- Corporate Travel Management

travelctm.com
Acquisition of Westminster Travel
4 for 27 Underwritten Entitlement Offer to raise $53.3 million
November 2013
Disclaimer
This document is not a prospectus under Australian law and does not constitute an offer, invitation or recommendation to subscribe for or purchase any security or financial product and
neither this document nor anything contained in it shall form the basis of any contract or commitment. It has not been lodged with the Australian Securities and Investments Commission
(ASIC) and is given to the recipient for information purposes only, pursuant to section 734(9) of the Corporations Act.
This document is not, and should not be construed as a recommendation by Corporate Travel Management Limited its directors, employees, officers and advisers to you to participate in the
proposed Offer. Nothing in this document constitutes legal, tax or other advice. The information in this document does not take into account your investment objectives, financial situation
or particular needs. Before making an investment decision, you should consider whether an investment in Corporate Travel Management Limited is appropriate in light of your particular
investment needs, objectives and financial circumstances and consider obtaining professional securities advice. In all cases you should conduct your own investigations and analysis of
the proposed Offer, the financial condition, assets and liabilities and business affairs of Corporate Travel Management Limited and its business, and the contents of this document.
No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information, opinions and conclusions contained in this document by any
person. To the maximum extent permitted by law, Corporate Travel Management Limited, its related bodies corporate (as that term is defined in the Corporations Act) and the officers,
directors, employees and agents of those entities do not accept any responsibility and disclaim all liability including, without limitation, any liability arising from fault or negligence on the
part of any person, for any loss arising from the use of this document or its contents or otherwise arising in connection with it.
This presentation contains forward-looking statements which can be identified by the use of words such as “may”, “should”, “will”, “expect”, “anticipate”, “believe”, “estimate”, “intend”,
“scheduled” or “continue” or similar expressions. Any forward-looking statements contained in this presentation are subject to significant risks, uncertainties, assumptions, contingencies
and other factors (many of which are outside the control of, and unknown to, Corporate Travel Management Limited and its officers, employees, agents or associates), which may cause
the actual results or performance to be materially different from any future result so performed, expressed or implied by such forward-looking statements. There can be no assurance or
guarantee that actual outcomes will not differ materially from these statements.
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Highlights
Acquisition
 Corporate Travel Management Limited (“CTM” or “the Company”) has agreed to acquire 75.1% of Westminster
Travel (WT)# for A$49.2 million cash consideration
 The remaining 24.9% will be acquired by the two major shareholders of Westminster Travel, Dato WONG Sin
Just and Mr YU Kam Kee Lawrence, MBE.
 Westminster Travel is a 40 year old leading travel management and services provider with offices in five Asian
countries/territories - Hong Kong, Singapore, China, Macau and Taiwan
 In FY13 Westminster Travel achieved ^HK$52.5 million NPAT (in A$7.3m) on revenue of HK$278.5 million ^(in
A$38.7m)
 The acquisition price reflects 7x FY13 profit before tax # (HK corporate tax rate is 16.5%)
 Conditions on Acquisition:
 WTL Shareholder approval – irrevocable undertakings have been obtained from shareholders with the
voting power required to pass the resolution
Strategic
Rationale
 Approval of Travel Agents Registry of Hong Kong, Travel Industry Council of Hong Kong
 Fast-tracks entry into the Asian travel market, delivering an immediate mature Asian footprint in key Asian
markets.
 Cross-sell opportunities for both businesses leading to increased market share in all CTM geographies.
 Business improvement opportunities for both groups through sharing of best practice systems and technology
innovations.
# CTM will be acquiring 75.1% of the subsidiaries of Westminster Travel Limited (WTL), which is listed on the Catalist Exchange of the Singapore Stock Exchange (SGX). 7 x PBT is for the
subsidiaries of WTL
^ Exchange rate used HKD$7.2=AUD1.00
Highlights
EPS accretive in  EPS accretive in FY14 based on 5 months contribution at 75.1% share
FY14
 Subject to no accounting adjustments relating to treatment of amortisation
Funding
 The acquisition will be funded through an underwritten 4 for 27 Renounceable Entitlement Offer at $4.60 per
share to raise $53.3 million
 The offer price reflects a 10% discount to theoretical ex-rights price (TERP) and a discount of 11.2% to the
closing price of $5.18 on Friday 15th November.
 Jamie Pherous will be a significant participant in the offer but is not in a position to take up his full entitlement
 All non-executive directors of CTM will take up their entitlements in full
Trading Update  FY14 guidance increased to underlying EBITDA $27m-$28m based on:
 WTL contribution for 5 month period (Feb-Jun14)
 ANZ and USA continue to trade in line with previous guidance
Agenda
•
Overview of Westminster Travel
•
Strategic rationale
•
Combined group overview
•
Entitlement Offer details
•
Appendix
BEST TRAVEL AGENCY
HONG KONG 2013
• Established in Hong Kong in 1973
• Employs approximately 700 people across five Asian countries/territories:
• Hong Kong, Singapore, China, Macau and Taiwan
• One-stop travel management - corporate travel services, wholesale products and leisure travel services
• Listed on the Catalist Exchange of the SGX in 2009
• Awarded Best Travel Agency in Hong Kong (four of the last six years)
• 5 years compound annual growth in NPAT of 19%
• Well known to CTM - worked with WT for several years including successfully winning and networking clients
• Highly capable WT senior management team collectively boasts 150 years of experience in the travel industry
• Skin in the Game - the two major shareholders will acquire 24.9% of the company
• Website www.westminstertravel.com (click English button)
Westminster Operating Segments
FY2013 Revenue
Leisure
Corporate
Travel
Wholesale
• Corporate Travel Services – Corporate business travel, Meetings Incentives Conferences Events (MICE)
• Wholesale – Sale of Air, Hotel, Cruise and Fully Independent Travellers (FIT) packages on behalf of suppliers to
Travel Agency customers
• Leisure Travel – Retail travel agency providing FIT packages, Air, Hotel and other travel related product
Track Record of NPAT Growth
60
55
50
45
40
35
HKD$m
30
52.5
25
20
15
39.1
26.3
44.3
29.6
10
5
0
FY09
FY10
FY11
FY12
FY13
Source: Westminster Travel Limited Annual Report 2013
Continuing Shareholders
Dato WONG Sin Just - Non Executive Chairman WT since 2008
Mr YU Kam Kee Lawrence, BBS, MBE, JP
• Founder of SBI E2-Capital Limited
• Mr Yu boasts many years of Senior Management experience
• Possesses over 20 years of experience in investment banking and
• Currently an independent Non Executive Director of Great China
venture capital.
• Independent Non Executive Director of CSI Properties Limited and
China Zenith Chemical Group Limited.
• Holds a Bachelor of Engineering (First Class Honours) from the
Holdings Limited and the Director of TVB Network Vision Limited
• Previously Chairman and Executive Director of China Renji Medical
Group Limited, Rosedale Hotel Holdings Limited, See Corporation
Limited, Trasy Gold ex Limited, The Hong Kong Building and Loan
Imperial College of Science, Technology and Medicine, University of
Agency Limited, CMMB Vision Holdings Limited and Evergrande
London and was qualified with the Institute of Chartered
Real Estate Group Limited.
Accountants, England and Wales in 1992 as a Chartered
Accountant.
• Mr Yu was awarded the Member of the Order of the British Empire
(MBE) in June 1997. In July 1999 Mr Yu was awarded the Bronze
Bauhinia Star (“BBS”).
• The CTM Board is delighted to have Dato WONG and Mr YU as co-shareholders in WT
• They bring experience and an extensive network in Asia which will be invaluable to WT going forward
Motivated and Experienced Management
LO Fai Wah, Larry, Managing Director WT
• 23 years experience in the travel industry
• Responsible for the Company’s local and regional sales and operations
• Holds a Bachelor Degree in Business Management, Royal Melbourne Institute of
Technology
• Was a Director of the Travel Industry Council of Hong Kong (TIC)
• Current Vice Chairman in the Society of International Air Transport Association
Passenger Agents (SIPA)
CHU Tak Shun, Henry, Finance Director WT
• Experience spans over 18 years in financial management, merger and acquisition,
investor relations, corporate governance and compliance and he has worked with
several listed companies and an international accounting firm in Hong Kong
• Holds a Bachelor of Arts (Hon) Degree in Accountancy, Hong Kong Polytechnic
University, and is a fellow member of the Association of Chartered Certified
Accountants and an associate member of Hong Kong Institute of Certified Public
Accountants
YU Chung Hang, Lucian, Executive Director WT Business Development
• More than 11 years of experience in the field of venture capital, private equity,
corporate finance and software development
• Mr Yu served as a Director of China Renji Medical Group Limited which is listed on
the HKEx
• Holds a Masters Degree in Engineering, Imperial College of Science, Technology and
Medicine, University of London
LEUNG Tai Leung, William
Managing Director - Wincastle
Travel Experience 40 years
CHANG Mei Po, Helen
Managing Director, S Travel.
Travel Experience 31 years
MA Wai Ling, Eliza
General Manager, TLX
Travel Experience 33 years
LIOW Yoke Ching, Lena
General Manager- Westminster SG
Travel Experience 30 years
KOK Kiu Ngor, Sharon
Financial Controller
19 years of experience in financial and
management accounting
TONG, Elaine
Head of Human Resource, Administration and
Communications
24 years experience in international companies
Agenda
•
Overview of Westminster Travel
•
Strategic rationale
•
Combined group overview
•
Entitlement Offer details
•
Appendix
Strategic Rationale
Asia
‘1 in 100
acquisition’
Key travel
market
Cultural
alignment
Best in
region
* Boeing Current Market Outlook 2013-2032
• Establishes an immediate and mature scalable presence in
five countries/territories of the Asian travel market - a key
region in CTM’s global strategy
• CTM becomes a key player in the Asia-Pac region
Clients
• ANZ and USA clients demand presence in Asian markets
• Opportunity to target regionally based clients
• Pool of potential new clients grows significantly
Cross-Sell
• Cross-sell opportunities for both groups providing an
opportunity for market share and revenue growth in all
regions (Asia, ANZ, USA)
Technology
• Business improvement opportunities for both groups
through sharing of best practice systems and technology
innovations
EPS Accretive
• EPS accretive in FY14 based on 5 months contribution at
75.1% share
Growing
Market
• 33% of the world’s new aircraft deliveries expected in the
Asian market compared to 20% in North America*
• Widely recognised as future growth market
Scale
Ownership
• 2 major shareholders acquiring 24.9% (Dato WONG Sin
Just, Mr YU Kam Kee Lawrence)
Asian Market Size
Northeast
Southeast
South Asia
Asia
Asia
North
America
World
6.6
2.5
3.2
6.7
8.6
2.7
5.0
3,080
1,790
11,810
7,250
35,280
33%
20%
100%
Growth Measures
China
GDP growth rate
6.4
1.6
4.7
Traffic growth rate
6.9
3.1
New deliveries (units)
5,580
1,360
% of New Aircraft
Total
Asia
Source: Boeing Current Market Outlook 2013-2032
Strategic Alignment
Westminster
CTM
Client service and people focused culture as reflected by high client and
staff retention rates


Focus on improving client-facing solutions through in-house developed
operating platforms


Industry recognition – multi-award winning travel agency


Sustained compound double-digit profit growth over last 5 years


Successful acquisition track record across geographies


Passionate and experienced management team


Ability to network business between both companies


Diversity – no client represents more than 4% profit for each business


Agenda
•
Overview of Westminster Travel
•
Strategic rationale
•
Combined group overview
•
Entitlement Offer details
•
Appendix
Global Presence – CTM Post Acquisition
NORTH
AMERICA FY13
*ASIA FY13
TTV: $556m
EBITDA: $7.0m
NPAT: $5.5m
700 Employees
TTV: $165m
EBITDA: $1.7m
170 Employees
Beijing
Denver
Dallas Fort Worth
Guangzhou
Macau
Houston
Taipei
Baton Rouge
New Orleans
Lafayette
Hong Kong
Singapore
ANZ FY13
TTV: $719m
EBITDA: $19.3m
450 Employees
Brisbane
Gold Coast
Perth
Sydney
Melbourne
* XR HKD7.2 = AUD1. 75.1% of Asia P&L flows through to CTM Group.
# FY13 CTM Underlying EBITDA and NPAT
Auckland
FY13 COMBINED
(annualised)
TTV: $1.440bn
EBITDA: $28.0m#
NPAT: $18.6m#
Operating out of 18 cities
Over 1300 employees
Group Result
CTM
AUD $m
TTV (unaudited)
Pro-forma
Group Total
AUD $m
WTL
AUD $m^#
883.8
556.8
1,440.6
Revenue
79.0
32.1
111.1
EBITDA (unadjusted)
20.0
7.0
27.0
EBITDA (underlying)
21.0
7.0
28.0
NPBT (statutory)
12.4
5.5
17.9
NPAT (underlying)
13.1
5.5
18.6
Attributable to equity holders
12.4
5.8
18.2
Source: Audited 30 June 2013 Financial statements
^ Exchange rate used HKD$7.2=AUD1.00
# Balances at 75.1% using equity accounting method
Pro Forma Balance Sheet
CTM
AUD$m
Cash
Receivables and other
Total Current Assets
PP&E
Intangibles
Total Assets
Payables
Other current
Total Current liabilities
Non Current liabilities
Total Liabilities
Net Assets
Equity
WTL Equity
Non controlling interest
Total Equity
13.5
28.7
42.2
3.2
75.7
121.1
26.0
5.7
31.7
16.4
48.1
73.0
73.0
WTL
AUD$m^
29
86.9
115.8
3.9
15.7
135.5
61.7
27.7
89.3
0.7
90.0
45.4
45.4
0.0
73.0
Acquisition
AUD$m
1.3
1.3
11.2
12.5
0.0
12.5
50.5*
(45.4)
7.4
12.5
Pro-forma
Group Total
AUD$m
43.8
115.6
159.3
7.1
102.6
269.0
87.7
33.4
121.0
17.1
138.1
130.9
123.5
0.0
7.4
130.9
Source: Audited 30 June 2013 Financial
statements
^ Exchange rate used HKD$7.2=AUD1.00
* Entitlement offer of circa $53m less raising
costs of circa $2.5m
Trading Update and Guidance
FY14 underlying EBITDA guidance upgraded to $27m-$28m (circa 29% - 33% growth on p.c.p.)
• Assumes 5 months contribution from the 75.1% share of WT, with built-in M&A contingencies
• ANZ and USA continue to trade in line with previous guidance
• Underlying NPAT for group more favourable (HK corporate tax rate 16.5%)
Trading Update
• ANZ – 1H record new client wins
• Expecting stronger 2H14 due to new client wins not yet trading and lower 2H13 comparatives
• Continue to build market share
• Remain well placed to leverage from economic recovery
• USA - Performing well with strong new client wins, integration going to plan
• Expecting stronger 2H due to new client wins not yet trading and USA seasonal skew to 2H
• ASIA – performing to expectations in 1Q14 as per management accounts
• M & A contingencies built into 2H contribution to group
Merger and Acquisition Discipline
Our acquisition strategy has remained consistent across 8 acquisitions:
• Strong discipline in selection criteria – looking for the “1 in 100”
• Alignment - “Skin in the game” for leaders and/or senior Management
• Focus on financial and people due diligence for cultural match
• Robust transition process concentrating on enhancing people, systems and revenue growth
• EPS accretive
Creates better business acumen and discipline in team for better results
2014
Acquisition
Westminster
ASIA
2014
1,316 Staff
2013
Acquisition
TravelCorp(USA)
CTM NTH
AMERICA
616 Staff
2011
Acquisition
ETM GROUP
MELBOURNE
2012
Acquisition
R&A TRAVEL
CTM NTH AMERICA
2013
2011
Acquisition
Travelcorp (AU)
SYDNEY, MELBOURNE
& PERTH
369 Staff
216 Staff
2003
CTM SYDNEY
2008
Acquisition
Travelogic
SYDNEY & PERTH
2010
Acquisition
Cavalier
CTM AUCKLAND
2011
2007
Acquisition
Debretts
CTM PERTH
2008
2001
Acquisition
Rhodes Corp.
CTM MELBOUNE
FY14 Initiatives
5 Year Plan
Aspirations:
•
5 year forward planning for ANZ, to ensure it continues to be a “fortress” of
continued growth and high profitability that underpins global expansion
strategy
•
To be in every major region (ANZ, North America, Asia, Europe) with
potential for emerging markets where suitable
•
To organically grow in all operations and win regional and global clients via a
client friendly multi-regional solution
•
By working with our clients, continuing to develop new technology, client
facing solutions and business models that evolve with their changing needs
•
To be renowned as the best travel company in every region we operate by
retaining CTM’s highly differentiated service model and high staff
engagement, underpinned by technology solutions that add client value
•
To ultimately be a truly global company where substantial profit is derived
off-shore
Agenda
•
Overview of Westminster Travel
•
Strategic rationale
•
Combined group overview
•
Entitlement Offer details
•
Appendix
Entitlement Offer Details
.
Fully Underwritten Renounceable Entitlement Offer
Entitlement Offer Ratio
Amount Raised
4 for 27
$53.3 million
Capital Structure
Current Issued Capital
New Shares Issued
Post Entitlement Offer Capital Structure
78,246,245 shares
11,592,036 shares
89,838,281 shares
Offer Price Metrics
Offer Price
TERP*
Offer Price discount to TERP
* Theoretical ex-rights price
$4.60
$5.11
10%
Acquisition and Offer Timetable
Announcement of Acquisition and Entitlement Offer
20 November 2013
Ex-date and Rights trading commences
22 November 2013
Record Date for Entitlement Offer (7pm AEDT)
28 November 2013
Entitlement Offer opens and Offer Documents sent to Eligible Shareholders
02 December 2013
Rights trading ends
09 January 2014
New shares quoted on deferred settlement basis
10 January 2014
Entitlement Offer closes (5pm AEDT)
16 January 2014
ASX notified of under subscriptions
21 January 2014
Despatch of Holding Statements
24 January 2014
Normal trading expected to commence
28 January 2014
Completion of Acquisition
31 January 2014
Agenda
•
Overview of Westminster Travel
•
Strategic rationale
•
Combined group overview
•
Entitlement Offer details
•
Appendix
Risks
Acquisition of WT entity
• Subject to the satisfaction of limited conditions
• Historical liabilities
Economic
• Specific (corporate and leisure travel), or general
Information technology
• Reliance on non-proprietary IT licences
Competition
• Growing through internet based travel providers
Client relationships
• Reduced demand or termination by key clients
Supplier relationships
• Key suppliers
• Changes to commission rates
Hostilities, terrorism and other external events
• General or specific travel locations
Employees
• Ability to retain key staff
• Increases in recruitment and remuneration costs
Future growth
•
•
•
•
Intellectual property
• Ability to develop and protect
Identification and execution of future merger and acquisition opportunities
Capital and funding requirements
Changes in regulation of travel industry
Post completion integration
Summary of Key Terms & Conditions
CTM will acquire 75.1% of Wealthy Aim Investments Limited (WAIL), a BVI registered entity, through Corporate Travel Management
(UK) Limited, a wholly owned subsidiary of CTM, registered in the UK. CTM has agreed to guarantee Corporate Travel Management
UK’s obligations under the share purchase agreement.
The remaining 24.9% of WAIL shall be acquired by Ever Prestige, a special purpose vehicle (SPV) jointly held by Dato WONG Sin Just
and Mr YU Kam Kee Lawrence, MBE the two largest shareholders of Westminster Travel Limited. CTM will loan the amount of
HK$117,420,074 to the SPV to enable it to complete the acquisition. CTM will take security over the SPV’s shares in WAIL in support
of the SPV’s obligations under the loan agreement.
SPV and CTM will enter into a shareholders’ agreement in respect of their rights and obligations as shareholders of WAIL which
includes certain minority shareholder protections including veto rights in certain circumstances.
Completion of the share purchase agreement for the acquisition of WAIL is conditional upon the satisfaction of the following:
•
•
•
•
approval by the shareholders of WTL;
approval by the Singapore Exchange Securities Trading Limited, WTL’s Catalist Sponsor;
approval by the Travel Agents Registry of Hong Kong;
approval by the Travel Industry Council of Hong Kong.
The Entitlement Offer is not subject to completion of the share purchase agreement.
WTL has given limited warranties in favour of CTM and SPV under the share purchase agreement, confirming its ability to sell the
shares in WAIL, the accuracy of the due diligence information provided to CTM and its compliance with relevant laws and regulations.
Westminster Travel History
1973: WestminsterHK established
Early 1990s:
appointed to act as
consolidator to
Cathay Pacific
1994: acquisition of
Jecking Tours &
Travel
1996: First MICE
event for 400 IBM
staff in Penang,
Malaysia
1997: Appointed
exclusive
Fulfillment Agent of
China Airlines’
Dynasty Packages
1998: Expansion
into the Peoples’
Republic of China
(Guangzhou)
2001: Appointed
Hogg Robinson
representative in
Hong Kong, PRC,
Macau and Taiwan
2002: Acquired
75% of Wincastle
Travel (HK)
2004: Acquired
Westminster Travel
(Taiwan) and
Westminster Travel
(Singapore)
2005: Appointed
international sales
office for Best
Western International
in Hong Kong, PRC
and Macau
2007: Westminster-HK
acquired by Wealthy Aim
creating an Asian-based
travel company with
operations in Hong Kong,
Singapore, Macau, China
and Taiwan
2009: Listed on the
Singapore
Securities
Exchange
2010: Joint Venture
with Webjet
(renounced in 2013
following Webjet
acquisition of Zuji)
2011: Established
S Travel (70%
owned subsidiary)
targeting leisure
travel
2012: Acquired
Travelex Hong
Kong (rebranded
TLX Travel)
2013: Mia travel
established (60%
subsidiary) targeting
overseas tours for
Chinese customers