Jamie Pherous: "Not the first time we've been shorted, won't be the last"

Corporate Travel Management (ASX: CTD) responded this morning to a short selling report from VGI Partners ahead of its AGM in Brisbane.

However, the company has been unable to stop the downward pressure on stock. At the close of trading shares were down 27 per cent at $20.05.

Managing director and founder of Corporate Travel Management Jamie Pherous (pictured) spoke to investors this morning in a bid to allay their concerns.

He was also eager to highlight recent achievements despite the negative sentiment that has plagued the company since Sunday.

"I want to make it crystal clear there are absolutely no issues of substance identified in the review," Pherous said.

"I don't speak for the share price. All I can do is run the business. The key point today is we upgraded - we're up 20 per cent," he told reporters after the AGM, where he had indicated the company was tracking in the upper end of previous underlying EBITDA guidance around the $150 million mark. 

Because of timing issues, cash flow is expected to be lower in the current half but higher than usual in the second half. 

Pherous claimed that in his interactions with VGI, before it released its short selling report, the hedge fund took a casual tone.

"I'd love to know more about your technology, it sounds really cool', or a phrase like that," Pherous recalled of how a specific e-mail exchange read. "They've certainly been shorting us on and off for at least a number of years, we know that for a fact."

The founder remained resolute in the face of the short selling report.

"This is not the first time we've been shorted. I'm sure it won't be the last," Pherous said.

"We know that they've [VGI] written a number of reports. It's either been around the same old chestnuts as we'd say, trying to cloud up cash flow," he said.

"As of yesterday we had around 3.7 per cent of shorts. That's not very much. That puts us at 83rd on the list of shorted companies. If you take the view that you can only really short 200 companies and we're a growth company, that's not material."

The "poor bugger" from VGI who took a photo of a Safeway carpark in the Bering Sea

All hands were on deck at the company's AGM with chairman Tony Bellas taking to the stage to reassure shareholders in his chairman's address.

He was due to step down after the meeting, but due to the circumstances with VGI's "ambush", he has decided to stay put for the time being and fill a casual vacancy on the board as well. 

Plenty of issues and questions were raised by shareholders. Of particular concern was the issue of the "ghost and phantom offices", a fire Bellas put out with a wry tone that drew laughs from the crowd. 

"There was considerable media coverage of our office in Dutch Harbor. Dutch Harbor is in the Bering Sea in Alaska we do have an office there," he said.

"We haven't updated our website because the office has moved from a small office in town to a kiosk at the airport.

"That office is supported by our fisheries team in four locations: in Seattle; in Fairbanks, Alaska; in Anchorage, Alaska; and Baton Rouge, Louisiana. It's a 364-day a year operation."

He said most of the business serviced fly-in, fly-out crews with a "very important and valued client" for CTM.

"They [VGI] sent somebody there, took a photo. I suppose it is our fault because they went to the address that was on our website we hadn't updated our website to say 'our office has moved to a kiosk at the airport'," Bellas said.

"This poor bugger ended up at the carpark of a Safeway supermarket and took a photo of it, and the suggestion was this was a phantom office."

Bellas also referenced VGI's attempts to discredit CTM over an empty office in Glasgow it visited at an address that was removed by CTM's website in April.

"We moved addresses in May but we updated our website back in April to show the new address. That photo in the VGI report purports to be from our website with our old address," the chairman said.

"I don't know when they took that snapshot but it can't have been since April of this year. We have 73 people in the Glasgow office.

"So 58 pages of that report were dedicated to alleging that CTM's global office footprint is overstated."

Speaking with journalists after the AGM, Pherous brushed off criticisms about the group's out-of-date website. 

"To be guilty or not of of not updating your website here or there, that's not material," said Pherous.

Pherous told shareholders key drivers for the business overseas would be its value proposition and increasing scale. The group has now reached a stage of maturity where it has more than $1 billion in total transaction value (TTV) in each of the continents where it operates.

"That 37 per cent compound growth has been relentless," said Pherous, emphasising the only way that was possible was to allow people in-country abroad to manage their operations.

"We think where global businesses fail they try to centralise everything. We empower people to make decisions at a local level so we can remain agile," he said.

He said that naturally as part of acquisitions CTM had inherited "little offices" in the US.

"I don't think a little office in the middle of the beach in Florida or somewhere in interstate Washington is going to make or break our business. So as part of strategy, as those leases roll out we'll close them down. Office numbers are changing," he told attendees at the AGM.

"The takeaway from the VGI report is that we probably won't put offices anymore because it's so fluid."

Addressing patents and executive share sales

Another important issue for CTM and its shareholders, raised in the VGI report, was the question of patents. Bellas admitted the group perhaps should not have used the word when attempting to describe its intellectual property protection.

However, he assured shareholders this was an issue of language rather than an outright fabrication on CTM's behalf, and that the company would be updating the terminology online to better reflect the reality of the situation.

Pherous wanted to reinforce the message that issues around IP and patents had not affected the business in any way.

"In some jurisdictions we're in Asia as well patents don't even stand up and putting a patent out there possibly means someone can really see how you're building it," he said.

"We've taken a commercial view that patents really aren't important in technology because in our place we're developing it so quickly."

Another red flag raised in VGI's report was that various directors and executives had sold stock, including Chris Thelen reportedly having sold 99.9 per cent of the shares he held at the beginning of the year.

"He sold them for personal reasons but he retains 431,000 shares," he clarifies. Even after today's share price plunge, that still puts Thelen's stock value at $8.6 million.

"Where Chris is different is he's also got earn-out shares which have just come after the year end; he's on long-term rights as well. He's got other future revenue streams of stock coming through."

Bellas added that after its review, the board had this morning approached VGI Partners seeking a meeting to explain the company's response and ask that the report be corrected or withdrawn.

"We have not yet received a response from VGI other than to say that they are currently examining our response to their report," he said.

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