VERY SERIOUS COMMENTS REPORTED AND RECOMMEND READING THE AGE REPORT
“Hedge fund VGI Partners has publicly accused the $3 billion travel specialist Corporate Travel Management of aggressive accounting, poor disclosure and running “phantom” offices in Europe and America.”
There was an article in Sundays Age Oct 28
https://www.theage.com.au/business/…arget-local-travel-group-20181028-p50cip.html
‘Troubling picture’: Hedge funds target local travel group
By Simon Johanson & Kylar Loussikian
28 October 2018 — 6:47pm
Hedge fund VGI Partners has publicly accused the $3 billion travel specialist Corporate Travel Management of aggressive accounting, poor disclosure and running “phantom” offices in Europe and America.
VGI Partners, which has a solid reputation for picking market winners and losers including Slater & Gordon in 2015, has taken a short position over the travel provider after it identified 20 “red flags” in a scathing 176 page presentation distributed to its clients.
They include declining cash flows at odds with claims of strong organic growth, overstating its global office footprint, management share sales and poor disclosure of the impact of revised revenue figures.
The Brisbane based travel agency has expanded internationally since going public and provides travel advice, booking, ticketing, recommendations and travel data management to businesses and government clients.
“Some of the red flags, viewed in isolation, may be of no concern and others may be individually explainable. However, we believe in aggregate they paint a troubling picture,” the hedge fund said.
In a note to investors, VGI said it visited the firm’s web-listed offices in Glasgow, Paris, Amsterdam, Stockholm and Switzerland and found no sign of activity in the buildings they supposedly operated out of.
Other offices in the United States were either ghost offices or staffed with a skeleton crew. The US makes up one third of Corporate Travel’s reported revenues.
In Corporate Travel’s Washington D.C. office an employee “appeared to be caught off guard by a visitor,” VGI said.
“We asked about corporate travel services but the employee said she only handles leisure travel and ‘we don’t even have business cards or any of that stuff,’” they said.
A significant number of offices on the travel agency’s website appear either to not exist or are unused. Around one-quarter of offices listed on the US website are sub-scale or unused, it says.
The business travel specialist claims to have 2750 staff around the world and has a one year share price return of 16 per cent.
VGI Partners also questioned how Corporate Travel could be twice as profitable as other similar travel agencies when its clients were government or businesses who are generally more sophisticated buyers of services.
“Our analysis is at odds with the rich valuation that the market currently places on Corporate Travel,” the hedge fund said.
VGI’s short position over 2 million of Corporate Travel’s shares means it has a vested interest in the company’s share price declining over time.
Corporate Travel Management said it was made aware of VGI Partners report around 3pm Sunday afternoon. It took the “claims seriously and we look forward to providing a detailed response as quickly as possible,” it said.
Taking into account its reported transactions, Corporate Travel is the eleventh largest travel booking business and seventh largest corporate travel specialist in the world.
Shareholders who invested in Corporate Travel’s initial public listing at $1 a share eight years ago would have enjoyed returns in excess of 3500 per cent as the company grew organically and through acquisitions.
Sydney and New York-based VGI has in recent years gained a reputation as a shrewd short seller of Australian and international stocks.
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