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CTD, Corporate Travel Ltd
nipper
post Posted: Sep 2 2019, 03:39 PM
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QUOTE
Corporate Travel's answers invite more questions
- by Jonathan Shapiro and Vesna Poljak


It is almost a year since Jamie Pherous’ Sunday lunch was disrupted by news that hedge fund VGI Partners had unleashed an activist short campaign against the high-flying travel company.

Since then the company, its financial statements and its board have attracted a disproportionate amount of interest as financial and reputational stakes are raised. The company has recruited a new chief financial officer, chairman, director and added a head of legal. They are betting their careers that the short-sellers have got it wrong.

The great voting machine that is the Corporate Travel share price has drifted in and out of favour with both sides, but lately it is leaning in the shorts' favour.

Last week Corporate Travel reported what on the surface was a solid result: underlying earnings hit the upper end of its guidance, and once again the accounts defied the cash flow doubters with a greater than 100 per cent conversion of profits to cashflow.

But the share price fell about 6.5 per cent, reversing a snap rally at the open, and has remained weak since. At present, Corporate Travel stock is down 37 per cent from the last trading session before VGI struck. On Friday, the shares fell almost 4 per cent to $17.37 as a block of 1 million shares was traded by an unknown entity.

If a share price is a barometer of sentiment, for highly acquisitive businesses it is also more than that. In part, such business models succeed because their equity (ascribed a premium by the market) enables them to deliver accretive deals that add value to shareholders. A sluggish share price does not help. But if Corporate Travel intends to do a deal, it is not bothering to hide its enthusiasm for expansion, identifying Europe or North America as optimal regions to hunt.

Pherous may even be suggesting this is a potentially opportune time to make an acquisition. He says Corporate Travel are doing better than their competitors and there is value to be found. But first, his immediate outward focus is on selling the 2018-19 result. Most sell-side analysts have responded with favourable research, although 2019-20 consensus EBITDA has been reduced around 4 per cent.

The buy-side is taking more convincing.

Pherous and new global chief financial officer Neale O'Connell continued meeting with investors last week. No doubt, without the same intrigue generated by VGI's unwelcome presence at a larger briefing hosted by Morgan Stanley the day after the result.

The company also invited The Australian Financial Review to discuss some of the issues raised, not only by VGI Partners but by other published analysis it disagrees with. Pherous has made a reasonably effective effort in distinguishing himself from other companies targeted by activist shorts by taking an 'ask me anything' approach.

The flashpoint is cash flow, which is the subject of intense debate.

An Ownership Matters report, which was based on its own discussion and confirmation with Corporate Travel, argued that the accounting method (the direct method with aspects of the indirect method) the company uses means the reported cash flow is "not derived from actual cash movements, but from accounting accrual balances".

This manifested itself in a situation where payments to staff and suppliers for the second half was $34 million - only a third of the actual $115 million staff expense. But even this is a point of ambiguity because Corporate Travel says it uses the direct method, in response to The Australian Financial Review's question.

In fact, either treatment is allowed by accounting standards. Ownership Matters proposed that a direct cash flow reconciliation would silence the doubters, using actual cash movements.

Pherous and O’Connell say such disclosure is unnecessary. It would create confusion about the presentation of cash flow without any meaningful improvement as the key figure, operating cash flow, should be the same under both methods. O'Connell, who encountered similar timing-of-payments issues at Tatts (as jackpots are unpredictable), said there was nothing uncommon about the way Corporate Travel reported. Computershare, Telstra and their closest competitor used the same standard, it says. (Flight Centre confirmed it uses the direct method).

Besides, Pherous said such criticism of cash conversion lumpiness was cherry-picking by only focusing on the last two second-half periods. In the first half the cash conversion is significantly lower: why focus on the halves where it exceeds 100 per cent? If the accusation, they argue, is that the company had the ability to selectively manage its payments to airlines or rail operators, they would look a lot smoother.

Pherous and O'Connell also say no analyst nor investor in the 40 meetings conducted have raised this as a concern. But the unconvinced argue that since the cash flow statement is not constructed based on cash flows, and given the scrutiny - warranted or not - additional disclosures would help resolve the issue once and for all.

Another divisive issue is around earnings quality.

Volume rebates, which are a type of high-margin revenue that the company gets for directing a certain amount of volume through a provider, outpaced the growth in total transaction value.

Pherous and O'Connell said this was due to the acquisition of the Lotus business, which had a higher reliance on such revenue. When this unit was combined with Corporate Travel Asia, it led to an increase in variable revenue. They dispute that this revenue item is highly discretionary and said these contracts tended to be short term, which means the rebates aren't significantly influenced by estimates.

Then there's the issue of capitalised software.

While the company flagged that it would capitalise about $20 million of software spend, the growth in software capitalisation relative to earnings growth increased significantly. The issue was raised as a key audit matter as most of the expense is related to staff. The company has once again flagged that it will capitalise $20 million in 2020.

Finally, there's the issue of the add-backs, which allowed the company to hit the top end of its underlying earnings target of $150 million. This includes $1.2 million of costs linked to its short-seller defence on lawyers, public relations and accountants. The $2.7 million of double rent for the Hong Kong offices it has since merged also attracted questions.

The sum of all these points is that Corporate Travel appeared to have stretched to hit its target. Pherous foregoing half his bonus nudged it to $150.1 million, making the result a formal beat.

Broadly, Pherous has reiterated his confidence that Corporate Travel is thriving and is guiding to 2019-20 underlying earnings of up to $175 million, or $185 million including the benefit of leasing standard adoption (which is net profit neutral).

The annual travel spend of large corporates typically stays within a tight band, which is why the company has such high earnings visibility, the company says. The guidance is "conservative" and assumes that the disruptions related to Brexit and the Hong Kong protests will continue to December 31.

Asia is where the disruption seems to be impacting the most. While the full-year results show the Asian business grew by 27 per cent, some analysts say currency and merger adjustments and a decline in profits paid to non-controlling interests suggest the region did not perform well. The company says it has been “quite transparent’ in its guidance about the impact of the unrest in Hong Kong and trade tensions.

Such disruptions are an imposition for any business, but Pherous says Corporate Travel can show its real abilities here. The UK government is a client requiring contingency travel plans. And amid the Hong Kong airport stand-off, staff were hiring buses and cars to drive clients to alternative airports. These are the value-add services that have propelled the company to a $2 billion enterprise, he says.

But the recent share price moves suggest Pherous will have to work harder than ever to keep it growing, or prevent it from stalling

https://www.afr.com/companies/tourism/corpo...20190829-p52m7f



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: blacksheep  
 
blacksheep
post Posted: Aug 19 2019, 10:31 PM
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In Reply To: nipper's post @ Aug 19 2019, 05:37 PM

CTD is due to release its FY results on Tuesday - should be interesting

Shortman shows current short positions @ 13/8/19 = 5.94%
https://www.shortman.com.au/stock?q=ctd

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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
nipper
post Posted: Aug 19 2019, 05:37 PM
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QUOTE
Corporate Travel Management faces new questions around earnings quality and a sweetheart deal with a top executive linked to its highly successful and bulked up European business.

The questions are raised by in-depth examination of its sprawling European business by Adelaide-based stockbroker Taylor Collison, which was dragged to court in an unsuccessful legal action brought by the failed sandalwood grower TFS.

Taylor Collison has published a 41-page report detailing questionable discretionary judgments in Corporate Travel's earnings statements - such as modifying the recognition of revenues by acquired businesses to record revenue or operating income on a probable basis instead of on receipt.

It is published as "part one", indicating further questions could arise from forthcoming research...




--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
blacksheep
post Posted: Mar 28 2019, 01:42 PM
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In Reply To: blacksheep's post @ Mar 26 2019, 01:35 PM

Managing Director’s shareholding resolved
QUOTE
Corporate Travel Management (ASX: CTD) has been informed by Managing Director, Jamie Pherous,
that his personal investment company has been reinstated by ASIC.

Mr Pherous has confirmed to CTD that he continues to indirectly hold 20.74 million CTD shares via
that personal investment company and that he has not sold and does not intend to sell any CTD
shares.


Mr Pherous has also confirmed to CTD that a company named Pherous Holdings Pty Ltd, which has
been registered with ASIC by Rob Luciano and Douglas Tynan of VGI Partners, is unrelated to him.


He's not going to sell any shares - he says - but AFR Rear Window suggests he has a capital gains issue. Perhaps he's got a lazy $150mil stashed away to pay for it? biggrin.gif Pherous Holdings Pty Ltd, now belongs to VGI - his biggest short seller. As RW said - "funny shit".

QUOTE
His 20.74 million Corporate Travel shares had a market value of $534 million after trading closed on March 7, the day Pherous Holdings was deregistered and ownership of that stock transferred to ASIC for tax purposes. So the capital gains tax payable in the inaugural tax return of ACN 106 590 050 Pty Ltd for FY19 would be 30 per cent of that ($160.2 million) minus his buy price (pre-IPO, so negligible), due on May 15, 2020. He better start racking up some epic deductibles!

So when Pherous insists that he "does not intend to sell any CTD shares", we naturally wonder how else he would come up with something in the order of $150 million for Zacchaeus. Maybe Morgans will spot him the dough?


read more - https://www.afr.com/rear-window/pherous-get...20190327-h1cvk9



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Mar 26 2019, 01:35 PM
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In Reply To: blacksheep's post @ Mar 18 2019, 01:19 PM

Bugger me - first sloppy paperwork re the chairman's holdings and now lack of providing paperwork re the CEO's holding. Hope they look after company matters better than personal matters

QUOTE
Clarification regarding media report
Corporate Travel Management (ASX: CTD) confirms that it has been informed by Managing Director,
Jamie Pherous, that he has not sold any CTD shares and has no intention to do so.

Mr Pherous has advised CTD that he will lodge the appropriate paperwork and outstanding fees as a
priority this morning to seek reinstatement of his personal investment company.


The AFR article that seems to have sparked the clarification notice
QUOTE
Jamie Pherous no longer owns a single Corporate Travel share
Ownership of $521 million of shares in Corporate Travel have transferred to ASIC.

https://www.afr.com/rear-window/jamie-phero...20190325-p517gj



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Mar 18 2019, 01:19 PM
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In Reply To: blacksheep's post @ Mar 14 2019, 01:38 PM

Explanation for late submission and rthe "Family Court" issues.
QUOTE
1. Please explain why the Announcement was lodged late?

After the market closed on 11 March 2019, Mr Tony Bellas advised CTM that he had just been
made aware by the bank which advises him on his superannuation investments that a parcel of
CTM shares had been transferred from a superannuation fund whose beneficiaries include both
Mr Bellas and Mrs Maria Bellas to a superannuation fund of Mrs Bellas. Mr Bellas subsequently
also advised CTM that:

 On 13 November 2018, an order was made by the family court requiring the transfer of
interests held by Mr Bellas in certain assets to his former spouse, Maria Bellas. The assets
subject to the court order include (but are not limited to) 180,836 CTM shares then held by a
superannuation fund whose beneficiaries include Mr and Mrs Bellas.

 The court order issued by the court registrar contained an error. Mr Bellas received legal
advice that he could not and should not act on the court order until the error in the court order
was corrected. Mr Bellas understood this to mean that no party could act on the court order
prior to it being corrected.

 Subsequent to the making of the court order, Mr Bellas signed documents to facilitate the
future transfer of the CTM shares from the joint superannuation fund which then held them, to
Mrs Bellas as required by the court order. Mr Bellas believed those documents would be held
in escrow, and no transfer of the CTM shares could occur, until the court order was corrected.
 The corrected court order has not yet been issued by the court registrar.

On 12 and 13 March 2019, Mr Bellas sought further information about how the transfer could
have occurred, given his understanding that the corrected court order had not yet been issued
and no party could act on the court order until it was corrected. In the course of those
investigations, Mr Bellas was advised that the transfer had, in fact, occurred on 14 February 2019.

Following further conversations with Mr Bellas on 12 and 13 March 2019, an Appendix 3Y was
lodged by CTM on 13 March 2019




--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 


blacksheep
post Posted: Mar 14 2019, 01:38 PM
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In Reply To: blacksheep's post @ Feb 28 2019, 09:52 AM

Hmmm - war of words with short sellers/threatening them - VGI - with legal action....meanwhile "chairman Tony Bellas. On February 14, he disposed of 180,836 shares, 82 per cent of his stake, worth $4.5 million (at an implied average share price of around $24.90). A month ago!" around the same time. Not a good look, but explanation given was - "Off‐market transfer under a Family Court"
order.

QUOTE
Corporate Travel Management is hoisting red flags faster than the frontline heraldry of a medieval cavalry charge.

At 7:37pm on Wednesday, long after the market's close, the under-fire Brisbane roll-up lodged a sensational change of director's interest notice for chairman Tony Bellas. On February 14, he disposed of 180,836 shares, 82 per cent of his stake, worth $4.5 million (at an implied average share price of around $24.90). A month ago!

ASX Guidance Note 22 stipulates that "a listed entity must notify ASX [if]… changes occur in a director's relevant interests… within five business days."

Joe Aston has the full piece here.


https://www.shortman.com.au/stock?q=ctd

CTD also took the opportunity to respond to market speculation

QUOTE
Corporate Travel Management Limited (“CTM”) notes the announcement made by Capita PLC
(“Capita”) regarding an unsolicited approach by CTM for Capita’s travel businesses.

Consistent with our stated strategy, CTM continues to evaluate a number of potential acquisition targets
and confirms that it has had preliminary discussions with Capita regarding its travel businesses.
These have been early stage discussions and there is no certainty as to whether a transaction will be
agreed nor as to the terms or timing.

In this regard CTM, has not contemplated undertaking any acquisition this financial year.
A further announcement will be made if appropriate.

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--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Feb 28 2019, 09:52 AM
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In Reply To: blacksheep's post @ Nov 8 2018, 11:52 AM

War of words continues
Corporate Travel Management lobs landmark legal threat at short-sellers
QUOTE
The tactics used by investors betting against companies are at the heart of a landmark legal stoush between $3 billion Corporate Travel Management and hedge fund VGI Partners that could reshape the rules for publicly criticising businesses.

Corporate Travel has threatened VGI Partners with a lawsuit alleging a conspiracy to hurt the company and market manipulation in a case that signals a major escalation of hostilities between short-sellers and their targets


QUOTE
If Corporate Travel proceeds with the action, which has not yet been lodged in court, it could temper how the county’s investment banks or activist hedge funds challenge the financial reporting of Australian Securities Exchange-listed companies.


Meanwhile, as Joe Aston points out in - Analysts asleep: Corporate Travel's bogus cash flow graph

QUOTE
Corporate Travel Management's rambunctious founder Jamie Pherous never intended to go down without a fight, and Lord knows the sell-side analysts never intended to give him one! "Good result mate," began the first question, as if Pherous was hosting a barbecue for his neighbours, not outlining one of the ASX200's most scrutinised set of financial accounts.

https://www.afr.com/brand/rear-window/analy...20190225-h1bp9q

The same laws should apply to short sellers as apply to a company director.” said Mr Pherous. What about sell side analysts when they get their analysis/lofty targets wrong - should they be sued?

https://www.shortman.com.au/stock?q=ctd - shows total short positions as at 21/2/2019 = 4.35%

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--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Nov 8 2018, 11:52 AM
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Posts: 6,217
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In Reply To: blacksheep's post @ Nov 8 2018, 11:28 AM

Corporate Travel soars, but VGI fight isn't over
QUOTE
But now it appears the professor at New York University's Stern School of Business has become central to the fight.

The good professor has, for many years, published detailed data free of charge on US country risk premiums, which can be incorporated into a range of accounting calculations, including working out what discount rates should be applied to assets.

https://www.afr.com/brand/chanticleer/corpo...20181108-h17nfk



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Nov 8 2018, 11:28 AM
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Posts: 6,217
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In Reply To: blacksheep's post @ Nov 6 2018, 09:21 AM

SP up 13.95% (currently) @ $22.79 following this morning's ann - will VGI provide another rebuttal?
https://www.shortman.com.au/stock?q=ctd
QUOTE
Last week CTM engaged EY to provide ongoing support to CTM, assess certain matters relating to CTM’s
financial statements for FY18 and subsequently to respond to certain matters raised by VGI and its
continuing attempts to discredit CTM's financial disclosures, notwithstanding CTM's detailed response to
VGI's report. EY’s engagement with CTM is continuing.

CTM engaged EY specifically because of its experience in the travel sector. EY is the auditor of Flight
Centre (ASX:FLT) and auditor and advisor to other global travel sector participants, and has a deep
understanding of not only the travel sector (including the timing of supplier (airline and rail) payments
and their relationship with receivables), but also the difference between the corporate and leisure
sectors. CTM notes its own auditor, PWC, is also the auditor of Helloworld (ASX:HLO) and was the auditor
of Hogg Robinson Group (HRG) before HRG was acquired by American Express Global Business Travel
(GBT).

EY has provided CTM with its preliminary observations with respect to certain issues raised by VGI and
notes that VGI’s report is superficial. EY’s preliminary observations are reflected in the attached release,
which addresses the following three points:

• Impairment testing of CTM’s North American business (Attachment A)
• Corporate travel sector accounting disclosures – Cash Flow and working capital (Attachment B)
• CTM’s cash and interest income (Attachment C)

CTM’s view is that VGI’s latest report raises no new substantive issues. CTM’s response to VGI's original
report addressed all claims by VGI. CTM refers shareholders to its initial response and sees no need to
comment further on many of the points repeated in VGI’s latest report, other than in respect of revenue
recognition and its office footprint and staff numbers (Attachment D)
.

https://www.asx.com.au/asxpdf/20181108/pdf/...384m03qgxn7.pdf
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--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
 


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