Ann: CTM RESPONSE TO VGI REPORT, page-52

First Read: Corporate Travel Management "Clearing the air" (Neutral) PlumbeCTD reviews and rejects several issues raised by VGICTD has rejected several claims raised in a VGI research report, key points being: 1) Global footprint overstated with 'ghost' & 'phantom' offices: European offices are maintained to comply with regulatory requirements with customers serviced out of London, while in North America CTD has inherited legacy offices it intends to consolidate; 2) Change in revenue recognition policy for Pay Direct Commissions: Immaterial impact ($0.5m or 0.4%) to FY18 EBITDA; 3) High FY18 Receivables growth (+$50m yoy): Driven by TTV growth (on credit terms) and timing (working capital cycle), not revenue recognition policy change; 4) Decline in 2H18 cash receipts (-9% yoy) and payments (-48% yoy): Driven by timing differences, with cash conversion volatile on a half-year basis, but trending ~100% in a full-year (~100% guided for FY19E); 5) Low client cash balance: Typically low in a corporate travel model (vs leisure), explaining the low levels of interest income; and, 6) Reduced goodwill discount rate for impairment testing in FY18: Sourced from an independent 3rd party (NYU professor).

Two issues have been acknowledged and will be addressed1) Outdated offices incorrectly listed on website: Some offices have been recently relocated or new offices have recently opened, which should have been updated on the website; and, 2) CTD has proprietary customer facing technology that is not 'patented': Contrary to prior disclosure, although some patents are pending and some patents have been allowed to expire for commercial reasons.

YTD trading remains strong: CTD now targeting the top-end of guidanceCTD now expects to achieve the top-end ($150m) of the FY19E underlying EBITDA guidance range of $144-150m (+15-20% yoy, UBSe $148.6m), underpinned by favourable global client activity and CTD client wins. CTD also noted USA generating double digit revenue growth (CC). We note guidance assumes AUDUSD of 0.76c vs FY19 YTD average of 0.726c; should YTD levels hold we believe this would drive a ~$3.7m uplift to FY19E EBITDA (~3% to growth).Valuation: $32.20 PT and Neutral rating unchangedWe leave our valuation and investment rating unchanged.

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