This is a developing news story.
Corporate Travel
Management revealed on Friday major accounting errors to the tune
of some £77.6 million (approx. $105 million) with repayments owed to a "small number" of
UK-based customers.
As part of an ongoing accounting review by KPMG,
the Australian-headquartered travel management company revealed it will
“reverse revenue” of up to £58.2 million from its 2023 and 2024
financial year accounts after having overcharged clients. A further
£19.4 million is also expected to be "reversed" from its current year
FY2025 earnings due to customer refunds and "where
contractual uncertainty may not allow for revenue to be recognized."
CTM managing director Jamie Pherous said the issue was "isolated to a
small number of U.K. customers only," according to a report by the
Australian Broadcasting Corporation. As a result, CTM’s U.K. and Europe
chief executive Michael Healy has been “temporarily stood down” with
immediate effect; he continues to collect pay.
CTM global chief operating officer Eleanor Noonan will act as interim CEO for CTM U.K. and Europe during Healy's suspension.
The
company, in a statement, said it has met with impacted customers
and has commenced “a comprehensive review of financial processes and
record keeping in the CTM U.K. group.” It will also undertake an external
governance review to identify why the matters were not previously
identified and resolved.
CTM’s U.K. clients include the U.K .government, however the company reportedly refused to confirm whether it
was among those affected. During an analyst call on Friday morning, the
TMC also reportedly failed to clarify whether the discrepancies were
due to fees charged or commissions retained. It is suspected, however,
that refunds from cancelled tickets had not been passed on to clients,
according to the ABC report.
Unrelated to the U.K. and European operations, other accounting discrepancies were identified in the Australia-New Zealand market to the tune of A$13.9 million “primarily due to an unexpected credit loss provision on receivables
arising in 2022-24 where doubt over collectability exists,” according to CTM documents. The company
emphasized the new issues had no relation to what now is deepening into a crisis in the U.K. and Europe operations.
“We recognize the impact this
situation has had on our shareholders and affected U.K. clients, and we
unreservedly apologize," Pherous said in a statement. "Our priority is
to uphold the highest standards across our operations, work closely with
our auditors to finalize the FY25 financial statements, and implement
all necessary measures to strengthen the company."
CTM
chairman Ewen Crouch added: “We recognize how serious this situation is
and the concerns it has caused. While further investigation is
required, including a comprehensive review of our UK operations and our
overall governance framework, we remain fully committed to taking the
necessary action to restore confidence."
KMPG,
which was appointed in September to conduct a review of CTM’s European
financial statements, presented an interim report to CTM on 23 November
after assessing some 47,000 documents and analyzing more than 1.5
million sales and purchases transaction lines representing aggregate
transaction values of more £400 million, according to CTM’s statement.
CTM said it has contacted current impacted clients and is reviewing those contracts which have concluded to determine the refunds
due. This process is expected to continue into 2026.
The
TMC added that it “will work with KPMG to complete their work and
determine the quantum of any further restatements and adjustments” and
will reissue its FY2023 and FY2024 financial statements, with the revised
amounts to be recorded as financial liabilities.
Analysts were stunned by the news, which seemed to be in direct opposition to CTM's statements from October that affirmed its “strong financial position” and indicated accounting issues would be"isolated to the European region only" and would likely "be to
increase prior year(s) earnings and reduce current year's earnings."
RBC Capital Markets’ Wei-Weng Chen said CTM’s accounts were “far
worse” than expected. “Up to a third of European revenues
from FY23-25 may need to be restated and possibly refunded which could
lead to significant cash impacts,” he wrote in an analyst note.
Documents posted on the CTM website stated the agency had A$148.3 million
in cash with no drawn down debt. The funds required to repay clients
dollar-for-dollar, however, likely exceed that cash reserve and there
are questions about whether a bank would be willing to release funds to
CTM on debt since the company has not been able to state its earnings
since August.
CTM in August
voluntarily suspended its shares from trading on the Australian Securities Exchange and delayed the publication of its FY2025 accounts after
discovering accounting discrepancies across its European operations. That suspension became mandated on Sep. 1 and remains in place as the agency works to finalize its FY2025 statements. CTM retracted its FY2025 guidance, released in May. The company set another update for Dec. 19, but expects to miss a Dec. 31 deadline for a full FY2025 report. - Additional reporting by Elizabeth West