Corporate Travel Management rejects 'misunderstood' short selling report from VGI Partners

Written on the 31 October 2018 by Matt Ogg

Corporate Travel Management rejects 'misunderstood' short selling report from VGI Partners

"CTM has a clear strategy to establish a global footprint and generate scale, but is not intending to do this by building a costly and less productive small office 'bricks and mortar' empire," the group says. 

Ahead of its AGM today Corporate Travel Management (CTM, ASX: CTD) has hit back at VGI Partners over its short position in the company, claiming the hedge fund's report either "misunderstands or misrepresents" its financial performance, governance and business model.

Click here for our coverage from the company's AGM today. 

"The timing of this report is unfortunate because it does not take into account the company's excellent performance record and continued successful execution of strategy. The company is in great financial shape," says CTM chairman Tony Bellas (pictured).

A presentation from VGI Partners to its wholesale investors alleged CTM used a change in its revenue recognition policy to inflate performance without sufficient explanation,had "ghost" and "phantom" offices in various parts of the world, and had cash payment outflow figures that were inconsistent with organic growth claims.

In its response this morning, CTM said it had treated its review of the report - which "at no point" had been shared with CTM by VGI to discuss its contents - with the highest priority, including seeking advise from its corporate and legal advisors.

Firstly, CTM rejects the claim that a change in its revenue recognition policy made a material difference ot FY18 earnings, with the alteration leading to a $0.5 million adjustment, or in other words a 0.4 per cent contribution to EBITDA.

The company emphasises its growth in receivables was not due to the revenue recognition change either, but rather "strong growth" in total transaction value (TTV) and timing differences in the working capital cycle.

The group also rejects claims that a decline in its cashflows indicates poor revenue quality.

"The movements in cash payments are primarily timing differences. Over time, CTM has consistently delivered at or near 100% cash conversion," the company said.

CTM also rejects claims that its cash balances appear low compared to its peers, explaining that cash balances and associated interest tend to be lower for a corporate travel company when compared to a leisure-dominant business.

The company also rejects the claim that its global footprint is overstated.

"CTM has a clear strategy to establish a global footprint and generate scale, but is not intending to do this by building a costly and less productive small office 'bricks and mortar' empire," the company said.

"VGI has been very clear in its intention to benefit from a decline in the Company's share price," says Bellas.

"We are concerned about the potential impact on shareholders from VGI making claims that, in our view, are not supported by the facts.

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Author: Matt Ogg

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