Hall of Shame

Consumer Discretionary

Corporate Travel Management (CDT AU)

Year: 2020

Corporate Travel Management Ltd. (CTM) is an Australian company that offers corporate travel management services. The Company operates on a fee for service model and provides business travel advice and services, bookings, ticketing, and ancillary services, and offers travel data diagnostics and recommendations.

CTM started to trade on the Australian Stock Exchange (ASX) in December 2010 raising A$21.70M.  Between 2012 and 2018 it raised a further A$112.31M in five additional share offerings; (Feb. 2012 - $3.01M, Feb.2012 - A$7M, Mar.2013 - A$10M, Jan.2015 - A$52.28M, Jul.2018 - A$40.02M).

October 28, 2018 VGI Partners release a report on Corporate Travel Management shorting the stock.  In the report, VGI state that their analysis of Corporate Travel had led to the identification of 20 red flags; (a red flag is a potential indicator of a problem with the quality of a business or the sustainability of its financial performance).  The red flags VGI identified were:

VGI stated that some of these, viewed in isolation, would have been of no concern and others could be individually explainable.  However it believed in aggregate they painted a troubling picture.  Included in these 20 red-flags, VGI had raised. were allegations that its cash flows was at odds with its claims of strong organic growth, that senior managers had been selling company shares and that it did not fully disclose the impact of revised revenue figures.  VGI said that it also found no sign of activity when it visited CTM's offices in Glasgow, Paris, Amsterdam, Stockholm and Switzerland, while about a quarter of its offices in the United States were either operating with
skeleton staff or where unused.

October 31, 2018 CTM issued a 14 page response to the report.  CTM acknowledged two issues. Otherwise, it stated that In CTM Board’s opinion, the rest of the report either misunderstands or misrepresents the Company’s financial performance, governance and business model. 

March 1, 2020 subsequent to CTM's release of its half year accounts, VGI Partners published another report.  VGI said it identified several new "red flags" in CTM's half-year accounts, including that volume-based commissions from airlines and hotels were in decline and could fall further due to the coronavirus outbreak.   VGI said CTM boosted its reported earnings by booking costs, such as wages, as "software assets", which had grown from $3.6 million to $35 million over the past four years.  VGI told its clients in a letter, seen by The Age and SMH, that even though its shares had slid 48 per cent since it first took aim at the company, the market continued to overestimate CTM's ability to deliver profitable growth and that its thesis was related to "accounting irregularities" unrelated to the coronavirus.

March 2, 2020 - CMT responded to the new report saying the timing of the release of VGI’s latest report, appeared to be an attempt to use the current uncertainty caused by Covid-19 to promote further market uncertainty with respect to CTM, despite this affecting the entire travel sector and the broader economy.

VGI Partners: Short Corporate Travel Management, 28 Oct 2018
CTM:  Response to VGI Report, 31 Oct 2018
Sydney Morning Herald: CTM reassures investors after VGI Partners' bombshell report, 29 Oct 2018
Financial Review: VGI reloads on Corporate Travel, 1 Mar 2020
Sydney Morning Herald: CTM under pressure from shorts as coronavirus hits travel sector, 2 Mar 2020
CTM: Response to VGI Report, 2 Mar 2020
CTM: HY 2020 Report 
CTM: Annual Report  2019
CTM: Annual Report  2018