Corporate Travel Management Limited (CTD) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the 2021 Annual General Meeting of Corporate Travel Management Limited, which is again this year being held as a virtual meeting due to continuing COVID-19 public health orders regarding travel restrictions, limitations on public gatherings and social distancing requirements. My name is Ewen Crouch, and I'm the Chairman of CTM. As we gather for this meeting in various places, I wish to recognize all the traditional lands on which we carry out our meeting today. I also acknowledge and pay my respects to elders past, present and emerging of all the lands on which participants in this meeting reside. We have reached the appointed time and a quorum is present. I am pleased to declare this meeting of members of Corporate Travel Management Limited open. I would like to introduce you to my colleagues who have joined me at today's meeting. Jon Brett, Non-Executive Director and Chair of the Board Audit and Risk Committee. Jon joins us from our Sydney office. Jon is standing for reelection today. Laura Ruffles, Executive Director and Global Chief Operating Officer, who is also in our Sydney office. Laura is also standing for reelection today. Sophia Mitchell, Non-Executive Director and Chair of the Board Remuneration and Sustainability Committee. Sophia is in our Brisbane office. Jamie Pherous, Managing Director and Chief Executive Officer, who joins us from our Brisbane office. Also with us from Brisbane is Cale Bennett, our Chief Financial Officer and Acting Company Secretary; together with Michael Crowe, representing our external auditors, PwC. Our share registry, Computershare, is with us at today's meeting, too. Members of Corporate Travel Management Limited's global, regional and leadership teams have also joined today's meeting. If you do have any questions about CTM's business and operations that we are unable to answer during the course of today's meeting, one of our team will contact you after the meeting to discuss your queries. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes in real time. Questions can be submitted at any time during the meeting. [Operator Instructions] Please note that while you can submit questions any time from now, I will address your questions at the relevant time in the meeting. We have also received a number of questions prior to the meeting, which I will address in my remarks shortly. We will endeavor to answer all of your questions. However, if due to time constraints we are unable to address your question in the meeting, we will contact you after the meeting. Please note that if we receive multiple questions on 1 topic, these questions will be amalgamated together. Where your questions are not relevant to the business of the meeting, we will contact you after the meeting to discuss your questions with you. If you have any issues submitting questions during the meeting, please contact our share registry, Computershare, on 03-9415-4025 -- let me repeat, 03-9415-4024, and they can assist you with any technical difficulties you may be experiencing. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions, and voting will remain open throughout the meeting. If you are eligible to vote at this meeting, a new voting tab will seem to be visible on your screen. Selecting this tab will bring up a list of today's resolutions and present you with voting options. To cast your vote, simply select one of the options: for, against or abstain. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting is open on all items of business. The voting tab will soon appear on your screens. Please submit your votes at any time. I will give you a warning before I move to close voting. The meeting has been called under the notice of meeting dated 24 September 2021. This notice was released to ASX and dispatched to those shareholders who have elected to receive a hard copy of the notice of meeting on 24 September 2021. And information about the meeting, including information about where shareholders could download a copy of the notice of meeting, was also dispatched to shareholders on the same day. A copy of the notice of meeting is available on the company's website. I will now table the notice of meeting, and I will take the notice as read. The minutes of the previous Annual General Meeting of Shareholders held on 27 October 2020, being in order, was signed by me as Chair of the meeting and are tabled for the information of shareholders. There are 5 resolutions which will be put to shareholders at today's meeting. The background to these resolutions is set out in the notice of meeting. As I mentioned earlier, written questions can be submitted at any time by pressing or clicking on the speech bubble icon on your screen, and verbal questions can be asked by pausing the broadcast on the virtual platform and clicking on the link asking -- under asking audio questions. I will address your questions at the relevant point in the meeting. You will still be able to listen to the meeting while waiting to ask your question. So before we get to the formal items of business, I would like to provide some brief observations about the group and the operating environment. As we meet today, there are good grounds for rising optimism in the outlook as vaccination levels in our major markets have resulted in definitive timetables, enabling broader travel activity. Widespread use of rapid antigen testing and the successful development of antiviral medications to combat COVID-19, further support pent-up demand for travel now becoming a reality. The last financial year again presented difficult trading conditions as the travel industry continued to experience major disruption because of government-mandated travel restrictions, border closures and quarantine requirements. The financial performance of CTM in FY '21 was significantly impacted by the COVID-19 operating environment, and the group reported a statutory net loss after tax of $57.8 million. Excluding one-off or nonrecurring items, the group's underlying net loss after tax was $32.3 million. This was a resilient performance in all circumstances, underpinned by a combination of prudent cost management, technology development and consistency of the revenue stream from essential service industries such as government, health care and mining. We were grateful for government assistance received for our operations in Australia, New Zealand, Singapore, Hong Kong and the U.K., which enabled us to maintain employment of a greater number of staff than would otherwise have been the case. Our ability to respond to changing client needs during the pandemic has been an important factor in winning and retaining clients. We have continued to invest in our technology solutions with a focus on risk management, safety and hygiene information, budget optimization tools, traveler well-being and sustainability. Our teams are committed to driving innovation and excellence in customer service. We are extremely proud to have been acknowledged across our global markets with awards for excellence in travel management and technology innovation as well as for our specialist events and leisure services. These include CTM being named the leading travel management company in both Australia and North America in the World Travel Rewards and our Lightning online booking tool being named best corporate booking platform at the Business Travel Awards Europe. Our revenues grew through the year, particularly in the second half, as vaccination rates in North America, the U.K. and Europe allowed travel activity to pick up in those regions. Following the acquisition of Travel & Transport 1 year ago, our enhanced scale in North America, the U.K. and Europe, provides us with a strong platform for the future. This was demonstrated in the fourth quarter of FY '21 with approximately 80% of our revenues derived from these regions. Unfortunately, in Australia and New Zealand, lockdowns and border closures, which commenced late in the second half of FY '21, have impacted recovery in those regions. We expect recent announcements in Australia and New Zealand to open borders because of high vaccination rates, will allow for a more predictable domestic environment in the second half of FY '22. We have 0 debt and sufficient cash to manage recovery. Our healthy cash position supported our decision to reduce our credit facility earlier this year. In August, we announced there would be no final dividend for FY '21. Given the continued uncertainty around travel, cash conservation remained critical. However, our dividend policy of returning approximately 50% of after-tax profits to shareholders remains unchanged. Our Managing Director, Jamie Pherous, will provide an update on our trading performance over the first quarter and our outlook for FY '22 during his address. We are not in a position to provide guidance on our financial outcomes. Subject to remaining travel restrictions lifting in accordance with announced timetables, and our key travel markets remaining open, we are targeting continuing -- continued improving profitability over FY '22, enabling dividends to resume following the release of the FY '22 results. This year, we released a more detailed sustainability report, which can be found in our 2021 annual report. The report focuses on the material risks and opportunities that we believe will determine CTM sustainability over the longer term. We have broadly aligned our reporting framework with the World Economic Forum's 4 reporting periods. We chose this approach because of its applicability to our business and the commitments from the number of relevant bodies to the World Economic Forum's process to develop a globally consistent reporting framework. CTM recognizes the importance of good corporate governance practices, which assist in ensuring the accountability of the Board and management of CTM to our stakeholders. The Board regularly reviews our governance practices in the light of corporate governance developments, applicable legislation and standards, stakeholder expectations and responsibilities, such as the monitoring of our supply chain and completing modern slavery reporting requirements. CTM continues to offset 100% of the carbon emissions created by our own employees' travel. We support our clients to achieve their own carbon neutrality goals through the CTM Climate+ program, and to make more informed travel choices through our ongoing investment in developing new sustainability features within our proprietary technology tools. Other exciting initiatives delivered in the last financial year include being the first travel management company to sign a multiyear sustainable aviation fuel agreement with Delta Airlines, which will reduce life cycle emissions by 209 metric tons of carbon dioxide, equivalent to the amount of carbon sequestered by 256 acres of U.S. forests. Locally, each CTM team has taken practical steps to have a positive impact on the environment, which includes initiatives to reduce waste, recycling, including recycling e-waste, and participating in Earth Hour. CTM's people initiatives focus on diversity, health and safety and training and development. Our teams are made up of employees who bring a diverse range of skills, experiences, backgrounds, thoughts and beliefs. We continue to have gender diversity at the leadership level, with 68% of our team leaders and managers being female; and 46% of our senior leader being female. During the year, we introduced new and enhanced training related to diversity and inclusion, equal opportunity, unconscious bias and becoming a diversity, equity and including ally and agent for change. In Australia, we completed indigenous engagement plan initiatives, which included our continuing partnership with the NRL Cowboys House in North Queensland. During these challenging times, the health and safety of our people continue to be paramount. We have supported our employees with a variety of initiatives, promoting health and mental well-being locally in each region. We launched a new global learning management system to support our people with flexible learning to suit everyone's different learning needs. We are focused on working and collaborating with our clients and suppliers to reduce our collective environmental footprint. We are committed to developing and supporting initiatives that provide practical and sustainable benefits to businesses today and into the future. While we have made good progress, we recognize that we need to continue to enhance our sustainability reporting and work on this will proceed through FY '22 to refine data capture, measurement and goal setting. Let me speak now about remuneration. The impact of COVID-19 on CTM's FY '21 earnings meant that many of the remuneration-related measures were put in place in response to COVID-19 during FY '20 had to remain in place for FY '21. These measures included no increases to fixed annual remuneration or to the fees paid to nonexecutive directors. No short-term incentives for key management personnel, and for many of our people, reduced working hours and pay. We also made some temporary adjustments to our share-based incentive program for the grants of share appreciation rights last year and this year. On 1 July 2020, we made 1- and 2-year equity incentive grants, the details of which are described in our 2021 remuneration report. We acknowledge the performance periods for these grants were shorter than those traditionally offered that they were aimed directly at [Audio Gap] and an excellent retention rate [Audio Gap] much uncertainty for staff in the travel sector. Talent retention and motivation are critical for CTM's business performance and to create wealth for shareholders. Employees in the travel industry with transferable skills who are experiencing uncertain future prospects are targeted by other industries. The FY '22 equity incentive program has also specifically been adjusted to enable grants across 2- and 3-year performance periods to address these ongoing challenges in the travel industry while seeking to focus our staff on sustainable growth and shareholder alignment by having skin in the game. Further details are also found in our 2021 remuneration report. These grants only vest where demonstrable outperformance by the company is achieved. The board is very conscious of shareholder alignment in any [Audio Gap] -- the company is in the unique position where the Managing Director does not participate in these grants, but as a major shareholder supports the grants, thus signaling further alignment with shareholders' interests. Our overarching remuneration strategy remains focused on driving performance and providing competitive total rewards that attract, retain and motivate the high-quality employees required to deliver on CTM's long-term growth aspirations [Audio Gap] director who currently participates in CTM's equity-based incentive program, and she participates in the program on the same basis as all the other senior leaders across the business. We expect that when business operating conditions normalize, the remuneration structure will return [Audio Gap] your board is of the view that this structure is simple and clear and has served CTM's shareholders and the leadership team well for many years. Throughout these difficult times, the group has demonstrated its ability to manage costs while keeping the business ready to capitalize on opportunities that align with CTM's strategic direction. CTM's track record of delivering expert service and proprietary technology is even more relevant in the complex COVID-19 travel environment, and our global expertise in cross-border travel arrangement and logistics has not only supported our high client retention, but also delivered client wins. I would like to thank and acknowledge all CTM management and team members for their efforts [Audio Gap]. We acknowledge the challenges faced by our staff globally and appreciate their resilience, adaptability and professionalism which has been demonstrated throughout the pandemic. The support, understanding and loyalty of our people is a testament to the culture at CTM. To our CTM alumni, we thank you, too, for all who have contributed to the business and look forward to welcoming many of you back as travel activity recovers around the world. As I mentioned earlier, significant progress has been made during the year in global responses to the pandemic, particularly in the production and rollout of vaccines, deployment of rapid antigen testing and development of antiviral medications. As business opens up and various travel restrictions begin to be relaxed or removed around the globe, we are well positioned for recovery with a clear focus and strategy for delivering long-term value for our shareholders. Finally, I would also like to thank you, our shareholders, for your continued loyalty and support. My commitment, alongside that of your whole Board of management is to ensure we continue growing a great corporate travel business. I will now ask our Managing Director, Jamie Pherous to address the meeting.

Thank you, Ewen, and welcome, everyone. If you can go to the next slide, if we can. I'm pleased to walk through our first quarter performance and provide some further color around trading into FY '22. And if you move to Slide 14, please. So from an investor perspective, we think we have 5 unique characteristics that set us apart from our peers. Firstly, I'm pleased to advise that profitability continues into FY '22, following on from fourth quarter '21. Also, our first quarter of '22 delivered in line with our internal forecast. So it's nice to say that 1H '22 is on track at CTM. But profitability is much more important than you might think at first glance because it's a unique differentiator. And profitability allows us to reinvest in both the technology and our people that we will need to service our clients through the recovery. So we're often asked why are we profitable, and it's sustainable profit as well because we're investing. And why does that happen? It's really because of the next 2 unique characteristics. Firstly, it's the environment, and it plays perfectly well to our strengths, which is all about winning market share. We've always said to our investors that you need a blend of quality service, innovative technology and global data to deliver a return on investment to be a sustainably successful business in the corporate travel segment. And we strongly believe no one else can genuinely deliver on all 3 of these things, and the current complexities of travel in the COVID environment has amplified our competitive advantage. Through the last 18 months or so, we have built a global reputation through our highly skilled experts in service and technology in managing large global travel logistics through the shutdown, translating into record levels of work won for the company, but often these clients are traveling immediately as they rely on our expertise to enable them to operate their businesses when borders are closed. This market share gain is also evidenced by our above-market revenue recovery rates and ability to be profitable, which we'll talk about shortly. And the next point is our largest regions are recovering the fastest. This is important. So Ewen talked about the last quarter being 80% of our group revenues deriving from North America and Europe. For September, it climbed to 83% because they're larger and they're more open. They're 72% on a CY '19 pro forma basis. So as you'll see shortly, these 2 regions are already fully open for domestic and will be fully opened for international travel from 8 November without any quarantine impediments. Fourthly, we have maintained a strong balance sheet through the COVID cycle with 0 debt. In fact, we expect strong operating cash conversion at our 1H '22 reporting period as the business built momentum. And lastly, and importantly, CTM will be a much larger business, in fact, 57% larger than it was pre-COVID upon a full recovery. This is where we're different to our peers. We often have to dilute shareholder value to survive the crisis. It's our strong financial position, enabling us to make the transformational acquisition of Travel & Transport in the U.S. last October 2020, and we estimate we are now the fourth largest branded corporate travel company in the world. As a result, along with our strong financial performance, we are well positioned to assess further acquisition opportunities. So if you go to Slide 15. This slide graphically illustrates how much larger the business will be on a full travel recovery. So as you can see on the chart here, this chart compares revenue and EBITDA in calendar '19, which is pre-COVID with what revenue and EBITDA will look like upon a full post COVID revenue recovery. So as you can see, on a full revenue recovery, revenue jumped 67% or from $459 million, which is what we delivered in CY '19, to $720 million. And the corresponding EBITDA increases from $150 million to what we forecast to be $235 million. Now this is due to the synergy realization through the combination of Travel & Transport, but also the global permanent cost out taken out of CTM as well as the benefits from further automation introduced throughout the group since 2019. But importantly, our recovery program is on track, because this chart illustrates what would happen on a full travel -- on a full revenue recovery. But there are 2 important further data points since the year-end that gives us confidence in achieving this revenue trajectory. Firstly, it's Europe. Europe's performance is a telling example that our recovery targets are attainable, even on lower revenues. Europe's first quarter '22 performance delivered an all-time record profit contribution in the history of the region to the group on just an 80% revenue recovery. So for us at CTM, to go to managing business to come all the way back to 80% and see that translate as we hoped, gives us a lot of confidence in the other regions in terms of returning to a great result when things return to full recovery in revenue. Secondly, and importantly, this chart does not account for any organic growth since calendar 2019. And you can see in that last bullet there, we know our recovery rates are significantly above market, but we also know that when regions have been opened for at least 4 months with no restrictions, these regions that we pointed to, which is China, New Zealand and intra-Queensland and WA, have been trading more than 100% of pre-COVID activity and in some cases, materially more than 100% of pre-COVID activity. Again, another data point that confirms the 2 things: we are making market share gains at CTM; and client activity does recover where there are no impediments to travel, i.e., quarantine. On to Slide 16. So we'll just give you a bit of an update now about the quarterly trading update just to illustrate our continuing profitability. So as you can see on the left-hand side charts, revenue has continued to climb a further 12% on the last quarter or 186% on the prior corresponding period. And the business continues its profitability. TTV was a solid 30% up on 4 quarter '21, which is our last consecutive quarter to approximately $1.1 billion for the quarter. And again, it's important to reinforce this 1Q result is in line with our internal forecast. And to make it very clear, this is because the first quarter is seasonally the weakest quarter of the year for CTM because the vast majority of our revenue comes from our largest regions of North America and Europe, where corporates are in vacation for around half the quarter. In fact, in 27 years of CTM, 1H profits rarely exceeded previous Jan, June's half profits. So that just supports the seasonality that we're seeing. Now let's look at the key impacts by region in the first quarter on the right-hand side of this slide. We will talk to what we've seen post September and into October and how this could play out on -- into 2H 2022 in the next 2 slides because as you're probably aware, if you read the papers and watch the media, things are turning positively quickly all around the world. But firstly to our largest region, North America. North America highlights the difficulties of bringing back a business in a stop-start economy. As we flagged at our full year results, we experienced a very rapid activity return in the fourth quarter of FY '21. As a result, employed 200 staff to manage the expected trajectory. And we want to do this because we've been through a number of cycles before, and we know that service suffers -- service can really suffer if you don't think ahead. And that's, again, having our profitability puts us in good stead to be able to make these plans. However, rising Delta infection rates in the U.S. temporarily slowed momentum through August, September, impacting EBITDA for these 2 months and the momentum in those 2 months. But thankfully, momentum returned late in September and North America is on track for its largest post-COVID profit result this month. And importantly, we have the workforce capacity to absorb this additional activity. So what we're seeing around the world is very clear. The higher vacs rates, the less likely the open-close cycle will continue, allowing greater predictability and planning for the recovery. And Europe is a prime example, with U.K. being the most advanced region in getting back to normal in this first quarter. Europe was clearly our outperformer due to momentum from client wins and the rapid reopening. As I mentioned earlier, the first quarter was a European all-time record profit contribution on just an average quarterly 80% revenue recovery in pro forma revenue. This recovery rate is well ahead of the market, further evidence of the large volume of clients won in the region since COVID. Now on to ANZ. Both Australia and New Zealand domestic has been largely closed throughout the entire first quarter. Despite the shutdown, we remain marginally profitable due to 100% recovery in interstate Queens and in WA travel. And like the U.S., we are terribly conscious of supporting clients through the recovery. We deliberately chose to retain our skilled and experienced workforce, particularly in Sydney and Melbourne, to service what looks like an imminent reopening. Whilst this impacted profit in first quarter, this will serve us and our clients really well into the second half of '22. In Asia, it continues losses as expected in the quarter. So if you go on to Slide 17 now, I want to talk a lot about what's happened post September because it's playing well into our regions. So there's a groundswell of travel relaxations currently occurring in key CTM markets, particularly offshore. We have chosen to put the regions in descending order, starting with the regions with the highest vaccination rates for the first quarter, which, by no surprise, are also the regions with little to no travel restrictions and have recovered the quickest in revenue and profitability versus pre-COVID. So before we continue, it's a timely reminder that the top 2 regions of Europe and North America contributed 85% of our first quarter revenues. So firstly, to Europe, our large -- our second largest region. As you can see now, domestic and international is fully opened without any quarantine restrictions and transatlantic is opening 8 November, completing a full opening without quarantine for anything that's material at CTM. So I know it must be very hard to comprehend, if you're sitting in Sydney or Melbourne listening to us by video conference, that the U.K. domestic is now fully open with no restrictions and international is open without quarantine including, of course, the transatlantic group coming shortly. After my weekly call with our European CEO this week, it's nice to say that offices are coming back to work. London is buzzing, standing room only on trains. There's no masks, car parks are full with traffic jams again. And for us, some key metrics, our conference requests are at all-time highs. And last week alone, we're back to booking over 3,000 rail tickets a week. So things in the U.K. seem pretty normal. And what does that mean for us? This points to a good, steady continued recovery as things appear to stay open and continue. Next, to North America. In our largest region, whilst we saw a 6-week pullback in domestic travel through mid-August and September, domestic is again unrestricted, and we are seeing a significant recovery in activity as a result in October, so much so that we still expect October to be North America's largest profit since COVID began. We also have significant capacity, as we said earlier, in the current workforce after employing in July. Again, a really important point to make sure we win and retain business through the recovery. The good news is international is finally opening 8 November, with quarantine to and from the U.S.A. on all key CTM routes, including the transatlantic, quarantine-free. In terms of the impact on this on the business route in the world, typically, corporates don't book too far in advance. But as of last week, North America issued over 3,000 tickets across the Atlantic, a positive sign of things to come. But I must point out, we seem to be going into the quiet Thanksgiving Christmas period in North America. And because of the lull with the Delta infections, some companies chose to delay coming into the office until January 1. So in terms -- so I guess, we've just got to be mindful of that. But we still think the momentum from having unrestricted travel sets up the region really nicely for a strong second half. Next, Australia, New Zealand. Again, we are also buoyed by the recent accelerated vaccinations and resulting border openings ahead of schedule. I want to reiterate that domestic activity recovered to 85% of pre-COVID activity in a 6-week period when all domestic and international borders were continuously opened back in April 21. So we know it can bounce quickly. The domestic triangle, which is currently dormant today in our results, represents 30% of the region's revenue and is largely online. So we know we can return with limited additional cost base to support that business. Additionally, to our surprise, we're opening up Sydney and Melbourne now to our key corporate trunk routes of U.K., U.S.A. and Singapore, which are also largely dormant today and represent over 10% of our regional revenue. Corporate routes to the U.S.A. and U.K. are also the most lucrative routes for the region. So lastly, we've won a number of large specialty and logistics projects, all commencing around December and January. So again, this will set up the region really nicely for a rebound in second half '22. So you're getting the theme of what's going on. We've got good openings, good consistency, setting up the second half. And lastly, on to Asia, where unlike the other regions, we're more like a normal travel company. For the rest of CTM, we have a 70%, 30% split between domestic and international. Asia, of course, ex China, is all international, where travel restriction is still up -- still apply at this point in time. As a result, it is making small marginal losses, as we expected. However, there are some positive signs for the first time since COVID began through October. China is running at 185% pre-COVID TTV month to date as the country has reopened internally and removed all restrictions domestically, which is a healthy sign. In Singapore, consistent with opening up to the world, is undergoing a rapid recovery, doubling month-on-month from August from -- to September to now October. In fact, some steps for our key non-Asian routes, for example, U.K., is back to 31% of pre-COVID TTV and U.S.A. back to 24% of pre-COVID rates, and that's in September, and that's moved in October. This is really encouraging for us in terms of thinking about what international structural changes could happen post COVID. So whilst this is positive, of course, and will assist us in reducing losses, we still do not expect profitability in the Asian region until Greater China opens up its borders to the rest of Asia, and that's what we're waiting for. So if you go into the last slide. It's a quick summary and recap. Firstly, our first half is on track because -- and 1Q delivered in line with our internal forecast. In the second quarter, we're logically expect increasing momentum from border openings highlighted on the previous slide. But I want to remind you that corporates typically [ slow up [ Thanksgiving and Christmas. We don't know if we're going to get a get a sugar hit or not. We just don't know, but we've been cautious. Nevertheless, it's pleasing to see unrestricted travel without quarantine in our largest markets of the U.S. and Europe. As a result, we now expect significant momentum and profitability in the second half of '22. And I say this again, to reiterate, because our largest regions of Europe and U.S.A. are expected to be fully open for the entire second half without any quarantine restrictions versus the first half. Additionally, Australia, both domestically and internationally, should be largely opened as well in the second half versus first half. So as you can see, the first half and the second half of CTM is expected to be comparing apples with oranges. And for this reason, we expect a stronger-than-normal 67% second half skew to profits, which makes good sense. And lastly, coming to acquisition opportunities. The acquisition COVID cycle certainly isn't over. We've seen continued large losses across the industry globally amongst our peers that are public and private that are reporting. Clearly, things are getting worse before we're getting better. And in overseas markets that are recovering, many peers are laden with a lot of debt. As a result, we continue to explore overseas acquisition opportunities to support global strategy, and there's still a lot of them around that we're looking at. And going on to cash flow and dividends. As Ewen said before, we expect strong operating cash flow conversion in the first half reporting date. And assuming the momentum continues, as we said in the second half, we are targeting return of dividends in CY '22. And lastly, our strong financial position and profitability gives us a large competitive advantage that cannot be underestimated. This is because recovering an open-close economy is really tricky. We've seen it in North America and Australia, where we employ in advance and then we get an open-close outcome. And our low fixed cost base, combined with our strong financial position in automation, allows us to continue to invest in the technology and the people will need to service our clients through the recovery. As I said before, this can't be underestimated, as winning and retaining clients is a core principle to our success to date and will be through the rest of the recovery. We have seen a number of recoveries in our 27-year history, and we know that it's harder than you think to keep the staff up with the service. And whilst the clients will give you goodwill through COVID, that goodwill evaporates quickly if you're not strategizing ahead of the game. And lucky for us, we're in that position to do so. So lastly, and importantly, I want to thank our staff for their resilience, patience and especially their loyalty through this cycle, to my wonderful management team that continue to execute near flawlessly in a really difficult environment and backdrop. And we all wish to pay much gratitude to our clients that have stuck with us. All of you are in safe hands because we have all the pieces in place to navigate this recovery with you. And to our investors, thank you again for your support. We still have so much more to achieve here at CTM. So thank you, and I'll hand back to our Chairman, Ewen Crouch.

Thank you, Jamie. There'll be an opportunity to ask questions on Jamie's presentation and my address shortly. However, before we proceed to the items of business for today's meeting, I remind you that only shareholders, proxies or other authorized representatives are entitled to ask questions at today's meeting and matters raised must be relevant to the business of the meeting. A total of 5 resolutions are to be put to shareholders at today's meeting. All resolutions are ordinary resolutions, meaning that to pass, they require at least 50% of the votes cast in favor of our shareholders entitled to vote on the resolution. Each agenda item will be discussed in turn, and we will address questions relevant to that item of business. As mentioned before, questions can be submitted at any time. To submit a written question, select the messaging tab at the top of the Lumi question and type in your question. Once you have finished typing, please hit the arrow symbol to send a question. To ask a question verbally, please pause the broadcast on the Lumi platform and then click on the link under asking audio questions. A new page will open where you'll be prompted to enter your name and the topic of your question before being connected. You will be able to listen to the meeting on this page, while waiting to ask your question. If you have any issues using the system, please return to the virtual platform. We ask that your questions are directed at matters relevant to the business of the meeting. We will endeavor to answer all of your questions. However, if due to time constraints, we are unable to address your question in the meeting, we will contact you after the meeting. Please note that if we receive multiple questions on 1 topic, these questions will be amalgamated together. Voting will be conducted by way of a poll on all items of business. As I explained earlier, voting for all resolutions is now open and will remain open throughout the meeting. If you are eligible to vote at this meeting, a voting tab will be visible on your screen. Selecting this tab will bring up a list of today's resolutions and present you with voting options. To cast your vote, simply select one of the options, for, against or abstain. There is no need to hit a submit or enter button, as the vote is automatically recorded. Please submit your votes at any time. I will give you a warning before I move to close voting. Valid proxies received are held by Computershare, CTM's share registry provider. I will announce the valid proxies received for each resolution when the agenda item is discussed. Please note that all valid proxies that have been received within the prescribed time limits have been admitted. Further, as set out in the notice of meeting and proxy firm, they confirm that I intend to vote undirected proxies given to me as Chairman of the meeting in favor of each item of business. The Corporations Act and the ASX listing rules require that certain persons must not vote in particular ways, and the company must disregard particular votes cast by or on behalf of certain persons on Resolutions 1, 3a and 3B. Full details of these voting restrictions are set out in the notice of meeting and have been compliant. I will now move on to the formal items of business. As required by Section 317 of the Corporations Act, I table for discussing the annual report, including the financial report, directors' report and independent auditor's report for Corporate Travel Management Limited and its controlled entities for the year ended 30 June 2021. This report has been sent to all shareholders. There is no requirement for a shareholder resolution on this item. The company's auditor, Mr. Michael Crowe from PwC, is present and available to answer any questions in respect to the independent auditor's report. I will pause now to see if there are any questions directed to Michael Crowe on the independent auditor's report. Thank you. Now is the opportunity to ask any questions of me or of Jamie in relation to my address or Jamie's presentation, or in respect to the 2021 annual report. I think we do have some questions here.

Chairman, we have a question from the Australian Shareholders Association. Your company has returned to profitability in the last 2 quarters. What division of the business or what region is likely to be the most profitable going forward in a recovering COVID-19 environment? And what would be the main drivers of this?

Thank you very much. As Jamie mentioned, we expect North America will be the largest region into the future because of its size and the scale that we have derived following the acquisition of Travel & Transport a year ago. Next question, please.

We have a second question from the Australian Shareholders Association and a similar question from shareholder, [ Raymond Tolson ] from [ Team Invest ] around M&A. Will your Board continue to see suitable merger and acquisition opportunities during the pandemic? What type of clarity in market and economic conditions would you require before making such a decision? And if any acquisitions are made, how is it intended to fund them?

Right. I'll take both questions together, and I think it's better Mr. Tolson, it's okay, if we answer your question with the ASA question. And I think it's better if Jamie addresses that for both of you. Over to you, Jamie.

Yes. Thank you, Ewen. In terms of acquisition, there's a lot of opportunities, particularly in the Northern Hemisphere that we're looking at. In terms of the conditions, I think it's fair to say that things have turned. So we've got a lot more clarity moving forward than we ever had when we undertook Travel & Transport. I think back in hindsight that was a lot more [ unknown ]. So in terms of -- so we're really comfortable making this environment because we think, particularly in that side of the market, they're going to turn quickly. The second question relates more to gaps in our network. And we have a consideration for acquisition and if they're made, how do we intend to fund them. Just on the network play. Just to remind you, and we'll talk about this more at the [ home ] Radius group and it's the largest independent group of network travel agents that many of them support many of our accounts around the world when were not on the ground. We're really advancing that network as well. That's one thing we're doing. And where we really love our partner, and we think that there is material. We hope to -- obviously, that's our first point of call to acquire that partner. But at this point, we're very comfortable with our footprint at the moment. We're in the right places that we need to be. If we're going to make an acquisition, how do we intend to fund them. Like we always say, we'll look at it at a point in time. We've got a very strong history of looking after our shareholders. and I'll leave at that.

Thank you, Jamie. Next question, please.

We have a further question from the Australian Shareholders Association. We noticed that the company has been well led and managed throughout COVID-19. Given the changes in workforce, structure, communication, technology and costs related to carbon emission reductions, what are possible risks that may need business model adjustments to ensure future shareholder value?

To the ASA, thank you very much for that acknowledgment of the efforts of our management team. We're very grateful to receive it. The team have been particularly agile in their approach to managing the business, continuously adjusting to reduce the impact of the pandemic on the business as far as possible and also to anticipate and prepare for risks in the longer term. One of the things that has been a key focus during the course of the last year is sustainability. To the extent that, as I mentioned in my address last year and earlier on, we expanded the remit of the Board's committee on remuneration to include sustainability matters, and that's been very capably chaired by Sophia Mitchell. I'd just like to give you a little bit of a flavor of what we're doing there. And I'll just pass over now to Chief Operating Officer and Executive Director, Laura Ruffles, who has management oversight of this area.

Thanks, Ewen, and thank you for the question. Absolutely, it's an area of focus and continued investment for us. There is not one customer proposal that comes out or what comes to us. It doesn't have a huge area on sustainability and travel choices for people. And therefore, we look at different solutions across our customer base as well as ourselves internally. So we have a program to offset our customer carbon emissions through climate-friendly -- through our Climate+ program, which has been very, very successful for us in our partnership with South Pole. And what we're trying to do is work across that customer base to understand what their goals are so they can make some responsible choices and give them more information available and different programs that will complement their own efforts as well as our own. I think also to supplement that, as we go through and look at our technology, which is a big part of our value proposition, we've made some changes to our technology, particularly in the last 12 months. And as Ewen alluded to, the recent award that we won in the U.K. prior Lighting product. What we've done is built a lot of sustainable information into our travel and transaction products so that people can make better choices upfront for response travel and purposeful travel as they move forward. And lastly, what we also do is as well as work with the customers, is go across our supply chain network. And one really good example of that is we were very proud to announce in -- back in July that we were the first partner of Delta to sign a multiyear agreement on the sustainable aviation fuel program. And that's really what we're doing across all of our suppliers, is engaging with them on their own goals and how we can partner to make better choices and have sustainable programs across that supply chain as well. So definitely has a lot of focus.

Thank you very much, Laura. Next question, please.

Chairman, we have a question from shareholder, [ Mr. Calin Jamil ]. Can you please give us more color on the client wins in the U.S. and U.K.? If travel was to return to pre-COVID levels, would CTM have revenue at 120%, 140% or 150%, et cetera, of pre-COVID revenue?

Thank you, [ Mr. Jamil ]. Let me pass across to Jamie to answer this question for you.

Yes. Thanks, Ewen, and thanks for the question. Look, as we said before, we never speculate on what could have, should have, would have, when we're trying to get through COVID. However, what we do look, we look at our recovering rate versus peers. And without exception, are ahead of our peers, which tells you we're winning market share. And that's our focus as well. So again, I'll just -- that's all I'm going to say at this point, but I hope you understand.