Corporate Travel Management faces an Australian government audit over overcharging claims
Corporate Travel Management has agreed to an independent audit after the Australian government demanded proof it hasn't been ripping off local clients following its $162m UK scandal.
Corporate Travel Management has agreed to undertake an independent audit at the request of the Australian government to prove it hasn’t been overcharging for its services, following revelations the company ripped off its UK clients to the tune of $162m.
Headed by chief executive officer Jamie Pherous, CTM already faces intense pressure from the UK government in relation to the overcharging, uncovered by KPMG.
Britain’s Cabinet Office has revealed it’s investigating the matter, and the Greater London Authority is also reviewing its contract with the Australian ASX-listed company.
Although CTM has not revealed which of its UK clients are caught up in the overcharging scandal, the Home Office has confirmed its involvement in the “appalling” scandal.
The Home Office manages the UK’s immigration system and in 2023 awarded CTM a contract worth £1.6bn to house asylum seekers on a barge. A further contract worth £553m was awarded in April, for the period until 2029.
A spokeswoman for the Australian government’s Department of Finance said it had written to CTM reminding it of its obligations under the Travel Management and Accommodation Services Deed in relation to reporting significant events.
CTM has a four-year contract with the Australian government which was awarded in 2023, and is believed to be worth $200m a year.
The department has requested that CTM provide additional information about the ASX announcements regarding the overcharging of clients in the UK.
“CTM has agreed with the Department of Finance to undertake an independent audit to provide validation that there is no overcharging or behaviour not in line with CTM’s obligations in the deed,” the spokeswoman said.
“We expect this will be undertaken in the first half of 2026.”
CTM delivered the stunning update on its financial affairs last Friday, after previously suggesting the issues uncovered by KPMG and auditor Deloitte were limited to the timing of recognition of revenues in its European business.
A previous market update was withdrawn and the reporting of full-year results were delayed until next year – and a trading halt will continue into 2026.
Chairman Ewen Crouch said CTM would fully refund affected clients but declined to provide details of how the overcharging came about.
Graham Turner, whose Flight Centre Travel Group includes a corporate booking arm that competes with CTM, said there were “probably some clients looking to jump ship” as a result of the company’s woes.
“It’s a very difficult time for them. I’d hate for the shoe to be on the other foot,” Mr Turner said. “I do feel for Jamie (Pherous).”
He said he could not understand how the overcharging came about, and that most clients kept a close eye on travel expenditure.
“Government accounts are generally not very lucrative because the margins are low and it’s very competitive,” Mr Turner said.
“I don’t know about the asylum seekers in the UK; I don’t think we bid for that.”
Wilson Asset Management lead portfolio manager Oscar Oberg described Friday’s news as “a shock” and “very disappointing”.
Wilson’s Capital Fund listed CTM as one of its top-20 holdings in a September investor newsletter, and Mr Oberg said the update was “a lot worse than what we thought it was going to be”.
“What else can you say? It’s very disappointing,” Mr Oberg said.
He stressed there was much information that was still to come to light about how the overcharging was missed in the first place and how the refunds would be made.
“We know that there’s $140m of cash on the balance sheet with no debt. They do have some facilities there. But, look, we’re in the dark. It’s been hard to make the call other than to say that it was a massive surprise,” he said.
CTM investors are expected to take massive hits to the value of their holdings when the stock resumes trading. Its shares last changed hands for $16.07.
Steve Johnson of Forager Funds said his company’s investment in Corporate Travel Management was relatively small, but it was extremely concerned about the state of the business.
He said there was much uncertainty about the extent of the overcharging and the state of the company’s financial accounts, and whether those issues went beyond the UK.
“They have indicated the problems are isolated to the UK but then again the latest statement was a lot different from their previous statement – so who would know at this point?” Mr Johnson said.
“I would imagine every client, every investor is asking questions.”
Tony O’Connor is the founder of independent travel procurement and management service Butler Caroye, and said it was difficult to believe the overcharging by CTM was limited to the UK arm of the business.
He surmised that it was possible CTM may not have returned refunds for cancelled flights and hotels to clients during the Covid-19 period, although he had no evidence of that.
“If the travel management company is in the position of acting as the merchant and buying the travel on the client’s behalf, then refunds go to the travel management company,” Mr O’Connor said.
“The travel management company then has to make the effort and devote the time and money to sending refunds out to its many clients. You can see how a temptation might arise, especially during the Covid slump and its aftermath.”
It’s understood that under the whole of Australian government travel arrangements, CTM is not the merchant for airline transactions which are paid for using an NAB virtual card connected to every individual traveller.
That means refunds flow directly back to the traveller not through CTM.
Similarly, accommodation is charged through a charge-back function, so government travellers only pay after they have stayed – meaning there are no accommodation refunds.
Originally published as Corporate Travel Management faces an Australian government audit over overcharging claims
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