’s largest corporates, rely on

us to take on complex briefs, deliver

under pressure and demonstrate that

we can achieve savings on their travel

spend. This focus has allowed CTM to

grow from a two-man operation to a

global workforce of more than 2,600

(full time equivalents) employees with

annual TTV in excess of $6.457 billion

for the year ended 30 June 2019.

1994
CTM founded
in Brisbane, Australia

2010
Enters New Zealand
market

2012
Enters US market

2014
Enters Asia market

2017
Established CTM tech
hubs across all regions

2010
Lists on ASX
Share price $1
Market cap $70.3m
TTV $352m
350 employees

2015
Enters UK market

2019
Share price $22.50 22.5x
Market cap $2,441m 34x
TTV $6,457m 18x
2,600+ employees

*At 30 June 2019

Sustainability, CSR
and Our People

At CTM, we understand our responsibility to deliver

biodiversity by investing in climate protection projects

business services, partnerships and working

in Australia, Thailand, Indonesia and China.

CTM also provides employees with Volunteer Days to

help support local charity events and initiatives.

environments which positively support our people,

customers, communities and the environment. CTM

CTM is also committed to deploying a broad range

In 2019, CTM launched a new Indigenous Awareness

has developed and maintains a strong commitment

of environmental initiatives across its global offices.

to Corporate Governance and Corporate Social

These include environmentally sound eWaste disposal

Responsibility (CSR).

processes, paperless processes to reduce printing

and the provision of recycling facilities to name a

We are committed to the ongoing development

few. Additionally, in Australia the office buildings CTM

and delivery of initiatives and programs that provide

occupies have achieved NABERS Energy and Water

practical benefits to the environment and local

Rating of 4 stars and above.

communities, while also prioritising investment in our

people.

In FY19, CTM deployed new employee onboarding

initiatives globally, including electronic onboarding

In support of our CSR plan and long-term vision, CTM

communications, the provision of reusable coffee

delivered a number of initiatives which contribute

cups, water bottles and shopping bags for employees

to furthering these objectives during FY19. Our

to reduce their plastic consumption.

efforts are focused into four core areas; Environment,

Community, Diversity and People.

Environment

Community

CTM is focused on developing partnerships that

CTM is committed to a range of initiatives that

deliver prolonged and meaningful benefits for the

support building sustainability in our business

wider community. We empower our teams in all

practices. In every region we operate in, we

global regions to develop local partnerships which

implement initiatives with the aim to reduce our

give back to local communities.

environmental footprint across every aspect of our

business.

In FY19, just some of these initiatives included;

CTM partners with South Pole, a company

•

Fundraising events for a range of beneficiaries

which provides businesses with

including the Paddington Fire Station’s

sustainability solutions which

A21RUNforGrenfell and Angelman Syndrome in

contribute to meeting the

the UK, the Cancer Council’s Biggest Morning Tea

Sustainable Development

in Australia, and a variety of initiatives supported

Goals set out by the UN. This

by the Community Chest of Hong Kong including

partnership enables CTM to

support services for the homeless, dental care

offset its own employees’

and child protection initiatives.

Plan in Australia, designed to take CTM employees

on an awareness-raising journey to gain a greater

understanding of traditional cultures and learn

about our shared history. Further extending CTM’s

commitment to cultural awareness, support and

People

integration, CTM is proud of its continued partnership

At CTM, we understand that people are at the core

with NRL Cowboys House, a program that provides

of our success and we implement a wide range

supported accommodation for Aboriginal and Torres

of initiatives that support equality of opportunity,

Strait Islander students from remote communities

professional development and wellness.

in Queensland, enabling them to access quality

secondary education options.

In FY19, CTM’s global leadership development

program, the HiPo Program, was made up of more

CTM also provides support for sponsored TAFE

than 50% females, demonstrating CTM’s ongoing

educational programs in Australia.

investment in developing its future female leaders.

Diversity

We also understand that modern workplaces must

At CTM, we work in an industry that embraces

embrace flexibility to drive a positive work/life balance

diversity and we strive to ensure that our workplaces,

and employee wellness. CTM applies industry-wide

employee initiatives, partnerships and solutions

best practices through a range of flexible work

support the principles of equality.

solutions globally, including flexible hours, job-

CTM provides Equal Opportunity Training to

launched a new ‘Holidays Contract’ in Australia,

employees globally through a robust compliance

designed to give employees (male and female) the

training program completed by employees upon

opportunity to take up to 12 weeks’ leave during

induction and again annually.

school holiday periods.

share and work-from-home options. This year, CTM

Globally, CTM is extremely proud of its high female

Around the world, CTM supports year-round wellness

employee base. As at 30 June 2019:

initiatives across its offices, designed to support

•

73% of all CTM employees globally were female.

and wellbeing programs. These include R U OK? Day,

50% of all CTM senior leaders globally were

White Ribbon Day, mental health initiatives and flu

employees and raise awareness of important health

travel against a range

•

Volunteer days at North Texas food bank and the

female.

vaccinations to name a few.

of global initiatives.

food bank of the Rockies, and cleaning Ronald

In the past 12

McDonald House in North America.

CTM actively participates in International Women’s

CTM’s long-term success is directly linked to the

months, CTM has

compensated

more than
500 tonnes of

greenhouse gas

emissions and

protected

more than
700m2 of

•

Salvation Army Christmas Gift Appeal donations

Day events, further supporting the importance of

safety and wellbeing of our people and supporting

in the UK and Australia.

Packing emergency provisions for women in need
in Australia.

Recycling and distribution of books to remote

communities in need in Taiwan.

Provision of bottled water for the MINDS

(Movement for the Intellectually Disabled of

Singapore) water project.

gender equality and equality of opportunity more

the communities where we work and live. To meet

broadly.

the needs of the present while contributing to a

sustainable future, we will continue to develop

In Australia, CTM is compliant with the Workplace

environmentally, socially and economically

Gender Equality Act (WGEA) 2012.

responsible programs into all our operations.

Ewen Crouch AM

Jamie Pherous

Stephen Lonie

Chairman

Managing Director

Independent

Greg Moynihan

Independent

Admiral Robert J.
Natter, US Navy (Ret.)

Laura Ruffles

Executive Director

Independent

Non-Executive Director

Independent

Non-Executive Director

Ewen Crouch was a Partner at

Jamie Pherous founded Corporate

Stephen Lonie is a Chartered

Greg Moynihan is a former Chief

Robert Natter retired from active

Laura Ruffles is CTM’s Global

Allens from 1988-2013. He served

Travel Management Limited (CTM)

Accountant and is a former

Executive Officer of Metway Bank

military service in 2003 and now

Chief Operating Officer and, in

as a member of the firm’s board

in Brisbane in 1994. He has built

Managing Partner Queensland

Limited. He has also held senior

has over 15 years of experience in

late 2015, was appointed an

for 11 years, including four years as

the Group from its headquarters

of the international accounting

executive positions with Citibank

both the government and private

Executive Director in recognition

Chairman of Partners and was co-

in Brisbane to become one of the

and consulting firm, KPMG. He

Australia and Suncorp Metway.

sectors in the North American

of her leadership contribution.

head mergers & acquisitions and

world’s largest travel management

now practices as an independent

Since leaving Suncorp Metway in

market.

equity capital markets from 2004-

companies.

management consultant and

2003, Greg Moynihan has focused

She has significant local, regional

and global industry experience

2010. He was a director of Mission

business adviser.

on his commitments as a Non-

In his Navy career, Robert Natter

and, in a career of more than 20

Australia from 1995, including

Prior to establishing CTM, Jamie

as Chairman from 2009, until

Pherous was employed by Arthur

retiring in November 2016. He is a

Andersen, now Ernst & Young, as

member of the Commonwealth

a qualified Chartered Accountant,

Remuneration Tribunal and a

specialising in business services

director of Jawun and Sydney

and financial consulting, notably in

Symphony Orchestra. He served as

Australia, Papua New Guinea and

a member of the Takeovers Panel

the United Arab Emirates.

from 2010-2015.

Ewen Crouch was appointed as

Chairman on 25 March 2019.

Executive Company Director, as

served as the Commander of

years, has led teams across sales,

well as pursuing business interests

the U.S. Seventh Fleet operating

account management, operations

in the investment management

throughout Asia and the Indian

and technology. Laura Ruffles

and private equity sectors.

Ocean; Commander in Chief of

is responsible for all aspects of

the U.S Atlantic Fleet; and the first

CTM’s business performance. She

Commander of U.S. Fleet Forces,

joined CTM in 2010 and has been

overseeing all Continental U.S.

a key contributor to its successful

Navy bases, facilities and training

growth. She is also a Director of

operations.

the Australian Federation of Travel

Agents.

Board of DirectorsJamie Pherous

Managing Director

Jamie Pherous founded Corporate Travel Management Limited (CTM) in

Brisbane in 1994. He has built the Group from its headquarters in Brisbane to

become one of the world’s largest travel management companies.

Prior to establishing CTM, Jamie Pherous was employed by Arthur Andersen,

now Ernst & Young, as a qualified Chartered Accountant, specialising in

business services and financial consulting, notably in Australia, Papua New

Guinea and the United Arab Emirates.

Neale O’Connell

Global Chief Financial Officer

Neale O’Connell joined CTM as Global CFO in July 2019, bringing a wealth

of experience in listed company financial management built over a 25-year

career. Neale spent 14 years at Tatts Group before departing in 2018 as Group

CFO following the merger with Tabcorp. Neale has deep public company

experience; he managed the major financial elements for the floats of

Smorgon Steel and Tattersall’s and managed multinational projects as Finance

Director for contracting and logistics supplier Delta Group. Neale is a member

of the Institute of Chartered Accountants, a member of the Australian Institute

of Company Directors and a member of the Finance and Treasury Association.

Laura Ruffles

Global Chief Operating Officer

Laura Ruffles is CTM’s Global Chief Operating Officer 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. She is also a Director of the
Australian Federation of Travel Agents.

Debbie Carling

CEO Europe

Debbie has worked in the travel industry for more than 30 years’ in several key

strategic and senior roles, including Commercial Director at Britannic Travel.

During this time Debbie led the setup 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 December 2014 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.

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 more than 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.

Greg McCarthy

CEO Australia & New Zealand

Greg McCarthy has more than 35 years’ experience in the travel industry holding

several leadership positions. He founded two travel management companies

in Australia, building them up from small operations to highly successful

medium-sized businesses. Greg has worked for international airlines and held an

executive directorship in a global TMC, achieving a strong track record delivering

for customers. He was co-founder of Platinum Travel Corporation. CTM acquired

Platinum’s Brisbane and Sydney offices in 2018, with Greg commencing as CTM

CEO Australia and New Zealand on 1 July 2018.

Larry Lo

CEO Asia

Joining Westminster Travel in 2008, Larry Lo is responsible for the company’s

overall management, sales operations and continued development of strategic

alliance partnerships across the Asia region. He started his career in 1988 as a

Travel Consultant and worked in several travel companies in Hong Kong and
Canada gaining an in-depth insight into the international travel industry. Today,

he manages the CTM business in Hong Kong, Mainland China, Macau, Taiwan

and Singapore. He currently serves as a Chairman on the Society of IATA

Passenger Agents (SIPA) and a director of the Travel Industry Council of

Hong Kong (TIC).

Executive TeamAnnual 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

101

103

Annual Financial Report

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 year ended 30 June 2019.

Directors

The following persons were Directors of Corporate Travel Management Limited during the financial year and until the
date of this report for the entire period unless otherwise stated:

•
•
•
•
•
•
•

Ewen Crouch AM (Chairman) (appointed on 25 March 2019).
Tony Bellas (Chairman) (resigned 25 March 2019).
Jamie Pherous (Managing Director).
Stephen Lonie (Independent Non-Executive Director).
Greg Moynihan (Independent Non-Executive Director).
Admiral Robert J. Natter, U.S. Navy (Ret.) (Independent Non-Executive Director).
Laura Ruffles (Executive Director).

Principal activities

The principal activities of the Group during the year consisted of managing the purchase and delivery of travel
services for its clients. There were no significant changes in the nature of the activities of the Group during the year.

Dividends

Dividends paid to members during the financial year were as follows:

Final ordinary dividend for the year ended 30 June 2018 of 21.0 cents per fully paid share paid on 4 October
2018

Interim ordinary dividend for the year ended 30 June 2019 of 18.0 cents per fully paid share paid on 12 April
2019

Total dividends paid

2019
$’000

22,734

19,529

42,263

Since the end of the financial year, the Directors have recommended the payment of a final ordinary dividend of
$23,868,229 (22.0 cents per fully paid share, 50% franked), to be paid on 3 October 2019 out of retained earnings at 30
June 2019.

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.

Group financial performance

CTM’s key financial metrics are summarised in the following table:

Total Transaction Value (TTV) (unaudited)

Revenue and other income

2019

$’000

2018

$’000

6,457,480

4,958,331

449,483

372,236

Earnings before interest, tax, depreciation and amortisation (EBITDA)

143,760

124,598

Acquisition/one-off/non-recurring costs

6,330

852

Underlying EBITDA (adjusted for acquisition/one-off/non-recurring costs)1

150,090

125,450

Statutory net profit after tax (NPAT):

NPAT - attributable to owners of CTM

Acquisition/one-off/non-recurring costs (tax effected)

89,473

80,582

86,235

76,712

5,053

708

Change

30%

21%

15%

20%

11%

12%

Directors’ Report (continued)

Review of operations (continued)

1 Management assess the performance of the business based on a measure of underlying EBITDA. This measurement
basis excludes the effects of the costs of acquisitions, acquisition related adjustments, and other non-recurring items
during the year. Refer note 1 – segment reporting.

The net profit after tax of the Group for the financial period amounted to $86,235,000 (2018: $76,712,000). The result
was underpinned by a 20% increase in revenue.

Strong organic growth and cost management has underpinned the performance, with a record value of new client
wins in the period.

In addition, underlying EBITDA grew by 20% to $150.1 million, with the reconciliation to profit before income tax
from continuing operations as set out in note 1 in the financial statements. On a constant currency basis, underlying
EBITDA grew by 14% to $142.8 million. Strong organic growth has underpinned the performance, with client wins
and retentions of historically high levels. There has been strong translation of revenue to EBITDA due to benefits of
CTM’s growing scale, technology and integrated automation, despite the increase move to on-line (lower yielding)
transactions.

2019

$’000

2018

$’000

2017

$’000

2016

$’000

2015

$’000

Statutory net profit after tax:

Attributable to members

86,235

76,712

54,556

42,134

26,367

Attributable to minority interest

3,238

3,870

3,282

3,609

2,727

Shareholder funds

Basic EPS (cents per share)

Basic EPS growth

Return on equity

Dividend per share - year end

Dividend per share - interim

Dividend per share - full financial year

Total Transaction Value (TTV) (unaudited)

364,368

301,747

281,847

175,231

161,675

79.6

10%

24%

22.00

18.00

40.00

72.4

35%

25%

21.00

15.00

36.00

53.5

24%

19%

18.00

12.00

30.00

43.2

54%

24%

15.00

9.00

24.00

28.1

48%

16%

10.00

6.00

16.00

TTV represents the amount at which travel products and services have been transacted across the Group’s operations
whilst acting as agents for airlines and other service providers, along with revenue streams. TTV does not represent
revenue in accordance with Australian Accounting Standards and is not subject to audit. TTV is stated net of GST. TTV
is utilised by management as a key travel industry metric.

TTV net of GST (unaudited)

2019

$’000

2018

$’000

6,457,480

4,958,331

The Group maintained strong growth in TTV (unaudited). The Group continues to grow market share particularly in
regions where the CTM SMART Technology suite has been fully implemented.

CTM also continues to maintain a strong financial position, with net current assets of $110.3 million and total equity of
$592.5 million. At 30 June 2019, the Group had $39.3 million (2018: $44.0 million) in borrowings.

The Company continues to pay dividends at its stated dividend policy level (refer note 14), with a final dividend
declared at 22.0 cents per share (full year: 40.0 cents). This dividend represents an increase of 11% on the preceding
period.

Underlying NPAT - attributable to owners of CTM

91,288

77,420

18%

Financing and working capital

Amortisation of client intangibles (tax effected)

5,576

8,561

Underlying NPAT - Attributable to owners (excluding acquisition amortisation)

96,864

85,981

13%

The timing of fixed supplier payment cycle relative to reporting dates results in short term fluctuations in reporting
cash flow. The operating cash flow conversion for the year ended 30 June 2019 was 113%. Cash conversion since the
time of IPO is demonstrated in the following graph:

Directors’ Report (continued)

Review of operations (continued)

Financing and working capital (continued)

The operating cash conversion rate, which is net operating cashflows excluding interest, finance costs and income tax
paid divided by EBITDA is approximately 113%.

As at 30 June 2019, borrowings totalled $39.3 million, representing a debt to equity ratio of approximately 7%.

Bank Guarantees

The Group has drawn on its financing facilities to put in place bank guarantees totalling $123.0 million. These
guarantees are used primarily for trade support for transactions with airlines in Greater China and European rail,
which are strongly growing businesses.

The requirement for these bank guarantees is mandatory by these suppliers and represents a significant barrier to
entry for competitors and new entrants in these markets, which are constrained by growth or financial capacity, and
provides an important competitive advantage for CTM.

Following the Lotus acquisition in October 2018, guarantees increased by $54.6 million to $138.2 million in December
2018.

Since 31 December 2018, the guarantees balance has reduced by $15.2 million. Subsequent to 30 June 2019,
guarantees have decreased by a further $27.1 million and at the date of this report total guarantees are $95.9 million.
This represents a $42.3 million or 30% decrease on the guarantees balance at 31 December 2018. The business
continues to rationalise guarantees with suppliers, particularly in Asia.

Subsequent to 30 June 2019, the Group refinanced the senior debt facilities. Details of the new facility are shown at
note 18. The new facility offers CTM improved rates, lower annual costs, bank diversity and allows for future growth
and flexibility.

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, being the risk that the Group’s offshore earnings fluctuate when reported in Australian
dollars.

The Group’s regional results for the 2019 financial year have also been provided on a constant currency basis in the
following commentary, with the revenue and EBITDA for the regions converted at the average rate for the 2018
financial year, to remove the impact of foreign exchange movements in assessing the Group’s performance against
the prior year. The constant currency comparatives are not compliant with Australian Accounting Standards.

Directors’ Report (continued)

Review of operations (continued)

Review of underlying operations
The key financial results by region are summarised in the following table:

CTM Consolidated

2019
$’m

2018
$’m

Australia
New Zealand

2019
$’m

2018
$’m

North America

Asia

Europe

Group

2019
$’m

2018
$’m

2019
$’m

2018
$’m

2019
$’m

2018
$’m

2019
$’m

2018
$’m

6,457.5 4,958.3

30% 1,335.5 1,155.9

16% 1,459.1 1,306.1

12% 2,519.0 1,483.0

70% 1,143.9 1,013.3

13%

446.7 371.0

20% 121.7 108.5

12% 149.3 127.0

18% 80.4

53.8

49% 95.3

81.7

17%

150.1 125.4

20% 51.5

44.0

17% 43.5

37.9

15% 24.7

19.5

27% 40.9

34.2

20% (10.5)

(10.2)

33.6% 33.8%

42.3% 40.6%

29.1% 29.8%

30.7% 36.2%

42.9% 41.9%

6,093.9 4,958.3

23% 1,334.6 1,155.9

15% 1,344.5 1,306.1

3% 2,320.5 1,483.0

56% 1,0494.3 1,013.3

424.3 371.0

14% 121.6 108.5

12% 137.4 127.0

8% 74.1

53.8

38% 91.2

81.7

12%

Reported AUD

TTV

Revenue

Underlying EBITDA

Underlying EBITDA as % of
Revenue

Constant Currency*

TTV

Revenue

Underlying EBITDA

142.8 125.4

14% 51.5

44.0

17% 39.9

37.9

5% 22.9

19.5

17% 39.0

34.2

14% (10.5)

(10.2)

Underlying EBITDA as % of
Revenue

33.7% 33.8%

42.4% 40.6%

29.0% 29.8%

30.9% 36.2%

42.8% 41.9%

* Constant currency reflects June 2018 as previously reported. June 2019 represents local currency converted at FY2018 average foreign currency rates.

Australia and New Zealand (“ANZ”)
Revenue rose by 12% to $121.7 million for the year ended 30 June 2019. The increased revenue has flowed through to
the underlying EBITDA, which rose by 17% to $51.5 million, with an improved margin of 42.3%. The region continued
to grow its market share through new client wins and continues its historic outperformance to market since listing.
In the lead up to the federal election, the region experienced a softening in activity which is attributed to uncertainty
in the market. Post election, the region experienced a return to normal trading. ANZ has again been a significant
contributor to the Group’s profit.

North America
Revenue grew by 18% to $149.3 million for the year ended 30 June 2019. The underlying EBITDA rose by 15%
to $43.5 million. As previously indicated to shareholders, this revenue growth was partially offset by $2.9 million
technology hub development costs expensed in this financial year that did not exist last year. The underlying EBITDA
margin declined from 29.8% to 29.1% largely as a result of the technology hub development costs. The technology
solution (SMART and Lightning) is now in place in the region which will assist in driving further market share growth
opportunities.

Asia
Revenue grew by 49% to $80.4 million for the year ended 30 June 2019 and underlying EBITDA grew by 27% to $24.7
million. Lotus Travel was acquired on 2 October 2018. The underlying EBITDA margin decreased from 36.2% to 30.7%
due to the impact of the Lotus nine-month contribution, as Lotus was acquired on a lower revenue and profit margin
than the existing CTM business. Lotus Travel is now fully integrated. The underlying EBITDA results excludes $4.2
million of non-recurring integration costs. The second half was impacted by the US/China trade discussions and the
Hong Kong demonstrations.

Europe
The operation in Europe contributed $95.3 million in revenue for the year ended 30 June 2019, an increase of 17% on
prior year. The underlying EBITDA for the Europe business rose by 20% to $40.9 million and the underlying EBITDA
margin increased from 41.9% to 42.9% as a result of improved supplier negotiations. The business continues to win
market share despite Brexit and the resulting effect of Brexit uncertainty.

Strategy and future performance

Implementing and integrating its acquisitions;
Retaining current clients;

The Group continues to focus on its key strategic drivers, being:
•
•
• Winning new clients;
•

Innovative technology such as client tools and internal processes, to enhance service to clients and improve
internal productivity; and
Staff engagement.

•

In the 2019 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 and high staff
engagement outcomes 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

Directors’ Report (continued)

Review of operations (continued)

Strategy and future performance (continued)

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 organic growth as well as
exploring acquisition opportunities in each regional market, underpinned by a focus on client service, supported by
the continued investment in new technology for its clients.

The Group is subject to both specific risks to its business activities and risks of a general nature.

Material business risks

These strategic risks include:

•

The Group operates in multiple jurisdictions subject to trade negotiations such as those occurring in Europe and
between the US and China, which may impact the Group’s operations, and are also subject to differing regulatory
environments and may be impacted by changes in government policy.
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
depending on major contracts. For further commentary refer note 15 – impairment. New acquisitions also require
additional resources and integration into the existing businesses. These can result in additional risk whilst the
Group completes these processes.
Information technology: The Group relies on both its outsourced technology platforms and develops its own IP.
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 and company performance. The Group’s internal and
outsourced systems are also subject to potential cyber-attacks. For example, cyber-attacks on airline operators
could cause significant disruption to travel schedules.
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. The company regularly reviews its succession planning
to ensure that key personnel risk is identified.
Financial risk management: refer note 16, for discussion on interest rate risk, credit risk, liquidity risk and foreign
exchange risk.

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.

Directors’ Report (continued)

Environmental regulation

The Group has determined that no particular or significant environment regulations apply to its operations.

The Directors have considered climate-related risks and do not currently deem there to be an associated material risk
to the Group’s operations and the amounts recognised in the financial statements. The Group continues to monitor
climate-related and other emerging risks and the potential impact on the financial statements.

Information on Directors

The following information is current as of the date of report.

Mr Ewen Crouch AM, BEc (Hons.), LLB, FAICD – Independent Non-Executive Director – Chairman

Experience and expertise

Ewen Crouch was a Partner at Allens from 1988-2013. He served as a member
of the firm’s board for 11 years, including four years as Chairman of Partners and
was co-head mergers & acquisitions and equity capital markets from 2004-2010.
He was a director of Mission Australia from 1995, including as Chairman from
2009, until retiring in November 2016. He is a member of the Commonwealth
Remuneration Tribunal and a director of Jawun and Sydney Symphony Orchestra.
He served as a member of the Takeovers Panel from 2010-2015.

Listed Company Directorships
(including key dates)

BlueScope Steel Limited (since March 2013) and Westpac Banking Corporation
(since February 2013).

Ewen Crouch was appointed as Chairman on 25 March 2019.

Special responsibilities

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

5,000

Mr Jamie Pherous, BCom – Executive Director, Managing Director

Experience and expertise

Jamie Pherous founded Corporate Travel Management Limited (CTM) in Brisbane
in 1994. He has built the Group from its headquarters in Brisbane to become one of
the world’s largest travel management companies.

Prior to establishing CTM, Jamie Pherous was employed by Arthur Andersen,
now Ernst & Young, as a qualified Chartered Accountant, specialising in business
services and financial consulting, notably in Australia, Papua New Guinea and the
United Arab Emirates.

Listed Company Directorships
(including key dates)

None.

Special responsibilities

Managing Director

Events since the end of the financial year

Interests in shares and options Ordinary shares in Corporate Travel Management Limited

21,266,893

Other than the following items, 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.

On 7 August 2019 the Group entered into a $225 million (GBP 125 million) multi-currency syndicated facility. The new
Syndicated Facility Agreement is with HSBC UK Bank plc, Commonwealth Bank of Australia and Barclays Bank plc.

Mr Stephen Lonie, BCom, MBA, FCA, SFFin, FAICD, FIMCA, Senior MACS – 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.

This facility replaces the existing facility in place at 30 June 2019 – refer note 12. The new facility offers CTM improved
rates, lower annual costs, bank diversity and allows for future growth and flexibility.

Listed Company Directorships
(including key dates)

MyState Limited (since 2012), Apollo Tourism and Leisure Ltd (since 2016) and Retail
Food Group Limited (2013-2018).

As part of the new agreement is a permitted indebtedness basket of $406 million (GBP 225 million) in support of
transactional banking facilities including bank guarantees, merchant facilities and overdrafts.

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.

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

Directors’ Report (continued)

Information on Directors (continued)

Mr Greg Moynihan, BCom, Grad Dip SIA, CPA, SFFIN, MAICD – Independent Non-Executive Director

Experience and expertise

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 focused
on his commitments as a Non-Executive Company Director, as well as pursuing
business interests in the investment management and private equity sectors.

Listed Company Directorships
(including key dates)

Special responsibilities

Shine Corporate Limited (since 2013).

Chair of Remuneration Committee
Nomination Committee member
Audit Committee member
Risk Management Committee member

Directors’ Report (continued)

Company secretaries

• Mrs Suzanne Yeates (Joint Company Secretary).
• Mr Steve Fleming (Joint Company Secretary).

Suzanne Yeates, BBus (Accounting), CA

Suzanne Yeates is a Chartered Accountant, Founder and Principal of Outsourced Accounting Solutions Pty Ltd. She
holds similar positions with other public and private companies.

Steve Fleming, BBus (Accounting), CA

Steve Fleming was CTM’s Global Chief Financial Officer until 9 July 2019 and is now CFO for the Europe region.

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.

Interests in shares and options Ordinary shares in Corporate Travel Management Limited

254,312

Steve Fleming is a member of the Institute of Chartered Accountants in Australia.

Admiral Robert J. Natter, US Navy (Ret.) – Independent Non-Executive Director

Experience and expertise

Robert Natter retired from active military service in 2003 and now has over 15
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.

Until this year, Robert Natter served as Chairman of the U.S. Naval Academy
Alumni Association representing about 60,000 graduates. He now serves on
the Naval Academy Foundation Board. He served for 10 years on the Board of
BAE systems, Inc. (the U.S. based subsidiary of BAE Systems Plc). He currently
serves on the Board of Allied Universal (a privately held US based security
company with over 210,000 employees) and is Chairman of the Governance and
Compensation Committees. He also served on the Board of the U.S. National
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

119,200

Meetings of Director

The numbers of meetings of the Group’s Board of Directors and of each Board Committee held during the year
ended 30 June 2019, and the numbers of meetings attended by each Director were:

Committee meetings

Director

Full meetings
of directors

Audit

Risk
Management

Renumeration

Nomination

Mr Ewen Crouch AM

Mr Tony Bellas

Mr Stephen Lonie

Mr Greg Moynihan

Mr Jamie Pherous

Admiral Robert J. Natter

Ms Laura Ruffles

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.

Remuneration report

Laura Ruffles – MBA, GAICD – Executive Director, COO

The Directors are pleased to present Corporate Travel Management Limited’s 2019 remuneration report, outlining key
aspects of the Group’s remuneration policy and framework, as well as remuneration awarded in the year.

Experience and expertise

Laura Ruffles is CTM’s Chief Operating Officer 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. She is also a Director of the Australian Federation of Travel
Agents.

Listed Company Directorships
(including key dates)

None.

Special responsibilities

Executive Director

Interests in shares and options Ordinary shares in Corporate Travel Management Limited

Share appreciation rights over ordinary shares in Corporate
Travel Management Limited

177,915

500,000

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.

Directors’ Report (continued)

Remuneration report (continued)

1. CTM’s remuneration framework

Directors’ Report (continued)

Remuneration report (continued)

1. CTM’s remuneration framework (continued)

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

Further info

Key questions

CTM’s approach

Further info

Remuneration framework

1. What is the objective
of the Group’s senior
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 senior executive
reward with achievement of strategic objectives and the creation
of value for shareholders, and conforms with market practice for
the delivery of senior executive rewards.

2. What are the key
elements of the
remuneration
framework?

The Board ensures that the approach to senior executive reward
satisfies the following key criteria for good reward governance
practices:

•
•

•

•
•

Competitiveness and reasonableness;
Alignment to the interests of shareholders and other
stakeholders;
Performance linkage and alignment of executive
compensation;
Transparency; and
Capital management.

The framework is based on the following key elements:

•

Alignment to shareholders’ interests, which:
• Has economic profit as a core component of plan design;
Focuses on sustained growth in shareholder wealth,
•
consisting of dividends and growth in share price, and
delivering an appropriate return on assets, as well as
focusing the executive on key non-financial drivers of
value; and

• Attracts and retains high calibre senior executives.

Alignment to program participants’ interests, which:
• Rewards capability and expertise;
•

Reflects competitive reward for contribution to growth in
shareholder wealth;

• Provides a clear structure for earning rewards; and
• Provides recognition for individual and team contributions.

3. What is the role of
the Remuneration
Committee?

The Remuneration Committee is a Committee of the Board
and its role 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.

Section 2

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.

Section 4

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 FY19?

8. Are any changes
planned for FY20?

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’s performance in 2019 in terms of EBITDA and
other financial targets, as well as non-financial strategic targets is
reflected in STI payments in the range of 40%-90% for Executive
KMP.

Long term: The three-year performance period for the FY17 LTI
completed on 30 June 2019. Based on strong growth in earnings
per share (EPS), the performance conditions pertaining to the FY17
share appreciation rights have been achieved.

CTM’s Board is committed to ensuring senior executives’
remuneration links to return on investment for shareholders
and, therefore, will continue to use EPS growth as the primary
performance metric for the FY20 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 FY19.

There are no significant changes planned for FY20. 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.

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).

Directors’ Report (continued)

Remuneration report (continued)

2. Key elements of remuneration (continued)

Additional detail on each of these components is included in the following table.

Key elements of remuneration

Fixed Pay

STI (continued)

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.

Senior 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.

In Australia, 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 senior 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.

Senior executives have a target STI opportunity
depending on the accountabilities of the role
and impact on the organisation or business unit
performance.

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 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 a senior executive’s total remuneration. The Group intends to
continue to review incentive plans during the year ending 30 June 2020 to ensure continued alignment with the
Group’s financial and strategic objectives.

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:

Board of Directors

Non-Executive Directors

Mr Ewen Crouch AM (appointed 25 March 2019).
Mr Tony Bellas (resigned 25 March 2019).
Mr Stephen Lonie.
Mr Greg Moynihan.
Admiral Robert J. Natter.

Other Group KMP

Mr Steve Fleming – Global CFO* (appointed CFO of
Europe on 9 July 2019).
Mr Larry Lo – CEO – Asia.
Mr Chris Thelen – CEO - North America.
Ms Debbie Carling – CEO - Europe.
Mr Greg McCarthy – CEO Australia and New Zealand
(appointed 1 July 2018).

Executive Directors

Mr Jamie Pherous.
Ms Laura Ruffles.

* Neale O’Connell was appointed Global CFO on 9 July 2019 and will be a KMP for the 2020 financial year.

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
benefits1
$

Leave2
$

Super-
annuation
$

Short-
term
Incentive
$

Long-term
incentive3
$

Total
$

Perfor-
mance
Related
%

Name

Year

Executive Directors

Jamie
Pherous4

Laura
Ruffles

2019

2018

2019

2018

470,808

460,319

8,908

8,904

23,857

39,531

100,000

3,203

62,730

200,000

643,104

735,156

700,000

10,280

66,058

76,229

630,000

473,109 1,955,676

588,219

10,954

29,919

106,516

533,000

274,855 1,543,463

Other key management personnel of the Group

Steve
Fleming5

Larry Lo5

Chris
Thelen5

Debbie
Carling5

Greg
McCarthy

Total
Executive
KMP

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

497,521

486,417

562,457

501,051

642,198

579,524

345,220

292,391

379,951

(9,046)

47,265

135,688

223,024

894,452

45,299

173,392

134,391

839,499

8,533

(9,447)

(1,371)

(8,916)

4,384

(1,500)

3,206

149,608

223,024

946,828

2,963

184,361

134,391

813,319

83,790

223,024

947,641

128,783

102,909

802,300

7,519

144,734

223,024

724,881

3,641

138,714

119,699

552,945

12,252

20,531

40,000

160,153

612,887

2019

3,598,155

19,188

104,667

194,281

1,283,820

1,525,358 6,725,469

2018

2,907,921

19,858

13,259

221,149

1,358,250

766,245 5,286,682

16%

27%

56%

52%

40%

37%

39%

32%

29%

51%

47%

33%

1 Non-cash benefits represents the cost to the Group of providing parking.

2 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.

3 Long-term incentive represents amounts expensed during the year relating to share appreciation rights granted to date and not yet

vested.

4 Jamie Pherous does not participate in the Long-Term Incentive Scheme. The preliminary estimate of his STI was $200,000, however,

Jamie Pherous offered, and the Board agreed, to forego 50% of his STI.

5 Payments made to Steve Fleming, Larry Lo, Chris Thelen and Debbie Carling are in local currency and converted at average exchange

rates.

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:

Purpose

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.

Participants

All Executive KMP participate in the STI scheme.

Performance
conditions

Structure

For the year ended 30 June 2019, 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). Other KPIs’ include the achievement of
business plans, client retention and satisfaction, and staff satisfaction. All KPIs are measurable
and have performance benchmarks.

If the Group achieves a pre-determined adjusted EBITDA target set by the Remuneration
Committee, a short-term incentive (“STI”) pool is available to executives and other eligible
participants. The adjusted EBITDA target set by the Remuneration Committee represents
EBITDA adjusted for non-recurring items, currency movements, and items such as merger and
acquisition activity.

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 2019 year was approximately 44% (2018: 47%) 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.

Directors’ Report (continued)

Remuneration report (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

The purpose of the LTI scheme at CTM is to provide long-term incentives to senior executives to
deliver long-term shareholder returns.

Eligibility

Participation in the plan is at the Board’s absolute discretion and no individual has a contractual
right to participate in the plan.

Instrument

Awards under this plan are made in the form of Share Appreciation Rights (SARs).

Performance
period

Performance is measured over a three-year period. The FY19 grant has a performance period
commencing 1 July 2018 and ending 30 June 2021.

Performance
hurdles

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.

Vesting

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.

Item

2019

2018

2017

2016

2015

Grants made during FY19 will vest on a scaled basis as follows:

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 (%)

86,235

76,712

54,556

42,134

26,367

79.6

72.4

42,263

34,964

49.0%

-17.6%

45.6%

19.0%

53.5

27,554

50.5%

63.9%

43.2

28.1

18,539

12,609

44.0%

35.8%

47.8%

60.6%

1.6%

1.9%

2.2%

2.1%

2.7%

* Dividend payout ratio based on dividends paid in respect of the financial year.

For each short term incentive included in the table on page 33, 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

Greg McCarthy

2019

2018

Awarded
%

Forfeited
%

Awarded
%

Forfeited
%

40%

90%

60%

30%

80%

60%

10%

40%

70%

20%

80%

89%

80%

50%

80%

20%

11%

20%

50%

20%

Minimum EPS growth from
1 July 2018 to 30 June 2021

Portion of SARs that become
performance qualified

80% achievement of target growth rate
(i.e. 8% EPS growth)

50% of SARs

90% achievement of target growth rate
(i.e. 9% EPS growth)

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 result 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.

Directors’ Report (continued)

Remuneration report (continued)

Directors’ Report (continued)

Remuneration report (continued)

4. Details of Executive KMP remuneration (continued)

5. Contractual arrangements for Executive KMP

The following table sets out details of the SARs granted to key management personnel during the financial year
under the 2019 allocation and vested under the 2016 allocation, as well as details of SARs granted under prior year
awards that have not yet vested as at 30 June 2019.

Each Executive KMP member, including the Managing Director, has a formal contract, known as a service agreement.
There were no changes to the service agreements for Executive KMP in FY19. Summary of the notice period required
for Executive KMP and the Group are included in the table below.

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

Vested
%

Forfeited
%

Laura
Ruffles

Steve
Fleming

Larry Lo

Chris
Thelen

Debbie
Carling

Greg
McCarthy

2019

2018

2017

2016

2019

2018

2017

2016

2019

2018

2017

2016

2019

2018

2017

2016

2019

2018

2017

2016

2019

2022

2021

2020

2019

2022

2021

2020

2019

2022

2021

2020

2019

2022

2021

2020

2019

2022

2021

2020

2019

150,000

200,000

100,000

75,000

40,000

$4.80

$2.49

$1.62

$1.26

$4.80

$2.49

$1.62

$1.26

$4.80

$2.49

$1.62

$1.26

$4.80

$2.49

$1.62

$4.80

$2.49

$1.62

$1.26

100,000

100%

75,000

100%

75,000

100%

40,000

100%

2022

100,000

$4.80

Max
value
yet to
vest
$

720,690

374,244

324,734

360,345

187,122

121,775

360,345

187,122

121,775

360,345

187,122

121,775

360,345

187,122

121,775

480,460

Executive KMP

Contract
duration

Notice period
by KMP

Notice period
by Group

Termination payment

Jamie Pherous

No fixed duration

6 months

Laura Ruffles

No fixed duration

24 weeks

Steve Fleming1

No fixed duration

6 months

Neale O’Connell1

No fixed duration

12 weeks

Larry Lo

No fixed duration

6 months

Chris Thelen

No fixed duration

6 months

Debbie Carling

No fixed duration

3 months

Greg McCarthy

No fixed duration

12 weeks

Combination of notice and payment
in lieu totalling no less than 6 months.

Combination of notice and payment
in lieu totalling no less than 24 weeks.

Combination of notice and payment
in lieu totalling no less than 6 months.

Combination of notice and payment
in lieu totalling no less than 12 weeks.

Combination of notice and payment
in lieu totalling no less than 6 months.

Combination of notice and payment
in lieu totalling no less than 3 months.

Combination of notice and payment
in lieu totalling no less than 12 weeks.

1 Steve Fleming ceased as an executive KMP on 9 July 2019. Neale O’Connell commenced as an executive KMP on 9
July 2019.

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.

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 25 September 2017.

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 (2018:
$700,000).

Directors’ Report (continued)

Remuneration report (continued)

Directors’ Report (continued)

Remuneration report (continued)

6. Non-Executive Director Arrangements (continued)

7. Additional required disclosures (continued)

Details of the remuneration of the Non-Executive Directors of the Group are set out in the following table.

Name

Ewen Crouch AM^

Tony Bellas^

Stephen Lonie

Greg Moynihan

Admiral Robert J. Natter**

Total Non-Executive Director
Remuneration

Year

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Director fees Superannuation*

59,010

102,846

134,904

110,000

107,342

110,000

107,342

144,618

131,797

526,474

481,385

5,133

9,770

12,816

10,450

10,198

10,450

10,198

35,803

33,212

Total

64,143

112,616

147,720

120,450

117,540

120,450

117,540

144,618

131,797

562,277

514,597

^ Tony Bellas resigned as Chairman on 25 March 2019. Ewen Crouch AM was appointed as Chairman on 25 March 2019.
The amounts represent remuneration paid to/from the respective dates.
* Superannuation contributions required under the Australian superannuation guarantee legislation are made and are
deducted from the Directors’ overall fee entitlements.
** Payments made to Admiral Natter are in US Dollars and converted at average exchange rates.

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

Restated

Balance
at
30 June 2018

Purchased

Disposed

Received on
vesting of
rights

Other
changes
during the
year

Balance
at
30 June 2019

Non-Executive Directors

Ewen Crouch AM

5,000

Tony Bellas

Stephen Lonie

Greg Moynihan

Admiral Robert J.
Natter

Executive Directors

220,836

254,312

107,200

12,000

Jamie Pherous

21,011,8931

255,000

Laura Ruffles

118,124

Other key management personnel of the Group

Steve Fleming

Larry Lo

Debbie Carling

Chris Thelen

Greg McCarthy

15,000

25,131

94,433

22,844

197,099

(180,836)

(20,000)

59,791

44,843

23,917

233,9083

85,6274

5,000

N/A2

254,312

119,200

21,266,893

177,915

84,974

139,276

26,761

431,007

85,627

1 As advised to the ASX on 1 April 2019, Mr Jamie Pherous is a director and 25% shareholder of Shamiz Pty Ltd which
held 526,893 CTM shares at 30 June 2019. The balance at 30 June 2018 has been restated to reflect this.
2 Tony Bellas ceased being a director on 25 March 2019.
3 Equity portion of deferred consideration payment in relation to the Chambers Travel acquisition.
4 Equity portion of consideration paid for acquisition of SCT Travel Limited on 1 July 2018.

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 (2018: nil).

Other transactions and balances with key management personnel
Deferred consideration balance of $13.5 million was paid to Chris Thelen in relation to the Chambers Travel acquisition.
No remaining deferred consideration is payable to Chris Thelen. Rental expense of $50,805 was also paid to Chris
Thelen.

A balance payable to Greg McCarthy is included as consideration payable at 30 June 2019. This payable relates to the
acquisition of Platinum Travel has been split between acquisition payable and contingent consideration payable. A
working capital adjustment of $44,000 was paid to Greg McCarthy in relation to the Platinum Travel acquisition.

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.

Directors and executives can receive travel and event management services. All transactions are made on normal terms
and conditions and at market rates. There are no amounts outstanding in relation to these transactions at 30 June 2019.

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.

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 27.

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.

Directors’ Report (continued)

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 Ewen Crouch AM
Chairman

Brisbane, 21 August, 2019

Mr Jamie Pherous
Managing Director

PricewaterhouseCoopers, ABN 52 780 433 757 480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001 T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 26 Auditor’s Independence Declaration As lead auditor for the audit of Corporate Travel Management Limited for the year ended 30 June 2019, 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 2001 in 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 Crowe Brisbane Partner PricewaterhouseCoopers 21 August 2019 Corporate Governance Statement

Consolidated Statement of Comprehensive Income

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 2019 corporate governance statement is dated as at 30 June 2019 and reflects the corporate governance practices
in place throughout the 2019 financial year. The 2019 corporate governance statement was approved by the Board on
21 August 2019. 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 investor.travelctm.com.au/corporate-governance/.

For the year ended 30 June 2019

Revenue

Other income

Total revenue and other income

Operating expenses

Employee benefits

Occupancy

Note

2019

$’000

2018

$’000

446,739

371,030

2,744

1,206

449,483

372,236

(225,394)

(186,214)

(18,557)

(12,429)

Depreciation and amortisation

(20,348)

(17,833)

Information technology and telecommunications

Travel and entertainment

Administrative and general

Total operating expenses

Finance costs

Profit before income tax

Income tax expense

Profit for the year

Profit attributable to:

Owners of Corporate Travel Management Limited

Non-controlling interests

Other comprehensive income

Items that may be reclassified to profit or loss:

Exchange differences on translation of foreign operations

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

(38,790)

(31,281)

(5,542)

(4,554)

(17,148)

(13,029)

(325,779)

(265,340)

(2,765)

(3,226)

120,939

103,670

(31,466)

(23,088)

89,473

80,582

86,235

76,712

23(b)

3,238

3,870

89,473

80,582

19,339

16,266

(447)

18,892

16,353

108,365

96,935

104,424

92,359

3,941

4,576

108,365

96,935

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)

79.6

79.3

72.4

71.4

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying
notes.

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

As at 30 June 2019

For the year ended 30 June 2019

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Other 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

2019

$’000

2018

$’000

138,791

84,297

328,771

252,237

10,576

4,203

478,138

340,737

13,328

6,118

506,690

451,597

5,693

6,389

525,711

464,104

1,003,849

804,841

316,753

253,621

19,205

14,677

5,971

7,310

25,905

15,786

367,834

291,394

4,158

2,872

20,085

29,301

4,488

14,802

1,833

7,949

43,533

41,955

592,482

471,492

14(a)

14(b)

14(c)

364,368

301,747

27,001

19,369

177,190

133,218

568,559

454,334

23(b)

23,923

17,158

592,482

471,492

Note

Contributed
Equity

Retained
Earnings

Other
Reserves

Total

Non-
Controlling
Interests

Total Equity

$’000

281,847

91,470

12,999

386,316

15,088

401,404

76,712

3,870

80,582

15,647

707

16,354

76,712

15,647

92,359

4,577

96,936

Balance at 30 June
2017

Profit for the year

Other
comprehensive
income (net of tax)

Total
comprehensive
income for the year

Transactions with owners in their capacity as owners:

Shares issued (net of
transaction costs)

14(a)

19,900

Dividends paid

Share-based
payments

(34,964)

19,900

(34,964)

(2,507)

(37,471)

(9,277)

Balance at 30 June
2018

Profit for the year

Other
comprehensive
income (net of tax)

Total
comprehensive
income for the year

19,900

(34,964)

(9,277)

(24,341)

(2,507)

(26,848)

301,747

133,218

19,369

454,334

17,158

471,492

86,235

3,238

89,473

18,189

703

18,892

86,235

18,189

104,424

3,941

108,365

Transactions with owners in their capacity as owners:

Shares issued (net of
transaction costs)

14(a)

62,621

411,367

333,349

Dividends paid

Share-based
payments

Non-controlling
interests acquisition
of subsidiary

Non-controlling
interests disposal of
subsidiary

Balance at 30 June
2019

(42,263)

62,621

(42,263)

(3,008)

(45,271)

(10,557)

5,560

272

62,621

(42,263)

(10,557)

9,801

2,824

12,625

364,368

177,190

27,001

568,559

23,923

592,482

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Consolidated Statement of Cash Flows

For the year ended 30 June 2019

Cash flows from operating activities

Receipts from customers (inclusive of consumption tax)

Payments to suppliers and employees (inclusive of consumption tax)

Transaction costs relating to acquisition

Interest received

Finance costs

Income tax paid

Note

2019

$’000

2018

$’000

455,131

337,468

(292,252)

(217,621)

(634)

292

(151)

131

(2,582)

(2,584)

(26,478)

(22,851)

Net cash flows from operating activities

133,477

94,392

Cash flows from investing activities

Payment for plant and equipment

Payment for intangibles

Proceeds from sale of plant and equipment

Purchase of controlled entities, deferred consideration

Payments relating to 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

Release of secured deposits

(8,138)

(2,676)

(18,770)

(11,057)

(15,835)

(33,476)

(30,777)

(3,683)

1,546

(71,961)

(50,876)

40,016

(796)

(38)

198,537

114,917

(206,963)

(117,995)

4,991

Dividends paid to company’s shareholders

(42,263)

(34,964)

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

(3,008)

(2,507)

(9,486)

(40,587)

52,030

2,464

2,929

2,151

84,297

79,217

138,791

84,297

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

Notes to the Consolidated Financial Statements

Basis of preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

Critical estimates, assumptions and judgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

This section explains the results and performance of the Group for the year ended 30 June 2019. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4. Dividends paid and proposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5. Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Group Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10. Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11. Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12. Borrowings and contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
13. Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
14. Contributed equity, reserves and retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
16. Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Unrecognised Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

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. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
18. Events occurring after the reporting period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Other Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

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.

19. Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
20. Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
21. Fair value measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
22. Share-based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
23. Interest in other entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
24. Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
25. Parent entity financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
26. Deed of cross guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
27. Auditors’ remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
28. Summary of significant account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
29. Changes in accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

NOTES 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:
• Refer note 7 – Business combinations.

Software developed or acquired not as part of a business combination:
• Refer note 8 – Intangible assets.

Impairment of goodwill:
• Refer note 15 – Impairment testing of goodwill.

Basis of preparation

(a) Basis of consolidation

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

Functional and presentation currency

(i)
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.

Transactions and balances

(ii)
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.

Foreign operations

(iii)
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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE

This section explains the results and performance of the Group for the year ended 30 June 2019. 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

(a) Description of segments

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 the 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.

(b) Segment information provided to the Chief Operating Decision Makers

The CODM assess the performance of the operating segments based on a measure of underlying EBITDA. This
measurement basis excludes the effects of the costs of acquisitions, acquisition related adjustments, and other non-
recurring items during the year.

The segment information provided to the CODM for the reportable segments for the year ended 30 June 2019 is as
follows:

June 2019

Total revenue from external
parties

Travel
services

Australia
and New
Zealand

North
America

Asia

Europe

Other*

$’000

Total

$’000

121,761

149,284

80,372

95,322

446,739

Underlying EBITDA

51,530

43,424

24,748

40,845

(10,457)

150,090

Total segment assets

142,367

285,996

295,202

267,386

12,898

1,003,849

Total assets include:

Non-current assets

Plant and equipment

2,803

2,016

7,096

1,413

13,328

Intangibles

66,958

218,204

67,898

150,154

3,476

506,690

Total segment liabilities

59,859

42,300

167,485

96,983

44,740

411,367

* The other segment represents the cost of the Group’s support service, created to support the operating segments
and growth of the global business.

1. Segment reporting (continued)

(b) Segment information provided to the Chief Operating Decision Makers (continued)

June 2018

Total revenue from external
parties

Travel
services

Australia
and New
Zealand

North
America

Asia

Europe

Other*

$’000

Total

$’000

108,519

127,003

53,816

81,692

371,030

Underlying EBITDA

44,038

37,888

19,541

34,232

(10,249)

125,450

Total segment assets

117,863

262,535

160,757

250,755

12,931

804,841

Total assets include:

Non-current assets

Plant and equipment

2,581

1,522

646

1,369

6,118

Intangibles

57,799

201,760

38,450

149,851

3,737

451,597

Total segment liabilities

49,292

34,334

88,371

84,708

76,644

333,349

* The other segment represents the cost of the Group’s support service, created to support the operating segments
and growth of the global business.

Other segment information

(i)

Underlying EBITDA

The reconciliation of underlying EBITDA to operating profit before income tax is provided as follows:

Underlying EBITDA

Interest revenue

Finance costs

Depreciation

Amortisation

One off items:

Activist response costs

Hong Kong office restructure costs

Acquisition and other non-recurring items

2019

$’000

2018

$’000

150,090

125,450

292

131

(2,765)

(3,342)

(3,226)

(2,045)

(17,006)

(15,788)

(1,242)

(4,152)

(936)

(852)

Net profit before income tax from continuing operations

120,939

103,670

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 committee that
makes strategic decisions.

Goodwill is allocated by management to groups of cash-generating units on a segment level.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE

2. Revenue

(a) Disaggregation of revenue from contracts with customers

2. Revenue (continued)

Accounting policy (continued)

June 2019

Travel
services

Australia
and New
Zealand

North
America

Asia

Europe

$’000

Total

$’000

Transactional revenue

98,426

130,745

50,088

85,264

364,523

Volume based incentive revenue

23,042

16,207

30,197

Other revenue

293

2,332

8,421

1,637

77,867

4,349

Total revenue from external parties

121,761

149,284

80,372

95,322

446,739

June 2018

Travel
services

Australia
and New
Zealand

North
America

Asia

Europe

$’000

Total

$’000

Transactional revenue

88,055

113,447

36,565

73,425

311,492

Volume based incentive revenue

20,093

12,816

17,184

Other revenue

371

740

6,784

1,483

56,877

2,661

Total revenue from external parties

108,519

127,003

53,816

81,692

371,030

(b) Assets related to contracts with customers

The Group has contract assets related to contracts with customers:

Contract assets

2019

$’000

2018

$’000

31,035

23,810

Contract assets represent only current balances for amounts outstanding from suppliers for volume based incentive
revenue.

(i) Significant changes in contract assets

The acquisition of Lotus Travel Limited on 2 October 2018 has contributed an additional $2.3 million to the closing
contract asset balance. Other significant changes which have contributed to the movement in the contract asset
balance relates to the overall growth of the business, which has impacted on the volume based incentive revenue.
The period end contract asset balance reflect the payment cycle for each individual supplier.

Accounting policy

Transactional revenue
Transactional revenue is revenue derived from clients and suppliers generated from the provision of travel services
to clients. The performance obligation is the facilitation of travel related services on behalf of clients. Transactional
revenue is the fixed amount per client transaction and is recognised at either the ticketed date of the travel booking
or on the date of travel, depending on the terms of the contract.

Transactional revenue also includes Pay Direct Commission, which is recognised when the performance obligation
has been satisfied and the amount of the commission is highly probable, which is either upon receipt from the
supplier or when it is confirmed commissionable by the supplier.

Volume based incentive revenue
Volume based incentive revenue is revenue derived from contracts with suppliers. The revenue is variable and
is dependent upon the achievement of contractual performance criteria specific to each supplier. Revenue is
recognised over time and is measured as the amount that is deemed highly probable to be received, which has been
determined using the most likely amount method and the Group’s experience with the contracts.

Other revenue
Other revenue is recognised when the transfer of the promised goods or service to the customer has been
completed. Other revenue includes third party licensing and development fees, interest revenue, rental income, and
other minor operating revenue.

3. Earnings per share

The following information reflects the income and share data used in the basic and diluted earnings per share
computations:

Net profit attributable to ordinary equity holders of Corporate Travel Management
Limited

2019

$’000

2018

$’000

86,235

76,712

2019

2018

Weighted average number of ordinary shares used as a denominator in calculating
basic earnings per share

108,278,527

105,941,226

Adjustments for calculation of diluted earnings per share:

Share appreciation rights (i)

Deferred shares on acquisitions (ii)

416,657

1,247,408

249,644

Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share

108,695,184

107,438,278

Share appreciation rights

(i)
Share Appreciation Rights (SARs) are considered to be potential ordinary shares. They have been included in the
determination of diluted earnings per share as 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 22.

Deferred shares

(ii)
Deferred shares on acquisitions relates to shares offered as part of the contingent consideration component of a
business combination. They have been included in the determination of diluted earnings per share as 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 is 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 is 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE

4. Dividends paid and proposed

Ordinary shares

Final ordinary dividend for the year ended 30 June 2018 of 21.0 cents per fully paid
share paid on 4 October 2018

Interim ordinary dividend for the year ended 30 June 2019 of 18.0 cents per fully paid
share paid on 12 April 2019

2019

$’000

2018

$’000

22,734

19,048

5. Income tax expense

Income tax expense

Current income tax

Current tax on profits for the year

Adjustments for current tax of prior periods

19,529

15,916

Deferred income tax

Total dividends paid

42,263

34,964

Approved by the Board of Directors on 21 August 2019 (not recognised as a liability as
at 30 June 2019)

Final ordinary dividend for the year ended 30 June 2019 of 22.0 cents (2018: 21.0 cents)
per fully paid share

23,868^

22,698^

^ This dividend does not include shares issued post balance sheet date as part of the vesting of share appreciation
rights.

(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% (2018: 30%)

Tax effect of amounts which are not deductible/(assessable) in calculating taxable income:

The final dividend recommended after 30 June 2019 will be 50% franked out of existing franking credits, or out of
franking credits arising from the payment of income tax in the year ending 30 June 2020.

Non-deductible amounts

Other amounts

Franking credit balance

Franking credits available for subsequent reporting periods based on a tax rate of
30% (2018: 30%)

2019

$’000

2018

$’000

3,848

4,993

These 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 of or receivables for income tax
and dividends after the end of the year.

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.

Recognition of temporary differences previously not brought to account

Difference in overseas tax rates

Changes in tax rates

Adjustments for current tax of prior periods

Research and development tax credit

Unrecognised tax losses

Income tax expense

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

2019

$’000

2018

$’000

29,693

25,420

(398)

(1,012)

(2,514)

601

4,685

(1,921)

31,466

23,088

120,939

103,670

36,282

31,101

776

(813)

(37)

1,676

(6,006)

(398)

(36)

(15)

823

(36)

787

(58)

(5,150)

(2,520)

(1,012)

(55)

(5)

(4,779)

(8,800)

31,466

23,088

2019

$’000

2018

$’000

5,774

3,641

1,210

4,815

6,638

10,625

11,483

(4,932)

(5,094)

5,693

6,389

15,000

2,493

2,241

8,708

2,383

1,952

19,734

13,043

(4,932)

(5,094)

14,802

7,949

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE

5. Income tax expense (continued)

Deferred tax
assets

At 1 July

Transfer
from
income
tax
receivable

(Charged)/
credited
in year via
P&L

(Charged)/
credited
in year via
equity

Acquisition
of
subsidiaries

Change in
FX rates

At 30 June

$’000

2019

Provisions

Employee benefits

Other

2018

Provisions

Employee benefits

Other

4,815

6,638

11,483

6,087

6,779

12,896

703

636

1,175

(60)

(3,633)

179

137

5,774

3,641

1,210

2,514

(3,693)

179

142

10,625

(925)

324

(398)

(465)

(601)

(863)

4,815

6,638

11,483

Deferred tax
liabilities

At 1 July

Transfer
from
income
tax
receivable

(Charged)/
credited
in year via
P&L

(Charged)/
credited
in year via
equity

Acquisition
of
subsidiaries

Change in
FX rates

At 30 June

$’000

2019

Depreciation/
amortisation

Accrued income

Other

2018

Depreciation/
amortisation

Accrued income

Other

Accounting policy

Tax consolidation

8,708

2,383

1,952

13,043

10,409

2,581

932

13,922

154

4,907

(241)

4,685

(2,020)

(206)

305

(1,921)

530

561

970

415

15,000

2,493

2,241

970

506

19,734

319

8,708

2,383

1,952

327

13,043

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.

5. Income tax expense (continued)

Accounting policy (continued)

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. The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where
the Group’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit nor loss.
Deferred income tax is determined using tax rates and laws that have been enacted, or substantially enacted, by the
end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.

Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:

• When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in

which case, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
Receivables and payables, which are stated with the amount of GST included.

•

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the Consolidated Statement of Financial Position. Cash flows are included in the Consolidated Statement
of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities,
which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments
and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: PERFORMANCE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE

6. Expenses

Profit before income tax includes the following specific expenses:

Depreciation and amortisation

Depreciation of non-current assets – plant and equipment note 20

Amortisation of client contracts and relationships – intangibles note 8

Amortisation of software – intangibles note 8

Amortisation of other intangible assets – intangibles note 8

2019

$’000

3,342

7,165

9,378

463

2018

$’000

2,045

10,186

5,174

428

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

Fair value acquisition consideration and reconciliation to cash flow

Lotus
$’000

Platinum
$’000

Initial consideration - cash paid

Initial consideration - equity issued

Working capital adjustment

39,928

3,000

2,298

3,232

8,574

Total
$’000

42,928

2,298

3,232

48,502

Total acquisition date fair value consideration

39,928

2,538

227

2,765

7,242

13,648

2,425

801

3,226

6,303

8,828

Cash paid

less: cash balances acquired

Total outflow of cash - investing activities

39,928

3,044

42,972

(10,602)

(1,593)

(12,195)

29,326

1,451

30,777

The provisional fair values of the assets and liabilities of Lotus and the final fair values of the assets and liabilities of
Platinum, at date of acquisition were as follows:

Total depreciation and amortisation expense

20,348

17,833

Acquisition date fair value contingent consideration - earn-out

Finance costs

Bank loans

Other interest

Total finance costs

Other expense disclosures

Defined contribution superannuation expense

Rental expense relating to operating leases

Accounting policy

Depreciation expense

Depreciation is calculated over plant and equipment using the following estimated useful lives and methods:

Item

Years Method

Plant and equipment:

Leasehold improvements

3 – 8

Straight line

Computer hardware

2.5 – 3

Straight line

Furniture, fixture and equipment

4 – 10 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

Intangible assets:

Years Method

Internally generated/acquired

Client contracts and relationships

3 – 5

Straight line

Acquired

Cash and cash equivalents

Trade and other receivables

Other assets

Plant and equipment

Intangible assets: client contracts and relationships

Deferred tax asset

Trade and other payables

Borrowings

Income tax payable

Provisions

Deferred tax liability

Net identifiable assets acquired*

Less: non-controlling interest

Goodwill on acquisition

Net assets acquired

Lotus
$’000

Platinum
$’000

10,602

61,493

10,937

1,255

4,767

155

1,593

255

614

Total
$’000

12,195

61,748

10,937

1,291

5,381

179

(56,521)

(1,524)

(58,045)

(2,963)

187

(6,798)

(786)

22,328

(5,560)

23,160

39,928

(2,963)

(21)

(82)

(184)

166

(6,880)

(970)

711

23,039

(5,560)

7,863

31,023

8,574

48,502

* There have been some reclassifications and measurement period adjustments within the opening balance sheet to
align with Group policy, this had an impact of approximately $508,000 on the net identifiable assets acquired.

Software

3 – 5

Straight line

Acquired/Internally generated

Lotus Travel Group Limited

Other intangible assets

Straight line

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.

On 2 October 2018, the Group acquired 75.1% of the shares of Lotus Travel Group Limited (“Lotus”), an Asian based
travel management company. The initial cost of the acquisition was $39,928,000 (HK$225,300,000), paid in cash.
Additional earn-out consideration, contingent on achieving an FY2019 net profit after tax threshold, was not expected
to be met at the date of acquisition, and has not been included within the acquisition date fair value consideration.

The full value of the goodwill and client intangibles is not expected to be tax deductible for tax purposes.

Acquisition-related costs of $425,300 are included in administrative and general expenses in the Statement of
Comprehensive Income.

The trade and other receivables approximate the gross contractual amount receivable, of which no balances are
expected to be uncollectable.

The acquired business contributed revenues of $23,263,000 and net profit after tax of $2,057,000 to the Group for
the period 2 October 2018 to 30 June 2019. If the acquisition had occurred on 1 July 2018, consolidated revenue and
net profit after tax for the Group for the year ended 30 June 2019 would have been $455,237,000 and $90,564,000
respectively.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE

7. Business combinations (continued)

SCT Travel Group Pty Ltd trading as Platinum Travel Corporation

Accounting policy (continued)

On 1 July 2018, the Group acquired 100% of the shares of SCT Travel Group Pty Ltd, trading as Platinum Travel
Corporation (“Platinum”), a travel management company headquartered in New South Wales, Australia. The initial
cost of the acquisition was $5,298,000, paid in both cash $3,000,000 and shares $2,298,000, with further contingent
consideration payable of $3,232,000.

The full value of the goodwill and client intangibles is not expected to be tax deductible for tax purposes.

The acquired business contributed revenues of $2,042,000 and net profit after tax of $883,000 to the Group for the
period 1 July 2018 to 30 June 2019.

The trade and other receivables approximate the gross contractual amount receivable of which no balances are
expected to be uncollectable.

Prior period business combinations

During the year ended 30 June 2019, the final deferred consideration of $8.8 million was paid for the Redfern business
combination. The final deferred consideration of $13.5 million in relation to the Chambers business combination was
also settled. Refer note 24 – related party transactions.

Summary of consideration paid for acquisitions made in prior periods

Cash paid

Equity issued

Redfern
$’000

Chambers
$’000

8,792

7,043

6,456

Total
$’000

15,835

6,456

Total consideration paid for acquisitions made in prior periods

8,792

13,499

22,291

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.

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 as 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, and interest
expense resulting from discounting is recognised within finance costs in the Statement of Comprehensive Income.
Any subsequent adjustment to the final contingent consideration, based on actual results as at 30 June 2019, 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.

8. Intangible assets

Client
contracts
and
relationships

Software

Goodwill

Other
Intangible
assets

Total

$’000

Year ended 30 June 2019

Cost

62,924

52,684

453,522

4,924

574,054

Accumulated depreciation

(43,668)

(22,370)

(1,326)

(67,364)

Opening net book amount at 1 July 2018

20,140

20,399

407,187

3,871

451,597

Additions

18,770

Additions through the acquisition of entities/
businesses (note 7)

5,381

31,023

18,770

36,404

19,256

30,314

453,522

3,598

506,690

Amortisation charge

Exchange differences

Closing net book amount

Year ended 30 June 2018

Cost

(7,165)

(9,378)

(463)

(17,006)

900

523

15,312

190

16,925

19,256

30,314

453,522

3,598

506,690

55,167

33,151

407,187

4,687

500,192

Accumulated depreciation

(35,027)

(12,752)

(816)

(48,595)

Opening net book amount

29,411

14,217

392,013

4,156

439,797

20,140

20,399

407,187

3,871

451,597

Additions

Amortisation charge

Exchange differences

11,057

(10,186)

(5,174)

11,057

(428)

(15,788)

915

299

15,174

143

16,531

Closing net book amount

20,140

20,399

407,187

3,871

451,597

Customer contracts

The customer contracts were acquired as part of a business combination (refer note 7 for details). They are recognised
at their fair value at the date of acquisition and are subsequently amortised based on the timing of projected cash
flows of the contracts over their estimated useful lives.

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: GROUP STRUCTURE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL

8. Intangible assets (continued)

Accounting policy

Software developed or 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 as
software and systems assets.

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.

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 in the Statement of Comprehensive Income.

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.

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 cash

Total cash and cash equivalents

2019

$’000

2018

$’000

96,571

57,019

42,220

27,278

138,791

84,297

Cash at bank earns interest at floating rates based on daily bank deposit rates: 2019: 0.00%-2.37% (2018: 0.00%-1.95%).
The client accounts earn interest at floating rates based on daily bank deposit rates: 2019: 0.00%-1.60% (2018: 0.00%-
1.30%). The weighted average interest rate for the year was 0.13% (2018: 0.12%).

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

Net exchange differences

Non-cash interest

Critical estimates, assumptions and judgements

Non-cash employee benefits expense - share-based payments

•

Software developed or acquired not as part of a business combination
The Group recognises internally generated software assets arising from development once they meet the criteria
set out in the Australian Accounting Standards. Estimates are used in determining the useful life for amortisation.
There is also judgement involved in assessing how the asset will deliver probable future economic benefit to the
Group.

Non-cash release of acquisition payable

Net (gain) on sale of subsidiary

Fair value adjustment of acquisition payable

Net gain/(loss) on disposal of non-current assets

Changes in operating assets and liabilities

(Increase) in trade and other receivables

(Increase)/decrease in prepayments

Increase/(decrease) in deferred tax balances

Increase in income tax payable

Increase in payables and provisions

Net cash flow from operating activities

2019

$’000

2018

$’000

89,473

80,582

20,348

17,833

406

122

3,690

(423)

(602)

169

(92)

678

2,168

(330)

(420)

(5)

(7,464)

(41,341)

(546)

2,190

2,797

669

(999)

1,730

23,317

33,919

133,477

94,392

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL

9. Cash and cash equivalents (continued)

10. Trade and other receivables (continued)

Net debt reconciliation

Accounting policy from 1 July 2018

Trade and client receivables are recognised initially at fair value and, subsequently, measured at amortised cost using
the effective interest method, less a provision for impairment in accordance with the simplified approach permitted
by AASB 9.

The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which
permits the use of the lifetime expected loss provision for all trade and client receivables and contract assets.

To measure the expected credit losses, trade and client receivables, contract assets and deposits have been grouped
based on their shared characteristics and the days past due.

Contract assets represent balances earned, but which are not yet unconditional and have the substantially the
same characteristics as trade receivables. The Group has therefore concluded that the expected loss rates for trade
receivables are a reasonable approximation for the contract asset balances.

The expected credit loss rates are based on the historical payment profile of receivables prior to 30 June 2019 and 1
July 2018 and the corresponding historical credit losses experienced during this period. The historical loss rates are
adjusted to reflect current and forward-looking information affecting the ability of the clients to settle the receivables.

Accounting policy applied until 30 June 2018

Trade and client receivables, which generally have 7 to 30 day terms, are recognised initially at fair value and,
subsequently, measured at amortised cost using the effective interest method, less an allowance for impairment.

Client receivables result from the provision of travel services to clients. Trade receivables result from other activities
relating to the provision of travel services, such as commissions payable by suppliers.

Collectability of trade and client receivables is reviewed on an ongoing basis at an operating unit level. Individual
debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when
there is objective evidence that the Group will not be able to collect the receivable. The amount of the impairment
loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at
the original effective interest rate.

The amount of the impairment loss is recognised in the profit and loss in the Consolidated Statement of
Comprehensive Income within administration expenses. When a trade receivable, for which an impairment allowance
had been recognised, becomes uncollectible in a subsequent period, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against administration expenses in the profit
and loss in the Consolidated Statement of Comprehensive Income.

This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

Cash and cash equivalents

Borrowings (repayable within 1 year)

Borrowings (repayable after 1 year)

Net debt

Cash and cash equivalents

Gross debt - variable interest rates

Net debt

Net debt at 1 July 2018

Cash flows

Acquisition

Foreign exchange adjustments

Net debt at 30 June 2019

Net debt at 1 July 2017

Cash flows

Foreign exchange adjustments

Net debt at 30 June 2018

10. Trade and other receivables

Current

Trade receivables (i)

Client receivables (i)

Contract assets (ii)

Deposits (iii)

Other receivables

Total trade and other receivables

2019

$’000

2018

$’000

138,791

84,297

(19,205)

(14,677)

(20,085)

(29,301)

99,501

40,319

138,791

84,297

(39,290)

(43,978)

99,501

40,319

Cash

$’000

84,297

52,030

2,464

138,791

79,217

2,929

2,151

84,297

Borrowings due
within 1 year

Borrowings due
after 1 year

Total

$’000

(14,677)

(1,270)

(2,963)

(295)

(19,205)

(18,122)

4,186

(741)

$’000

(29,301)

40,319

9,570

60,330

(2,963)

(354)

1,815

(20,085)

(27,301)

(1,518)

(482)

99,501

33,794

5,597

928

(14,677)

(29,301)

40,319

Restated

2018

$’000

2019

$’000

25,882

19,339

253,942

199,715

31,035

23,810

310,859

242,864

16,574

1,338

7,587

1,786

328,771

252,237

The increase in trade and other receivables is predominantly due to the acquisition of Lotus Travel.

(i) Trade and client receivables are non-interest bearing and are generally on terms ranging from 7 to 30 days. This
balance includes amounts receivable from a related party – refer note disclosure 24(e).
(ii) Balances were reclassified to contract assets as a result of the adoption of AASB 15. An amount of $31.0 million
(2018: $23.8 million) was reclassified from trade receivables to contract assets.
(iii) Deposits balance relates to advance deposits to suppliers and deposits made on behalf of clients for travel which
will occur at a future date. Advance deposits to suppliers relate to securing access during high sales periods, which is
the normal business practise in Hong Kong.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL

11. Trade and other payables

12. Borrowings and contingent liabilities

Current

Trade payables (i)

Client payables (i)

Other payables and accruals

Acquisition payable (ii)

Total current trade and other payables

Non-current

Other payables and accruals

Contingent consideration payable (iii)

Total non-current trade and other payables

2019

$’000

2018

$’000

13,373

12,536

267,424

185,122

35,256

33,458

700

22,505

316,753

253,621

1,573

2,585

4,158

2,872

(i) Trade payables and client payables are non-interest bearing and are normally settled on terms ranging from 7 to
30 days. The increase in trade and client payables is predominantly due to the acquisition of Lotus Travel and timing
of supplier payments.
(ii) The reduction in acquisition payable reflects the payments made during the year relating to the Redfern Travel
and Chambers Travel business combinations. Current balance represents the payable upon meeting the performance
hurdle for Platinum Travel acquisition for the year ended 30 June 2019.
(iii) The contingent consideration payable relates to the Platinum Travel business combination which remains
contingent on the achievement of specific performance hurdles.

Fair value
The carrying value of these payables approximates 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.

Acquisition and contingent consideration payable are recognised where settlement of any part of the business
combination is deferred or contingent on meeting additional earnout thresholds. 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 effective
interest rate.

Contingent consideration subsequently remeasured to fair value, with changes in fair value recognised in other
income or other expenses, and interest expense resulting from discounting is recognised within finance costs in the
Statement of Comprehensive Income. Any subsequent adjustment to the final contingent consideration, based on
actual results as at 30 June 2019, will be reflected in the Statement of Comprehensive Income.

Borrowings

A breakdown of the existing borrowings balance is set out in the following table:

Current borrowings

Non-current borrowings

Total borrowings

Guarantees/Letter of credit facilities

2019

$’000

2018

$’000

19,205

14,677

20,085

29,301

39,290

43,978

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 (IATA) regulations.
Guarantees provided by the parent are held on behalf of other Group entities.

Guarantees provided for:

Various vendors

Total guarantees

2019

$’000

2018

$’000

123,021

83,586

123,021

83,586

There were no other contingencies as at reporting date (2018: $nil).

Increase in guarantees following the Lotus acquisition in October 2018. Since 31 December 2018, the balance has
reduced by $15.2 million. Subsequent to 30 June 2019, guarantees have decreased by a further $27.1 million and at
the date of this report total guarantees are $95.9 million.

Financial facilities

The unused portion of the Group’s total facilities at 30 June 2019 is set out in the following table:

Senior facilities

Unused

Used (i)

Total senior facilities

Permitted indebtedness

Unused

Used (ii)

Total permitted indebtedness

Total facilities

Unused

Used (i)

Total facilities

$’000

82,776

100,724

183,500

$’000

53,322

96,678

150,000

$’000

136,098

197,402

333,500

(i) Included within the used portion of the total senior facilities are bank guarantees of $61.4 million.
(ii) Included within the used portion of the permitted indebtedness are bank guarantees of $51.2 million.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL

12. Borrowings and contingent liabilities (continued)

13. Provisions

Financial facilities (continued)

The Group’s facilities at 30 June 2019 include overdraft, merchant facilities and bank guarantees. The senior debt
facility is with HSBC Bank and Commonwealth Bank of Australia. This multi-currency facility includes senior debt
facilities of $183.5 million.

Including the permitted indebtedness, the Group had $333.5 million of facility which is drawn to $197.4 million at 30
June 2019 (being bank borrowings of $39.3 million, bank guarantees of $112.7 million and credit card facilities of $45.4
million). Lotus guarantees of $10.3 million are excluded from the permitted indebtedness basket.

Security had been provided to the guarantor over the Groups assets and subsidiary shareholding through a security
trustee on behalf of the senior lenders.

At 30 June 2019, Lotus Travel have secured deposits totalling $5.8 million in support of guarantees and merchant
banking facilities – refer note 19. The Group continues to integrate the banking requirements with the long-term
objective to reduce and eventually remove the need for this security. There has been a release of $5.0 million during
the period as a result of this integration.

On 7 August 2019, the Group refinanced the senior debt facilities (refer note 18). The new facilities provide
further headroom and broader banking relationships. The syndicated facility has three participants (HSBC Bank,
Commonwealth Bank of Australia and Barclays Bank).

Movements in provisions

At 1 July 2018

Acquisition of subsidiary (note 7)

Arising during the year

Utilised

Write back of provision

Changes due to change in foreign currency

At 30 June 2019

At 1 July 2017

Arising during the year

Utilised

Write back of provision

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.

Changes due to change in foreign currency

At 30 June 2018

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.

2019

Current

Non-current

2018

Current

Non-current

Accounting policy

Employee
entitlements

Make-good
provision

Provisions
for other
liabilities and
charges

Total

$’000

5,935

1,749

8,935

(7,454)

(592)

309

8,882

5,635

6,882

(6,541)

(106)

5,935

6,813

2,069

8,882

4,720

1,215

5,935

$’000

655

927

1,138

(320)

$’000

11,029

17,619

4,204

6,880

90,412

100,485

(84,788)

(92,562)

(2,599)

(3,191)

803

1,162

2,450

19,061

30,393

638

(87)

(5)

655

2,419

2,450

618

655

10,892

17,165

38,534

45,509

(36,020)

(42,648)

(2,779)

(2,890)

402

483

11,029

17,619

19,061

25,905

4,488

19,061

30,393

11,029

15,786

1,833

11,029

17,619

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL

13. Provisions (continued)

Accounting policy (continued)

Employee benefits

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.

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.

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.

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.

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

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.

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 another half year.

14. Contributed equity, reserves and retained earnings

(a) Contributed equity

Ordinary shares

Issued and fully paid

Contributed equity

2019

$’000

2018

$’000

364,368

301,747

364,368

301,747

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

Opening balance as at 1 July 2017

Number of shares

$’000

105,221,249

281,847

22 August 2017

Shares issued

Share appreciation rights issue.

600,600

13,754

13 October 2017 Shares issued

Contingent consideration payment for the
Chambers Travel business combination.

Total shares issued

Less: transaction costs arising on share issue

Deferred tax credit recognised directly in equity

At 30 June 2018

Opening balance as at 1 July 2018

2 July 2018

Shares issued

17 July 2018

Shares issued

Initial consideration for the SCT Travel
Group Pty Ltd business combination.

Capital raising used primarily for the
acquisition of Lotus Travel Group.

286,604

6,313

887,204

20,067

(38)

(129)

106,108,453

301,747

106,108,453

301,747

85,627

2,298

1,554,000

40,016

22 August 2018

Shares issued

Share appreciation rights issue.

509,961

14,585

22 October 2018 Shares issued

Deferred consideration payment for the
Chambers Travel business combination.

Total shares issued

Less: transaction costs arising on share issue

Deferred tax credit recognised directly in equity

233,908

6,456

2,383,496

63,355

(796)

At 30 June 2019

108,491,949

364,368

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 12), 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.

While dividend payments may vary from time to time, according to these anticipated needs, the Board’s current
dividend policy is to return between 50% to 60% of net profit after tax to shareholders.

Total borrowings

Total equity

Gearing ratio

2019

$’000

2018

$’000

39,290

43,978

592,482

471,492

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK

14. Contributed equity, reserves and retained earnings (continued)

(b) Reserves

The following table shows a breakdown of the ‘reserves’ line item as per the Consolidated Statement of Financial
Position, and the movements in these reserves during the year. A description of the nature and purpose of each
reserve is provided in the following table.

FX translation

Share-based
payments

Total

$’000

8,385

15,373

274

15,647

24,032

18,307

(118)

18,189

$’000

4,614

12,999

15,373

274

15,647

2,176

(13,754)

2,301

(4,663)

19,369

18,307

(118)

18,189

At 30 June 2017

Currency translation differences – current period

Deferred tax

Other comprehensive income

Share-based payments:

Expense for the year

Issuance of shares on vesting

Effect of tax

At 30 June 2018

Currency translation differences – current period

Deferred tax

Other comprehensive income

Share-based payments:

Expense for the year

Issuance of shares on vesting

Effect of tax

At 30 June 2019

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 an expense for the grant date fair value of deferred shares
granted to employees but not yet vested over the vesting period, as well as deferred tax associated with future tax
deductions. Upon vesting of shares, the fair value of the shares issued is recognised in share capital (refer note 14 (a))
and a corresponding entry recognised in the share-based payment reserve.

Movements in retained earnings were as follows:

Balance at 1 July

Net profit for the year

Dividends

Balance at 30 June

Accounting policy

2019

$’000

133,218

86,235

2018

$’000

91,470

76,712

(42,263)

(34,964)

177,190

133,218

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.

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 to the cash generating unit:

Travel service - Australia and New Zealand

Travel service - North America

Travel service - Asia

Travel service - Europe

Total goodwill

2019

$’000

2018

$’000

54,893

46,997

204,742

194,270

52,987

27,497

140,900

138,423

453,522

407,187

The recoverable amount of the cash generating unit has been determined based on financial budgets set for the
next financial year and management’s cash flow projections for subsequent years.

Travel services

Australia
and New
Zealand

North
America

Asia

Europe

13.72%

12.14%

11.38%

11.04%

3.50%

3.00%

2.00%

3.50%

3.00%

2.00%

3.50%

3.00%

2.00%

3.50%

3.00%

2.00%

12.77%

11.55%

10.86%

10.71%

Revenue

Operating expenses

Long term growth rate

2018

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 nominal growth rate of:

Revenue

Operating expenses

Long term growth rate

3.50%

3.00%

2.00%

3.50%

3.00%

2.00%

3.50%

3.00%

2.00%

3.50%

3.00%

2.00%

Key assumptions used for value-in-use calculations for the years ended 30 June 2019 and 30 June 2018

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
outcome 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
outcome achieved in the year immediately before the budgeted year, adjusted for growth and other known
circumstances.
Long term growth rate – the growth rate used to extrapolate cash flows beyond the budget period.

3,690

(14,585)

338

42,221

(15,220)

27,001

2019

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 nominal growth rate of:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK

15. Impairment testing of goodwill (continued)

16. Financial risk management

Sensitivity to changes in assumptions

The Group’s principal financial instruments comprise deposits with banks, overdraft facilities and borrowings.

Management recognises that there are various reasons the estimates used in these assumptions may vary. For cash
generating units, there are possible changes in key assumptions that could cause the carrying value of the unit to
exceed its recoverable amount. The changes required to each of the key assumptions to cause the carrying value of a
unit to exceed its recoverable amount are shown as follows:

Growth rates – Travel services – Australia and New Zealand

Possible change
considered

Change required to
indicate an impairment

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.

Revenue

Operating expenses

Growth rates – Travel services – North America

Revenue

Operating expenses

Growth rates – Travel services – Asia

Revenue

Operating expenses

Growth rates – Travel services – Europe

Revenue

Operating expenses

Accounting policy

Reduction in yield, rates,
client retention

Higher labour and/or other
support costs

Reduction in yield, rates,
client retention

Higher labour and/or other
support costs

Reduction in yield, rates,
client retention

Higher labour and/or other
support costs

Reduction in yield, rates,
client retention

Higher labour and/or other
support costs

Decrease to (6.50%)

(a) Interest rate risk

Increase to 14.21%

Decrease to (0.1%)

Increase to 6.6%

Decrease to (4.58%)

Increase to 11.18%

Decrease to (6.07%)

Increase to 14.59%

As at 30 June 2019, the Group had interest bearing borrowings of $39.3 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 USD LIBOR (London Interbank Offered Rate) 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 considered its exposure to interest rate movements and note that
significant changes in interest rates would not result in a material impact to Finance costs.

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.

(b) Credit risk

Credit risk arises from cash and cash equivalents, and balances owing from customers and suppliers including
outstanding receivables.

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.

The Group’s cash (refer note 9), is held at financial institutions with the following credit ratings:

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.

The 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.

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.

Australia and New Zealand

North America

Asia

Europe

Total cash and cash equivalents

2019 Moody’s Investor
$’000

Service Rating

19,312

23,178

Aa3 - A1

Aa1 - A1

61,001

Aa1 - Baa3

35,300

Aa2 - Baa3

138,791

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.
Client and trade receivables are held with predominantly un-rated entities.

Receivables are subject to the expected credit loss model. The Group has applied the AASB 9 simplified approach
to measuring the expected credit loss, which uses a lifetime expected loss allowance for all receivables and contract
assets.

To measure the expected credit losses, receivables and contract assets have been grouped based on shared credit
risk characteristics and the days past due. Contract assets represent balances earned which are not yet unconditional
and have the same characteristics as trade receivables. The Group has, therefore, concluded that the expected loss
rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK

16. Financial risk management (continued)

(b) Credit risk (continued)

(d) Foreign exchange risk (continued)

Receivables and contract assets are written off when there is no reasonable expectation of recovery. Impairment
losses on receivables and contract assets are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.

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.

Previous accounting policy for impairment of trade receivables
In the prior year, the impairment of receivables was assessed based on the incurred loss model. Individual receivables
which were known to be uncollectible were written off by reducing the carrying amount directly. Receivables for
which an impairment provision was recognised were written off against the provision when there was no expectation
of recovering additional cash.

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. Refer note 12 – borrowings and contingent liabilities for discussion
on the use of banking facilities in managing the Group’s liquidity needs.

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 2019.

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 2019.

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

2019

$’000

2018

$’000

2019

$’000

2018

$’000

316,661

253,556

316,753

253,621

2,942

1,691

4,158

2,872

Total trade and other payables

319,603

255,247

320,911

256,493

1 year or less

1 – 5 years

Over 5 years

Total borrowings

(d) Foreign exchange risk

19,205

14,677

19,205

14,677

20,085

29,301

20,085

29,301

39,290

43,978

39,290

43,978

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. Additionally, the Group has a multi-currency debt facility which allows for
borrowings in the relevant entity’s functional currency.

2019

USD

HKD

GBP

NZD

JPY

EUR

CHF

Others

Total foreign exchange risk

Cash
and cash
equivalents

Trade
and other
receivables

Related
party
loans

Trade
and other
payables

Borrowings

Total

$’000

3,145

23,438

133

(22,302)

$’000

(3,179)

(117)

(260)

857

2,894

(1,348)

4,788

1,388

3,209

(313)

(13)

(1,736)

514

838

4,689

14,272

(6,966)

$’000

25,475

(22,022)

921

2,930

(1,028)

5,476

1,642

3,995

17,389

Based on the 2019 balances, a 10% stronger/(weaker) Australian dollar against the currencies held, would result in a
Profit & Loss impact of $1,102,970/($902,430).

2018

USD

HKD

GBP

NZD

JPY

Others

Cash
and cash
equivalents

Trade and
Other
receivables

Related
party
loans

Trade and
Other
payables

Borrowings

Total

$’000

6,661

23,067

(3,505)

232

(23,698)

(6,009)

1,036

(57)

(80)

(1)

(1,257)

(1,441)

448

$’000

27,409

(23,084)

(5,832)

1,037

(1,062)

(214)

(1,746)

Total foreign exchange risk

2,690

7,427

(5,522)

(6,341)

$’000

2,071

264

324

295

487

267

1,684

5,394

$’000

1,186

439

257

109

697

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: UNRECOGNISED ITEMS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER 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. Commitments

(a) Operating lease commitments – Group as lessee

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 commitments

(b) Capital commitments

2019

$’000

10,371

2018

$’000

8,837

25,843

13,244

3,733

1,070

39,947

23,151

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.

18. Events occurring after the reporting period

19. Other assets

Prepayments

Secured deposits (i)

Financial assets at fair value

Total other current assets

2019

$’000

4,824

5,752

10,576

2018

$’000

3,701

502

4,203

(i) This relates to secured deposits within the Lotus business – refer note 12 for further details.

20. Plant equipment

No additions during the year (2018: $nil) were financed under lease agreements.

Furniture,
fixtures and
equipment

Computer
equipment

Leasehold
improvements

Other

Total

$’000

Year ended 30 June 2019

Cost

7,052

14,668

9,090

1,405

32,215

Accumulated depreciation

(4,219)

(11,797)

(2,649)

(222)

(18,887)

Opening net book amount

Additions

Additions through the acquisition of
entities/businesses (note 7)

Depreciation charge

Exchange differences

Closing net book amount

Year ended 30 June 2018

Cost

Accumulated depreciation

Opening net book amount

Additions

Depreciation charge

Exchange differences

Closing net book amount

Accounting policy

2,833

1,176

1,912

2,871

2,208

1,583

6,441

2,599

4,644

1,183

13,328

135

1,133

6,118

9,272

267

666

323

1,291

(533)

2,833

5,582

(4,406)

1,176

870

647

(353)

1,176

(1,656)

2,871

9,009

(6,801)

2,208

1,755

1,351

(967)

2,208

(850)

(303)

(105)

(3,342)

(11)

6,441

1,183

13,328

5,203

(2,604)

2,599

2,544

678

(672)

2,599

449

20,243

(314)

(14,125)

135

(53)

135

6,118

5,262

2,765

(2,045)

136

6,118

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

20. Plant and equipment (continued)

Accounting policy (continued)

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.

21. Fair value measurement

Fair value hierarchy

The balance for the Group’s asset and liabilities measured and recognised at fair value is $2.6 million. The following
table represents the changes for the year ended 30 June 2019.

Opening balance 1 July 2018

Additions

Transfer to Acquisition payable (i)

Discount unwind

Closing balance at 30 June 2019

Contingent
Consideration

$’000

3,232

(700)

2,585

(i) The balance transferred to Acquisition payable during the period relates to the Platinum Travel contingent
consideration ($0.7 million), based on the financial criteria relating to the earn out period being met.

Fair values of other financial instruments

At 30 June 2019 there are no forward exchange contracts in place.

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 Global 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.

22. 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.

22. Share-based payments (continued)

Share appreciation rights (continued)

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 2019 will vest on a scaled basis as follows:
•
•
•

50% vest at 80% target achievement;
75% vest at 90% target achievement; and
100% at 100% target achievement.

For equity based settlements, the calculation is as follows:
•

Equity Settlement Amount = ((SMV – BP) / SMV) x PQSR

For cash based settlements, the calculation is as follows:
Cash Settlement Amount = (SMV – BP) x PQSAR
•

Where:

Equity Settlement Amount – is the number of shares to be issued or transferred to the relevant participant in
equity settlement of the performance qualified SAR at exercise;

Cash Settlement Amount – is the amount paid to a participant in cash settlement of a performance qualified
SAR at exercise;

SMV – the Subsequent Market Value is the market value of a CTM Ltd share as at the performance
qualification date in connection with that SAR;

BP – the Base Price of the SAR as determined by the Board; and

PQSAR – is the total number of performance qualified SARs with the same Base Price held by the relevant
participant.

SARs granted under the plan carry no dividend or voting rights.

The following table summarises the SARs granted under the plan, no SARS expired during the periods below:

As at 1 July

Granted during the year

Exercised during the year

Forfeited during the year

As at 30 June

Vested and exercisable at 30 June

2019

2018

Number of SARS Number of SARS

3,575,500

1,613,000

(845,000)

(475,000)

3,117,500

1,610,000

(865,000)

(287,000)

3,868,500

3,575,500

SARs outstanding at the end of the year have the following expiry date and share base prices:

Grant date

Performance period

Base price

1 July 2015

1 July 2015 – 30 June 2018

$ 8.80

1 July 2015

1 July 2015 – 30 June 2018

$ 11.50

1 July 2016

1 July 2016 – 30 June 2019

$ 15.33

22 August 2017

1 July 2017 – 30 June 2020

$ 23.90

22 August 2018

1 July 2018 – 30 June 2021

$ 29.00

SARS
30 June 2019

SARS
30 June 2018

1,307,500

1,158,000

1,403,000

50,000

795,000

1,332,500

1,398,000

3,868,500

3,575,500

On 21 August 2019, 386,762 shares will be issued upon vesting of 1,297,500 SARs. In addition to the share issue, on 21
August 2019, 1,753,000 SARs were granted, pursuant to the CTM SARs plan.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

22. Share-based payments (continued)

23. Interests in other entities (continued)

Fair value of SARs granted

(a) Material subsidiaries (continued)

The assessed fair value at grant date of the SARs granted during the year ended 30 June 2019 was $4.80 per SAR
(2018 - $2.49). 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 2019 included:

•

•
•
•
•
•
•
•

SARs are granted for no consideration and vest based on Corporate Travel Management Limited’s Earnings per
Share growth over a 3 year vesting period.
Base price: $29.00 (2018 - $23.90).
Grant Date: 22 August 2018 (2018 – 22 August 2017).
Expiry Date: 1 July 2021 (2018 - 1 July 2020).
Share Price at Grant Date: $30.87 (2018 - $21.85).
Expected price volatility of the Group’s shares: 22.5% (2018 - 25%).
Expected dividend yield: 3.0% (2018 - 3.0%).
Risk-free interest rate: 2.13% (2018 – 1.94%).

The expected price volatility is based on the historic volatility, based on the remaining life of the SARS, adjusted for
any expected changes to future volatility due to publicly available information.

Expenses arising from SARS

Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense relating to share appreciation rights is $3,690,000 (2018: $2,176,000).

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.

23. Interests in other entities

(a) Material subsidiaries

The Group’s principal subsidiaries at 30 June 2019 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

Ownership
interest held
by noncontrolling
interest

Principal
activities

2019

2018

2019

2018

Corporate Travel
Management Group Pty
Ltd*

Corporate Travel
Management North
America Inc

Australia

100.0

- Travel services

United States
of America

100.0

- Travel services

Westminster Travel Limited

Hong Kong

75.1

24.9

24.9 Travel services

Lotus Travel Limited

Hong Kong

75.1

24.9

- Travel services

Corporate Travel
Management Limited (HK)

Corporate Travel
Management (United
Kingdom) Limited

Corporate Travel
Management (North)
Limited

Hong Kong

75.1

24.9

24.9 Travel services

United
Kingdom

100.0

- Travel services

100.0

- Travel services

* 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 note
26.

(b) Non-controlling interests (NCI)

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

23. Interests in other entities (continued)

24. Related party transactions (continued)

(b) Non-controlling interests (NCI) (continued)

The amounts disclosed are before inter-company eliminations.

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

24. Related party transactions

(a) Parent entities

The ultimate parent entity within the Group is Corporate Travel Management Limited.

(b) Subsidiaries

Interest in subsidiaries are set out in note 23

Short-term

Post-employment

Long-term benefits

Share-based payments

Total KMP compensation

Detailed remuneration disclosures are provided in the Remuneration Report on pages 29-39.

2019

$’000

2018

$’000

243,801

145,404

(164,246)

(85,983)

79,555

59,421

60,587

17,482

(4,064)

(936)

56,523

16,546

136,078

75,967

23,923

17,158

2019

$’000

2018

$’000

80,704

53,807

13,079

15,649

5,453

2,699

18,532

18,348

3,238

3,008

2019

$’000

3,870

2,507

2018

$’000

29,982

18,311

(47,965)

(832)

45,350

(13,085)

27,367

4,394

2019

2018

5,427,637

4,767,414

230,084

254,361

104,667

13,259

1,525,358

766,245

7,287,746

5,801,279

(d) Transactions with other related parties

Deferred consideration balance of $13.5 million was paid to Chris Thelen in relation to the Chambers Travel acquisition.
No remaining deferred consideration is payable to Chris Thelen. Rental expense of $50,805 was also paid to Chris
Thelen.

Working capital adjustment of $44,000 was paid to Greg McCarthy in relation to the Platinum Travel acquisition.

(e) Outstanding balances with related parties

The following balances are outstanding at the end of the reporting period in relation to transactions with related
parties:

Trade and other receivables

Key management personnel

Other payables

Key management personnel (i)

Other related parties

2019

$’000

2018

$’000

378

3,285

13,631

(i) The balance represents the present value of the consideration payable to Greg McCarthy, as a part of the
acquisition of SCT Travel Group Pty Ltd, trading as Platinum Travel Corporation – refer to note 11.

(f) Terms and conditions

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 are made on
normal commercial terms and conditions and at market rates.

Directors and executives can receive travel and event management services. All transactions are made on normal
terms and conditions and at market rates. There are no amounts outstanding in relation to these transactions at 30
June 2019.

25. Parent entity financial information

(a) Summary financial information

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

2019

$’000

8,186

2018

$’000

1,279

444,327

397,056

14,878

26,988

27,627

47,938

416,700

349,118

384,771

322,150

582

6,409

31,347

20,559

416,700

349,118

53,051

34,113

53,051

34,113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

25. Parent entity financial information (continued)

26. Deed of cross guarantee

(b) Guarantees entered into by the parent entity

The parent entity is party to the overall financing arrangements and related security as detailed in note 12.

The parent entity did not have any contingent liabilities as at 30 June 2019 or 30 June 2018.

(d) Contractual commitments

The parent did not have any contractual commitments at 30 June 2019 or 30 June 2018.

Accounting policy

The financial information for the parent entity, Corporate Travel Management Limited, has been prepared on the
same basis as the consolidated financial statements, except as follows:

(i) Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Corporate Travel Management
Limited.

(ii) Tax consolidation legislation
Corporate Travel Management Limited and its wholly-owned Australian controlled entities have implemented tax
consolidation legislation. The head entity, Corporate Travel Management Limited and the controlled entities in the tax
consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if
each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Corporate Travel Management Limited also recognises the
current tax liabilities or assets and the deferred tax assets arising from unused tax losses and unused tax credits
assumed from controlled entities in the tax consolidated group.

These 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.

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.

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, 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 2019 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 hedge

Other comprehensive income for the period, net of tax

Total comprehensive income for the year

2019

$’000

2018

$’000

271,265

235,600

39,308

21,276

310,573

256,876

(145,724)

(127,478)

(7,217)

(10,413)

(6,244)

(8,221)

(24,838)

(20,790)

(3,494)

(9,111)

(3,048)

(8,007)

(200,797)

(173,788)

(5,545)

(4,519)

104,231

78,569

(23,682)

(16,065)

80,549

62,504

8,662

(447)

8,215

7,119

7,206

88,764

69,710

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

26. Deed of cross guarantee (continued)

27. Auditors’ remuneration

(b) Consolidated Statement of Financial Position

The auditor of the Group is PricewaterhouseCoopers.

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Other assets

Related party receivable

Total current assets

Non-current assets

Plant and equipment

Intangible assets

Investment in related parties

Deferred tax assets

Related party receivable

Total non-current assets

TOTAL ASSETS

LIABILITIES

Current liabilities

Trade and other payables

Borrowings

Income tax payable

Provisions

Related party payable

Total current liabilities

Non-current liabilities

Trade and other payables

Borrowings

Provisions

Related party payable

Deferred tax liabilities

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed equity

Reserves

Retained earnings

TOTAL EQUITY

2019

$’000

2018

$’000

38,599

26,857

98,149

87,057

1,576

2,083

1,962

4,241

140,407

120,117

4,603

3,865

271,888

254,301

247,734

187,487

5,517

207

5,863

2,925

529,949

454,441

PricewaterhouseCoopers Australia:

Audit and review of the financial reports of the entity

Other assurance services

Other services in relation to the entity:

Tax compliance services

Tax 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 reports

Other assurance services

Tax compliance services

Tax advisory services

Other advisory services

670,356

574,558

Total remuneration of PricewaterhouseCoopers network firms

2019

2018

560,594

455,805

40,000

138,993

214,700

197,286

76,508

936,873

747,013

787,673

466,452

11,455

10,932

5,558

8,357

29,350

5,325

834,036

491,066

83,850

77,271

(1,980)

5,356

3,700

855

4,927

11,998

16,321

99,224

103,074

3,803

9,391

1,455

1,180

20,777

1,194

47,312

44,892

12,112

4,691

74,073

72,734

173,297

175,808

497,059

398,750

364,368

301,747

5,995

8,596

126,696

88,407

497,059

398,750

Non-PricewaterhouseCoopers firms:

Services in relation to the entity and any other entity in the consolidated group:

Audit and review of the financial report

Total remuneration of Non-PricewaterhouseCoopers firms

75,202

69,749

75,202

69,749

28. Summary of significant accounting policies

(a) Basis of preparation

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.

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.

(b) New and amended standards

The Group has applied the following standards and amendments for the first time for their annual reporting period
commencing 1 July 2018:

(i) AASB 9 Financial Instruments; and
(ii) AASB 15 Revenue from Contracts with Customers.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

28. Summary of significant accounting policies (continued)

(b) New and amended standards (continued)

The Group had to change its accounting policies and make certain presentation adjustments following the adoption
of AASB 9 and AASB 15, which is disclosed in note 29.

The Group has not early adopted any amendments, standards or interpretations that have been issued but are not yet
effective in the current year.

Certain new accounting standards and interpretations have been published that are not mandatory for the year
ended 30 June 2019 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

The Group will apply
the standard from its
mandatory adoption
date of 1 July 2019.
The Group intends to
apply the simplified
transition approach
and will not restate
comparative
amounts for the
year prior to first
adoption.

Right-of-use assets
will be measured
on transition as
if the new rules
had always been
applied but using
the incremental
borrowing rate at the
date of transition.

Title of standard Summary and impact on the Group’s financial statements

AASB 16 Leases

AASB 16 was issued in February 2016. It will result in almost all leases
being recognised on the balance sheet by lessees, as the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a financial
liability to pay rentals are recognised. The only exceptions are short-term
and low-value leases.

The Group has set up a project team which has reviewed all of the
Group’s leasing arrangements over the last year in light of the new lease
accounting rules in AASB 16. The standard will affect the accounting for
the Group’s operating leases.

As at the reporting date, the Group has non-cancellable operating lease
commitments of $39,947,000, refer note 17. Of these commitments,
approximately $1,085,000 relate to short-term leases and $1,088,000 to
low value leases which will both be recognised on a straight-line basis
as expense in profit or loss.

The Group expects to recognise right-of-use assets of approximately
$54,200,000 on 1 July 2019, lease liabilities of $57,400,000 (after
adjustments for prepayments and accrued lease payments recognised
as at 30 June 2019) and deferred tax assets of $894,000. Overall, net
assets will be approximately $2,300,000 lower, and net current assets
will be $7,600,000 lower due to the presentation of a portion of the
liability as a current liability.

Underlying EBITDA used to measure segment results is expected
to increase within the range of $9,500,000 to $10,500,000 as the
operating lease payments were previously included in EBITDA, but the
amortisation of the right-of-use assets and interest on the lease liability
will be excluded from this measure. The Group expects that net profit
after tax will decrease within the range of $50,000 to $950,000 for
financial year 2020 as a result of adopting the new standard.

Operating cash flows will increase, and financing cash flows will
decrease within the range of $9,000,000 to $9,500,000 as repayment of
the principal portion of the lease liabilities will now be classified as cash
flows from financing activities.

The Group’s activities as a lessor are not material and hence the Group
does not expect any significant impact on the financial statements.

Mandatory
application date/
date of adoption by
the Group

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

Summary and impact on the Group’s financial statements

AASB
Interpretation
23 Uncertainty
over Income Tax
Treatments

AASB Interpretation 23 clarifies how to apply the recognition and
measurement requirements in AASB 112 when there is uncertainty over
income tax treatments. Where such uncertainty exists, an entity will be
required to recognised and measure its current or deferred tax asset or
liability, applying the requirements in AASB 112 based on taxable profit
(tax loss), tax bases, unused tax losses, unused tax credits and tax rates
determined by applying this Interpretation. When there is uncertainty
over income tax treatments, the Interpretation addresses the following:

• Whether an entity considers uncertain tax treatments separately;
•

The assumptions an entity makes about the examination of tax
treatments by taxation authorities;

• How an entity determines taxable profit (tax loss), tax bases, unused

tax losses, unused tax credits and tax rates; and

• How an entity considers changes in facts and circumstances.

An entity is required to determine whether to consider each uncertain
tax treatment separately, or together, with one or more other uncertain
tax treatments, and shall follow the approach that better predicts the
resolution of the uncertainty.

The application of the interpretation is not anticipated to have a material
impact on the Group’s consolidated financial statements.

Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with policies adopted
by the Group.

(d) Rounding of amounts

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.

29. Changes in accounting policies

This note explains the impact of the adoption of AASB 15 Revenue from Contracts with Customers and AASB 9
Financial Instruments on the Group’s financial statements and discloses the new accounting policies that have been
applied from 1 July 2018, where they are different to those applied in prior periods.

AASB 15 Revenue from Contracts with Customers – Impact of adoption

The Group has adopted AASB 15 Revenue from Contracts with Customers from 1 July 2018, which resulted in
changes in accounting policies and adjustments to the note disclosure. There has been no material impact on the
Group’s results for the year ended 30 June 2019. In accordance with transition provisions, the Group has restated
comparatives for the year ended 30 June 2018 for note disclosures (note 10). A new accounting policy for revenue has
been disclosed within note - 2 Revenue. In line with AASB 15 disclosure requirements, revenue has been presented at
a disaggregated level within note 2 - Revenue and the total contract asset balance has also been disclosed separately
within note 10 – Trade and other receivables.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER ITEMS

29. Changes in accounting policies (continued)

Directors’ Declaration

In the Directors’ opinion:

AASB 9 Financial Instruments – Impact of adoption

AASB 9 replaces the provisions of AASB 139 that relate to the recognition, classification and measurement of financial
assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge
accounting.

The adoption of AASB 9 Financial Instruments from 1 July 2018 resulted in changes in accounting policies adopted
by the Group, which has been detailed note – 10 Trade and other receivables. The change in the Group’s accounting
policies, applied from 1 July 2018, did not impact prior year financial statement balances. Opening balances have not
been restated. There has been no material impact on the Group’s results for the year ended 30 June 2019.

(a) Classification and measurement

On 1 July 2018 (the date of initial application of AASB 9), the Group’s management has assessed which business
models apply to the financial assets held by the Group and has classified its financial instruments into the appropriate
AASB 9 categories. There was no material impact on the balances in the financial statements resulting from this
reclassification.

(b) Derivative and hedging activities

There is no material impact on derivative and hedge activities from the adoption of AASB 9. The Group does not have
any open hedges as at balance sheet date. The prior year balance relating to hedge activities is not impacted by the
adoption of AASB 9.

The Group’s financial assets are subject to AASB 9’s new expected credit loss model. The Group has revised its
impairment methodology for financial assets and applied the simplified approach to measuring expected credit
losses. The simplified approach uses a lifetime expected loss allowance.

Financial assets have been grouped based on their shared credit risk characteristics. Contract assets represent
balances earned, but which are not yet unconditional and have the same characteristics as trade receivables. Loss
rates for trade receivables are a reasonable approximation for contract asset balances. The loss allowances for
financial assets on 1 July 2018 were not materially different to the loss allowances as at 30 June 2018. There was no
material impact on the financial statement balances resulting from the application of AASB 9 methodology.

Individual debts that are known to be uncollectible are written off when identified.

(a) The financial statements and notes set out on pages 43 to 92 are in accordance with the Corporations Act 2001,
including:

(i)

(ii)

Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and

Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 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 26 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 26.

Note 28 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 Managing Director and Global 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 Ewen Crouch AM
Chairman

Brisbane, 21 August, 2019

Mr Jamie Pherous
Managing Director

79 Our audit approach An 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, Australia where the consolidation is performed. Materiality ●For the purpose of our audit we used overall Group materiality of $6.0 million, which representsapproximately 5% of the Group’s profit before tax.●We applied this threshold, together with qualitative considerations, to determine the scope of ouraudit and the nature, timing and extent of our audit procedures and to evaluate the effect ofmisstatements on the financial report as a whole.●We chose Group profit before tax because the Group is profit oriented and because, in our view, itis one of the metrics against which the performance of the Group is most commonly measured andit is a generally accepted benchmark.●We utilised a 5% threshold based on our professional judgement, noting it is within the range ofcommonly acceptable profit related thresholds.Audit Scope ●Our audit focused on where the Group made subjective judgements; for example, significantaccounting estimates involving assumptions and inherently uncertain future events.●In establishing the overall approach to the Group audit, we determined the type of audit work thatneeded to be performed by us, as the Group engagement team, and by component auditors inHong 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 overthe Asia and Europe regions respectively.-We performed audit procedures over the North America region, which included us visiting theHouston and Los Angeles based finance functions.PricewaterhouseCoopers, ABN 52 780 433 757 480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001 T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 78 Independent auditor’s report To the members of Corporate Travel Management Limited Report 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 the Group's financial position as at 30 June 2019 and of its financialperformance for the year then ended(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have audited The Group financial report comprises: ●the consolidated statement of financial position as at 30 June 2019●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 flows for the year then ended●the notes to the consolidated financial statements, which include a summary of significantaccounting policies●the directors’ declaration.Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) 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. 96

81 Key audit matter How our audit addressed the key audit matter Impairment assessment on the Group’s goodwill balances (Refer to note 15 Impairment testing of goodwill) At 30 June 2019, the Group recorded $506.7m of intangible assets, of which $453.5m 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 Australian Accounting Standards, at 30 June 2019 the Group performed an impairment assessment over the goodwill balance by calculating the recoverable amount for each CGU, using a ‘value in use’ 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’s determination of its CGUs ● Testing the mathematical accuracy of the underlying calculations in the Group’s discounted cash flow valuation models ● Comparing the cash flow forecasts for FY20 used in the models to the Board approved budget for FY20 ● Comparing the FY19 actual results with prior year forecasts to assess the accuracy of the Group’s forecasting processes ● Evaluating the key assumptions in the cash flow models, including growth rates and discount rates ● Performing sensitivity analysis to assess the impact of reasonably possible changes in the assumptions used in the valuation models, including the discount rates, growth rates, and FY20 forecast. We also compared the Group’s net assets as at 30 June 2019 of $592.5m to its market capitalisation of $2,441.1m at 30 June 2019, and noted the $1,848.6m of implied headroom in the comparison. Capitalisation of internally generated software development costs (Refer to note 8 Intangible assets) The Group has software development teams in each of its regions, and during the year ended 30 June 2019, material expenditure has been incurred in developing technology solutions. This expenditure is capitalised when the development projects meet the criteria of AASB 138 Intangible assets. In the year ended 30 June 2019, there were software additions of $18.8m, which primarily relates to salary costs associated with internally developed software. We focused on this area due to the level of judgement involved in assessing whether the costs meet the recognition criteria for capitalisation per AASB 138, as well as the quantum of expenditure capitalised during the year. Our procedures in relation to the capitalisation of internally generated software development costs included, amongst others: ● Developing an understanding of the Group’s policy for capitalising software development costs and the process for capturing costs ● Testing a sample of capitalised costs by obtaining payslip data and timesheet records ● Testing, on a sampling basis, whether transfers from ‘work in progress’ to ‘software’ have occurred at the appropriate time upon completion of the development project ● Assessing, on a sampling basis, the Group’s assessment of likely future economic benefit for developed assets ● Assessing, on a sampling basis, the reasonableness of the useful lives of developed software assets. 80 -We also performed audit procedures over the Australia & New Zealand region, in addition toauditing the consolidation of the Group’s regional reporting units into the Group’s financialreport.●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 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 2019.Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report 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 matter How our audit addressed the key audit matter Recognition and presentation of revenue (Refer to note 2 Revenue) The Group’s provision of travel services to clients drives a number of revenue streams. The recognition of revenue from these sources is dependent on the terms of the underlying contracts with customers and suppliers. Judgement is involved in the recognition of volume based incentive revenue, as revenue is accrued over the contract period based on the expected achievement of contractual performance criteria specific to each supplier. We focused on the recognition and presentation of revenue due to the materiality of the revenue balance as a whole, the judgemental nature of volume based incentive revenue, and the additional disclosure considerations per the requirements of AASB 15 Revenue from contracts with customers. Our procedures in relation to the recognition of revenue from selected significant revenue streams included, amongst others: ●Obtaining an understanding of the Group’srevenue recognition processes●Agreeing a sample of recorded fees andcommission transactions to supportingdocuments, including customer agreements,invoices, remittances and bank statements●Utilising data analytic techniques to identifyrevenue transactions for our testing of journalentries●Comparing on a sampling basis, volume basedincentive revenue balances to supportingdocuments, including third partyconfirmations, remittances and bankstatements●Comparing the percentages, rates and TotalTransaction Value (“TTV”) inputs used in theunderlying calculations of volume basedincentive revenue, for a sample of suppliers, topercentages and rates stipulated in thesupplier agreements, and known TTV datasupplied by third parties●Assessing the completeness and accuracy ofthe Group’s revenue disclosures per therequirements of AASB 15.98

83 When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free 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 directors either 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 report Our 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 Standards will 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. 82 Key audit matter How our audit addressed the key audit matter Accounting for business combinations (Refer to note 7 Business combinations) The Group completed two acquisitions during the year ended 30 June 2019: ● Lotus Travel (“Lotus”) in Hong Kong on 2 October 2018 ● SCT Travel (“Platinum”) in Australia on 1 July 2018 We determined that the accounting for business combinations was a key audit matter due to the materiality of the value of the transactions, net assets acquired and resultant goodwill arising on the acquisitions, as well as the judgement involved in the Purchase Price Allocation (“PPA”) calculations. Our procedures in relation to the accounting for acquisitions included, amongst others: ● Testing of the initial consideration paid for each of the acquisitions to the bank statements and the purchase agreements ● Obtaining purchase agreements for each of the acquisitions to determine the level of deferred consideration, and whether any consideration is contingent on future events ● Assessing the contingent consideration liability recognised at acquisition date for the Platinum acquisition, by reference to the terms of the purchase agreement ● Testing, on a sampling basis, acquired working capital balances, including trade receivables and trade payables, to post acquisition date payments and receipts ● Assessing the valuation of customer contract and relationship intangible assets recognised as part of the PPA calculations ● Assessing the mathematical accuracy of the Group’s calculation of the resulting goodwill arising on the PPA calculations ● Assessing the accuracy and completeness of business combination disclosures in the financial statements. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we obtained included the Chairman’s Report, Managing Director’s Report, Directors’ Report, Corporate Governance Statement, Shareholder Information and Corporate Directory. We expect the remaining other information to be made available to us after the date of this auditor's report. Our opinion on the financial report does not cover the other information and we do not and will not express an opinion or any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information 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 on the other information that we obtained prior to the date of this auditor’s report, 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. Shareholder Information

The shareholder information set out below was applicable at 21 August 2019.

a) Distribution of equity securities

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 Over

There were 395 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:

HSBC Custody Nominees (Australia) Limited

Pherous Holdings Group Pty Ltd

J P Morgan Nominees Australia Pty Limited

Citicorp Nominees Pty Limited

BNP Paribas Nominees Pty Ltd

National Nominees Limited

BNP Paribas Noms Pty Ltd

Matimo Pty Ltd

National Nominees Limited

Steven Craig Smith

Ms Helen Logas

Citicorp Nominees Pty Limited

Argo Investments Limited

Mr Matthew Dalling

HSBC Custody Nominees (Australia) Limited

HSBC Custody Nominees (Australia) Limited - A/C 2

Shamiz Pty Ltd

Christopher Alexander Thelen

Doobie Investments Pty Ltd

BNP Paribas Nominees Pty Ltd Hub24Custodial Serv Ltd Drp

Number of
shareholders

8,830

3,654

413

262

13,201

Percentage of
issued shares

25.20%

19.05%

10.55%

7.27%

2.87%

1.92%

1.89%

1.18%

1.16%

1.00%

0.90%

0.78%

0.68%

0.67%

0.52%

0.51%

0.48%

0.41%

0.38%

0.35%

2019
Number
held

27,432,968

20,740,000

11,488,471

7,919,806

3,123,760

2,091,849

2,057,810

1,279,350

1,264,961

1,090,838

978,554

844,884

736,682

729,171

569,477

553,118

526,893

446,864

414,936

380,770

84,671,162

77.77%

100

101

84 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 29 to 39 of the directors’ report for the year ended 30 June 2019. In our opinion, the remuneration report of Corporate Travel Management Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Michael Crowe Brisbane Partner 21 August 2019 Shareholder Information (continued)

b) Equity security holders (continued)

Unquoted equity securities

Corporate Directory

Directors

Share Appreciation Rights

c) Substantial holders

Number on
issue

Number of
holders

3,998,500

Substantial holders (including associate holdings) in the company are set out as follows:

HSBC Custody Nominees (Australia) Ltd

Pherous Holdings Group Pty Ltd and Shamiz Pty Ltd

Mitsubishi UFJ Financial Group Inc.

J P Morgan Nominees Australia Limited

Bennelong Australian Equity Partners Ltd

Citicorp Nominees Pty Limited

Morgan Stanley

Commonwealth Bank of Australia

Pinnacle Investment Management Group Limited and Pinnacle Investment
Management Limited

Hyperion Asset Management Limited

d) Voting rights

The voting rights attaching to each class of equity securities are set out below:

24,660,822

21,266,893

13,213,375

12,228,565

8,209,124

7,997,890

7,457,961

6,548,987

5,651,178

5,019,113

22.73%

19.60%

12.18%

11.27%

7.57%

7.37%

6.87%

6.04%

5.65%

5.04%

Ewen Crouch AM
Jamie Pherous
Stephen Lonie
Greg Moynihan
Admiral Robert J. Natter, U.S. Navy (Ret.)
Laura Ruffles
Sophie Mitchell (appointed 02 September 2019)

Secretary

S. Yeates
A. Tucker (appointed 02 September 2019)

Number
held

Percentage
Issued shares

Notice of Annual General Meeting

The Annual General Meeting of Corporate Travel Management will be
held in Brisbane on Wednesday 6 November 2019 at 11am at the Marriott,
Brisbane (515 Queen Street, Brisbane QLD 4000).

Registered office in Australia

Level 24, 307 Queen Street
Brisbane QLD 4000
Telephone: +61 7 3211 2400

Share register

Auditor

Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street,
Abbotsford, VIC 3067
Telephone: 1300 787 272

PricewaterhouseCoopers Australia
480 Queen Street
Brisbane QLD 4000

Stock exchange listing

Corporate Travel Management shares are listed on the Australian Securities
Exchange (ASX).

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.

Website address

www.travelctm.com

ABN

17 131 207 611

102

103

Registered Office:

Level 24,
307 Queen Street,
Brisbane QLD 4000
www.travelctm.com