Savage takedown of Brisbane firm


They've been a thorn in the side of Jamie Pherous and Corporate Travel Management for nearly 18 months - and now they've put the boot in again.

The gang at hedge fund VGI Partners lobbed another savage takedown of the Brisbane firm at the weekend, raising what they dubbed "10 red flags'' in CTM's disappointing half-year results, which saw a 14 per cent drop in net profit even before the hammer blow of the coronavirus disaster crystallises.

The 97-page critique alleges "severe accounting irregularities,'' and zeros in on things like weak cash flows, capitalised costs and falling volume-based incentive revenue.

VGI, which is understood to have shorted nearly $75 million worth of CTM stock in the hopes of the price falling, first raised the alarm about alleged discrepancies in a 176-page report back in October 2018. Since then, the share price has plummeted 48 per cent.

CTM managing director Jamie Pherous
CTM managing director Jamie Pherous

In a note to investors on Sunday, VGI said CTM "had gone from being a hyper-growth market darling at the time of our original report to now being clearly ex-growth''.

"Remember that the coronavirus had no impact until January 2020 and yet Corporate Travel's net profit after tax actually declined…in the half year to December 2019,'' the letter said.

"It did not surprise us that the company issued a significant downgrade to full year earnings guidance in conjunction with the result.''


CTM managing director Pherous and his crew returned fire on Monday, rejecting the idea that anything was wrong with their bookkeeping but addressing only five of the areas of concern.

"VGI holds a short position in CTM and has a vested interest in promoting market uncertainty with respect to CTM,'' the company said.

"The timing of the release of VGI's latest report appears to be an attempt to use the current uncertainty cause by Covid-19 (coronavirus) to promote further market uncertainty with respect to CTM, despite this affecting the entire travel sector and the broader economy.''



But CTM's rebuttal did little to help the shares, which lost more than 3 per cent of their value yesterday to close at $13.50.

Several market sources said they were underwhelmed with the defence from CTM, where Pherous is a top shareholder.

"Big investors reckon Corporate Travel glossed over a number of the smoking guns in the VGI report, including presentation figures that should reconcile the accounts but don't and confusion over just how much debt the company is carrying,'' one stakeholder told us.


In case all this wasn't a lousy enough start to the week for CTM, the company also announced yesterday that Bob Natter, a retired Admiral in the US Navy, had quit the board effective immediately.

Natter, who rose to Commander in Chief of the US Atlantic Fleet in a 41-year career, joined as a non-executive director in 2014.

Bob Natter, retired Admiral in the US Navy, is stepping down as a CTM director.
Bob Natter, retired Admiral in the US Navy, is stepping down as a CTM director.

No reason for his sudden exit was wheeled out but CTM maintained it was merely part of a of an "ongoing board renewal process''. His replacement is Jon Brett, chairman of fund manager Stride Equity Partners.

Natter originally came aboard thanks to his friendship with former CTM chairman Tony Bellas. The pair are still on the board of Brisbane lithium-ion battery outfit Novonix.


These latest dramas swirling around CTM come just weeks after a media report that its senior player Larry Lo, who mans the company's Asia desk, had pocketed about $3.5 million after dumping his entire holding of nearly 162,000 shares.

Not exactly a vote of confidence in CTM's future prospects!

Allegedly spooked by the dramatically escalating coronavirus crisis and the flow-on impact for CTM, Lo had supposedly sold the lot even though the company was in a blackout period for trading ahead of the release of half-year results.

CTM later disputed the story and said that Lo still continues to own the portfolio.

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